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, 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 January 31, 1996
Common Stock, $.25 Par Value 23,181,773 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, March 31,
1995 1995
(unaudited) (audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 12,054 $ 12,865
Accounts receivable (net of allowance
for doubtful accounts of $1,222 at
December 31 and $1,238 at March 31) 89,885 58,360
Prepaid expenses and other 5,520 4,613
Total Current Assets 107,459 75,838
Property and Equipment, at cost:
Marine services equipment 185,354 175,528
Mobile offshore production equipment 35,904 24,694
Buildings, improvements and other 28,423 28,648
249,681 228,870
Less: Accumulated Depreciation 142,891 134,515
Net Property and Equipment 106,790 94,355
Goodwill (net of amortization
of $2,273 and $1,546) 12,324 13,051
Investments and Other Assets 5,076 4,508
TOTAL ASSETS $231,649 $187,752
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $17,018 $ 15,228
Accrued liabilities 28,568 29,870
Income taxes payable 7,958 7,634
Total Current Liabilities 53,544 52,732
Long-Term Debt 40,000 9,472
Other Long-Term Liabilities 11,990 10,408
Shareholders' Equity 126,115 115,140
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $231,649 $187,752
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Three Months Ended
December 31,
1995 1994
(in thousands, except per share
amounts)
Revenues $ 74,236 $ 55,203
Cost of services 59,783 46,581
Selling, general and administrative 8,792 9,818
expenses
Income (loss) from operations 5,661 (1,196)
Interest income 551 124
Interest expense (642) (133)
Other income (expense), net (154) (118)
Income (loss) before income taxes 5,416 (1,323)
Provision for income taxes (1,888) (1,527)
Net income (loss) $ 3,528 $ (2,850)
Earnings (loss) per common share
equivalent $0.15 $(0.12)
Weighted average number of common share
equivalents outstanding 23,267 24,150
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Nine Months Ended
December 31,
1995 1994
(in thousands, except per share
amounts)
Revenues $222,865 $185,471
Cost of services 179,139 147,372
Selling, general and administrative 25,753 26,995
expenses
Income from operations 17,973 11,104
Interest income 1,203 411
Interest expense (1,574) (508)
Other income (expense), net (131) (371)
Income before income taxes 17,471 10,636
Provision for income taxes (6,583) (5,560)
Net income $ 10,888 $ 5,076
Earnings per common share equivalent $0.47 $0.21
Weighted average number of common share
equivalents outstanding 23,216 24,179
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Nine Months
Ended December 31,
1995 1994
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $10,888 $ 5,076
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization 15,306 11,911
Currency translation adjustments and other 462 541
Increase in accounts receivable (31,525) (7,304)
Increase in prepaid expenses and other
current assets (1,052) (1,798)
Increase in current liabilities 847 2,228
Increase (decrease) in other long-term
liabilities 1,582 (3,245)
Total adjustments to net income (14,380) 2,333
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES (3,492) 7,409
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and other
assets (29,272) (20,086)
Decrease (increase) in investments (451) 227
NET CASH USED IN INVESTING ACTIVITIES (29,723) (19,859)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of
payments 30,528 (66)
Proceeds from issuance of common stock less
purchases of Treasury Stock 750 (539)
Treasury stock reissued 1,126 --
NET CASH PROVIDED BY FINANCING ACTIVITIES 32,404 (605)
NET DECREASE IN CASH (811) (13,055)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 12,865 26,486
CASH AND CASH EQUIVALENTS - END OF PERIOD $12,054 $13,431
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 December 31,
1995 and its results of operations and cash flows for the 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 and $1,500,000 of the Company's cash as of December 31
and March 31, 1995, 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,
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 shares
issued $ 6,004 $ 6,004
Additional paid-in capital 81,586 80,800
Treasury stock, 849,364 and 977,363
shares, at cost (7,470) (8,596)
Retained earnings 55,087 44,199
Cumulative translation adjustments (9,092) (7,267)
Total Shareholders' Equity $126,115 $115,140
4. Income Taxes
Cash taxes paid were $6,158,000 and $7,100,000 for the nine months
ended December 31, 1995 and 1994, respectively.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Material Changes in Financial Condition
At December 31, 1995, the Company's working capital was approximately
$53.9 million, which included $10.6 million of unrestricted cash and
cash equivalents. In November 1995, the Company announced that it had
been awarded a contract by a major oil company to provide a floating
production, storage and offloading ("FPSO") system. The contract is a
dayrate lease arrangement which has an initial term of three years
with a targeted commencement date of August 1996. The Company has
purchased and is converting an existing 268,000 deadweight ton crude
oil tanker into the FPSO system at an estimated capital cost of $70
million. The Company intends to arrange debt financing to fund the
required capital expenditures and expects this project to contribute
incremental annual earnings of approximately $0.30 per share during
the contract term. In addition, the contract provides the customer
with the option to purchase the vessel at any time during the three-
year period which, if exercised, would increase the Company's expected
earnings for that year.
At December 31, 1995, the Company had borrowings of $40 million
outstanding under its $75 million credit agreement, 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 December 31, 1995, the Company had utilized $5.2
million for letters of credit under the Uncommitted Line.
Capital expenditures were $29 million during the first nine months of
fiscal 1996, as compared to $20 million during the corresponding
period of the prior fiscal year. Fiscal 1996 expenditures included
$12 million of construction costs for the FPSO, costs to complete the
upgrade of two offshore support vessels and upgrades and additions to
the Company's fleet of remotely operated vehicles ("ROVs").
Expenditures in fiscal 1995 were of a similar nature except for the
FPSO.
Results of Operations
Consolidated revenue and margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
(in thousands, except percentages)
Revenues $ 74,236 $ 55,203 $222,865 $185,471
Gross margin % 19% 16% 20% 21%
Operating margin % 8% (2%) 8% 6%
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 Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
(in thousands, except percentages)
Revenues $ 32,865 $23,179 $100,910 $ 85,583
Gross margins 2,917 1,892 16,461 14,781
Gross margin % 9% 8% 16% 17%
During the three and nine-month periods ended December 31, 1995,
revenues for the Oilfield Marine Services segment grew and gross
margins increased compared to those of the corresponding periods of
the prior year as profitability for ROV services improved. However,
diving margins declined as a consequence of competitive market
conditions and operational difficulties experienced with Company-owned
vessels, which resulted in increased costs and low utilization.
Revenues and gross margins in fiscal 1995 were negatively impacted by
a provision of $1.6 million to cover loss of revenues, various
counterclaims and legal and arbitration costs relating to the
unfavorable resolution of a 1992 contract dispute and by a provision
of $1.0 million against potential losses on a foreign contract.
Offshore Field Development
Revenue and gross margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
(in thousands, except percentages)
Revenues $ 17,884 $15,217 $ 62,394 $ 45,720
Gross margins 6,444 3,447 15,762 10,393
Gross margin % 36% 23% 25% 23%
Revenues and gross margins for the three and nine-month periods ended
December 31, 1995 include a $2.7 million gain on the involuntary
conversion of the OCEAN DEVELOPER rig which sank while under tow in
August 1995. Recognition of this gain had been deferred pending
resolution of contract negotiations with the intended customer which
continued subsequent to the loss of the rig. These negotiations have
failed to produce an agreement.
Revenues and gross margins for the nine-month period ended December
31, 1995 increased over those of the corresponding period of the prior
year primarily as a result of a contract to convert a jackup rig into
a Mobile Offshore Production Systems ("MOPS") unit. The conversion
was completed in the second quarter of fiscal 1996.
The Company's existing FPSO system continued to work offshore Angola
under a contract which expired in January 1996. A new four-year
contract has been awarded for continued operations in the same
location. Revenues and gross margins from this FPSO for the three and
nine-month periods ended December 31, 1995 and 1994 were as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
(in thousands)
Revenues $ 3,762 $ 4,414 $ 10,876 $ 13,198
Gross margins 2,141 2,207 5,582 6,914
Advanced Technologies
Revenue and gross margin information is as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
1995 1994 1995 1994
(in thousands, except percentages)
Revenues $ 23,487 $16,807 $ 59,561 $ 54,168
Gross margins 5,092 3,283 11,503 12,925
Gross margin % 22% 20% 19% 24%
Revenues and margins for the third quarter of fiscal 1996 were higher
than those of the corresponding period of the prior year as a result
of increased activity in civil works projects and subsea cable burial.
For the nine-month period ended December 31, 1995 revenues were higher
than those of the corresponding period of the prior year as a result
of higher activity in civil works projects and the subsea cable burial
market, partially offset by lower utilization of the Company's deep
ocean search and recovery equipment; gross margins were lower as a
result of lower profitability in deep ocean search and recovery,
space-related product sales, engineering and environmental services.
Other
Interest expense for the three and nine-month periods ended December
31, 1995 increased compared to that of the corresponding periods of
the prior year as a result of additional borrowings under the
Company s Credit Agreement. Interest income for the three and nine-
month periods ended December 31, 1995 increased compared to that of
the prior year primarily as a result of interest earned by financing
the conversion costs of a MOPS unit for an oilfield customer.
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
for the nine-month period ended December 31, 1995 was lower than that
of the corresponding period of fiscal 1995 because of the impact of
larger foreign losses in fiscal 1995 for which no tax benefit was
available.
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 8, 1996 By: //s// JOHN R. HUFF
John R. Huff, President and
Chief Executive Officer
Date: February 8, 1996 By: //s// MARVIN J. MIGURA
Marvin J. Migura, Senior Vice
President and Chief Financial Officer
Date: February 8, 1996 By: //s// RICHARD V. CHIDLOW
Richard V. Chidlow, Controller
and Chief Accounting Officer