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 September 30, 1995
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)
Registrant's telephone number, including area code: (713) 578-8868
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 October 27, 1995
Common Stock, $.25 Par Value 23,130,563 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, March 31,
1995 1995
(unaudited) (audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 12,521 $ 12,865
Accounts receivable (net of allowance
for doubtful accounts of $1,214 at
September 30 and $1,238 at March 31) 85,684 58,360
Prepaid expenses and other 7,809 4,613
Total Current Assets 106,014 75,838
Property and Equipment, at cost:
Marine services equipment 184,003 175,528
Mobile offshore production equipment 25,052 24,694
Buildings, improvements and other 29,494 28,648
238,549 228,870
Less: Accumulated Depreciation 142,471 134,515
Net Property and Equipment 96,078 94,355
Goodwill (net of amortization
of $2,031 and $1,546) 12,566 13,051
Investments and Other Assets 4,645 4,508
TOTAL ASSETS $219,303 $187,752
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 15,929 $ 15,110
Accrued liabilities 28,388 29,870
Income taxes payable 8,163 7,634
Current portion of long-term debt 339 118
Total Current Liabilities 52,819 52,732
Long-Term Debt, net of current portion 33,000 9,472
Other Long-Term Liabilities 11,144 10,408
Shareholders' Equity 122,340 115,140
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $219,303 $187,752
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Three Months Ended
September 30,
1995 1994
(in thousands, except per
share amounts)
Revenues $ 77,088 $ 66,898
Cost of services 61,124 51,515
Selling, general and administrative 8,652 8,811
expenses
Income from operations 7,312 6,572
Interest income 514 111
Interest expense (535) (163)
Other income (expense), net (40) (156)
Income before income taxes 7,251 6,364
Provision for income taxes (2,678) (2,104)
Net income $ 4,573 $ 4,260
Earnings per common share equivalent $0.20 $0.18
Weighted average number of common
share equivalents outstanding 23,224 24,204
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Six Months Ended
September 30,
1995 1994
(in thousands, except per share
amounts)
Revenues $148,629 $130,268
Cost of services 119,356 100,791
Selling, general and administrative 16,961 17,177
expenses
Income from operations 12,312 12,300
Interest income 652 287
Interest expense (932) (375)
Other income (expense), net 23 (253)
Income before income taxes 12,055 11,959
Provision for income taxes (4,695) (4,033)
Net income $ 7,360 $ 7,926
Earnings per common share equivalent $0.32 $0.33
Weighted average number of common share
equivalents outstanding 23,191 24,193
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Six Months
Ended
Sept. 30,
1995 1994
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 7,360 $ 7,926
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization 10,039 7,824
Currency translation adjustments and other 695 638
Increase in accounts receivable (27,324) (17,247)
Increase in prepaid expenses and other
current assets (3,359) (1,495)
Increase in current liabilities 124 6,598
Increase (decrease) in other long-term
liabilities 736 (3,471)
Total adjustments to net income (19,089) (7,153)
NET CASH PROVIDED BY/(USED IN) OPERATING
ACTIVITIES (11,729) 773
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and other
assets (13,242) (13,463)
Decrease in investments 0 154
NET CASH USED IN INVESTING ACTIVITIES (13,242) (13,309)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of
payments 23,528 (23)
Proceeds from issuance of common stock 415 89
Treasury stock reissued 684 0
NET CASH PROVIDED BY FINANCING ACTIVITIES 24,627 66
NET DECREASE IN CASH (344) (12,470)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 12,865 26,486
CASH AND CASH EQUIVALENTS - END OF PERIOD $12,521 $14,016
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. Management has reflected all adjustments which
it believes are necessary to present fairly the Company's financial
position at September 30, 1995 and its results of operations and cash
flows for the three and six 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, 1995.
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
of the Company's cash as of September 30, 1995 and as of March 31,
1995 was restricted and posted as security in interest-bearing
accounts related to litigation in the United Kingdom. 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:
September 30, March 31,
1995 1995
(unaudited) (audited)
(in thousands, except
share data)
Shareholders' Equity:
Common Stock, par value $0.25;
90,000,000 shares authorized;
24,017,046 and 24,017,046 issued $ 6,004 $ 6,004
Additional paid-in capital 81,251 80,800
Treasury stock, 899,600 and 977,363
shares at cost (7,912) (8,596)
Retained earnings 51,598 44,199
Cumulative translation adjustments (8,601) (7,267)
Total Shareholders' Equity $122,340 $115,140
4. Income Taxes
Cash taxes paid were $4,165,000 and $4,377,000 for the six months
ended September 30, 1995 and 1994, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Financial Condition
At September 30, 1995, the Company's working capital was approximately
$53 million, which included $11 million of unrestricted cash and cash
equivalents. The Company expects to be able to meet its ongoing annual
cash requirements from existing cash on hand, operating cash flows and
available credit facilities.
The Company has a credit agreement with a group of banks in the amount
of $75 million ("Credit Agreement"); borrowings under the Credit
Agreement were approximately $33 million at September 30, 1995, none of
which is required to be repaid prior to fiscal 1999. The Company also
has an uncommitted credit agreement with a bank in the amount of $20
million for use for letters of credit and short-term borrowings
("Uncommitted Line"). As of September 30, 1995, the Company had
utilized $7.3 million under the Uncommitted Line.
Capital expenditures were $13 million during the first six months of
fiscal 1996, as compared to $13 million during the corresponding period
of the prior fiscal year. Fiscal 1996 expenditures consisted of
costs for upgrades to offshore support vessels and to the
Company's fleet of remotely operated vehicles ("ROVs"). Expenditures in
fiscal 1995 consisted primarily of acquisition costs of an offshore
support vessel, upgrades to the Company's fleet of ROVs, additional
diving equipment and equipment required in the environmental services
business. There were no material commitments for capital expenditures
at September 30, 1995.
Results of Operations
Consolidated revenue and margin information is as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues (in
thousands) $ 77,088 $ 66,898 $148,629 $130,268
Gross margin % 21% 23% 20% 23%
Operating margin % 9% 10% 8% 9%
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.
Oilfield Marine Services
Revenue and gross margin information is as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands)
Revenues $ 36,464 $31,685 $ 68,045 $ 62,404
Gross margins 7,986 7,186 13,544 12,889
Gross margin % 22% 23% 20% 21%
Revenues from oilfield customers for the three and six month periods
ended September 30, 1995 increased over the corresponding periods of the
prior year while overall gross margin percentages remained at
approximately the same level.
For the second quarter of fiscal 1996, improved revenues and gross
margins in Asia, the North Sea and Africa were offset by lower margins
in the Gulf of Mexico. Revenues from the Company's ROV services for the
second quarter of fiscal 1996 increased compared to the second quarter
of fiscal 1995. Demand for diving and related services in the Gulf of
Mexico declined compared to the prior year and the Company experienced
downward pressure on prices for these services. Gross margin for the
second quarter includes a gain of $1.1 million arising from the
settlement of a dispute relating to a contract executed in West Africa
in fiscal 1992.
For the first six months of fiscal 1996 revenues and gross margins from
international operations increased compared to the corresponding period
of the prior year. In the Gulf of Mexico, revenues were at
approximately the same level as in the corresponding period of the prior
year as reduced revenues for diving services were offset by increased
demand for ROV services; however, gross margins were negatively impacted
by reduced profitability from diving services.
Offshore Field Development
Revenue and gross margin information is as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands)
Revenues $ 20,889 $ 15,782 $ 44,510 $ 30,503
Gross margins 4,511 3,635 9,318 6,946
Gross margin % 22% 23% 21% 23%
Revenues for the three and six month periods ended September 30, 1995
increased over the corresponding period of the prior year primarily as a
result of a contract to convert a jackup rig into a MOPS unit. The
conversion was completed during the second quarter of fiscal 1996 and
the unit delivered to the Customer s location offshore West Africa. The
Company's Floating Production, Storage and Offloading ("FPSO") system
continued to work offshore Angola under a contract expiring in January
1996; contract revenues for the FPSO were lower than the corresponding
periods of the prior year with a similar decrease in gross margins.
Revenues from the FPSO for the three and six month periods ended
September 30, 1995 and 1994 were $3,641,000 and $7,114,000,
respectively, and $4,507,000 and $8,784,000, respectively; gross margins
for the three and six month periods ended September 30, 1995 and 1994
were $1,724,000 and $3,441,000, respectively, and $2,446,000 and
$4,707,000, respectively.
Subsequent to the end of the quarter, the Company concluded a contract
for continued operation of the FPSO for a period of four years
commencing January 1996. Based on the Customer's anticipated increased
production from recently completed wells, the provisions of the contract
should allow the FPSO to contribute annual net financial results
comparable to those currently being achieved.
On August 14, 1995, the Company's semisubmersible rig, Ocean Developer,
was lost at sea off the coast of West Africa; all crew members were
safely evacuated. The rig was under tow en route to South Africa in
anticipation of conversion into production service subject to final
approval of a contract. The Company's interest in the rig was
adequately insured and the insurance proceeds were collected in October.
Recognition of any gain on the involuntary conversion is being deferred
pending resolution of ongoing contract negotiations. In the event that
a contract agreement can be reached, the Company anticipates being able
to acquire another suitable rig for conversion to meet the Customer's
requirements.
Advanced Technologies
Revenue and gross margin information is as follows:
Three Months Ended Six Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands)
Revenues $ 19,735 $ 19,431 $ 36,074 $ 37,361
Gross margins 3,467 4,562 6,411 9,642
Gross margin % 18% 23% 18% 26%
Revenues for the second quarter of fiscal 1996 were at approximately the
same level as the corresponding period of the prior year but changes in
the business mix in engineering work and poor results in the
environmental services unit contributed to lower gross margins.
Revenues and gross margins for the six month period ended September 30,
1995 decreased over the corresponding period of the prior year as a
result of lower utilization of the Company's deep ocean search
equipment, lower profitability in space-related product sales and lower
engineering services activity.
Other
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 three and six month periods ended September 30, 1995 compared to the
corresponding periods of fiscal 1995 as a result of an increase in the
amount of business subject to taxing jurisdictions with higher effective
tax rates, primarily the United States.
Interest expense for the three and six month periods ended September 30,
1995 increased compared with the corresponding periods of the prior year
as a result of borrowings under the Company's Credit Agreement.
Interest income for the three and six month periods ended September 30,
1995 increased compared with the prior year primarily as a result of
interest earned on financing of MOPS equipment for an oilfield customer.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company held its Annual Meeting of Shareholders on August 25,
1995.
(c) The following matters were voted upon at the Annual Meeting:
Election of Directors.
Nominee Shares For Shares Withheld
Gordon M. Anderson 18,568,762 1,366,866
David S. Hooker 18,573,312 1,362,316
Ratification of the appointment of Arthur Andersen LLP as
independent auditors of the Company.
Shares For Shares Against Shares Abstained
19,895,728 28,781 11,119
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: November 9, 1995 By: //s// JOHN R. HUFF
John R. Huff, President and
Chief Executive Officer
Date: November 9, 1995 By: //s// MARVIN J. MIGURA
Marvin J. Migura, Senior Vice President
and Chief Financial Officer
Date: November 9, 1995 By: //s// RICHARD V. CHIDLOW
Richard V. Chidlow, Controller
and Chief Accounting Officer