Exhibit 99.2
Indicative Example of Large Change Order on Hypothetical Project in Progress
Start of | Expected | Effects of a | Actual | Variance | ||||||||||||||||||
Total Contract | ||||||||||||||||||||||
Revenue ("TCV") | $ | 900 | $ | 300 | $ | 1,200 | $ | 300 | ||||||||||||||
Cost | $ | 720 | $ | 240 | $ | 960 | $ | 240 | ||||||||||||||
Gross Profit Dollars | $ | 180 | $ | 60 | $ | 240 | $ | 60 | ||||||||||||||
Gross Profit Percentage | 20 | % | 20 | % | 20 | % | 0 | % | ||||||||||||||
| POC Determinants | [1] | |||||||||||||||||||||
| Direct labor & equipment costs incurred | $ | 75 | $ | 150 | $ | 150 | $ | - | ||||||||||||||
| Direct labor & equipment total cost - est. at completion ("EAC") | $ | 300 | $ | 300 | $ | 240 | $ | 540 | $ | 240 | ||||||||||||
| Percent Complete ("POC") | 25 | % | 50 | % | 28 | % | -22 | % | ||||||||||||||
| Cumulative Recognition | ||||||||||||||||||||||
| Revenue (POC * TCV) | $ | 225 | $ | 450 | $ | 333 | $ | (117 | ) | |||||||||||||
| Gross Profit (POC * GP Dollars) | $ | 45 | $ | 90 | $ | 67 | $ | (23 | ) | |||||||||||||
| Recognition in Quarter | ||||||||||||||||||||||
| Revenue | $ | 225 | $ | 108 | $ | (117 | ) | |||||||||||||||
| Gross Profit | $ | 45 | $ | 22 | $ | (23 | ) | |||||||||||||||
[1] Generally includes McDermott's scope work for engineering, construction and installation and generally excludes procurement and sub-contracts. | ||||||||||||||||||||||
For a complete discussion on our revenue recognition accounting policy, please see McDermott’s quarterly and annual filings with the Securities and Exchange Commission.