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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: March 25, 1996
J. RAY McDERMOTT, S.A.
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(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 1-13570 72-1278896
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
1450 Poydras Street, New Orleans, Louisiana 70112-6050
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (504) 587-5300
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Item 2. DISPOSITION OF ASSETS
On March 25, 1996, J. Ray McDermott, S. A. ("JRM") and Heerema Offshore
Construction Group, Inc. ("Heerema") entered into a transaction pursuant to
which each of them, through their respective subsidiaries, sold to companies
included within the HeereMac joint venture (a joint venture that is equally
owned by JRM and Heerema, which provides heavy-lift marine installation
services) the major marine vessels they had been chartering to the joint
venture (JRM's DB101 and DB102 and Heerema's Hermod and Balder) (collectively,
the "Vessel Sales"). The DB101 and DB102 are semi-submersible derrick barges
with maximum derrick lift of 3,500 and 13,000 tons, respectively.
Under the terms of the transaction, HeereMac purchased JRM's vessels for $210.0
million (consisting of cash of $105.0 million and a promissory note for $105.0
million), and also purchased all of the outstanding stock of the two Heerema
subsidiaries that own the Heerema vessels for $210.0 million (consisting of
cash of $105.0 million and a promissory note of $105.0 million). Substantially
all of the cash portion of the combined purchase price was funded through a
$200.0 million stand-alone credit arrangement obtained by the HeereMac joint
venture (the "Credit Agreement"), which has an initial term of five years.
The promissory notes received by JRM and Heerema bear interest at the rate of
7.75% per annum and mature on March 31, 2003. All payments of principal and
interest on the promissory notes are subordinated to the Credit Agreement
insofar as such payments can be made only in accordance with certain provisions
of the Credit Agreement relating to available surplus funds. Interest accrued
and not paid on such notes will be added to the principal balance of the notes.
The notes are unsecured and do not contain any financial covenants or
cross-default or cross-acceleration provisions. The amount and nature of the
consideration paid in the transaction was determined through negotiations
between JRM and Heerema.
JRM used approximately $20.5 million of the cash proceeds it received from the
Vessel Sale to repay a floating rate note to McDermott International, Inc.
("McDermott International") and approximately $55 million of the cash proceeds
to reduce borrowings under a bank credit agreement. The remaining cash proceeds
will be used for general corporate purposes.
As a result of the Vessel Sales, JRM recorded a deferred gain of approximately
$103 million, which it will amortize over 12 years.
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Item 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following pro forma financial information and exhibits are filed as a
part of this report.
(b) Pro forma financial information required pursuant to Article 11 of
Regulation S-X:
<TABLE>
<CAPTION>
Item Page
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<S> <C>
J. Ray McDermott, S.A. Pro Forma Condensed Consolidated
Financial Statements (Unaudited):
Pro Forma Condensed Consolidated Balance Sheet -
December 31, 1995 4
Pro Forma Condensed Consolidated Statement of Income
- Fiscal Year Ended March 31, 1995 5
Pro Forma Condensed Consolidated Statement of Income
- Nine Months Ended December 31, 1995 6
Notes to the Pro Forma Condensed Consolidated Financial
Statements 7
</TABLE>
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31,
1995 gives effect to the sale of the vessels as if the disposition had occurred
on December 31, 1995. The Unaudited Pro Forma Condensed Consolidated Statement
of Income for the fiscal year ended March 31, 1995 includes adjustments
relating to the contribution by McDermott International of substantially all of
its marine construction services business to JRM and the adjustments relating
to the acquisition of Offshore Pipelines, Inc. in January 1995 ("Contribution
and Merger Adjustments"). The Unaudited Pro Forma Condensed Consolidated
Statements of Income for the fiscal year ended March 31, 1995 and the nine
months ended December 31, 1995 give effect to the sale of the vessels as if the
disposition had occurred at the beginning of each period. Incremental direct
costs associated with the disposition are not material and are not reflected in
the unaudited pro forma condensed consolidated financial statements. The pro
forma information is based on JRM's previously reported historical financial
statements using the assumptions and adjustments in the accompanying Notes to
the Pro Forma Condensed Consolidated Financial Statements. The pro forma
condensed consolidated financial statements should be read in conjunction with
JRM's historical consolidated financial statements and notes thereto contained
in its Annual Report on Form 10-K for fiscal year ended March 31, 1995, as
amended, and its Quarterly Report on Form 10-Q for the quarter ended December
31, 1995.
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J. RAY McDERMOTT, S.A.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Vessel Sales
Historical Adjustments Pro Forma
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(In thousands)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 79,454 $ 23,357 (a) $ 112,811
10,000 (b)
Accounts and notes receivable 332,846 - 332,846
Contracts in progress 174,953 - 174,953
Other current assets 16,134 - 16,134
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Total Current Assets 603,387 33,357 636,744
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Property, Plant and Equipment, at Cost 1,474,473 (246,983)(a) 1,227,490
Less accumulated depreciation and amortization 931,274 (138,949)(a) 792,325
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Net Property, Plant and Equipment 543,199 (108,034) 435,165
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Excess of Cost Over Fair Value of Net Assets
of Purchased Businesses 322,750 - 322,750
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Investment in Unconsolidated Affiliates 88,231 3,034 (a) 81,265
(10,000)(b)
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Other Assets 86,923 - 86,923
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TOTAL $ 1,644,490 $ (81,643) $ 1,562,847
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes and accounts payable and current
maturities of long-term debt $ 354,250 $ (81,643)(a) $ 272,607
Advance billings on contracts 50,071 - 50,071
U.S. and foreign Income taxes 26,240 - 26,240
Other current liabilities 163,013 - 163,013
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Total Current Liabilities 593,574 (81,643) 511,931
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Long-Term Debt 123,358 - 123,358
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Deferred and Non-Current Income Taxes 55,101 - 55,101
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Notes Payable to McDermott International 231,000 - 231,000
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Other Liabilities 66,391 - 66,391
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Stockholders' Equity:
Preferred stock 32 - 32
Common stock 402 - 402
Other stockholders' equity 574,632 - 574,632
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Total Stockholders' Equity 575,066 - 575,066
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TOTAL $ 1,644,490 $ (81,643) $ 1,562,847
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</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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J. RAY McDERMOTT, S.A.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Historical Pro Forma
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Combined
After Combined
Giving After
Effect to Giving
J. Ray Offshore Contribution Contribution Effect
McDermott, Pipelines, and Merger and Merger Vessel Sales to All
S.A. Inc.* Adjustments Adjustments Adjustments Adjustments
---------- --------- ---------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $1,127,320 $ 346,461 $ (31,087)(c) $ 1,442,694 $(31,069) (m) $1,141,625
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Costs and Expenses:
Cost of operations
(excluding depreciation
and amortization) 887,223 290,001 (32,740)(c) 1,146,019 - 1,146,019
1,535 (d)
Depreciation and
amortization 70,372 15,725 (2,175)(d) 104,349 (11,157) (m) 93,192
18,083 (g)
(333)(h)
2,677 (i)
Selling, general and
administrative expenses 114,165 28,937 (970)(c) 142,132 - 142,132
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1,071,760 334,663 (13,923) 1,392,500 (11,157) 1,381,343
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Operating Income before Equity
in Income of Investees 55,560 11,798 (17,164) 50,194 (19,912) 30,282
Equity in Income
of Investees 22,857 (80) (3,846)(c) 23,149 2,967 (n) 34,613
4,218 (h) 8,497 (m)
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Operating income 78,417 11,718 (16,792) 73,343 (8,448) 64,895
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Interest Income 9,298 1,006 (16)(c) 1,299 8,138 (n) 9,437
(8,989)(e)
Interest Expense (25,158) (9,168) (300)(c) (37,261) 1,361 (o) (35,900)
16,824 (f)
(208)(i)
538 (j)
(17,325)(k)
(2,464)(l)
Other-net 7,028 2,362 70 (c) 9,460 - 9,460
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Income before provision for
income taxes and cumulative
effect of accounting change 69,585 5,918 (28,662) 46,841 1,051 47,892
Provision for income taxes 8,885 664 (1,469)(c) 8,609 - 8,609
224 (d)
117 (h)
188 (j)
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Income before cumulative
effect of accounting
change $ 60,700 $ 5,254 $ (27,722) $ 38,232 $ 1,051 $ 39,283
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</TABLE>
* Historical amounts for OPI represent activity for ten months ended January 31,
1995.
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements.
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J. RAY McDERMOTT, S.A.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Vessel Sales
Historical Adjustments Pro Forma
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(In thousands)
<S> <C> <C> <C>
Revenues $ 939,996 $ (26,106) (m) $ 913,890
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Costs and Expenses:
Cost of operations (excluding depreciation
and amortization) 752,450 - 752,450
Depreciation and amortization 66,045 (11,397) (m) 54,648
Selling, general and administrative expenses 85,107 - 85,107
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903,602 (11,397) 892,205
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Operating Income before Equity in Income
of Investees 36,394 (14,709) 21,685
Equity in Income of Investees 9,845 4,359 (n) 20,577
6,373 (m)
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Operating income 46,239 (3,977) 42,262
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Interest Income 3,339 6,103 (n) 9,442
Interest Expense (33,494) 3,759 (o) (29,735)
Other-net 6,371 - 6,371
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Income before provision for income taxes 22,455 5,885 28,340
Provision for income taxes 3,979 522 (o) 4,501
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Net income $ 18,476 $ 5,363 $ 23,839
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</TABLE>
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements.
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J. RAY McDERMOTT, S.A.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet Adjustments
(a) Sale of two marine vessels to HeereMac for $105,000,000 in cash, which
will be used to repay short-term debt and fund working capital
requirements, and a promissory note in principal amount of $105,000,000
from HeereMac, net of a deferred gain of $101,966,000.
(b) Net distribution of cash from HeereMac of $10,000,000.
Statements of Income Adjustments
(c) Adjustment to conform Offshore Pipelines, Inc.'s ("OPI") proportionate
consolidation method to JRM's accounting policies.
(d) Adjustments to conform OPI's drydock and depreciation method to JRM's
accounting policies.
(e) To adjust interest income for Other Assets (notes receivable from
affiliates that are excluded from the contribution of substantially all of
McDermott International's marine construction business in accordance with
the terms of the Merger Agreement) and accounts and notes receivable
(interest income recognized on claims that are excluded from the
contribution from McDermott International).
(f) To adjust interest expense on long-term debt (notes payable to affiliates
that are excluded in accordance with the terms of the Merger Agreement).
(g) To amortize over 15 years the costs in excess of net assets acquired.
(h) To record additional depreciation on write-up of OPI's property, plant and
equipment based on the estimated remaining life thereof, which is assumed
to be 12 years, and to reflect the impact of other purchase accounting
adjustments.
(i) To amortize covenants-not-to-compete over a period of 5 years per the
terms of the agreements.
(j) To amortize premium recognized on write-up of OPI debt.
(k) To record interest expense on the 9% Notes.
(l) To record interest on a floating rate note, that was issued to McDermott
International in connection with the contribution transaction referred to
in (e) above.
(m) To record the reduction in revenues and depreciation expense relating to
the sale of the vessels, and amortization of the deferred gain recorded on
the sale.
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J. RAY McDERMOTT, S.A.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(cont.)
(n) To record JRM's share of the net impact of the Vessel Sales on the
HeereMac joint venture due to lower operating expenses and increased
interest expense on promissory notes to Heerema and JRM and the Credit
Agreement issued in conjunction with the transaction. To record interest
income on note from HeereMac.
(o) To record adjustments to interest expense resulting from reductions in a
floating rate note to McDermott International, Inc. and borrowings by JRM
and its subsidiaries under a bank credit agreement. Tax expense on
certain assumed interest expense savings is recorded at a 35% (U.S.) rate.
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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.
J. RAY McDERMOTT, S.A.
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(REGISTRANT)
By: /s/ Daniel R. Gaubert
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Daniel R. Gaubert
Vice President, Finance
(Principal Accounting Officer)
April 5, 1996
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