FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
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 1-10945
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2628227
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16001 Park Ten Place, Suite 600, Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
(713) 578-8868
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 31, 1995
Common Stock, $.25 Par Value 24,017,046 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Dec. 31, Mar. 31,
1994 1994
(unaudited) (audited)
(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents $ 13,431 $ 26,486
Accounts receivable (net of allowance
for doubtful accounts of $1,142,000
at December 31 and $1,023,000 at
March 31) 58,867 51,563
Prepaid expenses and other 4,594 2,764
Total Current Assets 76,892 80,813
Property and Equipment, at cost:
Underwater services equipment 155,234 136,799
Offshore production equipment 24,510 24,464
Buildings, improvements and other 28,197 25,658
207,941 186,921
Less: Accumulated Depreciation 124,862 114,153
Net Property and Equipment 83,079 72,768
Investments and Other Assets 4,087 4,391
Goodwill, Net of Amortization 13,293 14,021
TOTAL ASSETS $177,351 $171,993
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $12,648 $13,897
Accrued liabilities 28,832 25,808
Income taxes payable 7,122 6,683
Total Current Liabilities 48,602 46,388
Long-Term Debt, net of current portion 119 171
Other Long-Term Liabilities 8,836 12,081
Shareholders' Equity 119,794 113,353
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $177,351 $171,993
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Three Months Ended
December 31,
1994 1993
(in thousands, except per share
amounts)
Revenues $ 55,203 $ 55,492
Cost of services 46,581 42,510
Selling, general and administrative 9,818 7,759
expenses
Income/(loss) from operations (1,196) 5,223
Interest income 124 226
Interest expense (133) (232)
Other income (expense), net (118) 80
Income/(loss) before income taxes (1,323) 5,297
Provision for income taxes (1,527) (1,408)
Net income/(loss) $(2,850) $ 3,889
Earnings/(loss) per common share $(0.12) $0.16
equivalent
Weighted average number of common
share equivalents outstanding 24,150 24,169
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Nine Months Ended
December 31,
1994 1993
(in thousands, except per share
amounts)
Revenues $ 185,471 $ 180,421
Cost of services 147,372 140,030
Selling, general and administrative
expenses 26,995 22,746
Income from operations 11,104 17,645
Interest income 411 676
Interest expense (508) (743)
Other income (expense), net (371) 148
Income before income taxes 10,636 17,726
Provision for income taxes (5,560) (4,354)
Net income $ 5,076 $ 13,372
Earnings per common share equivalent $0.21 $0.56
Weighted average number of common
share equivalents outstanding 24,179 24,045
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months
Ended December 31,
1994 1993
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,076 $13,372
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 11,911 8,845
Currency translation adjustments
and other 541 (365)
Decrease (increase) in accounts
receivable (7,304) (990)
Decrease (increase) in prepaid
expenses and other
current assets (1,798) 1,198
Increase (decrease) in current
liabilities 2,228 (1,559)
Increase (decrease) in other long-
term liabilities (3,245) (655)
Total adjustments to net income 2,333 6,474
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,409 19,846
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and
other assets (20,086) (18,589)
Decrease (increase) in investments 227 530
NET CASH (USED IN) INVESTING ACTIVITIES (19,859) (18,059)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (66) (72)
Proceeds from issuance of common stock
less purchases of Treasury Stock (539) 653
NET CASH PROVIDED BY/(USED IN) FINANCING
ACTIVITIES (605) 581
NET INCREASE (DECREASE) IN CASH (13,055) 2,368
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 26,486 33,973
CASH AND CASH EQUIVALENTS - END OF PERIOD $13,431 $36,341
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and Significant Accounting Policies
These Consolidated Financial Statements are unaudited and have been
prepared pursuant to instructions for the Quarterly Report on Form
10-Q required to be filed with the Securities and Exchange
Commission and do not include all information and footnotes
normally included in financial statements prepared in accordance
with generally accepted accounting principles. Certain amounts
from prior years have been reclassified to conform with current
year classifications. Management has reflected all adjustments
which it believes are necessary to present fairly the Company's
financial position at December 31, 1994 and its results of
operations and cash flows for the three and nine month periods
presented. All such adjustments are of a normal recurring nature.
The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Registrant's Annual Report on Form 10-K for its fiscal year ended
March 31, 1994. The results for interim periods are not
necessarily indicative of annual results.
2. Cash and Cash Equivalents
Cash and cash equivalents includes demand deposits and highly
liquid interest-bearing investment grade securities. Approximately
$1,400,000 and $1,300,000 of the Company's cash as of December 31,
and March 31, 1994, respectively, was restricted and is posted as
security in interest bearing accounts related to litigation
involving the Company's United Kingdom subsidiary. The Company
believes it has adequate defenses to the claims and that the
outcome will not have a material adverse effect on the financial
position or results of operations of the Company.
3. Shareholders' Equity
Shareholders' Equity consisted of the following:
Dec. 31, March 31,
1994 1994
(unaudited) (audited)
(in thousands)
Shareholders' Equity:
Common Stock, par value $0.25;
90,000,000 shares authorized;
24,017,046 and 23,995,796 shares
issued $ 6,004 $ 5,999
Treasury Stock, at cost, 88,406 shares (904) ---
Additional paid-in capital 80,422 80,062
Retained earnings 43,779 38,703
Cumulative translation adjustments (9,507) (11,411)
Total Shareholders' Equity $119,794 $113,353
4. Income Taxes
Effective fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
No. 109"). Cash taxes paid were $7,100,000 and $3,400,000 for the
nine months ended December 31, 1994 and 1993, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Material Changes in Financial Condition
The Company expects to continue to be able to meet its ongoing cash
requirements from existing cash on hand and from operating cash flows,
although if significant investment opportunities arise, the Company
may require the use of externally generated funds. In addition, the
Company has two credit agreements in the amounts of $25,000,000 and
$30,000,000. The $25,000,000 revolving credit agreement ("Credit
Agreement"), shared equally by two participating banks, which can be
converted into a term loan, provides for letters of credit and short-
term borrowings subject to an accounts receivable borrowing base.
Availability under the $25,000,000 Credit Agreement was approximately
$18,500,000 at December 31, 1994 as a result of outstanding letters of
credit. As of December 31, 1994, the availability under the
$30,000,000 term loan facility was $12,000,000.
Capital expenditures were $20,000,000 during the first nine months of
fiscal 1995, as compared to $19,000,000 during the corresponding
period of the prior fiscal year. Expenditures in fiscal 1995
primarily consist of the acquisition cost and upgrade of an offshore
support vessel, upgrades to the Company's fleet of remotely operated
vehicles ("ROVs"), additional diving equipment and equipment required
in the environmental services business. Expenditures in the
corresponding period of the prior year consisted of the acquisition
cost of four ROVs, the purchase of the assets and certain business of
the Space Systems Division of ILC Dover, Inc. and the acquisition of
Oil Industry Engineering Inc., a designer and manufacturer of subsea
well control equipment. There were no material commitments for
capital expenditures at December 31, 1994.
The Company is not aware of any circumstances which would cause a
material adverse effect in respect to meeting its ongoing financial
obligations. The Company operates primarily as a subcontracting
services company under short-term day-rate contracts. However, the
Company owns certain specialized capital assets, in particular a
Floating Production Storage and Offloading system ("FPSO"), which, if
not fully utilized, could have a negative effect on cash resources as
a result of continuing fixed operating costs and reduced revenues.
The FPSO is currently operating profitably offshore Angola under a
contract which has been extended until January 1996.
The primary market that the Company serves, oil and gas, is a cyclical
industry and remains volatile, resulting in potentially large
fluctuations in demand for the Company's primary services, which could
result in significant changes in the Company's revenues and profits.
Although the oil and gas industry continues to be its principal
market, the Company also performs services for the United States and
foreign governments and the telecommunications, aerospace, insurance
and environmental remediation industries. The Company is continually
seeking opportunities for business combinations to improve its market
position or expand into related service lines.
Material Changes in Results of Operations
Consolidated revenue and margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
(in thousands, except percentages)
Revenues $ 55,203 $ 55,492 $185,471 $180,421
Gross margins % 16% 23% 21% 22%
Operating margin % (2%) 9% 6% 10%
Oilfield Marine Services
Revenue and gross margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
(in thousands, except percentages)
Revenues $ 23,179 $ 29,875 $ 85,583 $ 98,655
Gross margins 1,892 7,860 14,781 26,996
Gross margin % 8% 26% 17% 27%
Revenues and gross margins from oilfield customers for the third
quarter of fiscal 1995 and for the nine month period ended December
31, 1994 were lower than the corresponding periods of the prior year.
Revenues in the Gulf of Mexico in the third quarter of fiscal 1995 and
for the nine month period ended December 31, 1994 were higher than in
the corresponding period of the prior year but gross margin
percentages were lower reflecting continued competitive pressures. In
the Company's foreign operating areas revenues and margins for the
three and nine month periods ended December 31, 1994 were lower than
the corresponding periods of the prior year as a result of lower
demand for the Company's services. During the third quarter of fiscal
1995, there was continued downward pressure on prices in all major
geographic areas compared to the corresponding period of the prior
year, resulting in lower profitability in all service lines.
Results for the third quarter of fiscal 1995 were negatively impacted
by the unfavorable resolution of a contract dispute relating to a
contract for services offshore West Africa which was completed in
fiscal 1992 and by difficulties experienced in the collection of
amounts due under a certain foreign contract entered into by the U.S.
operating area. A provision of $1,600,000 was made to cover loss of
revenues, various counterclaims and legal and arbitration fees
relating to the West African contract and a provision of $1,000,000
was made against potential losses on the foreign contract.
Offshore Field Development
Revenue and gross margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
(in thousands, except for percentages)
Revenues $ 15,217 $ 7,065 $ 45,720 $ 29,055
Gross margins 3,447 486 10,393 1,665
Gross margin % 23% 7% 23% 6%
Revenues and margins for the three month period ended December 31,
1994 increased over the corresponding period of the prior year as a
result of higher earnings from the FPSO and from additional
contributions from the Multiflex division which was acquired in March
1994. Revenues and margins for the nine month period ended December
31, 1994 increased over the corresponding period of the prior year as
a result of higher earnings from the FPSO and additional contributions
from the subsea controls and Multiflex divisions which were acquired
in July 1993 and March 1994, respectively. During the third quarter
of fiscal 1994, the FPSO was demobilized from its previous contract
and upgraded and mobilized to its new location offshore Angola. From
the fourth quarter of fiscal 1994, the FPSO has been operating under a
contract providing substantially higher rates than its previous
contract. The primary contract term for the FPSO expired in early
January 1995 and has been extended for a further one year term at a
lower rate which will continue to be profitable. See Item 2 -
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Material Changes in Financial Condition."
Revenues from the FPSO for the three and nine month periods ended
December 31, 1994 and 1993 were $4,414,000 and $13,198,000,
respectively, and $3,610,000 and $5,624,000, respectively. Gross
margins for the three and nine month periods ended December 31, 1994
and 1993 were $2,207,000 and $6,914,000, respectively, and $128,000
and $(787,000), respectively.
Other Mobile Offshore Production Systems ("MOPS") results for the nine
month period ended December 31, 1993 included the contribution from a
large extended well test project in the North Sea. The Company has
not undertaken a similar project in fiscal 1995. The reduced revenues
and margins from the MOPS activities were offset by additional
contributions from the subsea controls division and the Multiflex
division, which produces subsea umbilical control cables.
Advanced Technologies
Revenue and gross margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1994 1993 1994 1993
(in thousands, except for percentages)
Revenues $ 16,807 $ 18,552 $ 54,168 $ 52,711
Gross margins 3,283 4,636 12,925 11,730
Gross margin % 20% 25% 24% 22%
Revenues and margins for the three month period ended December 31,
1994 were lower than for the corresponding period of the prior year
primarily as a result of lower activity in the US Navy support groups.
Revenues and margins for the nine month period ended December 31, 1994
increased over the corresponding periods of the prior year primarily
as a result of both stronger demand and improved profitability in the
industrial marine business.
Other
Selling, general and administrative expenses increased in the three
and nine month periods ended December 31, 1994 compared to the
corresponding periods of the prior year reflecting the impacts of
business acquisitions. In addition, during the third quarter of
fiscal 1995, restructuring costs of approximately $500,000 were
incurred in consolidation and reduction of office and warehouse
facilities in the United Kingdom.
The provisions for income taxes were related to U.S. income taxes
which were provided at estimated annual effective rates using
assumptions as to earnings and other factors which would affect the
tax calculation for the remainder of the fiscal year, and to the
operations of foreign branches and subsidiaries which were subject to
local income and withholding taxes. The Company's effective tax rate
increased during the third quarter of fiscal 1995 compared to the
third quarter of fiscal 1994 as a result of an increase in the amount
of pre-tax income subject to taxing jurisdictions with higher
effective tax rates, primarily the United States, and losses in fiscal
1995 in areas, primarily the North Sea, where the Company derives no
tax benefit as it already has net operating loss carryforwards.
The quarters ending June 30 and September 30 have generally been the
Company's peak in both revenues and net income for its Oilfield Marine
business. Revenues and net income in the Offshore Field Development
and Advanced Technologies businesses are generally not seasonal.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) The Company did not file any reports on Form 8-K during the
quarter for which this report is filed.
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.
OCEANEERING INTERNATIONAL, INC.
(Registrant)
Date: February 7, 1995 By: //s// JOHN R. HUFF
John R. Huff, President and
Chief Executive Officer
Date: February 7, 1995 By: //s// T. JAY COLLINS
T. Jay Collins, Executive Vice
President and Chief Financial Officer
Date: February 7, 1995 By: //s// RICHARD V. CHIDLOW
Richard V. Chidlow, Controller
and Chief Accounting Officer