<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT 1934
For the transition period from ______________to______________
Commission File No. 1-8430
McDERMOTT INTERNATIONAL, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 72-0593134
- --------------------------------------------------------------------------------
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation of Organization)
1450 Poydras Street, New Orleans, Louisiana 70112-6050
- -------------------------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, Including Area Code (504) 587-5400
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
The number of shares of Common Stock, par value $1 per share, outstanding
as of October 25, 1996 was 54,841,403.
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M c D E R M O T T I N T E R N A T I O N A L , I N C.
I N D E X - F O R M 1 0 - Q
---------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1 - Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet
September 30, 1996 and March 31, 1996 4
Condensed Consolidated Statement of Income (Loss)
Three and Six Months Ended September 30, 1996 and 1995 6
Condensed Consolidated Statement of Cash Flows
Six Months Ended September 30, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
PART II - OTHER INFORMATION
- ---------------------------
Item 4 - Submission of Matters to a Vote of Security Holders 26
Item 6 - Exhibits and Reports on Form 8-K 27
SIGNATURES 28
Exhibit 11 - Calculation of Earnings (Loss) Per
Common and Common Equivalent Share 30
Exhibit 27 - Financial Data Schedule 31
</TABLE>
2
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PART I
McDERMOTT INTERNATIONAL, INC.
FINANCIAL INFORMATION
---------------------
Item 1. Condensed Consolidated Financial Statements
3
<PAGE>
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS 9/30/96 3/31/96
-------- --------
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $ 255,927 $ 238,663
Accounts receivable - trade 513,230 457,049
Accounts receivable - unconsolidated affiliates 38,816 57,691
Accounts receivable - other 172,527 162,335
Insurance recoverable - current 199,489 116,280
Contracts in progress 493,555 457,265
Inventories 74,078 77,592
Deferred income taxes 78,446 93,104
Other current assets 48,414 64,559
- --------------------------------------------------------------------------
Total Current Assets 1,874,482 1,724,538
- --------------------------------------------------------------------------
Property, Plant and Equipment, at Cost: 1,883,573 1,890,103
Less accumulated depreciation 1,205,691 1,199,416
- --------------------------------------------------------------------------
Net Property, Plant and Equipment 677,882 690,687
- --------------------------------------------------------------------------
Investments:
Government obligations 283,942 132,674
Other investments 145,887 109,352
- --------------------------------------------------------------------------
Total Investments 429,829 242,026
- --------------------------------------------------------------------------
Insurance Recoverable 451,114 606,963
- --------------------------------------------------------------------------
Excess of Cost Over Fair Value of Net Assets
of Purchased Businesses Less Accumulated
Amortization of $142,571,000 at September 30, 1996
and $126,882,000 at March 31, 1996 447,503 460,058
- --------------------------------------------------------------------------
Prepaid Pension Costs 293,125 283,656
- --------------------------------------------------------------------------
Other Assets 387,245 379,323
- --------------------------------------------------------------------------
TOTAL $ 4,561,180 $4,387,251
==========================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
9/30/96 3/31/96
-------- --------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 471,619 $ 234,258
Accounts payable 264,247 264,930
Environmental and products liabilities - current 261,192 161,062
Accrued employee benefits 99,988 98,159
Advance billings on contracts 205,851 187,378
Other current liabilities 368,393 446,765
-------------------------------------------------------------------------
Total Current Liabilities 1,671,290 1,392,552
- --------------------------------------------------------------------------
Long-Term Debt 694,001 576,256
- --------------------------------------------------------------------------
Accumulated Postretirement Benefit Obligation 403,174 401,321
- --------------------------------------------------------------------------
Environmental and Products Liabilities 538,864 721,740
- --------------------------------------------------------------------------
Other Liabilities 272,314 268,975
- --------------------------------------------------------------------------
Contingencies
- --------------------------------------------------------------------------
Minority Interest:
Subsidiary's preferred stocks 173,301 173,301
Other minority interest 171,079 168,586
- --------------------------------------------------------------------------
Total Minority Interest 344,380 341,887
- --------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, authorized 25,000,000 shares;
outstanding 2,875,000 Series C $2.875 cumulative
convertible, par value $1.00 per share,
(liquidation preference $143,750,000) 2,875 2,875
Common stock, par value $1.00 per share,
authorized 150,000,000 shares; outstanding
54,741,403 at September 30, 1996 and
54,435,823 at March 31, 1996 54,741 54,436
Capital in excess of par value 956,227 949,022
Deficit (342,693) (290,968)
Minimum pension liability (1,428) (1,428)
Net unrealized loss on investments (2,418) (1,875)
Currency translation adjustments (30,147) (27,542)
- --------------------------------------------------------------------------
Total Stockholders' Equity 637,157 684,520
- --------------------------------------------------------------------------
TOTAL $ 4,561,180 $4,387,251
==========================================================================
</TABLE>
5
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
<S> <C> <C> <C> <C>
9/30/96 9/30/95 9/30/96 9/30/95
--------- --------- ---------- ----------
(Unaudited)
(In thousands)
Revenues $ 806,898 $ 813,307 $1,681,030 $1,630,567
- ----------------------------------------------------------------------------------------------
Costs and Expenses:
Cost of operations (excluding
depreciation and amortization) 723,083 686,460 1,492,351 1,397,108
Depreciation and amortization 38,259 36,660 72,114 70,772
Selling, general and
administrative expenses 60,898 68,168 123,981 135,019
---------------------------------------------------------------------------------------------
822,240 791,288 1,688,446 1,602,899
- ----------------------------------------------------------------------------------------------
Operating Income (Loss) before Equity
in Income (Loss) of Investees (15,342) 22,019 (7,416) 27,668
Equity in Income (Loss) of Investees 23,864 (15) 28,308 33,164
- ----------------------------------------------------------------------------------------------
Operating Income 8,522 22,004 20,892 60,832
- ----------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 9,522 8,431 19,851 19,690
Interest expense (23,758) (21,376) (43,486) (42,914)
Minority interest (5,383) (5,516) (14,840) (9,146)
Other-net 4,124 1,437 2,552 (1,773)
- ----------------------------------------------------------------------------------------------
(15,495) (17,024) (35,923) (34,143)
- ----------------------------------------------------------------------------------------------
Income (Loss) before Provision for
(Benefit from) Income Taxes (6,973) 4,980 (15,031) 26,689
Provision for (Benefit from)
Income Taxes 5,457 (4,074) 5,223 8,803
- ----------------------------------------------------------------------------------------------
Net Income (Loss) $ (12,430) $ 9,054 $ (20,254) $ 17,886
==============================================================================================
Net Income (Loss) Applicable to
Common Stock (after Preferred
Stock Dividends) $ (14,497) $ 6,987 $ (24,387) $ 13,753
==============================================================================================
Net Income (Loss) per Common and
Common Equivalent Share
(Primary and Fully Diluted) $ (0.27) $ 0.13 $ (0.45) $ 0.25
==============================================================================================
Weighted Average Number of Common
and Common Equivalent Shares
Outstanding 54,694,402 54,359,639 54,603,746 54,386,373
==============================================================================================
Cash Dividends:
Per common share $ 0.25 $ 0.25 $ 0.50 $ 0.50
Per preferred share $ 0.72 $ 0.72 $ 1.44 $ 1.44
==============================================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SEPTEMBER 30, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
9/30/96 9/30/95
------- -------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (Loss) $ (20,254) $ 17,886
- -------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 72,114 70,772
Equity in income of investees,
less dividends (21,703) 15,431
Provision for (benefit from) deferred taxes 7,576 (1,719)
Other (10,266) (4,899)
Changes in assets and liabilities:
Accounts receivable (45,829) (103,538)
Net contracts in progress and advance billings (18,651) (89,911)
Accounts payable (2,279) (6,089)
Accrued and other current liabilities (50,012) (57,990)
Other, net 43,643 (28,110)
Proceeds from insurance for products liabilities claims 55,395 49,305
Payments of products liabilities claims (79,859) (74,112)
- -------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (70,125) (212,974)
- -------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition - (6,527)
Proceeds from sale and disposal of assets 20,141 17,908
Purchases of property, plant and equipment (59,158) (38,666)
Investment in asset held for lease - (9,802)
Purchases of investments (255,970) (304,920)
Sales and maturities of investments 68,486 652,904
Investments in equity investees (10,267) (4,609)
- -------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (236,768) 306,288
- -------------------------------------------------------------------------
</TABLE>
7
<PAGE>
CONTINUED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
9/30/96 9/30/95
-------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt $ (15,238) $(163,047)
Issuance of long-term debt 244,375 13,240
Increase in short-term borrowing 127,236 108,304
Dividends paid (31,394) (31,142)
Other (887) 979
- --------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 324,092 (71,666)
- --------------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 65 (3)
- --------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 17,264 21,645
- --------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 238,663 85,909
- --------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 255,927 $ 107,554
==========================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 39,058 $ 47,175
Income taxes (net of refunds) $ 15,084 $ 29,934
==========================================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
McDERMOTT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - BASIS OF PRESENTATION
McDermott International, Inc. is the parent company of the McDermott group of
companies, which includes J. Ray McDermott, S.A. ("JRM") and McDermott
Incorporated. Unless the context otherwise requires, hereinafter,
"International" will be used to mean the consolidated enterprise.
The accompanying unaudited condensed consolidated financial statements are
presented in U. S. Dollars, and have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. Such adjustments are of a normal,
recurring nature except for an asset impairment loss ($4,742,000, net of tax of
$2,553,000, or $0.09 per share) included in the three and six months ended
September 30, 1996; a favorable insurance adjustment ($12,000,000 or $0.22 per
share) in the three and six months ended September 30, 1995; a gain resulting
from the sale of two power purchase contracts ($20,047,000, net of tax of
$10,565,000, or $0.37 per share) included in the six months ended September 30,
1995. Certain amounts previously reported have been reclassified to conform
with the presentation at September 30, 1996. Operating results for the three
and six months ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1997. For
further information, refer to the consolidated financial statements and
footnotes thereto included in International's, annual report on Form 10-K for
the year ended March 31, 1996.
9
<PAGE>
NOTE 2 - PRODUCTS LIABILITY
At September 30, 1996, the estimated liability for pending and future non-
employee products liability asbestos claims was $764,127,000 (of which
approximately $220,000,000 had been asserted) and estimated insurance
recoveries were $650,603,000. Estimated liabilities for pending and future non-
employee products liability asbestos claims are derived from International's
claims history and constitute management's best estimate of such future costs.
Estimated insurance recoveries are based upon analysis of insurers providing
coverage of the estimated liabilities. Inherent in the estimate of such
liabilities and recoveries are expected trends in claim severity and frequency
and other factors, including recoverability from insurers, which may vary
significantly as claims are filed and settled. Accordingly, changes in
estimates could result in a material adjustment to operating results for any
fiscal quarter or year and the ultimate loss may differ materially from amounts
provided in the consolidated financial statements.
NOTE 3 - INVENTORIES
Consolidated inventories at September 30, 1996 and March 31, 1996 are summarized
below:
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
------------- ----------
(Unaudited)
(In thousands)
<S> <C> <C>
Raw Materials and Supplies $ 48,830 $ 47,457
Work in Progress 18,432 17,305
Finished Goods 6,816 12,830
- --------------------------------------------------------------------------
$ 74,078 $ 77,592
==========================================================================
</TABLE>
10
<PAGE>
NOTE 4 - SUMMARIZED INCOME STATEMENT INFORMATION OF AFFILIATES
The combined financial results of two of JRM's joint ventures, HeereMac and
McDermott-ETPM West, Inc., which are accounted for using the equity method, are
summarized below. These ventures were significant (as defined by applicable
Securities and Exchange Commission regulations) in fiscal year 1996.
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/96 9/30/95 9/30/96 9/30/95
------- ------- -------- -------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Revenues $ 214,404 $126,104 $ 385,757 $ 318,023
- ----------------------------------------------------------------------------------------------
Operating Income (Loss) $ 42,141 $ (1,274) $ 64,860 $ 4,338
- ----------------------------------------------------------------------------------------------
Income (Loss) before Income Taxes $ 45,542 $ (200) $ 46,255 $ 10,011
Provision for (Benefit from) Income Taxes 2,439 (1,355) 4,413 318
- ----------------------------------------------------------------------------------------------
Net Income $ 43,103 $ 1,155 $ 41,842 $ 9,693
==============================================================================================
Equity in Net Income $ 20,561 $ 891 $ 19,356 $ 4,873
==============================================================================================
</TABLE>
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
McDermott International, Inc. is the parent company of the McDermott group of
companies, which includes J. Ray McDermott, S.A. ("JRM") and McDermott
Incorporated. Unless the context otherwise requires, hereinafter
"International" will be used to mean the consolidated enterprise. A significant
portion of International's revenues and operating results are derived from its
foreign operations. As a result, International's operations and financial
results are affected by international factors, such as changes in foreign
currency exchange rates. International attempts to minimize its exposure to
changes in foreign currency exchange rates by attempting to match foreign
currency contract receipts with like foreign currency disbursements. To the
extent that International is unable to match the foreign currency receipts and
disbursements related to its contracts, it enters into forward exchange
contracts to hedge foreign currency transactions, which reduce the impact of
foreign exchange rate movements on operating results.
Management's discussion of revenues and operating income is presented on a
business unit basis as follows: the JRM business unit (includes the results of
operations of the marine construction services business); the B&W Operations
business unit (includes the operations of the Babcock & Wilcox Power Generation
and Government Groups); and the Industrial Operations business unit (includes
Engineering and Construction operations, barge construction, ship repair and
other industrial operations). Other business unit revenues include combining
adjustments and eliminations resulting from inter-business unit contracts.
Other business unit income (loss) includes certain adjustments which are not
allocated to the business units, including retiree benefit and legal costs as
well as the impact of combining adjustments on margins of inter-business unit
contracts. Business unit revenue and income (loss) for the three and six months
ended September 30, 1995 have been restated to reflect the reclassification of
certain operations to B&W Operations from the Industrial Operations business
unit; the allocation of certain expenses to the B&W Operations and the
Industrial Operations business units from Other; the allocation of certain
expenses from Business Unit Income (Loss) to Corporate General & Administrative
Expense; and to include gains and losses on asset sales and disposals to conform
with the presentation at September 30, 1996.
12
<PAGE>
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/96 9/30/95 9/30/96 9/30/95
-------- -------- ---------- ----------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
REVENUES
J. Ray McDermott, S.A. $ 368,708 $ 359,503 $ 758,305 $ 671,662
B&W Operations 350,429 333,652 696,058 711,648
Industrial Operations 117,132 128,780 269,579 265,411
Other (including Transfer Eliminations) (29,371) (8,628) (42,912) (18,154)
- ----------------------------------------------------------------------------------------------
TOTAL REVENUES $ 806,898 $ 813,307 $1,681,030 $1,630,567
==============================================================================================
OPERATING INCOME
Business Unit Income (Loss):
J. Ray McDermott, S.A. $ 7,852 $ 25,608 $ 29,500 $ 41,552
B&W Operations 11,220 (1,898) 13,084 1,528
Industrial Operations (10,346) (4,559) (15,444) (9,198)
Other (12,645) 11,558 (13,654) 10,483
- ----------------------------------------------------------------------------------------------
TOTAL BUSINESS UNIT
INCOME (LOSS) (3,919) 30,709 13,486 44,365
- ----------------------------------------------------------------------------------------------
Equity in Income (Loss) of Investees:
J. Ray McDermott, S.A. 22,853 (1,903) 24,151 (2,801)
B&W Operations 1,145 1,758 4,273 35,841
Industrial Operations (134) 130 (116) 124
- ----------------------------------------------------------------------------------------------
TOTAL EQUITY IN INCOME (LOSS)
OF INVESTEES 23,864 (15) 28,308 33,164
- ----------------------------------------------------------------------------------------------
Corporate General & Administrative
Expense (11,423) (8,690) (20,902) (16,697)
- ----------------------------------------------------------------------------------------------
TOTAL OPERATING INCOME $ 8,522 $ 22,004 $ 20,892 $ 60,832
==============================================================================================
</TABLE>
13
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1995
JRM's revenues increased $9,205,000 to $368,708,000, primarily due to higher
volume in North America, partially offset by lower activities in the North Sea
and lower leasing activities due to the sale of the DB101 and DB102 to the
HeereMac joint venture.
B&W Operations' revenues increased $16,777,000 to $350,429,000, primarily due to
higher revenues from the Power Generation Group's repair and alteration of
existing fossil fuel steam systems, plant enhancement projects, and replacement
nuclear steam generators for domestic customers manufactured at B&W's Cambridge,
Ontario location. In addition, the Government Group's commercial nuclear
environmental services had higher revenues. These increases were partially
offset by lower volume from fabrication and erection of fossil fuel steam and
environmental control systems and Canadian nuclear services.
Industrial Operations' revenues decreased $11,648,000 to $117,132,000, primarily
due to lower revenues from engineering and construction activities from this
business unit's Canadian and domestic operations. These decreases were
partially offset by higher barge construction activities in this business unit's
domestic operations and ship repair activities in its Mexican operations.
JRM's business unit income decreased $17,756,000 to $7,852,000, primarily due to
lower volume and margins on the Foinaven project, the completion of profitable
Offshore Pipelines, Inc. contracts in West Africa last year, lower leasing
activities due to the sale of the DB101 and DB102, and lower margins in the
Middle East. These decreases were partially offset by higher volume in North
America and improved margins in the Far East.
B&W Operations' business unit income increased $13,118,000 from a loss of
$1,898,000 to income of $11,220,000, primarily due to the Power Generation
Group's higher volume and margins on industrial boilers and replacement nuclear
steam generators and improved margins on repair and alteration of existing
fossil fuel steam systems. These increases were partially offset by lower
volume and margins on fabrication and erection of fossil fuel steam and
environmental control systems. In addition, there were higher volume and
margins from the Government Group's nuclear fuel assemblies and reactor
components for
14
<PAGE>
the U. S. Government and from commercial nuclear environmental services. These
increases were partially offset by lower volume and margins on other defense and
space-related projects (other than nuclear fuel assemblies and reactor
components).
Industrial Operations' business unit loss increased $5,787,000 to $10,346,000,
primarily due to cost overruns on the engineering, procurement and construction
contract for a cogeneration plant and cost overruns on domestic barge
construction operations.
Other business unit income decreased $24,203,000 from income of $11,558,000 to a
loss of $12,645,000, primarily due to a favorable insurance adjustment of
$12,000,000 in the prior period and an asset impairment loss of $7,295,000 in
the current period.
JRM's equity in income (loss) of investees increased $24,756,000 from a loss of
$1,903,000 to income of $22,853,000, primarily due to the improved operating
results from the HeereMac joint venture. The revenues of the HeereMac and the
McDermott-ETPM West, Inc. joint ventures increased from $126,104,000 to
$214,404,000 primarily due to increased volume in the North Sea and North
America, partially offset by decreased volume in the Far East and West Africa.
Equity in income of investees from these two joint ventures increased from
$891,000 to $20,561,000 primarily as a result of higher volume and margins and
foreign currency transaction gains. There was also higher interest expense as a
result of debt issued by the HeereMac joint venture to finance the purchase of
major marine vessels it had been chartering, including JRM's DB101 and DB102.
Equity in income of investees in the current period also includes income of
$2,168,000 from the amortization of the deferred gain resulting from the sale of
the DB101 and DB102.
Interest income increased $1,091,000 to $9,522,000, primarily due to interest on
the promissory note of $105,000,000 received as part of the consideration from
the sale of the DB101 and DB102.
Interest expense increased $2,382,000 to $23,758,000, primarily due to changes
in debt obligations and interest rates prevailing thereon.
15
<PAGE>
Other-net increased $2,687,000 to $4,124,000. This increase is primarily due to
increases in certain reimbursed financing costs and foreign currency transaction
gains in the current period compared to foreign currency transaction losses in
the prior period.
The provision for income taxes increased $9,531,000 from a benefit of $4,074,000
to a provision of $5,457,000, while income (loss) before provision for income
taxes decreased $11,953,000 from income of $4,980,000 to a loss of $6,973,000.
The increase in the provision for income taxes is due in part to a reduction in
the provision in the prior period resulting from the reappraisal of tax
liabilities in certain foreign tax jurisdictions. In addition, International
operates in many different tax jurisdictions. Within these jurisdictions, tax
provisions vary because of nominal rates, allowability of deductions, credits
and other benefits, and even tax basis (for example, revenues versus income).
These variances, along with variances in the mix of income within jurisdictions,
are often responsible for shifts in the effective tax rate. As a result of
these factors, the provision for income taxes was 78% of pretax loss for the
three months ended September 30, 1996 compared to a benefit from income taxes of
82% of pretax income for the three months ended September 30, 1995.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1996 VS. SIX MONTHS ENDED
SEPTEMBER 30, 1995
JRM's revenues increased $86,643,000 to $758,305,000, primarily due to higher
volume in North America, partially offset by lower activities in the North Sea
and lower leasing activities due to the sale of the DB101 and DB102 to the
HeereMac joint venture.
B&W Operations' revenues decreased $15,590,000 to $696,058,000, primarily due to
lower revenues from the Power Generation Group's fabrication and erection of
fossil fuel steam and environmental control systems, from Canadian nuclear
services, and from replacement nuclear steam generators for domestic customers
manufactured at B&W's Cambridge, Ontario location. These decreases were
partially offset by higher revenues from the repair and alteration of existing
fossil fuel steam systems and plant enhancement projects. In addition, the
Government Group's commercial nuclear environmental services had higher
revenues. These were partially offset by lower revenues from defense and space-
related products (other than nuclear fuel assemblies and reactor components).
16
<PAGE>
Industrial Operations' revenues increased $4,168,000 to $269,579,000, primarily
due to higher volume from engineering and construction activities in this
business unit's Canadian operations and higher barge construction activities in
this business unit's domestic operations and ship repair activities in its
Mexican operations. These increases were partially offset by lower revenues
from engineering and construction activities in this business unit's domestic
operations.
JRM's business unit income decreased $12,052,000 to $29,500,000, primarily due
to lower volume and margins on the Foinaven project, the completion of
profitable Offshore Pipelines, Inc. contracts in West Africa last year and lower
leasing activities due to the sale of the DB101 and DB102. These decreases were
partially offset by higher volume in North America and improved margins in the
Far East.
B&W Operations' business unit income increased $11,556,000 to $13,084,000,
primarily due to improved margins on the repair and alteration of existing
fossil fuel steam systems and higher volume and margins on industrial boilers.
These increases were offset by lower volume and margins on the fabrication and
erection of fossil fuel steam and environmental control systems, lower volume on
replacement nuclear steam generators for domestic customers and lower margins on
plant enhancement projects. In addition, there were higher volume and margins
from the Government Group's nuclear fuel assemblies and reactor components for
the U. S. Government, and from commercial nuclear environmental services and
lower sales and marketing expenses. These increases were partially offset by
lower volume and margins from defense and space-related products (other than
nuclear fuel assemblies and reactor components).
Industrial Operations' business unit loss increased $6,246,000 to $15,444,000,
primarily due to cost overruns on the engineering, procurement and construction
contract for a cogeneration plant and cost overruns on domestic barge
construction operations.
Other business unit income decreased $24,137,000 from income of $10,483,000 to a
loss of $13,654,000, primarily due to a favorable insurance adjustment of
$12,000,000 in the prior period and an asset impairment loss of $7,295,000 in
the current period.
17
<PAGE>
JRM's equity in income (loss) of investees increased $26,952,000 from a loss of
$2,801,000 to income of $24,151,000, primarily due to the improved operating
results from the HeereMac joint venture. The revenues of the HeereMac and
McDermott-ETPM West, Inc. joint ventures increased from $318,023,000 to
$385,757,000 primarily due to increased volume in the North Sea and North
America, partially offset by decreased volume in the Far East and West Africa.
Equity in income of investees from these two joint ventures increased from
$4,873,000 to $19,356,000 primarily as a result of higher volume and margins.
There was also higher interest expense as a result of debt issued by the
HeereMac joint venture to finance the purchase of major marine vessels it had
been chartering, including JRM's DB101 and DB102. Equity in income of investees
in the current period also includes income of $4,313,000 from the amortization
of the deferred gain resulting from the sale of the DB101 and DB102.
B&W Operations' equity in income of investees decreased $31,568,000 to
$4,273,000. This represents the results of approximately fifteen active joint
ventures. The decrease is almost entirely due to a nonrecurring equity income
gain of $30,612,000 resulting from the sale of power purchase contracts back to
a local utility in June 1995.
Interest income increased $161,000 to $19,851,000. This increase is primarily
due to interest on the promissory note of $105,000,000 received as part of the
consideration from the sale of the DB101 and DB102, offset by a decrease
resulting from a reduction in investments in government obligations and other
investments.
Interest expense increased $572,000 to $43,486,000, primarily due to changes in
debt obligations and interest rates prevailing thereon.
Minority interest expense increased $5,694,000 to $14,840,000, primarily due to
minority shareholder participation in the improved operating results of JRM and
the McDermott-ETPM joint venture.
Other-net increased $4,325,000 from expense of $1,773,000 to income of
$2,552,000. This increase is primarily due to increases in certain reimbursed
financing costs and lower bank fees and discounts on the sales of certain
accounts receivable.
18
<PAGE>
The provision for income taxes decreased $3,580,000 to $5,223,000, while income
(loss) before provision for income taxes decreased from income of $26,689,000 to
a loss of $15,031,000. The decrease in the provision for income taxes is
primarily due to a decrease in income, offset, in part, due to a reduction in
the provision in the prior period resulting from the reappraisal of tax
liabilities in certain foreign tax jurisdictions. In addition, International
operates in many different tax jurisdictions. Within these jurisdictions, tax
provisions vary because of nominal rates, allowability of deductions, credits
and other benefits, and even tax basis (for example, revenues versus income).
These variances, along with variances in the mix of income within jurisdictions,
are often responsible for shifts in the effective tax rate. As a result of
these factors, the provision for income taxes was 35% of pretax loss for the six
months ended September 30, 1996 compared to a provision for income taxes of 33%
of pretax income for the six months ended September 30, 1995.
<TABLE>
<CAPTION>
Backlog
- -------
9/30/96 3/31/96
------- -------
(In thousands)
<S> <C> <C>
Business Unit Backlog:
J. Ray McDermott, S.A. $ 1,450,003 $ 977,896
B&W Operations 2,131,288 2,164,507
Industrial Operations 340,117 317,401
Other (including Transfer Eliminations) (25,893) (60,408)
- ---------------------------------------------------------------------------
TOTAL BACKLOG $ 3,895,515 $3,399,396
===========================================================================
</TABLE>
In general, International's business units are capital intensive and rely on
large contracts for a substantial amount of their revenues.
JRM's consolidated backlog increased to $1,450,003,000 at September 30, 1996
from $977,896,000 at March 31, 1996, and backlog relating to contracts to be
performed by JRM's unconsolidated joint ventures (not included above) increased
to $1,474,000,000 at September 30, 1996 from $1,374,000,000 at March 31, 1996.
JRM believes its markets are beginning to emerge from the difficult competitive
environment that has put pressure on margins in recent years. JRM also believes
that these strong markets and increased
19
<PAGE>
backlog suggest improving financial results over the longer term. However, in
this historically seasonal business, JRM does not expect second half results to
be as profitable as in the first half. JRM does expect asset sales in the
second half to partially offset the seasonal results.
B&W Operations' backlog at September 30, 1996 was $2,131,288,000 compared to
$2,164,507,000 at March 31, 1996. At September 30, 1996 this business unit's
backlog with the U.S. Government was $678,141,000 (of which $45,913,000 had not
been funded) and included orders for nuclear fuel assemblies and reactor
components for the U.S. Navy. This business unit's foreign markets for
industrial and utility boilers remain strong and the U. S. market for
replacement nuclear steam generators is expected to continue to make significant
contributions to operating income in the foreseeable future. However, domestic
utility markets remain weak.
Industrial Operations' backlog at September 30, 1996 was $340,117,000, compared
to $317,401,000 at March 31, 1996, and included a four year backlog for the
construction of hopper barges at its domestic shipyard. At September 30, 1996,
this business unit's backlog with the U.S. Government was $45,979,000 (of which
$3,094,000 had not been funded).
Liquidity and Capital Resources
- -------------------------------
Unless the context otherwise requires, hereinafter the "Delaware Company" will
be used to mean McDermott Incorporated, a Delaware corporation which is a
subsidiary of International, and the Delaware Company's consolidated
subsidiaries, which include The Babcock & Wilcox Company ("B&W").
During the six months ended September 30, 1996, International's cash and cash
equivalents increased $17,264,000 to $255,927,000 and total debt increased
$355,106,000 to $1,165,620,000 due to increases in short and long-term
borrowings of $127,236,000 and $244,375,000 (which includes the issuance of
JRM's 9.375% Senior Subordinated Notes), respectively. During this period,
International used cash of $70,125,000 in operating activities; $59,158,000 for
additions to property, plant and
20
<PAGE>
equipment; $187,484,000, net, for purchases of investments; $31,394,000 for
dividends on International's common and preferred stock; and $15,238,000 for
repayment of long-term debt and received cash proceeds of $20,141,000 from the
sale and disposal of assets.
Pursuant to an agreement with a majority of its principal insurers,
International negotiates and settles products liability asbestos claims from
non-employees and bills these amounts to the appropriate insurers. As a result
of collection delays inherent in this process, reimbursement is usually delayed
for three months or more. While the number of claims received had declined
during the last six months of fiscal year 1996, they have increased during the
first six months of fiscal year 1997 but not to the levels experienced from
October 1994 to September 1995. Management is currently investigating and
evaluating the basis for this increase in the number of claims. The average
amount of these claims (historical average of approximately $5,500 per claim
over the last three years) has continued to rise. Claims paid during the six
months ended September 30, 1996 were $79,861,000, of which $71,790,000 has been
recovered or is due from insurers. At September 30, 1996, receivables of
$79,618,000 were due from insurers for reimbursement of settled claims including
$17,059,000 due from certain insurers which have refused to reimburse B&W for
amounts paid by B&W to settle claims under applicable policies. B&W has filed a
lawsuit against these insurers seeking reimbursement of these claims and expects
to prevail in this litigation which may continue beyond fiscal year 1997 unless
a settlement is reached. B&W will require that any settlement reimburse B&W for
all amounts billed to date and any future payments up to full policy limits. The
increase in amounts classified current for products liability asbestos claims
and insurance recoverable at September 30, 1996 reflects management's intention
to reduce the level of unpaid asserted claims over the next several quarters
subject to insurers' concurrence. Estimated liabilities for pending and future
non-employee products liability asbestos claims are derived from International's
claims history and constitute management's best estimate of such future costs.
Estimated insurance recoveries are based upon analysis of insurers providing
coverage of the estimated liabilities. Inherent in the estimate of such
liabilities and recoveries are expected trends in claim severity and frequency
and other factors, including recoverability from insurers, which may vary
significantly as claims are filed and settled.
21
<PAGE>
Accordingly, the ultimate loss may differ materially from amounts provided in
the consolidated financial statements. Settlement of the liability is expected
to occur over approximately the next 25 years. The collection delays (including
the lawsuit mentioned above), and the amount of claims paid for which insurance
recovery is not probable, have not had a material adverse effect on
International's liquidity, and management believes, based on information
currently available, that they will not have a material adverse effect on
liquidity in the future.
Expenditures for property, plant and equipment increased $20,492,000 to
$59,158,000 for the six months ended September 30, 1996 compared with the same
period last year. In addition to maintaining existing facilities and equipment,
these expenditures included $4,887,000 for the purchase of a cable lay vessel
and modifications thereon which operates in the North Sea; $4,167,000 for cable
lay equipment, which includes a deep bury plow used in the installation of fiber
optic cable; and $9,613,000 to upgrade a marine barge operating in the Gulf of
Mexico.
At September 30, and March 31, 1996, B&W had sold, with limited recourse, an
undivided interest in a designated pool of qualified accounts receivable of
approximately $87,000,000 and $107,000,000, respectively, under the terms of an
agreement with a U.S. bank. The maximum sales limit available under the
agreement, which is renewed annually, is $140,000,000. Depending on the amount
of qualified accounts receivable available for the pool the amount sold to the
bank can vary (but not greater than the maximum sales limit available) from time
to time.
At September 30, and March 31, 1996, International had available to it various
uncommitted short-term lines of credit totaling $433,807,000 and $439,610,000,
respectively. Borrowings against these lines of credit at September 30 and
March 31, 1996 were $252,175,000 and $149,067,000, respectively. In addition,
B&W had available to it a $150,000,000 unsecured and committed revolving credit
facility. Borrowings against this facility at September 30 and March 31, 1996
were $75,000,000 and $50,000,000, respectively. It is a condition to borrowing
under this revolving credit facility that the borrower's tangible net worth,
debt to capitalization, and interest coverage as defined in the agreement meet
or exceed certain covenant requirements. JRM also had an unsecured and
committed revolving credit facility which contains a debt to
22
<PAGE>
capitalization covenant which limit's its incremental borrowing capacity to
$2,600,000 at September 30, 1996. There were no borrowings outstanding on
this facility at September 30 or March 31, 1996. While JRM has various
committed short-term lines of credit with limits in excess of current borrowings
($43,559,000 at September 30, 1996), borrowings against these short-term lines
is also limited to an additional $2,600,000. This limitation is not expected to
impact the liquidity of JRM, primarily because of the availability of
$137,842,000 in cash and cash equivalents. In addition, JRM is restricted, as
a result of the consolidated tangible net worth covenant in this agreement, to
pay cash dividends to its public shareholders or to transfer funds through cash
dividends or through unsecured loans or investments to McDermott International,
Inc. and its subsidiaries. At September 30, 1996, approximately $23,000,000
of JRM's net assets were not subject to this restriction.
The Delaware Company is restricted, as a result of covenants in certain credit
agreements, in its ability to transfer funds to McDermott International, Inc.
and its subsidiaries through cash dividends or through unsecured loans or
investments. At September 30, 1996, substantially all of the net assets of the
Delaware Company were subject to such restrictions. It is not expected that
these restrictions will have any significant effect on McDermott International
Inc.'s liquidity.
International maintains an investment portfolio of government obligations and
other investments. The fair value of short-term investments and the long-term
portfolio at September 30, 1996 was $432,253,000. At September 30, 1996,
approximately $115,494,000 fair value of these investments were pledged to
secure a letter of credit in connection with a long-term loan and certain
reinsurance agreements.
Working capital decreased $128,794,000 from $331,986,000 at March 31, 1996 to
$203,192,000 at September 30, 1996 due in part to the current classification of
JRM's 12.875% Guaranteed Senior Notes as JRM plans to call the Notes for
redemption in the second quarter of fiscal year 1998. During the September
quarter, JRM issued $250,000,000 principal amount of 9.375% Senior Subordinated
Notes due 2006 and received net proceeds of $244,375,000 which were used
primarily to repay intercompany indebtedness (including interest) of
approximately $239,000,000 owed to McDermott
23
<PAGE>
International, Inc. McDermott International, Inc. used $50,000,000 of the
proceeds to reduce short-term debt and invested the remainder of the proceeds in
its investment portfolio. During the remainder of fiscal year 1997,
International expects to obtain funds to meet working capital, capital
expenditure and debt maturity requirements from operating activities, sales of
non-strategic assets and borrowings under its short-term lines of credit.
Leasing agreements for equipment, which are short-term in nature, are not
expected to impact International's liquidity or capital resources. Also during
the September quarter, the sale of certain equipment to the HeereMac joint
venture was completed. Prior to this sale, JRM had received $30,000,000 as a
deposit in March 1996.
International has provided a valuation allowance for deferred tax assets which
cannot be realized through carrybacks and future reversals of existing taxable
temporary differences. Management believes that remaining deferred tax assets
in all other tax jurisdictions are realizable through carrybacks and future
reversals of existing taxable temporary differences, and, if necessary, the
implementation of tax planning strategies involving sales of appreciated assets.
A major uncertainty that affects the ultimate realization of deferred tax assets
is the possibility of declines in value of appreciated assets involved in
identified tax planning strategies. This factor has been considered in
determining the valuation allowance. Management will continue to assess the
adequacy of the valuation allowance on a quarterly basis.
On October 7, 1996, McDermott International, Inc. announced that its board of
directors has directed management to begin to implement a series of steps to
improve International's financial and operating performance. Management has
been directed to focus International on its core business lines and dispose of
non-core businesses and underperforming assets. Core business lines include the
power generation and government operations of B&W and the marine construction
operations of JRM. Management was also directed to realign the operations of
B&W's Power Generation Group consistent with the current demands of the
worldwide power generation market. This is expected to include the
rationalization of manufacturing overcapacity and continued reduction in
personnel. Finally, management was directed to continue efforts to reduce
personnel and other costs at the operating and corporate headquarters of both
International and JRM. Although
24
<PAGE>
business and asset disposal plans associated with this directive have not been
finalized, it is anticipated that these disposals will negatively impact near-
term operating results, while having a positive long-term impact on operations.
It is also anticipated that these disposals will have a positive impact on
liquidity, both upon disposition and long-term.
At the November 7, 1996 Board of Directors Meeting, McDermott International,
Inc.'s quarterly dividend on its common stock was reduced from $0.25 per share
to $0.05 per share.
New Accounting Standard
- -----------------------
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities," effective for
transactions occurring after December 31, 1996. SFAS No. 125 established
accounting and reporting standards for transfers and servicing of financial
assets and extinguishment of liabilities. This statement also provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. International has not yet
finalized its review of the impact of this statement, but it is not expected to
have a material impact on the consolidated financial statements.
25
<PAGE>
PART II
MCDERMOTT INTERNATIONAL, INC.
OTHER INFORMATION
-----------------
No information is applicable to Part II for the current quarter, except as noted
below:
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Stockholders held on August 6, 1996, the following
matters were submitted to McDermott International, Inc.'s ("International")
stockholders with voting as follows:
(a) The election of four directors to Class II of the Board for a three year
term:
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C> <C>
Theodore H. Black 46,350,376 721,771
John F. Bookout 46,601,814 470,333
J. Howard Macdonald 46,612,686 459,461
William McCollam, Jr. 46,611,069 461,078
</TABLE>
Messrs. Thomas D. Barrow, Philip J. Burguieres, Brock A. Hattox, John W.
Johnstone, Jr., James L. Dutt, Robert E. Howson and John N. Turner also
continued as directors immediately after the meeting, subsequent to which Mr.
Hattox resigned and the Board appointed Richard E. Woolbert as a director
effective September 19, 1996.
(b) a proposal to approve International's 1996 Officer Long-Term Incentive
Plan: 31,937,551 votes for, 14,349,585 votes against and 785,011
abstentions, with broker non-votes not applicable.
(c) A proposal to retain Ernst & Young LLP as International's independent
auditors for the fiscal year ending March 31, 1997: 46,947,353 votes for,
67,320 votes against and 57,474 abstentions, with broker non-votes not
applicable.
26
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 - Calculation of Earnings (Loss) Per Common and Common
Equivalent Share
27 - Financial Data Schedule
(b) Reports on Form 8-K
There were no current reports on Form 8-K filed during the three
months ended September 30, 1996.
Signatures
27
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
McDERMOTT INTERNATIONAL, INC.
Date: November 11, 1996 By: /s/ Daniel R. Gaubert
-------------------------------
(SIGNATURE)
Daniel R. Gaubert
Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized
Representative)
28
<PAGE>
EXHIBIT INDEX
Exhibit Description
11 Calculation of Earnings (Loss) per Common and Common Equivalent Share
27 Financial Data Schedule
29
<PAGE>
EXHIBIT 11
MCDERMOTT INTERNATIONAL, INC.
CALCULATION OF EARNINGS (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except shares and per share amounts)
PRIMARY AND FULLY DILUTED
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
---------------------- ---------------------
<S> <C> <C> <C> <C>
9/30/96 9/30/95 9/30/96 9/30/95
-------- -------- ------- --------
(Unaudited)
Net Income (Loss) $(12,430) $ 9,054 $(20,254) $ 17,886
Less dividend requirements of preferred
stock, Series C (2,067) (2,067) (4,133) (4,133)
- -----------------------------------------------------------------------------------------------------------------------
Net income (loss) for primary computation $(14,497) $ 6,987 $(24,387) $ 13,753
=======================================================================================================================
Weighted average number of common
shares outstanding during the period 54,694,402 54,197,329 54,603,746 54,107,556
Common stock equivalents of stock options
and stock appreciation rights based on
"treasury stock" method - 162,310 - 278,817
- -----------------------------------------------------------------------------------------------------------------------
Weighted average number of common
shares outstanding during the period 54,694,402 54,359,639 54,603,746 54,386,373
=======================================================================================================================
Net Income (loss) per common and
common equivalent share: /(1)/ $ (0.27) $ 0.13 $ (0.45) $ 0.25
=======================================================================================================================
/(1)/ Net Income (Loss) per common and common equivalent share assuming full
dilution are the same for the periods presented.
</TABLE>
30
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCDERMOTT
INTERNATIONAL'S SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 255,927
<SECURITIES> 2,425
<RECEIVABLES> 598,311
<ALLOWANCES> 85,081
<INVENTORY> 567,633
<CURRENT-ASSETS> 1,874,482
<PP&E> 1,883,573
<DEPRECIATION> 1,205,691
<TOTAL-ASSETS> 4,561,180
<CURRENT-LIABILITIES> 1,671,290
<BONDS> 694,001
0
2,875
<COMMON> 54,741
<OTHER-SE> 579,541
<TOTAL-LIABILITY-AND-EQUITY> 4,561,180
<SALES> 1,681,030
<TOTAL-REVENUES> 1,681,030
<CGS> 1,688,446
<TOTAL-COSTS> 1,688,446
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,486
<INCOME-PRETAX> (15,031)
<INCOME-TAX> 5,223
<INCOME-CONTINUING> (20,254)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,254)
<EPS-PRIMARY> (0.45)
<EPS-DILUTED> (0.45)
</TABLE>
