UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) FORM 10 - K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
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 1-8430
McDERMOTT INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
REPUBLIC OF PANAMA 72-0593134
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
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
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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 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. [X]
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 [X] NO [ ]
The aggregate market value of the registrant's common stock held by
nonaffiliates of the registrant was $258,410,985 as of January 31, 2003.
The number of shares of the registrant's common stock outstanding at January 31,
2003 was 64,831,612.
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 Company's 2002 Annual Meeting of Stockholders are
incorporated by reference into Part III hereof.
McDERMOTT INTERNATIONAL, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
Page
Report of Independent Accountants 3
Financial Statement Schedule Covered by Reports of Independent Accountants:
I Condensed Financial Information of Registrant 4
II Valuation and Qualifying Accounts 11
All schedules other than the above have been omitted because they are
not required or the information is included in the Consolidated
Financial Statements or Notes thereto.
Signature of Registrant 12
2
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Stockholders of
McDermott International, Inc.
We have audited the consolidated financial statements of McDermott
International, Inc. (the "Company") as of December 31, 2002 and 2001, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 2002, and have issued our report thereon dated March
24, 2003. Our report includes an emphasis of matter paragraph referring to Notes
1, 12, 20 and 21 of the consolidated financial statements regarding the
Company's wholly-owned subsidiary, The Babcock & Wilcox Company, losses related
to certain construction projects at the Company's wholly owned subsidiary,
J. Ray McDermott, S.A. and the negative impacts of these matters, among others,
on the Company's liquidity. Our audit also included Schedule I - Condensed
Financial Information of Registrant and Schedule II - Valuation and Qualifying
Accounts. In our opinion, these financial statement schedules presents fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
New Orleans, Louisiana
March 24, 2003
3
Schedule I
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
ASSETS
December 31,
2002 2001
-------- --------
(In thousands)
Current Assets:
Cash and cash equivalents $ 163 $ 49
Accounts receivable - trade, net 37 59
Accounts receivable - other 162 149
Accounts receivable from subsidiaries 5,959 46,256
Accounts receivable from The Babcock & Wilcox Company 52 1,727
Other currents assets 2,065 1,483
-------- --------
Total Current Assets 8,438 49,723
-------- --------
Investments in Subsidiaries and
Other Investees, at Equity 306,451 793,920
-------- --------
Notes Receivable from Subsidiaries 50 5,833
-------- --------
Property, Plant and Equipment, at Cost:
Buildings 5 --
Machinery and equipment 61 61
-------- --------
66 61
Less accumulated depreciation 61 61
-------- --------
Net Property, Plant and Equipment 5 --
-------- --------
Investments in Debt Securities 30,007 29,779
-------- --------
Accounts Receivable from The Babcock & Wilcox Company 2,297 565
-------- --------
Other Assets 20,595 21,195
-------- --------
TOTAL $367,843 $901,015
======== ========
See accompanying notes to condensed financial information.
4
Continued
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
December 31,
2002 2001
----------- -----------
(In thousands)
Current Liabilities:
Accounts payable $ 144 $ 119
Accounts payable to The Babcock & Wilcox Company 5,803 4,964
Accrued liabilities - other 9,790 32,671
Income taxes 1,659 1,659
----------- -----------
Total Current Liabilities 17,396 39,413
----------- -----------
Notes Payable to Subsidiaries 23,220 37,031
----------- -----------
Accounts Payable to Subsidiaries 171,350 53,588
----------- -----------
Accrued Cost of The Babcock & Wilcox Company
Bankruptcy Settlement 61,533 --
----------- -----------
Negative Investments in Subsidiaries, at Equity 510,722 --
----------- -----------
Other Liabilities 379 873
----------- -----------
Commitments and Contingencies
Stockholders' Equity (Deficiency):
Common stock 66,351 63,733
Capital in excess of par value 1,093,428 1,077,148
Accumulated deficit (1,027,318) (250,924)
Treasury stock (62,792) (62,736)
Accumulated other comprehensive loss (486,426) (57,111)
----------- -----------
Total Stockholders' Equity (Deficiency) (416,757) 770,110
----------- -----------
TOTAL $ 367,843 $ 901,015
=========== ===========
5
Schedule I
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF LOSS
Year Ended December 31,
2002 2001 2000
--------- --------- ---------
(In thousands)
Costs and Expenses:
Cost of operations $ 479 $ 4,710 $ 5,300
Selling, general and administrative expenses 16,877 18,264 2,245
--------- --------- ---------
17,356 22,974 7,545
--------- --------- ---------
Loss on Asset Disposals-net -- -- (517)
--------- --------- ---------
Operating Loss before Equity in
Income (Loss) of Investees (17,356) (22,974) (8,062)
--------- --------- ---------
Equity in Income (Loss) of Subsidiaries
and Other Investees (706,095) 2,809 (10,025)
--------- --------- ---------
Operating Loss (723,451) (20,165) (18,087)
--------- --------- ---------
Other Income (Expense):
Interest income 1,603 2,113 2,811
Interest expense (2,340) (4,740) (6,486)
Estimated loss on The Babcock & Wilcox
Company bankruptcy settlement (61,533) -- --
Other - net (483) (1,800) (5,442)
--------- --------- ---------
(62,753) (4,427) (9,117)
--------- --------- ---------
Loss from Continuing Operations
before Benefit from Income Taxes
and Extraordinary Item (786,204) (24,592) (27,204)
Benefit from Income Taxes -- (170) (2,340)
--------- --------- ---------
Loss from Continuing Operations before
Extraordinary Item (786,204) (24,422) (24,864)
Income from Discontinued Operations 9,469 3,565 2,782
--------- --------- ---------
Loss before Extraordinary Item (776,735) (20,857) (22,082)
Extraordinary Item 341 835 --
--------- --------- ---------
Net Loss $(776,394) $ (20,022) $ (22,082)
========= ========= =========
See accompanying notes to condensed financial information.
6
Schedule I
MCDERMOTT INTERNATIONAL, INC
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
Year Ended December 31,
2002 2001 2000
----------- ----------- -----------
(In thousands)
Net Loss $ (776,394) $ (20,022) $ (22,082)
----------- ----------- -----------
Other Comprehensive Income (Loss):
Equity in other comprehensive loss of
subsidiaries and other investees (429,416) (2,272) (8,386)
Minimum pension liability adjustments 17 19 18
Reclassification adjustment for gains (losses)
included in net income 84 (6) 497
----------- ----------- -----------
Other Comprehensive Loss (429,315) (2,259) (7,871)
----------- ----------- -----------
Comprehensive Loss (1,205,709) (22,281) (29,953)
=========== =========== ===========
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,
2002 2001 2000
--------- --------- ---------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(776,394) $ (20,022) $ (22,082)
--------- --------- ---------
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Depreciation and amortization 3,612 1,931 1,450
Equity in income or loss of subsidiaries
and other investees, less dividends 806,094 19,691 7,243
Estimated loss on The Babcock & Wilcox
Company bankruptcy settlement 61,533 -- --
Other 10,650 7,984 9,029
Changes in assets and liabilities:
Accounts and notes receivable 40,249 (30,102) 1,507
Accounts payable 104,815 4,011 (135,077)
Income taxes -- -- (1)
Other, net (14,325) 393 9,581
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 236,234 (16,114) (128,350)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (5) -- --
Purchases of available-for-sale securities (166,402) (101,301) (10,473)
Maturities of available-for-sale securities 107,085 7,000 10,325
Sales of available-for-sale securities 58,738 93,451 1,247
Execution of put/call agreement with McDermott Inc. (242,945) -- --
Decrease in loans to subsidiaries 5,783 11,326 122,710
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (237,746) 10,476 123,809
========= ========= =========
8
Continued
Year Ended December 31,
2002 2001 2000
--------- --------- ---------
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock $ 1,394 $ 1,000 $ 47
Dividends paid -- -- (8,972)
Purchase of McDermott International, Inc. stock -- -- (5)
Other 232 4,641 4,526
--------- --------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 1,626 5,641 (4,404)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 114 3 (8,945)
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 49 46 8,991
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 163 $ 49 $ 46
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest, including intercompany
interest (net of amount capitalized) $ 2,325 $ 5,275 $ 6,453
Income taxes, net of refunds $ -- $ 3 $ 361
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Settlement of intercompany balances with a subsidiary $ -- $ -- $ 932,935
========= ========= =========
See accompanying notes to condensed financial information.
9
Schedule I
McDERMOTT INTERNATIONAL, INC.
(PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL INFORMATION
DECEMBER 31, 2002
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 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 and independent accountants' reports thereon.
NOTE 2 - CONTINGENCIES
McDermott International, Inc. is contingently liable under standby letters of
credit totaling $22,854,000 at December 31, 2002, all of which were issued in
the normal course of business. In addition, at the time of The Babcock & Wilcox
Company ("B&W") bankruptcy filing, McDermott International, Inc. was a maker or
guarantor of outstanding letters of credit aggregating approximately
$146,500,000 ($9,400,000 at December 31, 2002) which were issued in connection
with the business operations of B&W and its subsidiaries. Although new letters
of credit have been issued under B&W's Debtor in Possession ("DIP") Credit
Facility to backstop or replace these preexisting letters of credit, McDermott
International, Inc. 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 B&W has exposure and for the associated letter of credit fees paid under
the facility. As of December 31, 2002, approximately $51,400,000 in letters of
credit have been issued under the DIP Credit Facility to replace or backstop
these preexisting letters of credit. McDermott International, Inc. has
guaranteed a $2,500,000 line of credit, of which $5,000 is outstanding at
December 31, 2002, to a certain unconsolidated joint venture.
McDermott International, Inc. has agreed to indemnify our two surety companies
for obligations of various of its subsidiaries, 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, 2002, the aggregate
outstanding amount of surety bonds that were guaranteed by McDermott
International, Inc. and issued in connection with the business operations of its
subsidiaries was approximately $121,000,000, of which $107,700,000 related to
the business operations of B&W and its subsidiaries.
Also, McDermott International, Inc. has guaranteed the performance of certain of
its subsidiaries for construction projects in the ordinary course of business.
These guarantees totaled $146,400,000 at December 31, 2002.
NOTE 3 - DIVIDENDS RECEIVED
McDermott International, Inc. received dividends from its consolidated
subsidiaries of $100,000,000, $26,900,000 and $487,562,000 for the years ended
December 31, 2002, 2001 and 2000, respectively. Also during the year ended
December 31, 2000, McDermott International, Inc. received a capital contribution
from one of its consolidated subsidiaries of $445,373,000.
10
Schedule II
McDERMOTT INTERNATIONAL, INC.
VALUATION AND QUALIFYING ACCOUNTS
Additions
-------------------------
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expense (2) Accounts Deductions (3) of Period
----------- --------- ----------- ---------- -------------- ----------
(In thousands)
Estimated Drydock Liability (1):
Year Ended December 31, 2002 $ 36,171 $ 10,378 $ -- $ (14,675) $ 31,874
Year Ended December 31, 2001 $ 26,016 $ 14,178 $ -- $ (4,023) $ 36,171
Year Ended December 31, 2000 $ 21,753 $ 12,173 $ -- $ (7,910) $ 26,016
Valuation Allowance for Deferred
Tax Assets (4):
Year Ended December 31, 2002 $ (12,840) $ (43,866) $ (158,121) $ -- $ (214,827)
Year Ended December 31, 2001 $ (15,478) $ 2,638 $ -- $ -- $ (12,840)
Year Ended December 31, 2000 $ (34,794) $ 19,316 $ -- $ -- $ (15,478)
(1) Estimated drydock liability is reported within accrued liabilities-other
and other liabilities on the balance sheet.
(2) Net of reductions and other adjustments, all of which are charged to costs
and expenses.
(3) Reductions in the estimates to actual costs incurred.
(4) Charged to Other Comprehensive Income (Minimum Pension Liability).
11
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)
April 28, 2003
12
EXHIBIT INDEX
Exhibit
Number
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23.1 Consent of Independent Accountants
99 Supplementary Financial Information on Panamanian Securities Regulations