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 June 30, 1996
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 July 26, 1996
Common Stock, $.25 Par Value 23,431,791 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, March 31,
1996 1996
(unaudited) (audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 11,045 $ 9,351
Accounts receivable (net of allowance
for doubtful accounts of $1,185 at
June 30 and $1,201 at March 31) 87,124 96,391
Prepaid expenses and other 6,655 4,733
-----------------------
Total Current Assets 104,824 110,475
-----------------------
Property and Equipment, at cost:
Marine services equipment 193,949 187,337
Mobile offshore production equipment 71,174 56,607
Buildings, improvements and other 29,357 29,438
-----------------------
294,480 273,382
Less: Accumulated Depreciation 148,836 145,105
-----------------------
Net Property and Equipment 145,644 128,277
-----------------------
Goodwill (net of amortization
of $2,761 and $2,515) 12,097 12,082
Investments and Other Assets 5,521 5,262
-----------------------
TOTAL ASSETS $268,086 $256,096
=======================
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 22,469 $ 25,607
Accrued liabilities 34,606 35,823
Income taxes payable 8,122 6,618
-----------------------
Total Current Liabilities 65,197 68,048
-----------------------
Long-Term Debt 57,000 48,000
-----------------------
Other Long-Term Liabilities 12,778 12,950
-----------------------
Shareholders' Equity 133,111 127,098
-----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $268,086 $256,096
=======================
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Three Months Ended
June 30,
1996 1995
(in thousands, except per
share amounts)
Revenues $ 80,535 $ 71,541
Cost of services 65,685 58,232
Selling, general and administrative expenses 8,908 8,309
-----------------------
Income from operations 5,942 5,000
Interest income 503 138
Interest expense, net (430) (397)
Other income (expense), net 80 63
-----------------------
Income before income taxes 6,095 4,804
Provision for income taxes (2,348) (2,017)
-----------------------
Net income $ 3,747 $ 2,787
=======================
Earnings per common share equivalent $0.16 $0.12
Weighted average number of common share
equivalents outstanding 23,591 23,158
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months Ended
June 30,
1996 1995
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $3,747 $ 2,787
Adjustments to reconcile net income to net
cash provided by/(used in)operating activities:
Depreciation and amortization 5,349 4,803
Currency translation adjustments and other 672 211
(Increase)/decrease in accounts receivable 9,267 (13,599)
(Increase)/decrease in prepaid expenses and
other current assets (1,922) 153
Increase in other assets (260) --
Increase/(decrease) in current
liabilities (2,851) 5,662
Increase/(decrease) in other long-term
liabilities (172) 50
----------------------
Total adjustments to net income 10,083 (2,720)
----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,830 67
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and
other assets (22,472) (9,757)
----------------------
NET CASH USED IN INVESTING ACTIVITIES (22,472) (9,757)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings,
net of payments 9,000 11,528
Proceeds from issuance of common stock 1,336 559
----------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,336 12,087
----------------------
NET INCREASE IN CASH 1,694 2,397
----------------------
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 9,351 12,865
----------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $11,045 $15,262
======================
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 June 30, 1996
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, 1996. 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
$1.4 million of the Company's cash as of June 30 and March 31, 1996
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:
June 30, March 31,
1996 1996
(unaudited) (audited)
(in thousands, except
share data)
Shareholders' Equity:
Common Stock, par value $0.25;
90,000,000 shares authorized;
24,017,046 shares issued $ 6,004 $ 6,004
Additional paid-in capital 82,188 81,921
Treasury stock, 641,733 and 793,170
shares, at cost (5,644) (6,976)
Retained earnings 60,303 56,556
Cumulative translation adjustments (9,740) (10,407)
-----------------------
Total Shareholders' Equity $133,111 $127,098
=======================
4. Income Taxes
Cash taxes paid were $800,000 for the first quarters of fiscal 1997
and 1996.
5. Accounting for impairment of long-lived assets
In March 1995, Statement of Financial Accounting Standards Board
standard number ("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," was
issued. SFAS 121, effective for fiscal years beginning after
December 15, 1995, requires that certain long-lived assets be
reviewed for impairment whenever events indicate that the carrying
amount of an asset may not be recoverable and that an impairment
loss be recognized under certain circumstances in the amount by
which the carrying value exceeds the fair value of the asset. The
Company adopted SFAS 121 on April 1, 1996, as required. There was
no material effect on the Company's results of operations or
financial position as a result of the adoption of SFAS 121.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
All statements in this Form 10-Q, other than statements of historical
facts, including, without limitation, statements regarding the
Company's business strategy, plans for future operations, and industry
conditions, are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company utilizes a variety of internal and external data
and management judgement in order to develop such forward-looking
information. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, because
of the inherent limitations in the forecasting process, as well as the
relatively volatile nature of the industry in which the Company
operates, it can give no assurance that such expectations will prove
to have been correct. Accordingly, evaluation of future prospects of
the Company must be made with caution when relying on forward-looking
information.
Material Changes in Financial Condition
The Company considers its liquidity and capital resources adequate to
support continuing operations and capital commitments. At June 30,
1996, the Company had working capital of $40 million, including $10
million of unrestricted cash. Additionally, the Company had $63
million available for borrowings under a $120 million credit facility
and $11 million was unused under its $20 million uncommitted line of
credit. None of the $57 million of long-term bank debt is required to
be repaid prior to fiscal 1999.
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 system ("FPSO"). 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 purchased and
is converting an existing 268,000 dwt crude oil tanker into the FPSO
ZAFIRO PRODUCER at an estimated capital cost of $70 million. To
facilitate the funding of the capital expenditures required for this
project, the Company expanded its committed credit facility from $75
million to $120 million during the first quarter of fiscal 1997.
The contract also provides the customer with the options to either
extend the contract at reduced rates or purchase the vessel and
terminate the lease at any time during the initial three-year period.
Exercise of the purchase option would increase the Company's expected
earnings for that year and substantially increase the Company's
liquidity.
Total debt increased from $48 million as of the end of fiscal 1996 to
$57 million as of June 30, 1996 primarily as a result of continued
expenditures on the FPSO ZAFIRO PRODUCER conversion project. As a
percentage of total capitalization, long-term debt increased from 27%
at March 31, 1996 to 30% at June 30, 1996.
Capital expenditures were $22 million during the first three months of
fiscal 1997, as compared to $10 million during the corresponding
period of the prior fiscal year. Fiscal 1997 expenditures included
construction costs of $15 million for the FPSO and additions to the
Company's fleet of remotely operated vehicles ("ROV"). Fiscal 1996
expenditures consisted of costs to complete the upgrade of two
offshore support vessels and upgrades to the Company's ROV fleet.
Commitments for capital expenditures at June 30, 1996 were
approximately the $25 million required to complete the conversion of
the ZAFIRO PRODUCER during fiscal 1997.
Results of Operations
Consolidated revenue and margin information is as follows:
Three Months Ended
June 30,
1996 1995
(in thousands)
Revenues $ 80,535 $ 71,541
Gross Margin 14,850 13,309
Gross margin % 18% 19%
Operating Margin % 7% 7%
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
June 30,
1996 1995
(in thousands, except percentages)
Revenues $ 41,639 $31,581
Gross margins 7,344 5,558
Gross margin % 18% 18%
During the three-month period ended June 30, 1996, revenues for the
Oilfield Marine Services segment grew and gross margin percentage was
maintained compared to that of the corresponding period of the prior
year. Improved results from ROV services were offset by lower margins
in other service lines.
Offshore Field Development
Revenue and gross margin information is as follows:
Three Months Ended
June 30,
1996 1995
(in thousands, except percentages)
Revenues $ 16,564 $23,621
Gross margins 3,346 4,807
Gross margin % 20% 20%
Revenues and gross margins for offshore production systems were lower
in the first quarter of fiscal 1997 compared to the corresponding
period of the prior year as a result of the project to convert a rig
to a production system which took place in fiscal 1996. The Company
did not undertake a similar project in the first quarter of fiscal
1997. During the first quarter of fiscal 1997, the Company's FPSO
OCEAN PRODUCER continued to work offshore West Africa under a contract
which expires in January 2000. Revenues and gross margins from subsea
product sales increased over the corresponding period of fiscal 1996.
Advanced Technologies
Revenue and gross margin information is as follows:
Three Months Ended
June 30,
1996 1995
(in thousands, except percentages)
Revenues $ 22,332 $16,339
Gross margins 4,160 2,944
Gross margin % 19% 18%
Revenues and margins for the first quarter of fiscal 1997 were higher
than those of the corresponding period of the prior year as a result
of increased activity in civil works projects, subsea cable burial and
space related products.
Other
Selling, general and administrative expenses for the first quarter of
fiscal 1997 were higher than the corresponding period of the prior
year primarily due to higher bid and proposal costs. Interest expense
for the three-month period ended June 30, 1996 was net of capitalized
interest of $600,000 relating to the FPSO conversion project.
Interest income for the three-month period ended June 30, 1996
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 total amount of principal and interest
outstanding under this financing arrangement was paid in full by the
customer in June 1996.
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.
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: August 5, 1996 By: //s// JOHN R. HUFF
John R. Huff, President and
Chief Executive Officer
Date: August 5, 1996 By: //s// MARVIN J. MIGURA
Marvin J. Migura, Senior Vice
President and Chief Financial Officer
Date: August 5, 1996 By: //s// RICHARD V. CHIDLOW
Richard V. Chidlow, Controller
and Chief Accounting Officer