<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 OF 1934
For the transition period from ______________ to ______________
Commission File No. 1-13570
J. RAY McDERMOTT, S.A.
-------------------------------------------------------------
(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 72-1278896
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1450 Poydras Street, New Orleans, Louisiana 70112-6050
- ------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (504) 587-5300
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 $.01 per share, outstanding as
of October 24, 1997 was 41,075,503.
<PAGE>
J. RAY McDERMOTT, S.A.
I N D E X - F O R M 10 - 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 12
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 20
Item 6 - Exhibits and Reports on Form 8-K 20
SIGNATURES 21
Exhibit 11 - Calculation of Earnings (Loss) Per Common
and Common Equivalent Share 23
Exhibit 27 - Financial Data Schedule 24
2
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PART I
J. RAY McDERMOTT, S.A.
FINANCIAL INFORMATION
---------------------
Item 1. Condensed Consolidated Financial Statements
3
<PAGE>
J. RAY McDERMOTT, S.A.
CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
ASSETS
<TABLE>
<CAPTION>
9/30/97 3/31/97
-------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 288,177 $ 134,948
Short-term investments in debt securities - 75,516
Accounts receivable-trade 251,465 261,621
Accounts receivable-unconsolidated
affiliates 68,345 58,324
Accounts receivable-other 45,557 32,113
Contracts in progress 99,023 81,900
Other current assets 23,411 23,972
---------- ----------
Total Current Assets 775,978 668,394
---------- ----------
Property, Plant and Equipment, at Cost: 1,177,172 1,173,001
Less accumulated depreciation 844,595 816,271
---------- ----------
Net Property, Plant and Equipment 332,577 356,730
---------- ----------
Excess of Cost Over Fair Value of Net Assets
of Purchased Businesses Less Accumulated
Amortization of $64,108,000 at September 30, 1997
and $52,405,000 at March 31, 1997 284,691 296,394
---------- ----------
Investment in Unconsolidated Affiliates 87,176 81,981
---------- ----------
Other Assets 51,822 56,169
---------- ----------
TOTAL $1,532,244 $1,459,668
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
9/30/97 3/31/97
------- -------
(Unaudited)
(In thousands)
Current Liabilities:
Notes payable and current
maturities of long-term debt $ 9,278 $ 109,095
Accounts payable 180,640 144,388
Accrued contract costs 83,114 63,586
Accrued liabilities - other 116,091 110,366
Advance billings on contracts 131,643 86,542
U.S. and foreign income taxes 48,416 22,282
---------- ----------
Total Current Liabilities 569,182 536,259
---------- ----------
Long-Term Debt 269,573 273,443
---------- ----------
Deferred and Non-Current Income Taxes 36,404 42,556
---------- ----------
Other Liabilities 78,739 71,452
---------- ----------
Contingencies
---------- ----------
Stockholders' Equity:
Preferred stock, authorized 10,000,000 shares;
outstanding 3,200,000 Series A $2.25 cumulative
convertible, par value $0.01 per share,
(liquidation preference $160,000,000) 32 32
Common stock, par value $0.01 per share,
authorized 60,000,000 shares; outstanding
41,060,962 at September 30, 1997 and
40,617,792 at March 31, 1997 411 406
Capital in excess of par value 598,598 590,263
Deficit (12,714) (33,463)
Currency translation adjustments (7,981) (21,280)
---------- ----------
Total Stockholders' Equity 578,346 535,958
---------- ----------
TOTAL $1,532,244 $1,459,668
========== ==========
</TABLE>
5
<PAGE>
J. RAY McDERMOTT, S.A.
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 $494,175 $368,055 $958,757 $757,244
-------- -------- -------- --------
Costs and Expenses:
Cost of operations (excluding
depreciation and amortization) 407,949 313,582 796,634 631,268
Depreciation and amortization 27,239 23,255 53,406 44,402
Selling, general and
administrative expenses 24,671 27,429 50,892 58,790
-------- -------- -------- --------
459,859 364,266 900,932 734,460
-------- -------- -------- --------
Gain (Loss) on Asset Disposals and
Impairments-net (570) 653 24 1,061
-------- -------- -------- --------
Operating Income before Equity in
Income (Loss) of Investees 33,746 4,442 57,849 23,845
Equity in Income (Loss) of Investees 2,177 (3,535) (1,969) (10,131)
-------- -------- -------- --------
Operating Income 35,923 907 55,880 13,714
-------- -------- -------- --------
Other Income (Expense):
Interest income 4,977 3,379 9,588 7,099
Interest expense (7,216) (10,891) (16,605) (21,064)
Other-net (476) 6,547 482 6,597
-------- -------- -------- --------
(2,715) (965) (6,535) (7,368)
-------- -------- -------- --------
Income (Loss) before Provision for
Income Taxes 33,208 (58) 49,345 6,346
Provision for Income Taxes 16,001 12,579 25,165 13,348
-------- -------- -------- --------
Net Income (Loss) $ 17,207 $(12,637) $ 24,180 $ (7,002)
======== ======== ======== ========
</TABLE>
6
<PAGE>
CONTINUED
<TABLE>
<CAPTION>
THREE SIX
MONTHS ENDED MONTHS ENDED
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income (Loss) Applicable to
Common Stock (after Preferred
Stock Dividends) $ 15,407 $ (14,437) $ 20,580 $ (10,602)
========== ========= ========== ==========
Net Income (Loss) per Common and
Common Equivalent Share
(Primary and Fully Diluted) $ 0.37 $ (0.36) $ 0.50 $ (0.26)
========== ========= ========== ==========
Weighted Average Number of
Common and Common
Equivalent Shares Outstanding 41,270,246 40,302,554 41,104,413 40,260,653
========== ========== ========== ==========
Cash Dividends:
Per preferred share $ 0.5625 $ 0.5625 $ 1.125 $ 1.125
========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
J. RAY McDERMOTT, S.A.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SEPTEMBER 30, 1997
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
9/30/97 9/30/96
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 24,180 $ (7,002)
-------- --------
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 53,406 44,402
Equity in loss of investees,
less dividends 3,781 10,131
Gain on asset disposals and impairments-net (24) (1,061)
Other (5,851) 3,274
Changes in assets and liabilities:
Accounts receivable (23,656) (46,989)
Net contracts in progress and advance billings 42,866 5,850
Accounts payable 43,276 (16,794)
Accrued contract costs 19,528 14,698
Accrued liabilities 6,371 (32,021)
Income taxes 28,036 2,950
Other, net 46 66
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 191,959 (22,496)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (15,571) (39,803)
Proceeds from asset disposals 7,632 2,314
Maturities of investments 76,400 -
Investment in equity investees (550) (3,908)
Other - 141
-------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 67,911 (41,256)
======== ========
</TABLE>
8
<PAGE>
CONTINUED
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED
9/30/97 9/30/96
------- -------
(Unaudited)
(In thousands)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term debt $(80,451) $ (5,932)
Issuance of long-term debt - 244,375
Increase (decrease) in short-term borrowing (23,856) 33,109
Decrease in notes payable to
McDermott International - (231,000)
Issuance of common stock 4,929 390
Preferred dividends paid (3,600) (3,600)
Other - (2,225)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (102,978) 35,117
--------- ---------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH (3,663) 69
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 153,229 (28,566)
--------- ---------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 134,948 166,408
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 288,177 $ 137,842
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 18,439 $ 16,929
Income taxes (net of refunds) $ 9,580 $ 11,596
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
9
<PAGE>
J. RAY McDERMOTT, S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
J. Ray McDermott, S.A. ("JRM") is a majority owned subsidiary of McDermott
International, Inc. ("International").
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 (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. 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
fiscal 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 JRM's investment in the
HeereMac joint venture. For further information, refer to the consolidated
financial statements and footnotes thereto included in JRM's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997.
10
<PAGE>
NOTE 2 - INVESTIGATIONS
JRM and International are conducting an internal investigation, with the
assistance of outside counsel, of allegations of wrongdoing by a limited number
of former employees of JRM and International and by others. JRM and
International notified the appropriate authorities of their investigation in
April 1997. In June 1997, International received a federal grand jury subpoena
for documents relating principally to an investigation of possible anti-
competitive activity in the heavy-lift barge service business of JRM and the
HeereMac joint venture. In October 1997, International received, from the same
grand jury, a subpeona 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,
International received an informal request from the Securities and Exchange
Commission for the voluntary production of documents. JRM and International 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, JRM and
International do not have sufficient information to predict the ultimate outcome
of this matter.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
J. Ray McDermott, S.A. ("JRM") is a majority owned subsidiary of McDermott
International, Inc. ("International"). A significant portion of JRM's revenues
and operating results are derived from its foreign operations. As a result,
JRM's operations and financial results are affected by international factors,
such as changes in foreign currency exchange rates. JRM 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, JRM 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 by
geographic area. Other geographic area revenues include activity in Central and
South America and eliminations between geographic areas; and Other geographic
area operating income includes activity in Central and South America and the
amortization of covenants-not-to-compete resulting from JRM's acquisition of
Offshore Pipelines, Inc. during fiscal year 1995. Results for the three and six
months ended September 30, 1996 have been restated to reflect the discontinuance
of the equity method of accounting for JRM's investment in the HeereMac joint
venture and to include gains and losses on asset disposals and impairments in
Operating Income.
12
<PAGE>
<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
United States $213,745 $190,739 $382,685 $345,180
Europe and West Africa 129,591 103,676 240,323 201,380
Middle East 82,810 24,341 183,205 72,247
Far East 75,044 48,223 165,385 137,691
Other (including Transfer Eliminations) (7,015) 1,076 (12,841) 746
-------- -------- -------- --------
TOTAL REVENUES $494,175 $368,055 $958,757 $757,244
======== ======== ======== ========
OPERATING INCOME
Business Unit Income (Loss) by Geographic Area:
United States $ 30,811 $ 20,207 $ 44,099 $ 32,527
Europe and West Africa 8,830 (10,771) 10,477 (7,597)
Middle East 10,390 (6,552) 22,511 (4,649)
Far East (11,209) 1,438 (12,565) 7,123
Other 420 3,443 1,004 2,342
-------- ------- -------- --------
TOTAL 39,242 7,765 65,526 29,746
-------- ------- -------- --------
Gain (Loss) on Asset Disposals and Impairments-net:
United States (2,621) 713 (2,095) 784
Europe and West Africa 874 3 881 25
Middle East 386 303 136 379
Far East 581 - 814 -
Other 210 (366) 288 (127)
-------- ------- -------- --------
TOTAL (570) 653 24 1,061
-------- ------- -------- --------
Equity in Income (Loss) of Investees:
United States 1,559 205 1,486 205
Europe and West Africa (737) (3,420) (3,580) (9,129)
Far East 1,150 (567) 1,583 (783)
Other 205 247 (1,458) (424)
-------- ------- -------- --------
TOTAL 2,177 (3,535) (1,969) (10,131)
-------- ------- -------- --------
Corporate G&A Expense (4,926) (3,976) (7,701) (6,962)
-------- ------- -------- --------
TOTAL OPERATING INCOME $ 35,923 $ 907 $ 55,880 $ 13,714
======== ======= ======== ========
</TABLE>
13
<PAGE>
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 VS. THREE MONTHS
ENDED SEPTEMBER 30, 1996
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.
Interest income increased $1,598,000 to $4,977,000, primarily due to increases
in cash equivalents, investments in government obligations and other investments
during the current period.
Interest expense decreased $3,675,000 to $7,216,000, primarily due to changes in
debt obligations and interest rates prevailing thereon.
Other-net decreased $7,023,000 to expense of $476,000 from income of $6,547,000
primarily due to a decrease in certain reimbursed financing costs and minority
shareholder participation in the improved results of McDermott Subsea
Constructors Limited.
14
<PAGE>
The provision for income taxes increased $3,422,000 to $16,001,000 while income
before the provision for income taxes increased $33,266,000 from a loss of
$58,000 to income of $33,208,000. The increase in income taxes is due primarily
to the increase in income. In addition, JRM operates in many tax jurisdictions.
Within these jurisdictions, tax provisions vary because of nominal rates,
allowability of deductions, credits and other benefits, and tax basis (for
example, revenue 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 48% of pretax income for the three months ended September 30, 1997.
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1997 VS. SIX MONTHS ENDED
SEPTEMBER 30, 1996
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 in the Far East.
Equity in loss of investees decreased $8,162,000 to $1,969,000 primarily due to
improved results from Brown & Root McDermott Fabricators Limited and McDermott-
ETPM West, Inc., as well as joint ventures in the Far East and the Gulf of
Mexico.
Interest income increased $2,489,000 to $9,588,000, primarily due to increases
in cash equivalents, investments in government obligations and other investments
during the current period.
15
<PAGE>
Interest expense decreased $4,459,000 to $16,605,000, primarily due to changes
in debt obligations and interest rates prevailing thereon.
Other-net decreased $6,115,000 to $482,000 primarily due to a decrease in
certain reimbursed financing costs and minority shareholder participation in the
improved results of McDermott Subsea Constructors Limited.
The provision for income taxes increased $11,817,000 to $25,165,000 while income
before the provision for income taxes increased $42,999,000 to $49,345,000. The
provision for income taxes was 51% of pretax income for the six months ended
September 30, 1997.
<TABLE>
<CAPTION>
Backlog
- -------
9/30/97 3/31/97
-------- --------
(Unaudited)
(In thousands)
<S> <C> <C>
United States $ 513,108 $ 565,318
Europe and West Africa 144,527 297,767
Middle East 301,010 443,393
Far East 434,789 453,748
---------- ----------
TOTAL BACKLOG $1,393,434 $1,760,226
========== ==========
</TABLE>
JRM's 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. Backlog relating to contracts to
be performed by JRM'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.
In general, JRM's business is capital intensive and relies on large contracts
for a substantial amount of its revenues.
Liquidity and Capital Resources
- -------------------------------
During the six months ended September 30, 1997, JRM's cash and cash equivalents
increased $153,229,000 to $288,177,000 and total debt decreased $103,687,000 to
$278,851,000, primarily due to repayment of $80,451,000 in long-term debt and a
decrease in short-term borrowings of $23,856,000. During this period, JRM
provided cash of
16
<PAGE>
$191,959,000 from operating activities, and received cash of $76,400,000 from
maturities of investments and $4,929,000 from the issuance of stock upon
exercise of stock options. JRM used cash of $15,571,000 for additions to
property, plant and equipment and $3,600,000 for cash dividends on preferred
stock.
Expenditures for property, plant and equipment decreased $24,232,000 to
$15,571,000 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, JRM had available various uncommitted short-
term lines of credit from banks totaling $27,477,000 and $34,174,000,
respectively. Borrowings by JRM against these lines of credit at September 30
and March 31, 1997 were $3,000 and $23,858,000, respectively. JRM is also a
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 2 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
that JRM will need to borrow funds under the JRM Revolver during fiscal year
1998.
JRM is restricted, as a result of covenants in its credit agreements, in paying
cash dividends to its public shareholders or in transferring funds through cash
dividends (including annual cash dividends of $7,200,000 on its Series A
Preferred Stock held by International) or through unsecured loans to or
investments in International. At September 30, 1997, JRM could make unsecured
loans to or investments in International of approximately $21,616,000.
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.
17
<PAGE>
Working capital increased $74,661,000 to $206,796,000 at September 30, 1997 from
$132,135,000 at March 31, 1997. During the remainder of fiscal year 1998, JRM
expects to obtain funds to meet working capital, capital expenditure and debt
maturity requirements from operating activities and from cash and cash
equivalents. Leasing agreements for equipment, which are short-term in nature,
are not expected to impact JRM's liquidity or capital resources.
JRM 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 and future taxable income. An uncertainty that affects the
ultimate realization of deferred tax assets is the risk of incurring losses in
the future. 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.
New Accounting Standards
- ------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share," which is required
to be adopted on December 31, 1997. At that time, JRM 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 and diluted earnings per share under the new standard
would have been $0.38 and $0.37, respectively, for the quarter ended September
30, 1997. Basic and diluted earnings per share for the six months ended
September 30, 1997 and for the quarter and six months ended September 30, 1996
would have been the same as primary and fully diluted amounts reported.
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. JRM 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
18
<PAGE>
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. JRM 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. JRM has
not yet finalized its review of the impact of this guidance.
19
<PAGE>
PART II
J. RAY McDERMOTT, S.A.
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 29, 1997, the following
matters were submitted to J. Ray McDermott, S.A. ("JRM") stockholders with
voting as follows:
(a) The election of two directors to Class III of the Board for a three year
term:
Nominee Votes For Votes Withheld
------- --------- --------------
Robert L. Howard 40,950,833 44,537
Cedric E. Ritchie 40,949,283 46,037
Messrs. Rick L. Burdick, William J. Johnson, Robert H. Rawle, Roger E.
Tetrault and Richard E. Woolbert also continued as directors immediately
after the meeting.
(b) A proposal to approve Amendments to JRM's Restated 1994 Executive Long-
Term Incentive Compensation Plan: 38,742,485 votes for, 2,213,845 votes
against and 39,040 abstentions, with broker non-votes not applicable.
(c) A proposal to retain Ernst & Young LLP as JRM's independent auditors for
the fiscal year ending March 31, 1998: 40,953,376 votes for, 8,020 votes
against and 33,974 abstentions, with broker non-votes not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Calculation of Earnings 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, 1997.
20
<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.
J. RAY McDERMOTT, S.A.
/s/ Daniel R. Gaubert
--------------------------------------------
By: Daniel R. Gaubert
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer
and Duly Authorized Representative)
November 10, 1997
21
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
11 Calculation of Earnings (Loss) per Common and Common Equivalent Share
27 Financial Data Schedule
22
<PAGE>
EXHIBIT 11
J. RAY MCDERMOTT, S.A.
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
9/30/97 9/30/96 9/30/97 9/30/96
---------- ---------- ---------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Net income (loss) $ 17,207 $ (12,637) $ 24,180 $ (7,002)
Less dividend requirements of
preferred stocks (1,800) (1,800) (3,600) (3,600)
---------- ---------- ---------- ----------
Net income (loss) for
primary computation $ 15,407 $ (14,437) $ 20,580 $ (10,602)
========== ========== ========== ==========
Weighted average number of
common shares outstanding
during the period 40,984,412 40,302,554 40,841,512 40,260,653
Common stock equivalents of
stock options based on
"treasury stock" method 285,834 - 262,901 -
---------- ---------- ---------- ----------
Weighted average number of common
and common equivalent shares
outstanding during the period 41,270,246 40,302,554 41,104,413 40,260,653
========== ========== ========== ==========
Net income (loss) per common and
common equivalent share /(1)/ $ 0.37 $ (0.36) $ 0.50 $ (0.26)
========== ========== ========== ==========
</TABLE>
/(1)/ Net income per common and common equivalent share assuming full dilution
are the same for the periods presented.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM J. RAY
MCDERMOTT'S SEPTEMBER 30, 1997 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 288,177
<SECURITIES> 0
<RECEIVABLES> 280,384
<ALLOWANCES> 28,919
<INVENTORY> 102,429
<CURRENT-ASSETS> 775,978
<PP&E> 1,177,172
<DEPRECIATION> 844,595
<TOTAL-ASSETS> 1,532,244
<CURRENT-LIABILITIES> 569,182
<BONDS> 0
0
32
<COMMON> 411
<OTHER-SE> 577,903
<TOTAL-LIABILITY-AND-EQUITY> 1,532,244
<SALES> 958,757
<TOTAL-REVENUES> 958,757
<CGS> 900,932
<TOTAL-COSTS> 900,932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,605
<INCOME-PRETAX> 49,345
<INCOME-TAX> 25,165
<INCOME-CONTINUING> 24,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,180
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
