1
EXHIBIT 99.1
GULFMARK RETAINED ASSETS
BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1997 1996
------------- -------------
(in thousands)
ASSETS
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 $ 356
Accounts receivable
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 421 802
Unbilled receivables on jobs in progress . . . . . . . . . . . . . 136 31
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 24
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 157
Prepaids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 124
------------- -------------
750 1,494
Investment in EVI, Inc., including unrealized ------------- -------------
gain of $82,732,000 and $51,483,000, respectively . . . . . . . . . . 102,288 71,040
Property and equipment, at cost:
Transportation equipment . . . . . . . . . . . . . . . . . . . . . 279 279
Construction equipment . . . . . . . . . . . . . . . . . . . . . . 129 129
Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . 71 71
Furniture, fixtures and other . . . . . . . . . . . . . . . . . . 68 68
------------- -------------
547 547
Less - accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (318) (287)
------------- -------------
Net property and equipment . . . . . . . . . . . . . . . . . . . . 229 260
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 422
------------- -------------
$ 103,376 $ 73,216
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LIABILITIES AND ADVANCES AND EQUITY
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 152 $ 414
Accrued payroll and related expenses . . . . . . . . . . . . . . . . . . . 160 560
Accrued warranty expenses . . . . . . . . . . . . . . . . . . . . . . . . . - 354
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 286 426
------------- -------------
598 1,754
------------- -------------
Deferred income taxes and other . . . . . . . . . . . . . . . . . . . . . 33,294 22,646
Commitments and contingencies
Advances and retained earnings . . . . . . . . . . . . . . . . . . . . . . 15,967 15,923
Cumulative translation adjustment related to EVI, Inc. investment . . . . . (1,086) (1,086)
Unrealized gain on EVI, Inc. investment . . . . . . . . . . . . . . . . . 54,603 33,979
------------- -------------
============= =============
The accompanying notes are an integral part of these financial statements.
2
GULFMARK RETAINED ASSETS
STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended March 31,
-----------------------
1997 1996
---------- ----------
(in thousands, except
per share amounts)
Contract revenues . . . . . . . . . . . . . . . . . . . . . . . $ 818 $ 538
---------- ---------
Contract costs . . . . . . . . . . . . . . . . . . . . . . . . 678 440
Selling, general and administrative . . . . . . . . . . . . . . 688 346
---------- ---------
Income before income taxes . . . . . . . . . . . . . . . . . . (548) (248)
Provision (benefit) for income taxes . . . . . . . . . . . . . 100 (84)
---------- ---------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ (648) $ (164)
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Earnings per share . . . . . . . . . . . . . . . . . . . . . . $ (0.10) $ (0.02)
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Weighted average shares outstanding . . . . . . . . . . . . . . 6,680 6,672
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The accompanying notes are an integral part of these financial statements.
3
GULFMARK RETAINED ASSETS
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
Ended March 31,
---------------------------------
1997 1996
----------- ----------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .. . . . . . . . . . . . . . . . . . . . . . . . $ (648) $ (164)
Adjustments to reconcile net loss to net cash
used by operations:
Depreciation and amortization . . . . . . . . . . . . . 31 27
Deferred income tax provision . . . . . . . . . . . . . 29 (96)
Change in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . 300 672
Inventory, prepaids and other . . . . . . . . . . . . 409 (28)
Accounts payable . . . . . . . . . . . . . . . . . . (262) (688)
Accrued payroll and related expenses . . . . . . . . (400) (375)
Other accrued liabilities . . . . . . . . . . . . . . . (140) -
Other, net . . . . . . . . . . . . . . . . . . . . . . (5) (58)
---------- ----------
Net cash used by continuing operations . . . . . . . (686) (710)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment . . . . . . . . . . . - (14)
---------- ----------
Net cash used in investing activities . . . . . . . . - (14)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt, net of direct financing costs . . . . - 24
Net change in cash advances . . . . . . . . . . . . . . . 338 721
---------- ----------
Net cash provided by financing activities . . . . . 338 745
---------- ----------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . (348) 21
CASH AT BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . 356 27
---------- ----------
CASH AT END OF PERIOD . . . . . . . . . . . . . . . . . . . . . $ 8 $ 48
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The accompanying notes are an integral part of these financial statements.
4
GULFMARK RETAINED ASSETS
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BACKGROUND AND ORGANIZATION:
On April 30, 1997, the stockholders of GulfMark International, Inc. (the
Predecessor), approved a transaction to transfer the assets, liabilities and
operations of its offshore marine services business (the Marine Business) to
GulfMark Offshore, Inc. (New GulfMark), a new wholly owned subsidiary of the
Predecessor. Immediately after the transfer of the Marine Business, the
Predecessor spun off New GulfMark by distributing all the common stock of New
GulfMark to the Predecessor's stockholders (the Distribution). Following the
Distribution, on May 1, 1997, a subsidiary of EVI, Inc. (formerly Energy
Ventures, Inc.) (EVI), was merged (the Merger) into the Predecessor, which then
consisted solely of the Predecessor's remaining active business, the erosion
control business (Ercon), as well as the Predecessor's investment in
approximately 4.4 million shares of EVI common stock. The Predecessor survived
the Merger as a subsidiary of EVI. The surviving entity is referred to herein
as GulfMark Retained Assets.
The accompanying financial statements include the accounts of GulfMark Retained
Assets, as described in the preceding paragraph.
EVI, Inc. effected a two-for-one stock split of EVI's common stock on May 12,
1997. As a result of the stock split, all EVI stock data contained herein has
been restated to reflect the effect of the two-for-one stock split.
Ercon offers a variety of turnkey erosion control products and services to
assist customers to control soil erosion and prevent damage or destruction, by
rivers, streams and bayous, of various types of assets, including highways,
bridges, pipelines, buildings and railroads. EVI is a publicly traded
international oil field equipment and service company which manufactures
artificial lift and completion systems, drill pipe and premium tubulars.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from these estimates.
Construction Contracts
GulfMark Retained Assets reports income from construction contracts using the
percentage-of-completion method of accounting. The percentage of completion on
a given contract is determined considering the relationship of total cost
incurred to date to total estimated contract cost. Total revenues from claims
for additional compensation are recorded only if the scope and amount of the
claim have been agreed to by the customer (or the claim is specifically
provided for in the contract terms) and the amount of the claim can be reliably
estimated. On contracts where an ultimate loss is anticipated upon completion,
the full amount of the estimated loss is accrued when known.
Although the duration of construction contracts may exceed one year, GulfMark
Retained Assets generally invoices and collects for work performed on a monthly
basis. Accordingly, GulfMark Retained Assets' operating cycle has been defined
as one year for purposes of classifying amounts on its balance sheet as current
or noncurrent.
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Unbilled receivables on construction jobs in progress represent revenues
recognized in excess of amounts billed. Generally, unbilled work is billable
within 30 days.
Income Taxes
GulfMark Retained Assets accounts for income taxes in accordance with Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes," which requires recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been recognized in the
financial statements or tax returns. Under this method, deferred tax assets
and liabilities are determined based on the difference between the financial
statement carrying amounts and tax bases of assets and liabilities using
enacted tax rates and laws in effect in the years in which the differences are
expected to reverse. SFAS No. 109 also requires that the likelihood and amount
of future taxable income be included in the criteria used to determine the
timing and amount of tax benefits recognized for net operating losses and tax
credit carryforwards in the financial statements.
GulfMark Retained Assets has been included in consolidated federal income tax
returns filed by the Predecessor. However, the tax expense reflected in the
Statements of Income and the tax liabilities reflected in the Balance Sheets
have been prepared on a separate return basis as though GulfMark Retained
Assets had filed stand-alone income tax returns, except for the utilization of
net operating loss (NOL) carryforward benefits, which have been allocated by
the Predecessor to GulfMark Retained Assets based on GulfMark Retained Assets'
pro-rata share of the Predecessor's actual pre-tax financial statement earnings
for each year.
Cumulative Translation Adjustment
GulfMark Retained Assets recorded its portion of EVI's cumulative translation
adjustment as a component of advances and equity during the periods which
GulfMark Retained Assets accounted for its investment in EVI on the equity
method.
Inventory
Inventory is stated at the lower of cost (moving-average) or market. Inventory
consists primarily of Palisade Erconet panels whose open weave of synthetics
controls water flow, Ercomat double-layered and cabled grout injectable fabric
for contoured bank armoring, and Ercorap bags of hydratable grout for more
vertical bank armoring.
Property and Equipment
Property and equipment is recorded at cost and depreciated over estimated
service lives. Depreciation is computed primarily using the straight-line
method. Estimated lives for major classes of property and equipment are as
follows:
Transportation equipment 3 to 4 years
Construction equipment 4 to 6 years
Office equipment, furniture, fixtures and other 4 to 7 years
Expenditures for maintenance and repairs are charged currently to expense;
renewals and betterments are capitalized. Asset costs and accumulated
depreciation for property retired or otherwise disposed of are removed from the
accounts, with any gain or loss included in the results of operations.
3. INVESTMENT IN EVI, INC:
At December 31, 1996, the Predecessor owned 4,471,144 shares of stock of EVI.
On July 26, 1996, the Predecessor sold 600,000 shares of its 5,071,144 shares
holding in EVI in conjunction with a public offering by EVI of 6,900,000 newly
issued shares. As a result, the Predecessor received net proceeds of
approximately $8.9 million, resulting in an after-tax gain of approximately
$4.1 million. As a result of this sale and offering, the Predecessor's
ownership interest in EVI decreased to approximately 9.7 percent.
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The shares of EVI owned by the Predecessor were held for investment purposes.
Because of, among other things, the Predecessor's ownership interest in EVI, as
well as the two common directors between the two companies, the Predecessor may
be considered an "affiliate" of EVI under federal securities rules and
regulations. As such, these EVI shares may not have been able to be sold by
the Predecessor absent registering such shares under the Securities Act of 1933
or an exemption therefrom.
Prior to June 30, 1995, the Predecessor accounted for EVI on the equity method;
however, the reduction in the Predecessor's ownership interest on June 30,
1995, required a change from the equity method to the cost method and the
application of certain requirements of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under the cost method, the
Predecessor no longer records its proportionate share of EVI's earnings as was
done prior to June 30, 1995, under the equity method.
In addition, under SFAS No. 115, "...the portion of the security that can
reasonably be expected to qualify for sale within one year..." must be reported
at its "fair value." If the Predecessor was considered an "affiliate" under
the federal securities rules and regulations, approximately 3,129,200 shares as
of March 31, 1997, represents the number of shares which could have been sold
by the Predecessor without registration pursuant to Rule 144 promulgated under
the Securities Act of 1933. Accordingly, GulfMark Retained Assets has
reflected in the accompanying balance sheet approximately 3,129,200 shares of
EVI holdings at the closing price quoted on the New York Stock Exchange as of
March 31, 1997. The related unrealized gain on those shares is reflected as a
separate component of advances and equity, net of the related deferred taxes.
The remaining 1,341,944 shares are carried at historical cost.
The following represents unaudited summarized income statements for EVI. For
more information regarding EVI's financial condition and operations, reference
is made to EVI's March 31, 1997, Form 10-Q filed with the Securities and
Exchange Commission.
Summarized Income Statements
(Unaudited)
Three Months Ended
March 31
------------------------
1997 1996
----------- ----------
(In Thousands)
Revenues $ 164,640 $ 90,326
Expenses (142,045) (82,149)
Other expenses, net (355) (3,953)
---------- --------
Income before taxes 22,240 4,224
Tax provision 7,895 1,477
---------- --------
Income from continuing operations 14,345 2,747
Discontinued operations, net of taxes - 1,600
---------- --------
Net income $ 14,345 $ 4,347
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