<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, 1997
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 OR 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 24, 1997 WAS 56,003,450.
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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
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheet
September 30, 1997 and March 31, 1997 4
Condensed Consolidated Statement of Income (Loss)
Three and Six Months Ended September 30, 1997 and 1996 6
Condensed Consolidated Statement of Cash Flows
Six Months Ended September 30, 1997 and 1996 8
Notes to Condensed Consolidated Financial Statements 10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 28
Item 6 - Exhibits and Reports on Form 8-K 29
SIGNATURES 30
Exhibit 11 - Calculation of Earnings (Loss) Per
Common and Common Equivalent Share 32
Exhibit 27 - Financial Data Schedule 34
2
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PART I
McDERMOTT INTERNATIONAL, INC.
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
3
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
9/30/97 3/31/97
--------- --------
(Unaudited)
(In thousands)
Current Assets:
Cash and cash equivalents $ 442,714 $ 257,783
Short-term investments in debt securities 98 75,946
Accounts receivable - trade 525,979 547,082
Accounts receivable - unconsolidated affiliates 74,455 66,074
Accounts receivable - other 197,324 185,138
Insurance recoverable - current 175,442 183,000
Contracts in progress 307,681 326,512
Inventories 62,328 66,322
Deferred income taxes 66,623 60,866
Other current assets 33,131 65,604
- -------------------------------------------------------------------------
Total Current Assets 1,885,775 1,834,327
- -------------------------------------------------------------------------
Property, Plant and Equipment, at Cost: 1,765,920 1,764,300
Less accumulated depreciation 1,201,851 1,164,555
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Net Property, Plant and Equipment 564,069 599,745
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Investments in Debt Securities:
Government obligations 340,750 291,538
Other investments 89,747 118,057
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Total Investments 430,497 409,595
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Insurance Recoverable 642,404 720,913
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Excess of Cost Over Fair Value of Net Assets
of Purchased Businesses Less Accumulated
Amortization of $173,964,000 at September 30,
1997 and $158,523,000 at March 31, 1997 399,557 423,095
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Prepaid Pension Costs 316,187 303,825
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Other Assets 305,011 307,982
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TOTAL $4,543,500 $4,599,482
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See accompanying notes to condensed consolidated financial statements.
4
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LIABILITIES AND STOCKHOLDERS' EQUITY
9/30/97 3/31/97
---------- ----------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 176,036 $ 451,857
Accounts payable 307,677 268,274
Environmental and products liabilities - current 209,401 211,841
Accrued employee benefits 109,192 106,498
Advance billings on contracts 284,952 200,163
Other current liabilities 415,648 370,123
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Total Current Liabilities 1,502,906 1,608,756
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Long-Term Debt 623,754 667,174
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Accumulated Postretirement Benefit Obligation 395,818 400,445
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Environmental and Products Liabilities 806,599 903,379
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Other Liabilities 251,509 250,885
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Contingencies
- -------------------------------------------------------------------------------
Minority Interest:
Subsidiary's preferred stocks 166,249 170,983
Other minority interest 182,174 160,859
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Total Minority Interest 348,423 331,842
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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
55,800,670 at September 30, 1997 and
54,936,956 at March 31, 1997 55,801 54,937
Capital in excess of par value 985,310 962,445
Deficit (399,821) (538,163)
Minimum pension liability (2,148) (2,148)
Net unrealized loss on investments 26 (4,132)
Currency translation adjustments (27,552) (38,813)
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Total Stockholders' Equity 614,491 437,001
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TOTAL $4,543,500 $4,599,482
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5
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS)
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- --------- ---------
(Unaudited)
(In thousands)
<S> <C> <C> <C> <C>
Revenues $920,051 $800,921 $1,848,138 $1,673,730
- --------------------------------------------------------------------------------------
Costs and Expenses:
Cost of operations (excluding
depreciation and amortization) 771,859 715,093 1,558,711 1,483,508
Depreciation and amortization 39,378 38,259 77,701 72,114
Selling, general and
administrative expenses 54,658 61,357 110,227 124,552
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865,895 814,709 1,746,639 1,680,174
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Gain (Loss) on Asset Disposals
and Impairments - Net 28,215 (860) 125,596 575
- --------------------------------------------------------------------------------------
Operating Income (Loss) before Equity
in Income (Loss) of Investees 82,371 (14,648) 227,095 (5,869)
Equity in Income (Loss) of Investees 6,406 (2,524) 6,476 (5,974)
- --------------------------------------------------------------------------------------
Operating Income (Loss) 88,777 (17,172) 233,571 (11,843)
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Other Income (Expense):
Interest income 12,382 9,522 24,878 19,851
Interest expense (19,188) (23,758) (44,393) (43,486)
Minority interest (9,701) 4,555 (16,394) (2,233)
Other-net (149) 3,430 1,497 1,005
- --------------------------------------------------------------------------------------
(16,656) (6,251) (34,412) (24,863)
- --------------------------------------------------------------------------------------
Income (Loss) before Provision for
Income Taxes 72,121 (23,423) 199,159 (36,706)
Provision for Income Taxes 33,960 4,377 51,138 3,047
- --------------------------------------------------------------------------------------
Net Income (Loss) $ 38,161 $(27,800) $ 148,021 $ (39,753)
- --------------------------------------------------------------------------------------
</TABLE>
6
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<TABLE>
<CAPTION>
CONTINUED
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Earnings (Loss) per Common and
Common Equivalent Share:
(In thousands, except shares and per share amounts)
Primary
Net income (loss) applicable to
common stock (after preferred
stock dividends) $ 36,094 $ (29,867) $ 143,888 $ (43,886)
- -------------------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share $ 0.64 $ (0.55) $ 2.56 $ (0.80)
- -------------------------------------------------------------------------------------------
Weighted average number of
common equivalent shares 56,808,206 54,689,791 56,122,767 54,598,738
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Fully Diluted
Net income (loss) applicable to
common stock (after preferred
stock dividends) $ 39,711 $ (29,867) $ 151,121 $ (43,886)
- -------------------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share $ 0.62 $ (0.55) $ 2.38 $ (0.80)
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Weighted average number of
common equivalent shares 64,124,059 54,689,791 63,559,152 54,598,738
- -------------------------------------------------------------------------------------------
Cash Dividends:
Per common share $ 0.05 $ 0.25 $ 0.10 $ 0.50
Per preferred share $ 0.72 $ 0.72 $ 1.44 $ 1.44
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
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McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SEPTEMBER 30, 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED
9/30/97 9/30/96
------- -------
(Unaudited)
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 148,021 $(39,753)
- --------------------------------------------------------------------------------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 77,701 72,114
Equity in income or loss of investees,
less dividends (914) 12,579
Gain on asset disposals and
impairments - net (125,596) (575)
Provision for deferred taxes 2,032 7,576
Other 12,458 (2,395)
Changes in assets and liabilities:
Accounts receivable (10,971) (45,829)
Net contracts in progress and advance billings 118,465 (18,651)
Accounts payable 46,529 (2,279)
Accrued and other current liabilities 34,382 (50,012)
Other, net 18,070 21,564
Proceeds from insurance for products liabilities claims 68,944 55,395
Payments of products liabilities claims (94,554) (79,859)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 294,567 (70,125)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (24,479) (59,158)
Purchases of investments (383,284) (255,970)
Sales and maturities of investments 444,030 68,486
Proceeds from asset disposals 174,277 20,141
Investment in equity investees (3,363) (10,267)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 207,181 (236,768)
- --------------------------------------------------------------------------------
8
<PAGE>
CONTINUED
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED
9/30/97 9/30/96
------- -------
(Unaudited)
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt $(125,370) $(15,238)
Issuance of long-term debt - 244,375
Increase (decrease) in short-term borrowing (192,590) 127,236
Issuance of common stock 15,932 190
Dividends paid (9,637) (31,394)
Repurchase of subsidiary's preferred stock (4,513) -
Other 3,005 (1,077)
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (313,173) 324,092
- --------------------------------------------------------------------------------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (3,644) 65
- --------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 184,931 17,264
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 257,783 238,663
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 442,714 $255,927
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 50,098 $ 39,058
Income taxes (refunds)- net $ (16,803) $ 15,084
- --------------------------------------------------------------------------------
See accompanying notes to condensed consolidated financial statements.
9
<PAGE>
MCDERMOTT INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
McDermott International, Inc. ("McDermott International") 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 a gain of $33,072,000 from the sale of
International's interest in Universal Fabricators Incorporated during the three
and six months ended September 30, 1997, a gain of $96,059,000 from the sale of
International's interest in Sakhalin Energy Investment Company, Ltd. during the
six months ended September 30, 1997; and an asset impairment loss of $7,295,000
included in the three and six months ended September 30, 1996. Operating
results for the three and six months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1998. Results for the three and six months ended September 30, 1996
have been restated to reflect the change in fiscal year 1997 from the equity to
the cost method of accounting for International's investment in the HeereMac
joint venture. For further information, refer to the consolidated financial
statements and footnotes thereto included in McDermott International, Inc.'s
annual report on Form 10-K for the fiscal year ended March 31, 1997.
10
<PAGE>
NOTE 2 - PRODUCTS LIABILITY
At September 30, 1997, the estimated liability for pending and future non-
employee products liability asbestos claims was $988,228,000 (of which less than
$276,000,000 had been asserted) and estimated insurance recoveries were
$817,846,000. 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 an 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
Inventories at September 30, 1997 and March 31, 1997 are summarized below:
September 30, March 31,
1997 1997
---- ----
(Unaudited)
(In thousands)
Raw Materials and Supplies $ 47,523 $ 50,823
Work in Progress 7,727 8,498
Finished Goods 7,078 7,001
- --------------------------------------------------------------------------------
$ 62,328 $ 66,322
- --------------------------------------------------------------------------------
NOTE 4 - INVESTIGATIONS
McDermott International and JRM are conducting an internal investigation, with
the assistance of outside counsel, of allegations of wrongdoing by a limited
number of former employees of McDermott International and JRM and by others.
McDermott International and JRM notified the appropriate authorities of their
investigation in April 1997. In June 1997, McDermott International received a
federal grand jury subpoena for documents relating principally to an
investigation of possible anti-competitive activity in the heavy-lift
11
<PAGE>
barge service business of JRM and the HeereMac joint venture. In October 1997,
McDermott International received, from the same grand jury, a subpoena for
documents relating principally to an investigation of possible anti-competitive
activity in the marine construction service business of the Middle East joint
venture between JRM and ETPM. In July 1997, McDermott International received an
informal request from the Securities and Exchange Commission for the voluntary
production of documents. McDermott International and JRM are cooperating with
the authorities. The allegations which are the subject of the internal
investigation, if true, and the outcome of the grand jury proceedings, could
result in civil and/or criminal liability. At this time, McDermott International
and JRM do not have sufficient information to predict the ultimate outcome of
this matter.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
McDermott International, Inc. ("McDermott International") 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 it is unable to match the foreign currency receipts and
disbursements related to its contracts, International enters into forward
exchange contracts to hedge foreign currency transactions, which reduces 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: Marine Construction Services (includes the
results of operations of JRM); Power Generation Systems (includes the results
of operations of the Babcock & Wilcox Power Generation Group); Government
Operations (includes the results of operations of BWX Technologies, Inc.,
formerly, the Babcock & Wilcox Government Group) and Other (includes the
results of operations of Engineering and Construction operations, and
Shipbuilding operations, other non-core business operations and certain
adjustments, which are not allocated to the business units). The results of
operations for the three and six months ended September 30, 1996 have been
restated to reflect the reclassification of certain operations from B&W
Operations to Power Generation Systems and Government Groups and Marine
Construction Services business unit to Other to conform with the presentation at
September 30, 1997. Results for the three and six months ended September 30,
1996 have also been restated to reflect the discontinuance of the equity method
of accounting for International's investment in the HeereMac joint venture, and
to include gains and losses on asset disposals and impairments in Operating
Income.
13
<PAGE>
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
-------- -------- -------- --------
(Unaudited)
(In thousands)
REVENUES
Marine Construction Services $494,175 $368,055 $ 958,757 $ 757,244
Power Generation Systems 259,022 255,935 544,059 512,185
Government Operations 80,550 90,326 164,072 179,233
Other 96,196 96,443 199,457 246,100
Eliminations (9,892) (9,838) (18,207) (21,032)
- --------------------------------------------------------------------------------
TOTAL REVENUES $920,051 $800,921 $1,848,138 $1,673,730
- --------------------------------------------------------------------------------
OPERATING INCOME
Business Unit Income (Loss):
Marine Construction Services $ 39,242 $ 7,765 $ 65,526 $ 29,746
Power Generation Systems 13,206 (430) 32,236 (4,748)
Government Operations 9,849 8,196 19,784 13,518
Other 3,272 (17,437) 4,984 (23,487)
- --------------------------------------------------------------------------------
TOTAL 65,569 (1,906) 122,530 15,029
- --------------------------------------------------------------------------------
Gain (Loss) on Asset Disposals and Impairments - Net:
Marine Construction Services (570) 653 24 1,061
Power Generation Systems 10 4,623 13 4,883
Government Operations 2 8 2 88
Other 28,677 (6,602) 125,153 (6,024)
Corporate 96 458 404 567
- --------------------------------------------------------------------------------
TOTAL 28,215 (860) 125,596 575
- --------------------------------------------------------------------------------
Equity in Income (Loss) of Investees:
Marine Construction Services 2,177 (3,535) (1,969) (10,131)
Power Generation Systems 2,202 770 3,976 3,286
Government Operations 519 375 1,099 987
Other 1,508 (134) 3,370 (116)
- --------------------------------------------------------------------------------
TOTAL 6,406 (2,524) 6,476 (5,974)
- --------------------------------------------------------------------------------
Corporate G&A Expense (11,413) (11,882) (21,031) (21,473)
- --------------------------------------------------------------------------------
TOTAL OPERATING
INCOME (LOSS) $ 88,777 $(17,172) $ 233,571 $ (11,843)
- --------------------------------------------------------------------------------
14
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1996
Marine Construction Services
- ----------------------------
Revenues increased $126,120,000 to $494,175,000, primarily due to higher volume
in virtually all activities in all geographic areas, except in offshore
activities in the Far East and fabrication activities in the United States.
Business unit income increased $31,477,000 to $39,242,000, in virtually all
activities in all geographic areas, except in the Far East.
Equity in income (loss) of investees increased $5,712,000 from a loss of
$3,535,000 to income of $2,177,000 primarily due to improved results from
McDermott-ETPM West, Inc., and Brown & Root McDermott Fabricators Limited, as
well as joint ventures in the Far East and the Gulf of Mexico.
Power Generations Systems
- -------------------------
Revenues increased $3,087,000 to $259,022,000, primarily due to higher revenues
from fabrication and erection of fossil fuel steam and environmental control
systems, boiler cleaning equipment and plant enhancement projects. These
increases were partially offset by lower revenues from replacement nuclear steam
generators and repair and alteration of existing fossil fuel steam systems.
15
<PAGE>
Business unit income (loss) increased $13,636,000 from a loss of $430,000 to
income of $13,206,000, primarily due to higher volume and margins from plant
enhancement projects and boiler cleaning equipment. In addition, there were
lower selling and general and administrative expenses. These increases were
partially offset by lower volume from replacement nuclear steam generators.
Gain on asset disposals and impairments-net decreased $4,613,000 to $10,000.
The prior year included a gain on the sale of a domestic tool rental business.
Equity in income of investees increased $1,432,000 to $2,202,000. This
represents the results of approximately twelve active joint ventures. This
increase is primarily due to the favorable operating results from three foreign
joint ventures and a provision for a loss on a domestic joint venture in the
prior year. This increase was partially offset by lower operating results from
a domestic joint venture.
Government Operations
- ---------------------
Revenues decreased $9,776,000 to $80,550,000, primarily due to lower revenues
from nuclear fuel assemblies and reactor components for the U. S. Government and
commercial nuclear environmental services. These decreases were partially
offset by higher revenues from operation and management contracts for U. S.
Government owned facilities.
Business unit income increased $1,653,000 to $9,849,000, primarily due to higher
volume from operation and management contracts for U. S. Government owned
facilities and lower operating and general and administrative expenses. These
increases were partially offset by lower volume and margins from commercial
nuclear environmental services.
Other
- -----
Revenues decreased $247,000 to $96,196,000, primarily due to lower revenues from
engineering and construction activities in Canadian operations. In addition,
there were lower revenues as a result of the disposition of non-core businesses
(domestic shipyard and ordnance operations) in the prior year. These decreases
were partially offset by higher
16
<PAGE>
revenues from air cooled heat exchangers, domestic engineering activities,
Canadian maintenance activities and Mexican shipyard operations.
Business unit income (loss) increased $20,709,000 from a loss of $17,437,000 to
income of $3,272,000, primarily due to cost overruns on engineering and
construction contracts in the prior period. In addition, there was higher
volume and margins from Mexican shipyard operations and lower operating and
general and administrative expenses. Also, the prior year included losses in
non-core businesses (domestic shipyard and ordnance operations).
Gain on asset disposals and impairments-net increased $35,279,000 from a loss of
$6,602,000 to a gain of $28,677,000 primarily due to the sale of International's
interest in Universal Fabricators Incorporated.
Equity in income of investees increased $1,642,000 from a loss of $134,000 to
income of $1,508,000 primarily due to higher operating results from two foreign
joint ventures.
Other Income Statement Items
- ----------------------------
Interest income increased $2,860,000 to $12,382,000, primarily due to increases
in cash equivalents, investments in government obligations and other investments
during the current period.
Interest expense decreased $4,570,000 to $19,188,000, primarily due to changes
in debt obligations and interest rates prevailing thereon.
Minority interest expense increased $14,256,000 to expense of $9,701,000 from
income of $4,555,000, primarily due to minority shareholder participation in the
improved operating results of JRM and McDermott Subsea Constructors Limited.
Other-net decreased $3,579,000 to expense of $149,000 from income of $3,430,000,
primarily due to a decrease in certain reimbursed financing costs.
17
<PAGE>
The provision for income taxes increased $29,583,000 to $33,960,000, while
income before provision for income taxes increased $95,544,000 from a loss of
$23,423,000 to income of $72,121,000. The increase in income taxes is primarily
due to an increase in income. In addition, McDermott 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 tax basis (for example, revenues versus income). These variances,
along with variances in the mix of income within jurisdictions, are responsible
for shifts in the effective tax rate. As a result of these factors, the
provision for income taxes was 47% of the pretax income for the three months
ended September 30, 1997 compared to a provision for income taxes of 19% of
pretax loss for the three months ended September 30, 1996.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1997 VS. SIX MONTHS ENDED
SEPTEMBER 30, 1996
Marine Construction Services
- ----------------------------
Revenues increased $201,513,000 to $958,757,000, primarily due to higher volume
in virtually all activities in all geographic areas, except in offshore
activities in the Far East and fabrication activities in the United States.
Business unit income increased $35,780,000 to $65,526,000, in virtually all
activities in all geographic areas, except the Far East.
Equity in loss of investees decreased $8,162,000 to $1,969,000, primarily due to
improved results from the Brown & Root McDermott Fabricators Limited and
McDermott-ETPM West, Inc., as well as joint ventures in the Far East and the
Gulf of Mexico.
18
<PAGE>
Power Generations Systems
- -------------------------
Revenues increased $31,874,000 to $544,059,000, primarily due to higher revenues
from fabrication and erection of fossil fuel steam and environmental control
systems, boiler cleaning equipment and replacement parts. These increases were
partially offset by lower revenues from repair and alteration of existing fossil
fuel steam systems, replacement nuclear steam generators, industrial boilers and
plant enhancement projects.
Business unit income (loss) increased $36,984,000 from a loss of $4,748,000 to
income of $32,236,000, primarily due to higher volume and margins from
replacement parts and boiler cleaning equipment, higher margins from plant
enhancement projects and replacement nuclear steam generators and higher volume
from fabrication and erection of fossil fuel steam systems and environmental
control systems. In addition, there were lower operating, selling and general
and administrative expenses. These increases were partially offset by lower
volume and margins from industrial boilers and repair and alteration of existing
fossil fuel steam systems.
Gain on asset disposals and impairments-net decreased $4,870,000 to $13,000.
The prior year included a gain on the sale of a domestic tool rental business.
Equity in income of investees increased $690,000 to $3,976,000. This represents
the results of approximately twelve active joint ventures. The increase is
primarily due to the favorable operating results from three foreign joint
ventures and a provision for a loss on a domestic joint venture in the prior
year. This increase was partially offset by a favorable termination settlement
by a domestic joint venture in the prior year and lower operating results from
two domestic joint ventures.
Government Operations
- ---------------------
Revenues decreased $15,161,000 to $164,072,000, primarily due to lower revenues
from commercial nuclear environmental services and nuclear fuel assemblies and
reactor components for the U. S. Government. These decreases were partially
offset by higher revenues from operation and management contracts for U. S.
Government owned facilities.
19
<PAGE>
Business unit income increased $6,266,000 to $19,784,000, primarily due to
higher volume from operation and management contracts for U. S. Government owned
facilities and higher margins on other related operations. In addition, there
were lower general and administrative expenses. These increases were partially
offset by lower volume and margins from commercial nuclear environmental
services.
Other
- -----
Revenues decreased $46,643,000 to $199,457,000, primarily due to lower revenues
from engineering and construction activities in Canadian operations. In
addition, there were lower revenues as a result of the disposition of non-core
businesses (domestic shipyard and ordnance operations) in the prior year. These
decreases were partially offset by higher revenues from air cooled heat
exchangers, domestic engineering activities and Mexican shipyard operations.
Business unit income (loss) increased $28,471,000 from a loss of $23,487,000 to
income of $4,984,000, primarily due to cost overruns on engineering and
construction contracts in the prior period. In addition, there were higher
volumes from Mexican shipyard operations, air cooled heat exchangers, domestic
engineering activities and lower operating and general and administrative
expenses. Also, the prior year included losses in non-core businesses (domestic
shipyard and ordnance operations).
Gain on asset disposals and impairments-net increased $131,177,000 from a loss
of $6,024,000 to income of $125,153,000 primarily due to the sale of
International's interest in Sakhalin Energy Investment Company Ltd. and
Universal Fabricators Incorporated.
Equity in income (loss) of investees increased $3,486,000 from a loss of
$116,000 to income of $3,370,000, primarily due to higher operating results
from two foreign joint ventures.
20
<PAGE>
Other Income Statement Items
- ----------------------------
Interest income increased $5,027,000 to $24,878,000, primarily due to increases
in cash equivalents, investments in government obligations and other investments
during the current period.
Interest expense increased $907,000 to $44,393,000, primarily due to changes in
debt obligations and interest rates prevailing thereon.
Minority interest expense increased $14,161,000 to $16,394,000, primarily due to
minority shareholder participation in the improved operating results of JRM and
McDermott Subsea Constructors Limited.
The provision for income taxes increased $48,091,000 to $51,138,000, while
income before provision for income taxes increased $235,865,000 from a loss of
$36,706,000 to income of $199,159,000. The provision for income taxes was 26%
of the pretax income for the six months ended September 30, 1997 compared to a
provision for income taxes of 8% of pretax loss for the six months ended
September 30, 1996.
21
<PAGE>
Backlog 9/30/97 3/31/97
- ------- ------- -------
(Unaudited)
(In thousands)
Backlog by Business Unit:
Marine Construction Services $1,393,434 $1,760,226
Power Generation Systems 1,399,452 1,554,125
Government Operations 766,838 797,764
Other 385,054 384,968
Eliminations (193,979) (269,661)
- --------------------------------------------------------------------------------
TOTAL BACKLOG $3,750,799 $4,227,422
- --------------------------------------------------------------------------------
In general, International's business is capital intensive and relies on large
contracts for a substantial amount of its revenues.
Marine Construction Services' Domestic, Middle East and North Sea marine markets
remain steady. The North Sea engineering market is beginning to weaken, while
the Far East market is beginning to show significant improvement. Contracts to
be performed by this business unit's unconsolidated joint ventures (not included
above) was $1,890,000,000 at September 30, 1997 compared to $1,439,000,000 at
March 31, 1997.
Power Generation Systems' markets (excluding Southeast Asia) for industrial and
utility boilers remain strong and the U. S. market for replacement nuclear steam
generators is expected to make significant contributions to operating income
into the foreseeable future. However, the domestic market for industrial and
utility boilers remains weak. Contracts to be performed by this business unit's
unconsolidated joint ventures (not included above) was $188,000,000 at September
30, 1997 compared to $154,000,000 at March 31, 1997.
At September 30, 1997 the Government Operations' backlog with the U.S.
Government was $670,992,000 (of which $23,791,000 had not been funded). This
business unit's backlog is not expected to experience any significant growth as
a result of reductions in the defense budget over the past several years. It is
expected to remain relatively constant since B&W is the sole source provider of
nuclear fuel assemblies and nuclear reactor components for the U. S.
Government.
22
<PAGE>
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 McDermott International, and the Delaware Company's consolidated
subsidiaries, which include The Babcock & Wilcox Company ("B&W").
During the six months ended September 30, 1997, International's cash and cash
equivalents increased $184,931,000 to $442,714,000 and total debt decreased
$319,241,000 to $799,790,000, primarily due to a reduction in short-term
borrowings of $192,590,000 and repayment of $125,370,000 in long-term debt.
During this period, International provided cash of $294,567,000 from operating
activities, and received cash proceeds of $174,277,000 from asset disposals
(including $118,114,000 from the sale of its interest in Sakhalin Energy
Investment Company, Ltd and $35,009,000 from the sale of Universal Fabricators
Incorporated), $60,746,000 from net sales and maturities of investments, and
$15,932,000 from the issuance of stock upon exercise of stock options.
International used cash of $24,479,000 for additions to property, plant and
equipment; and $9,637,000 for dividends on McDermott International's common and
preferred stock. Decreases in net contracts in progress and advance billings
were primarily due to the timing of billings on Power Generations Systems'
contracts.
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. The average amount of these claims (historical
average of approximately $6,100 per claim over the last three years) has
continued to rise. Claims paid during the six months ended September 30, 1997
were $94,554,000, of which $86,063,000 has been recovered or is due from
insurers. At September 30, 1997, receivables of $97,204,000 were due from
insurers for reimbursement of settled claims. 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. Settlement of the liability is expected to occur over
approximately the next 15 years. Estimated insurance recoveries are based upon
analysis of insurers providing
23
<PAGE>
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, the ultimate loss
may differ materially from amounts provided in the consolidated financial
statements. The collection delays 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 decreased $34,679,000 to
$24,479,000 for the six months ended September 30, 1997, compared with the same
period in the prior year. The majority of these expenditures were to maintain,
replace and upgrade existing facilities and equipment.
At September 30 and March 31, 1997, B&W had sold, with limited recourse, an
undivided interest in a designated pool of qualified accounts receivable of
approximately $88,969,000 and $93,769,000, respectively, under the terms of an
agreement with a U.S. bank. The maximum sales limit available under the
agreement was reduced during October 1997 from $125,000,000 to $100,000,000.
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. The existing agreement will expire on
January 31, 1998; however, B&W expects to negotiate renewal of the agreement.
International accounts for these sales as secured borrowings. On October 24,
1997, B&W reduced the amount of receivables sold by $43,186,000 to $45,783,000.
At September 30 and March 31, 1997, McDermott International and its
subsidiaries, had available to them various uncommitted short-term lines of
credit from banks totaling $132,332,000 and $179,137,000, respectively.
Borrowings against these lines of credit at September 30 and March 31, 1997 were
$15,186,000 and $53,165,000, respectively. At September 30, 1997 there were no
borrowings outstanding under the $150,000,000 unsecured committed revolving
credit facility of B&W (the "B&W Revolver"), while at March 31, 1997,
$150,000,000 was outstanding.
24
<PAGE>
JRM is party to an unsecured and committed revolving credit facility (the "JRM
Revolver"). There were no borrowings outstanding at September 30 or March 31,
1997 under the JRM Revolver. As a condition to borrowing under the facility,
JRM must comply with certain requirements, including legal representations.
Presently, JRM cannot satisfy the legal representations due to the allegations
of wrongdoing (see Note 4 to the condensed consolidated financial statements)
and cannot borrow under the JRM Revolver. The JRM Revolver also limits the
amount of funds which JRM can borrow from other sources. It is not anticipated
JRM will need to borrow funds under the JRM Revolver during fiscal year 1998.
The Delaware Company and JRM are restricted, as a result of covenants in certain
credit agreements, in their ability to transfer funds to McDermott International
and its subsidiaries through cash dividends or through unsecured loans or
investments. At September 30, 1997, substantially all of the net assets of the
Delaware Company and JRM were subject to such restrictions. It is not expected
that these restrictions will have any significant effect on McDermott
International'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, 1997 was $430,595,000. At September 30, 1997,
approximately $79,725,000 fair value of these obligations were pledged to secure
a letter of credit in connection with a long-term loan and certain reinsurance
agreements.
Over the past several years, International has entered into certain investments
in oil and gas projects in the former Soviet Union. During the June quarter,
International sold its last Soviet Union oil and gas interest, which was in the
Sakhalin Energy Investment Company Ltd., to other members of the consortium.
International received proceeds of $118,114,000.
On July 15, 1997, JRM redeemed the $70,000,000 outstanding principal amount of
its 12.875% Guaranteed Senior Notes due 2002 for an aggregate redemption price
of $78,986,250 including a premium of $4,480,000 and accrued interest to date of
$4,506,250.
25
<PAGE>
Working capital increased $157,298,000 from $225,571,000 at March 31, 1997 to
$382,869,000 at September 30, 1997. During the remainder of fiscal year 1998,
International expects to obtain funds to meet capital expenditure, working
capital and debt maturity requirements from operating activities, cash and cash
equivalents, investments in debt securities and short-term borrowings. Leasing
agreements for equipment, which are short-term in nature, are not expected to
impact International's liquidity or capital resources.
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
are realizable through carrybacks and future reversals of existing taxable
temporary differences, future taxable income and, if necessary, the
implementation of tax planning strategies involving sales of appreciated assets.
Uncertainties that affect the ultimate realization of deferred tax assets are
the risk of incurring losses in the future and the possibility of declines in
value of appreciated assets involved in identified tax planning strategies.
These factors have been considered in determining the valuation allowance.
Management will continue to assess the adequacy of the valuation allowance on a
quarterly basis.
New Accounting Standards
- ------------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which is required to be adopted on December 31, 1997. At that time,
International will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new requirements
for calculating basic earnings per share, the dilutive effect of stock options
and stock appreciation rights will be excluded. Basic earnings per share
under the new standard would have been $0.65 and $2.60 per share for the three
and six months ended September 30, 1997. Diluted earnings per share for the
three and six months ended September 30, 1997 and basic and diluted earnings per
share for the three and six months ended September 30, 1996 would have been the
same as primary and fully diluted amounts reported.
26
<PAGE>
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997. SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components in a full set of general-purpose financial statements.
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.
Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 requires that certain financial
information be reported on the basis that it is reported internally for
evaluating segment performance and deciding how to allocate resources to
segments. International anticipates adopting this standard during the last
quarter of fiscal year 1998. Because this Statement addresses how supplemental
financial information is disclosed in annual and interim reports, the adoption
will have no material impact on the consolidated financial statements.
At its July 1997 meeting, the Emerging Issues Task Force reached a final
consensus on Issue 96-16, "Investor's Accounting for an Investee When the
Investor has a Majority of the Voting Interest but the Minority Shareholder or
Shareholders Have Certain Approval or Veto Rights." This issue addresses
whether to consolidate a majority owned investee when the rights of the minority
make it unclear if the majority owner actually has control, and establishes
criteria for making this decision. For existing investment agreements, the
guidance is effective for fiscal years ending after December 15, 1998.
International has not yet finalized its review of the impact of this guidance.
27
<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 September 2, 1997, the following
matters were submitted to McDermott International, Inc.'s ("McDermott
International") stockholders with voting as follows:
(a) The election of four directors:
Class III - For a three year term:
----------------------------------
Nominee Votes For Votes Withheld
------- --------- --------------
Robert L. Howard 48,786,911 919,262
Roger E. Tetrault 49,016,432 689,741
John N. Turner 49,010,734 695,439
Class II - For a two year term:
-------------------------------
Nominee Votes For Votes Withheld
------- --------- --------------
Richard E. Woolbert 49,009,793 696,380
Messrs. Theodore H. Black, Philip J. Burguieres, Bruce DeMars, John W.
Johnstone, Jr. and William McCollam, Jr. also continued as directors
immediately after the meeting.
(b) A proposal to approve McDermott International's 1997 Directors
Stock Plan: 44,980,661 votes for, 4,587,593 votes against and
137,919 abstentions, with broker non-votes not applicable.
(c) A proposal to approve Amendments to McDermott International's 1996
Officer Long-Term Incentive Plan: 48,334,931 votes for, 1,229,921
votes against and 141,321 abstentions, with broker non-votes not
applicable.
(d) A proposal to retain Ernst & Young LLP as McDermott International's
independent auditors for the fiscal year ending March 31, 1998:
49,575,244 votes for, 39,079 votes against and 91,850 abstentions,
with broker non-votes not applicable.
28
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 11 - Calculation of Earnings (Loss) Per Common and Common
Equivalent Share
Exhibit 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, 1997.
29
<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.
-----------------------------
(REGISTRANT)
By: /s/ DANIEL R. GAUBERT
--------------------------
(SIGNATURE)
Daniel R. Gaubert
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Representative)
November 10, 1997
30
<PAGE>
EXHIBIT INDEX
Exhibit Description
11 Calculation of Earnings (Loss) per Common and Common Equivalent Share
27 Financial Data Schedule
31
<PAGE>
EXHIBIT 11
MCDERMOTT INTERNATIONAL, INC.
CALCULATION OF EARNINGS (LOSS)
PER COMMON AND COMMON EQUIVALENT SHARE
(In thousands, except shares and per share amounts)
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
-------- -------- -------- --------
(Unaudited)
Primary:
Net income (loss) $ 38,161 $(27,800) $ 148,021 $ (39,753)
Less dividend requirement of
preferred stock, Series C (2,067) (2,067) (4,133) (4,133)
-------------------------------------------------------------------------------
Net income (loss) for primary
computation $ 36,094 $ (29,867) $ 143,888 $ (43,886)
- --------------------------------------------------------------------------------
Weighted average number of
common shares outstanding
during the period 55,542,576 54,689,791 55,281,318 54,598,738
Common stock equivalents of
stock options and stock
appreciation rights based on
"treasury stock" method 1,265,630 - 841,449 -
- --------------------------------------------------------------------------------
Weighted average number of
common and common equivalent
shares outstanding during the
period 56,808,206 54,689,791 56,122,767 54,598,738
- --------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share $ 0.64 $ (0.55) $ 2.56 $ (0.80)
- --------------------------------------------------------------------------------
32
<PAGE>
EXHIBIT 11
(CONTINUED)
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
(Unaudited)
Fully Diluted:
Net income (loss) $ 38,161 $ (27,800) $ 148,021 $ (39,753)
Less dividend requirement
of preferred stock, Series C - (2,067) - (4,133)
Dividends on Subsidiary's
Series A $2.20 Cumulative
Convertible Preferred Stock
assuming conversion to
Common Stock 1,550 - 3,100 -
- --------------------------------------------------------------------------------
Net income (loss) for fully
diluted computation $ 39,711 $ (29,867) $ 151,121 $ (43,886)
- --------------------------------------------------------------------------------
Weighted average number
of common shares
outstanding during period 55,542,576 54,689,791 55,281,318 54,598,738
Common stock equivalents
of stock options and stock
appreciation rights based
on "treasury stock" method 1,684,790 - 1,381,124 -
Shares applicable to Subsidiary's
Series A $2.20 Cumulative
Convertible Preferred Stock 2,818,679 - 2,818,696 -
Shares applicable to Series C
$2.875 Cumulative Convertible
Preferred Stock 4,078,014 - 4,078,014 -
- --------------------------------------------------------------------------------
Weighted average number of
common and common
equivalent shares outstanding
during the period, assuming
full dilution 64,124,059 54,689,791 63,559,152 54,598,738
- --------------------------------------------------------------------------------
Earnings (loss) per common and
common equivalent share
assuming full dilution $ 0.62 $ (0.55) $ 2.38 $ (0.80)
- --------------------------------------------------------------------------------
Fully diluted earnings (loss) per share includes only computations which cause
dilution.
33
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MCDERMOTT
INTERNATIONAL'S SEPTEMBER 30, 1997 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-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 442,714
<SECURITIES> 98
<RECEIVABLES> 623,892
<ALLOWANCES> 97,914
<INVENTORY> 370,009
<CURRENT-ASSETS> 1,885,775
<PP&E> 1,765,920
<DEPRECIATION> 1,201,851
<TOTAL-ASSETS> 4,543,500
<CURRENT-LIABILITIES> 1,502,906
<BONDS> 623,754
0
2,875
<COMMON> 55,801
<OTHER-SE> 555,815
<TOTAL-LIABILITY-AND-EQUITY> 4,543,500
<SALES> 1,848,138
<TOTAL-REVENUES> 1,848,138
<CGS> 1,746,639
<TOTAL-COSTS> 1,746,639
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,393
<INCOME-PRETAX> 199,159
<INCOME-TAX> 51,138
<INCOME-CONTINUING> 148,021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,021
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 2.38
</TABLE>
