UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2005
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 Number 001-08430
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)
777 N. ELDRIDGE PKWY.
HOUSTON, TEXAS 77079
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (281) 870-5000
Securities Registered Pursuant to Section 12(b) of the Act: ______
Name of each Exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, $1.00 par value New York Stock Exchange
Rights to Purchase Preferred Stock New York Stock Exchange
(Currently Traded with Common Stock)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer,
as defined in Rule 405 of the Securities Act.
Yes [X] No [ ]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes [ ] No [X]
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant on the last business day of the registrant's
most recently completed second fiscal quarter (based on the closing sales price
on the New York Stock Exchange on June 30, 2005) was approximately
$1,444,933,119.
The number of shares of the registrant's common stock outstanding at
January 31, 2006 was 72,042,835.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A under the Securities Exchange Act
of 1934 in connection with the registrant's 2006 Annual Meeting of Stockholders
are incorporated by reference into Part III of this report.
McDERMOTT INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
Page
----
Report of Independent Registered Public Accounting Firm 3
Financial Statement Schedule Covered by Reports of Independent Registered
Public Accounting Firm:
I Condensed Financial Information of Registrant 4
All schedules other than the above have been omitted because they are not
required or the information is included in the previously filed Form
10-K on March 1, 2006.
Signature of Registrant 11
Consent of Independent Registered
Public Accounting Firm
Supplementary Financial Information
2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON FINANCIAL STATEMENT
SCHEDULE
To the Board of Directors of
McDermott International, Inc.
Our audits of the consolidated financial statements and financial statement
schedules, of management's assessment of the effectiveness of internal control
over financial reporting and of the effectiveness of internal control over
financial reporting referred to in our report (which includes an emphasis of
matter paragraph referring to Notes 1, 20 and 22 of the consolidated financial
statements which discusses The Babcock & Wilcox Company's voluntary petition
with the U.S. Bankruptcy Court to reorganize under Chapter 11 of the U.S.
Bankruptcy Code as well as the confirmation of its joint plan of reorganization
and settlement agreement and its emergence from Chapter 11 on February 22, 2006)
dated February 28, 2006 appearing in the Annual Report on Form 10-K of McDermott
International, Inc. for the year ended December 31, 2005 also included an audit
of the financial statement schedule listed in the accompanying index of this
Form 10K/A. In our opinion, this financial statement schedule presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Houston, Texas
February 28, 2006
3
Schedule I
MCDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
ASSETS
DECEMBER 31,
-------------------
2005 2004
-------- --------
(IN THOUSANDS)
Current Assets:
Cash and cash equivalents $ 100 $ 5,107
Short-term investments 4,642 --
Accounts receivable - trade, net -- 52
Accounts receivable - other 56 39,008
Accounts receivable from subsidiaries 44,226 40,357
Accounts receivable from The Babcock & Wilcox Company 4,072 1,038
Other currents assets 475 682
-------- --------
Total Current Assets 53,571 86,244
-------- --------
Investments in Subsidiaries and
Other Investees, at Equity 363,143 327,212
-------- --------
Notes Receivable from Subsidiaries 28,050 50
-------- --------
Property, Plant and Equipment, at Cost:
Buildings 5 5
Machinery and equipment 61 61
-------- --------
66 66
Less accumulated depreciation 63 62
-------- --------
Net Property, Plant and Equipment 3 4
-------- --------
Investments in Debt Securities 32,953 29,952
-------- --------
Accounts Receivable from The Babcock & Wilcox Company 2,793 2,793
-------- --------
Other Assets 1,085 1,049
-------- --------
TOTAL $481,598 $447,304
======== ========
See accompanying notes to condensed financial information.
4
Continued
LIABILITIES AND STOCKHOLDERS' DEFICIT
DECEMBER 31,
------------------------
2005 2004
---------- -----------
(IN THOUSANDS)
Current Liabilities:
Accounts payable $ 205 $ 113
Accounts payable to The Babcock & Wilcox Company 7,571 7,739
Accrued liabilities - other 2,940 12,623
Income taxes 1,360 3,059
---------- -----------
Total Current Liabilities 12,076 23,534
---------- -----------
Notes Payable to Subsidiaries 61,761 63,411
---------- -----------
Accounts Payable to Subsidiaries 190,802 254,574
---------- -----------
Accrued Cost of The Babcock & Wilcox Company
Bankruptcy Settlement 5,566 5,136
---------- -----------
Negative Investments in Subsidiaries, at Equity,
net of Subordinated Note to Subsidiary 294,614 357,899
---------- -----------
Other Liabilities 77 4,193
---------- -----------
Commitments and Contingencies.
Stockholders' Deficit:
Common stock 73,858 69,561
Capital in excess of par value 1,183,123 1,122,055
Accumulated deficit (862,931) (1,060,908)
Treasury stock (56,496) (64,625)
Accumulated other comprehensive loss (420,852) (327,526)
---------- -----------
Total Stockholders' Deficit (83,298) (261,443)
---------- -----------
TOTAL $ 481,598 $ 447,304
========== ===========
5
Schedule I
MCDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF INCOME (LOSS)
YEAR ENDED DECEMBER 31,
-------------------------------
2005 2004 2003
-------- -------- ---------
(IN THOUSANDS)
Costs and Expenses:
Cost of operations $ (8,818) $ 1,743 $ 688
Gain on settlement of pension plan (1,390) (27,722) --
Selling, general and administrative expenses 18,476 12,608 15,021
-------- -------- ---------
8,268 (13,371) 15,709
-------- -------- ---------
Operating Income (Loss) before Equity in
Income (Loss) of Investees (8,268) 13,371 (15,709)
-------- -------- ---------
Equity in Income (Loss) of Subsidiaries
and Other Investees 206,252 50,874 (83,983)
-------- -------- ---------
Operating Income (Loss) 197,984 64,245 (99,692)
-------- -------- ---------
Other Income (Expense):
Interest income 1,332 510 905
Interest expense (3,608) (1,761) (1,671)
Estimated gain (loss) on The Babcock & Wilcox
Company bankruptcy settlement (430) (678) 138
Other - net 1,000 (654) (368)
-------- -------- ---------
(1,706) (2,583) (996)
-------- -------- ---------
Income (Loss) from Continuing Operations
Before Provision for (Benefit from) Income Taxes
and Cumulative Effect of Accounting Change 196,278 61,662 (100,688)
Provision for (Benefit from) Income Taxes (1,699) 23 1,470
-------- -------- ---------
Income (Loss) from Continuing Operations before
Cumulative Effect of Accounting Change 197,977 61,639 (102,158)
Income from Discontinued Operations -- -- 3,219
-------- -------- ---------
Income (Loss) before Cumulative Effect of
Accounting Change 197,977 61,639 (98,939)
Cumulative Effect of Accounting Change -- -- 3,710
-------- -------- ---------
Net Income (Loss) $197,977 $ 61,639 $ (95,229)
======== ======== =========
See accompanying notes to condensed financial information.
6
Schedule I
MCDERMOTT INTERNATIONAL, INC
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEAR ENDED DECEMBER 31,
-----------------------------
2005 2004 2003
-------- ------- --------
(IN THOUSANDS)
Net Income (Loss) $197,977 $61,639 $(95,229)
-------- ------- --------
Other Comprehensive Income (Loss):
Equity in other comprehensive income (loss) of
subsidiaries and other investees (93,454) 24,276 134,758
Minimum pension liability adjustments 13 17 22
Unrealized gains on investments:
Reclassification adjustment for gains
included in net income 115 (24) (149)
-------- ------- --------
Other Comprehensive Income (Loss) (93,326) 24,269 134,631
-------- ------- --------
Comprehensive Income (Loss) $104,651 $85,908 $ 39,402
======== ======= ========
See accompanying notes to condensed financial information.
7
Schedule I
MCDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-------------------------------
2005 2004 2003
--------- -------- --------
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 197,977 $ 61,639 $(95,229)
--------- -------- --------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,047 3,063 2,777
Cumulative effect of accounting change -- -- (3,710)
Equity in income or loss of subsidiaries
and other investees, less dividends (206,002) (45,174) 83,983
Estimated (gain) loss on The Babcock & Wilcox
Company bankruptcy settlement 430 678 (138)
Other 3,985 9,929 6,090
Changes in assets and liabilities:
Accounts and notes receivable 32,101 (71,565) (3,176)
Prepaid pensions -- 17,925 --
Accounts payable (63,848) 30,072 55,057
Notes payable to subsidiaries (1,650) (3,490) 43,681
Income taxes (1,699) -- 1,400
Other, net (403) (1,729) (2,746)
--------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (38,062) 1,348 87,989
--------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities (207,132) (88,673) (87,657)
Maturities of available-for-sale securities 205,224 85,335 85,306
Sales of available-for-sale securities -- 3,730 2,483
Increase in loans to subsidiaries (28,000) -- (90,000)
Other (857) (2) (556)
--------- -------- --------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (30,765) 390 (90,424)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock $ 60,951 $ 2,800 $ --
Other 2,869 (118) 2,959
--------- -------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 63,820 2,682 2,959
--------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,007) 4,420 524
--------- -------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,107 687 163
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 100 $ 5,107 $ 687
========= ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including intercompany
interest (net of amount capitalized) $ 3,666 $ 1,755 $ 1,701
Income taxes, net of refunds $ -- $ 23 $ 70
========= ======== ========
See accompanying notes to condensed financial information.
8
Schedule I
MCDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL INFORMATION
DECEMBER 31, 2005
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared to present the
unconsolidated financial position, results of operations and cash flows of
McDermott International, Inc. (Parent Company Only). Investments in subsidiaries
and other investees are stated under the equity basis of accounting which is at
cost plus equity in undistributed earnings from date of acquisition. These
Parent Company Only financial statements should be read in conjunction with
McDermott International, Inc.'s consolidated financial statements filed in the
Annual Report on Form 10K.
NOTE 2 - CONTINGENCIES
As of December 31, 2005, McDermott International, Inc. ("MII") had one
outstanding performance guarantee for a contract executed by The Babcock &
Wilcox Company ("B&W"). The guarantee has a cap of $3.2 million, which has
expired. Additionally, MII had outstanding performance guarantees for one
contract executed by Volund, a subsidiary of B&W. This guarantee will expire on
December 31, 2007, and has an aggregate cap of $0.8 million. These projects have
all been completed, and MII has never had to satisfy a performance guaranty for
Volund or B&W. Under the terms of an agreement between MII and B&W, B&W must
reimburse MII for any costs MII may incur under any of these performance
guarantees. As of December 31, 2005, B&W had sufficient liquidity to cover its
obligations under this agreement. However, if Volund incurs and is unable to
satisfy substantial warranty liabilities on these projects prior to expiration
of the guaranty periods and B&W is not able to satisfy its contractual
obligation to MII, and such liabilities are not covered by insurance, MII would
be liable.
At the time of the B&W bankruptcy filing, MII was a maker or a guarantor of
outstanding letters of credit aggregating approximately $146.5 million, which
were issued in connection with the business operations of B&W and its
subsidiaries. At that time, MI and BWICO were similarly obligated with respect
to additional letters of credit aggregating approximately $24.9 million, which
were issued in connection with the business operations of B&W and its
subsidiaries. Although a permitted use of the debtor-in-possession revolving
credit and letter of credit facility (the "DIP Credit Facility") is the issuance
of new letters of credit to backstop or replace these preexisting letters of
credit, each of MII, MI and BWICO has agreed to indemnify and reimburse B&W and
its filing subsidiaries for any customer draw on any letter of credit issued
under the DIP Credit Facility to backstop or replace any such preexisting letter
of credit for which it has exposure and for the associated letter of credit fees
paid under the facility. As of December 31, 2005, approximately $11.1 million in
letters of credit has been issued under the DIP Credit Facility to replace or
backstop these preexisting letters of credit. All previous preexisting letters
of credit have expired.
MII has agreed to indemnify our two surety companies for obligations of
various subsidiaries of MII, including B&W and several of its subsidiaries,
under surety bonds issued to meet bid bond and performance bond requirements
imposed by their customers. As of December 31, 2005, the aggregate outstanding
amount of surety bonds that were guaranteed by MII and issued in connection with
the business operations of its subsidiaries was approximately $36.0 million, of
which $31.9 million related to the business operations of B&W and its
subsidiaries.
One of B&W's Canadian subsidiaries has received notice of a possible
warranty claim on one of its projects. This project included a limited term
performance bond totaling approximately $140 million for which MII entered into
an indemnity arrangement with the surety underwriters. At this time, B&W's
subsidiary is analyzing the facts and circumstances surrounding this issue. It
is possible that B&W's subsidiary may incur warranty costs in excess of amounts
provided for as of December 31, 2005. It is also possible that a claim could be
initiated by the B&W subsidiary's customer against the surety underwriter should
certain events occur. If such a claim were successful, the surety could seek to
recover from B&W's subsidiary the costs incurred in satisfying the customer
claim. If the surety seeks recovery from B&W's subsidiary, we believe that B&W's
subsidiary has adequate liquidity to satisfy its obligations. However, if claims
are made by the surety against B&W's subsidiary, and B&W's subsidiary is unable
to satisfy its obligations, MII could ultimately have to satisfy any claims.
This surety bond is not included in our disclosures above as the project is
deemed complete and in the warranty phase. In addition, BWICO has provided a
9
parent company guarantee to the customer of the B&W subsidiary for contract
performance associated with this project.
NOTE 3 - DIVIDENDS RECEIVED
McDermott International, Inc. received dividends from its consolidated
subsidiaries of $0.3 million, $5.7 million and $98.9 million for the years ended
December 31, 2005, 2004 and 2003, respectively.
10
SIGNATURE OF THE REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
McDERMOTT INTERNATONAL, INC.
s/ Francis S. Kalman
----------------------------------------
By: Francis S. Kalman
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Duly Authorized Representative)
s/ Michael S. Taff
----------------------------------------
By: Michael S. Taff
Vice President and
Chief Accounting Officer
(Principal Accounting Officer and
Duly Authorized Representative)
March 31, 2006
11
EXHIBIT INDEX
Exhibit
Number
-------
23.1 Consent of Independent Registered Public Accounting Firm
99 Supplementary Financial Information on Panamanian Securities
Regulations
12