UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
| (Mark One) | ||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES | |
| EXCHANGE ACT OF 1934 |
For the period ended September 30, 2003
OR
| o | 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. 1-8430
McDERMOTT INTERNATIONAL, INC.
| REPUBLIC OF PANAMA | 72-0593134 | |
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| (State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer 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) 587-5400
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 [ü] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [ü] No [ ]
The number of shares of the registrant’s common stock outstanding at October 31, 2003 was 66,001,534.
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 |
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Item 1 - Condensed Consolidated Financial Statements |
3 | |||||
Condensed Consolidated Balance Sheets
September 30, 2003 and December 31, 2002 |
4 | |||||
Condensed Consolidated Statements of Income (Loss)
Three and Nine Months Ended September 30, 2003 and 2002 |
6 | |||||
Condensed Consolidated Statements of Comprehensive Income (Loss)
Three and Nine Months Ended September 30, 2003 and 2002 |
7 | |||||
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2003 and 2002 |
8 | |||||
Notes to Condensed Consolidated Financial Statements |
10 | |||||
Item 2 - Management’s Discussion and Analysis of
Financial Condition and Results of Operations |
38 | |||||
Item 3 - Quantitative and Qualitative Disclosures About Market Risk |
55 | |||||
Item 4 - Controls and Procedures |
55 | |||||
PART II - OTHER INFORMATION |
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Item 1 - Legal Proceedings |
56 | |||||
Item 6 - Exhibits and Reports on Form 8-K |
56 | |||||
SIGNATURES |
57 | |||||
2
PART I
McDERMOTT INTERNATIONAL, INC.
FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
3
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | ||||||||
| 2003 | 2002 | ||||||||
| (Unaudited) | |||||||||
| (In thousands) | |||||||||
ASSETS |
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Current Assets: |
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Cash and cash equivalents |
$ | 163,525 | $ | 174,341 | |||||
Restricted cash |
7,899 | — | |||||||
Investments |
— | 108,269 | |||||||
Accounts receivable - trade, net |
252,796 | 191,672 | |||||||
Accounts receivable from The Babcock & Wilcox Company |
7,864 | 12,273 | |||||||
Accounts receivable - unconsolidated affiliates |
14,140 | 17,695 | |||||||
Accounts receivable - other |
28,978 | 63,270 | |||||||
Contracts in progress |
102,083 | 147,336 | |||||||
Deferred income taxes |
2,123 | 3,350 | |||||||
Other current assets |
33,712 | 45,403 | |||||||
Total Current Assets |
613,120 | 763,609 | |||||||
Property, Plant and Equipment |
1,262,316 | 1,238,447 | |||||||
Less accumulated depreciation |
910,014 | 885,051 | |||||||
Net Property, Plant and Equipment |
352,302 | 353,396 | |||||||
Investments in Debt Securities |
44,591 | 64,958 | |||||||
Goodwill |
12,926 | 12,926 | |||||||
Prepaid Pension Costs |
18,974 | 19,311 | |||||||
Other Assets |
82,210 | 63,971 | |||||||
TOTAL |
$ | 1,124,123 | $ | 1,278,171 | |||||
See accompanying notes to condensed consolidated financial statements.
4
LIABILITIES AND STOCKHOLDERS’ DEFICIT
| September 30, | December 31, | |||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
Current Liabilities: |
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Notes payable and current maturities of long-term debt |
$ | 505 | $ | 55,577 | ||||||
Accounts payable |
179,564 | 163,811 | ||||||||
Accounts payable to The Babcock & Wilcox Company |
45,751 | 32,379 | ||||||||
Accrued employee benefits |
62,421 | 60,896 | ||||||||
Accrued liabilities - other |
156,357 | 190,844 | ||||||||
Accrued contract costs |
50,414 | 53,335 | ||||||||
Advance billings on contracts |
208,810 | 329,031 | ||||||||
U.S. and foreign income taxes payable |
9,875 | 31,176 | ||||||||
Total Current Liabilities |
713,697 | 917,049 | ||||||||
Long-Term Debt |
85,729 | 86,104 | ||||||||
Accumulated Postretirement Benefit Obligation |
26,512 | 26,898 | ||||||||
Self-Insurance |
70,186 | 71,918 | ||||||||
Pension Liability |
441,369 | 392,072 | ||||||||
Accrued Cost of The Babcock & Wilcox Company Bankruptcy Settlement |
92,019 | 86,377 | ||||||||
Other Liabilities |
114,663 | 114,510 | ||||||||
Commitments and Contingencies |
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Stockholders’ Deficit: |
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Common stock, par value $1.00 per share, authorized
150,000,000 shares; issued 67,983,694 at
September 30, 2003 and 66,351,478 at December 31, 2002 |
67,984 | 66,351 | ||||||||
Capital in excess of par value |
1,101,432 | 1,093,428 | ||||||||
Accumulated deficit |
(1,039,840 | ) | (1,027,318 | ) | ||||||
Treasury stock at cost, 2,061,407 shares at September 30,
2003 and at December 31, 2002 |
(62,792 | ) | (62,792 | ) | ||||||
Accumulated other comprehensive loss |
(486,836 | ) | (486,426 | ) | ||||||
Total Stockholders’ Deficit |
(420,052 | ) | (416,757 | ) | ||||||
TOTAL |
$ | 1,124,123 | $ | 1,278,171 | ||||||
See accompanying notes to condensed consolidated financial statements.
5
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||||||
Revenues |
$ | 645,334 | $ | 430,937 | $ | 1,753,546 | $ | 1,291,423 | |||||||||||
Costs and Expenses: |
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Cost of operations |
600,353 | 452,546 | 1,644,438 | 1,257,077 | |||||||||||||||
Impairment of JRM goodwill |
— | 313,008 | — | 313,008 | |||||||||||||||
Loss on write-off of investment in
The Babcock & Wilcox Company |
— | — | — | 224,664 | |||||||||||||||
Selling, general and administrative expenses |
43,052 | 37,091 | 120,287 | 116,989 | |||||||||||||||
| 643,405 | 802,645 | 1,764,725 | 1,911,738 | ||||||||||||||||
Equity in Income of Investees |
6,457 | 4,469 | 19,582 | 14,421 | |||||||||||||||
Operating Income (Loss) |
8,386 | (367,239 | ) | 8,403 | (605,894 | ) | |||||||||||||
Other Income (Expense): |
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Interest income |
709 | 1,540 | 2,598 | 6,877 | |||||||||||||||
Interest expense |
(3,801 | ) | (2,983 | ) | (11,631 | ) | (12,516 | ) | |||||||||||
(Increase) decrease in estimated cost of The Babcock
& Wilcox Company bankruptcy settlement |
9,682 | — | (5,642 | ) | — | ||||||||||||||
Other-net |
299 | (1,916 | ) | 2,286 | (506 | ) | |||||||||||||
| 6,889 | (3,359 | ) | (12,389 | ) | (6,145 | ) | |||||||||||||
Income (Loss) from Continuing Operations before
Provision for (Benefit from) Income Taxes
and Cumulative Effect of Accounting Change |
15,275 | (370,598 | ) | (3,986 | ) | (612,039 | ) | ||||||||||||
Provision for (Benefit from) Income Taxes |
5,140 | (4,284 | ) | 16,801 | (9,676 | ) | |||||||||||||
Income (Loss) from Continuing Operations before
Cumulative Effect of Accounting Change |
10,135 | (366,314 | ) | (20,787 | ) | (602,363 | ) | ||||||||||||
Income from Discontinued Operations |
1,649 | 9,258 | 4,555 | 10,498 | |||||||||||||||
Income (Loss) before Cumulative Effect of
Accounting Change |
11,784 | (357,056 | ) | (16,232 | ) | (591,865 | ) | ||||||||||||
Cumulative Effect of Accounting Change |
— | — | 3,710 | — | |||||||||||||||
Net Income (Loss) |
$ | 11,784 | $ | (357,056 | ) | $ | (12,522 | ) | $ | (591,865 | ) | ||||||||
Earnings (Loss) per Common Share: |
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Basic: |
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Income (Loss) from Continuing Operations before
Cumulative Effect of Accounting Change |
$ | 0.16 | $ | (5.91 | ) | $ | (0.33 | ) | $ | (9.78 | ) | ||||||||
Income from Discontinued Operations |
$ | 0.03 | $ | 0.15 | $ | 0.07 | $ | 0.17 | |||||||||||
Cumulative Effect of Accounting Change |
$ | — | $ | — | $ | 0.06 | $ | — | |||||||||||
Net Income (Loss) |
$ | 0.18 | $ | (5.76 | ) | $ | (0.20 | ) | $ | (9.61 | ) | ||||||||
Diluted: |
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Income (Loss) from Continuing Operations before
Cumulative Effect of Accounting Change |
$ | 0.15 | $ | (5.91 | ) | $ | (0.33 | ) | $ | (9.78 | ) | ||||||||
Income from Discontinued Operations |
$ | 0.02 | $ | 0.15 | $ | 0.07 | $ | 0.17 | |||||||||||
Cumulative Effect of Accounting Change |
$ | — | $ | — | $ | 0.06 | $ | — | |||||||||||
Net Income (Loss) |
$ | 0.18 | $ | (5.76 | ) | $ | (0.20 | ) | $ | (9.61 | ) | ||||||||
See accompanying notes to condensed consolidated financial statements.
6
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| (In thousands) | |||||||||||||||||||
Net Income (Loss) |
$ | 11,784 | $ | (357,056 | ) | $ | (12,522 | ) | $ | (591,865 | ) | ||||||||
Other Comprehensive Income (Loss): |
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Currency translation adjustments: |
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Foreign currency translation adjustments |
(771 | ) | 350 | 488 | 877 | ||||||||||||||
Reclassification adjustment for
impairments of investments |
— | — | — | 18,435 | |||||||||||||||
Unrealized gains (losses) on derivative financial
instruments: |
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Unrealized gains (losses) on derivative financial
instruments |
(82 | ) | (582 | ) | 495 | 3,342 | |||||||||||||
Reclassification adjustment for (gains) losses
included in net income |
(331 | ) | 119 | (732 | ) | (230 | ) | ||||||||||||
Unrealized gains (losses) on investments: |
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Unrealized gains (losses) arising during the period |
(67 | ) | 458 | (258 | ) | 489 | |||||||||||||
Reclassification adjustment for gains
included in net income |
(5 | ) | — | (403 | ) | (915 | ) | ||||||||||||
Other Comprehensive Income (Loss) |
(1,256 | ) | 345 | (412 | ) | 21,998 | |||||||||||||
Comprehensive Income (Loss) |
$ | 10,528 | $ | (356,711 | ) | $ | (12,934 | ) | $ | (569,867 | ) | ||||||||
See accompanying notes to condensed consolidated financial statements.
7
McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended | ||||||||||
| September 30, | ||||||||||
| 2003 | 2002 | |||||||||
| (Unaudited) | ||||||||||
| (In thousands) | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
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