1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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 000-23225
TRANSCOASTAL MARINE SERVICES, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 72-1353528
(State Or Other Jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification No.)
3535 BRIARPARK, SUITE 210, HOUSTON, TEXAS 77042
(Address of principal executive offices)
(Zip Code)
(713) 784-7429
(Registrant's telephone number, including area code)
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 [ ] No [ X ]*
*The Registrant became subject to the reporting requirements of Section 13
of the Securities Act of 1934 on October 29, 1997.
The number of shares of Common Stock of the registrant, par value $.001
per share, outstanding at December 12, 1997 was 9,148,441.
2
Part I - Financial Information
Item 1 - Financial Statements
General Information.........................................................3
Combined Balance Sheets - TransCoastal Marine Services, Inc.
as of December 31, 1996 and September 30, 1997 and
Pro Forma as of September 30, 1997........................................4
Combined Statements of Operations - TransCoastal Marine Services, Inc.
for the Three-Month Periods ended September 30, 1996 and 1997 and
Pro Forma for the Three-Month Periods ended September 30, 1996 and 1997...5
Combined Statements of Operations - TransCoastal Marine Services, Inc.
for the Nine-Month Periods ended September 30, 1996 and 1997 and
Pro Forma for the Nine-Month Periods ended September 30, 1996 and 1997....6
Combined Statements of Cash Flows - TransCoastal Marine Services, Inc.
for the Nine-Month Periods ended September 30, 1996 and 1997..............7
Notes to the Financial Statements...........................................9
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................13
Part II - Other Information
Item 1 - Legal Proceedings....................................................17
Item 6 - Exhibits and Reports on Form 8-K ....................................18
Signature.....................................................................19
-2-
3
TRANSCOASTAL MARINE SERVICES, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
General Information
Transcoastal Marine Services, Inc. ("TCMS" or the "Company") was organized in
April 1996 to become a fully integrated marine construction company focusing on
the transition zone (marsh, swamp, and coastal regions out to water depths of
20 feet) and shallow water (water depths of 20 to 200 feet) regions along the
U.S. Gulf Coast. The Company's goal is to become a leader in the consolidation
of these fragmented segments of the marine construction industry. On November
4, 1997, TCMS acquired in separate transactions (the Acquisitions),
simultaneously with the closing of its initial public offering (the Offering)
of its common stock (the Common Stock), four businesses: The Red Fox Companies
of New Iberia (RFCNI), The Woodson Companies (Woodson), CSI Hydrostatic
Testers, Inc. (CSI), and HBH, Inc. (HBH). With closing of the Acquisitions, the
Company's services now include offshore pipeline installation and repair
services, hydrostatic testing and commissioning of pipelines and fabrication
and refurbishment of components for offshore platforms and drilling rigs.
The consideration for the Acquisitions of the Founding Companies consisted of a
combination of cash, debt and Common Stock. Because (i) the stockholders of the
Founding Companies owned a majority of the outstanding shares of Common Stock
following the Offering and the Acquisitions, and (ii) the stockholders of
Woodson received the greatest number of shares of Common Stock among the
stockholders of the Founding Companies, for financial statement presentation
purposes, Woodson has been identified as the accounting acquiror. The
acquisitions of TCMS, CSI, HBH and RFCNI will be accounted for using the
purchase method of accounting. Therefore the accompanying historical financial
statements as of December 31, 1996 and September 30, 1997 and for the nine and
three-month periods ended September 30, 1996 and September 30, 1997 of Woodson
are presented as the historical financial statements of the registrant. Unless
the context otherwise requires, all references herein to the Company include
TCMS and the Founding Companies.
Operating results for interim periods are not necessarily indicative of the
results for full years. The financial statements included herein should be read
in conjunction with the Pro Forma Combined Financial Statements of the Company
and the related notes thereto, the Financial Statements of TCMS, Woodson, CSI,
HBH and RFCNI and related notes thereto, and management's discussion and
analysis of financial condition and results of operations related thereto, all
of which are included in the Company's Registration Statement on Form S-1 (No.
333-34603), as amended (the "Registration Statement"), filed with the SEC in
connection with the Offering.
TCMS is a Delaware corporation. Its corporate offices are located at 3535
Briarpark, Suite 210, Houston, Texas 77042, and its telephone number is
713-784-7429.
-3-
4
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED BALANCE SHEETS
(In Thousands, Except Share Data)
Historical Pro Forma
---------------------------- -------------
December 31, September 30, September 30,
1996 1997 1997
-------- -------- --------
(Unaudited) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,117 $ 1,113 $ 7,660
Accounts receivables, net 1,418 5,864 15,372
Costs and estimated earnings in excess of billings on
uncompleted contracts -- 2,440 4,064
Inventory 243 460 460
Available-for-sale securities, at fair value 1,603 128 128
Other 861 644 1,638
-------- -------- --------
Total current assets 5,242 10,649 29,322
PROPERTY AND EQUIPMENT, net 2,956 4,048 63,816
GOODWILL -- -- 66,465
OTHER 958 90 3,599
-------- -------- --------
Total assets $ 9,156 $ 15,587 $163,202
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 760 $ 3,356 $ 15,220
Notes payable and current maturities of long-term debt 229 1,399 2,460
Payable to founding stockholders 450 -- --
Billings in excess of costs and estimated earnings on
uncompleted contracts -- 54 270
-------- -------- --------
Total current liabilities 1,439 809 17,950
-------- -------- --------
LONG-TERM DEBT -- -- 12,700
DEFERRED INCOME TAXES -- -- 17,283
-------- -------- --------
Total liabilities 1,439 4,809 47,933
-------- -------- --------
STOCKHOLDERS' EQUITY:
Common stock 1 1 9
Additional paid-in capital 122 122 106,540
Retained earnings 7,275 10,619 8,684
Net unrealized gain on available-for-sale securities 319 36 36
-------- -------- --------
Total stockholders' equity 7,717 10,778 115,269
-------- -------- --------
Total liabilities and stockholders' equity $ 9,156 $ 15,587 $163,202
======== ======== ========
The accompanying notes are an integral part of these financial statements.
-4-
5
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
(Unaudited)
Historical Pro Forma
----------------------------- -----------------------------
For the For the
Three-Months Ended Three-Months Ended
September 30, September 30,
----------------------------- -----------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
REVENUE $ 4,277 $ 13,886 $ 18,839 $ 32,012
COSTS AND EXPENSES:
Cost of revenue 3,260 10,616 14,407 23,087
Selling, general and administrative expenses 743 756 1,691 2,468
Depreciation and amortization 154 262 1,506 1,947
----------- ----------- ----------- -----------
Operating income 120 2,252 1,235 4,510
INTEREST EXPENSE (17) (38) (227) (251)
OTHER INCOME (EXPENSE), net 68 (1) (271) (310)
----------- ----------- ----------- -----------
Income before taxes 171 2,213 737 3,949
PROVISION FOR INCOME TAXES 128 164 459 1,737
----------- ----------- ----------- -----------
NET INCOME $ 43 $ 2,049 $ 278 $ 2,212
=========== =========== =========== ===========
PRO FORMA INFORMATION:
Income before taxes $ 171 $ 2,213
Pro forma income taxes 68 885
----------- -----------
Pro forma net income $ 103 $ 1,328
=========== ===========
PRO FORMA INCOME PER SHARE $ .03 $ .24
=========== ===========
SHARES USED IN COMPUTING
PRO FORMA INCOME PER SHARE 9,176,219 9,176,219
=========== ===========
The accompanying notes are an integral part of these financial statements.
-5-
6
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
(Unaudited)
Historical Pro Forma
-------------------------- -------------------------
For the For the
Nine-Months Ended Nine-Months Ended
September 30, September 30,
-------------------------- --------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
REVENUE $ 14,966 $ 31,990 $ 55,538 $ 86,918
COSTS AND EXPENSES:
Cost of revenue 11,093 25,859 43,728 66,010
Selling, general and administrative expenses 2,222 2,191 4,981 6,408
Depreciation and amortization 445 717 4,510 5,602
----------- ----------- ----------- -----------
Operating income 1,206 3,223 2,319 8,898
INTEREST EXPENSE (23) (83) (674) (724)
OTHER INCOME (EXPENSE), net 207 558 82 (431)
----------- ----------- ----------- -----------
Income before taxes 1,391 3,698 1,727 7,743
PROVISION FOR INCOME TAXES 145 354 1,183 3,590
----------- ----------- ----------- -----------
NET INCOME $ 1,246 $ 3,344 $ 544 $ 4,153
=========== =========== =========== ===========
PRO FORMA INFORMATION
Income before taxes $ 1,391 $ 3,698
Pro forma income taxes 556 1,479
----------- -----------
Pro forma net income $ 835 $ 2,219
=========== ===========
PRO FORMA INCOME PER SHARE $ .06 $ .45
=========== ===========
SHARES USED IN COMPUTING
PRO FORMA INCOME PER SHARE 9,176,219 9,176,219
=========== ===========
The accompanying notes are an integral part of these financial statements.
-6-
7
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Historical
For the
Nine-Months Ended
September 30,
------------------
1996 1997
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,246 $ 3,344
Adjustments to reconcile net income to net cash provided by (used in)
operating activities-
Depreciation and amortization 445 717
(Gain) on sale of property, plant and equipment (132) (1)
Realized gains on sale of available-for-sale securities -- (530)
Deferred income taxes (145) (354)
Changes in operating assets and liabilities-
(Increase) decrease in-
Accounts receivable 1,738 (4,446)
Cost and estimated earnings in excess of billings on
uncompleted contracts (5) (2,440)
Inventory (97) (217)
Other current assets (147) 217
Other assets 61 422
Increase (decrease) in-
Accounts payable and accrued expenses 507 2,596
Billings in excess of costs and estimated earnings on
uncompleted contracts (856) 54
------- -------
Net cash provided by (used in) operating activities 2,615 (638)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of capital assets 189 243
Capital expenditures (1,022) (2,051)
Proceeds from sale of investments -- 2,005
Change unrealized gain 157 (283)
------- -------
Net cash used in investing activities (676) (86)
------- -------
(Continued)
-7-
8
TRANSCOASTAL MARINE SERVICES, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
For the
Nine-Months Ended
September 30,
------------------
1996 1997
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 654 1,855
Principal payments on notes payable (222) (685)
Principal payments on notes payable to shareholders -- (450)
Payment of dividends to shareholders (1,263) --
------- -------
Net cash provided by (used in) financing activities (831) 720
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,108 (4)
CASH AND CASH EQUIVALENTS, beginning of period 852 1,117
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 1,960 $ 1,113
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for-
Interest $ 23 $ 83
Noncash investing and financing activities-
Purchase of assets through assumption of debt -- 1,080
------- -------
The accompanying notes are an integral part of these financial statements.
-8-
9
TRANSCOASTAL MARINE SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION:
Background
TCMS was organized in April 1996 to create a fully integrated marine
construction company focusing on transition zone and shallow water regions of
the U.S. Gulf Coast. On November 4, 1997, TCMS acquired, simultaneously with
the closing of the Offering, the Founding Companies (Woodson, CSI, HBH and
RFCNI) for consideration consisting of cash, debt and common stock. The closing
of the Offering also occurred on that date.
For financial statement purposes, Woodson has been identified as the accounting
acquirer. Accordingly, the historical combined financial statements represent
those of Woodson prior to the Acquisitions and the Offering. These combined
financial statements include the accounts of the following Woodson Companies,
which are related by the common ownership of immediate family members acting as
a control group:
Woodson Construction Company, Inc.
Laine Construction Company, Inc.
Kori Corporation
EnviroSystems, Inc.
Pro forma net income consists of the historical net income of the Woodson
Companies, including two S Corporations, adjusted for income taxes that would
have been recorded had each company operated as a C Corporation.
Acquisitions
The Acquisitions were accounted for using the purchase method of accounting.
The allocations of the purchase price to the assets acquired and liabilities
assumed of the Founding Companies have been initially assigned and recorded
based on preliminary estimates of fair value and may be revised as additional
information concerning the valuation of such assets and liabilities becomes
available.
The pro forma financial information for the nine and three-month periods ended
September 30, 1996, and September 30, 1997, includes the results of TCMS
combined with the Founding Companies as if the Acquisitions had occurred at the
beginning of each respective nine or three-month period. The pro forma combined
financial information includes the effects of (i) the Acquisitions, (ii) the
closing of the Offering and the application of net proceeds thereof, (iii)
certain reductions in rent, (iv) the distribution or sale of certain assets
prior to the Acquisitions to the former owners of the Founding Companies and
expenses related thereto, (v) amortization of goodwill resulting from the
Acquisitions using a 40-year estimated life and (vi) advances under the Credit
Facility (see Note 3 to the financial statements) including decreases in
interest expense resulting from the repayment or refinancing of the Founding
Companies' debt. The pro forma financial information may not be comparable to
and may not be indicative of the Company's post-Acquisition results of
operations because (i) the Founding Companies were not under common control or
management and (ii) the Company will use the purchase method to establish a new
basis of accounting to record the Acquisitions.
Interim Reporting
The accompanying unaudited interim financial statements are prepared pursuant
to the rules and regulations for reporting on Form 10-Q. Accordingly, certain
information and footnotes required by generally accepted accounting principles
for complete financial statements are not included herein. The Company believes
all adjustments necessary for a fair presentation of these interim statements
have been included and are of a normal and recurring nature. The interim
statements should be read in conjunction with the financial statements and
notes thereto included in the Registration Statement.
-9-
10
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
There has been no significant change in the accounting policies of the Company
during the periods presented. For a description of these policies, refer to
Note 2 of Notes to Financial Statements of TCMS and Woodson included in the
Financial Statements in the Company's Registration Statement.
3. CREDIT AGREEMENT:
On October 28, 1997, TCMS entered into a Credit Agreement with Joint Energy
Development Investments, Limited Partnership, an affiliate of Enron Capital &
Trade Resources Corp. (the Lender). The Credit Agreement provides for
borrowings up to $75.0 million, with the initial borrowing availability being
$50.0 million (the Initial Availability) and the remaining $25.0 million being
made available from time to time and in such amounts as the Lender shall
determine in its sole discretion. The Credit Agreement is divided into two
tranches: (a) a senior secured revolving credit facility (the Revolving Credit
Facility), providing for borrowings of up to $60.0 million ($40.0 million of
which comprises part of the Initial Availability) and (b) $15.0 million of
senior subordinated term loan borrowings (the Term Loan Facility) ($10.0
million of which comprises the remainder of the Initial Availability).
Borrowings under the Credit Agreement bear interest at LIBOR plus 275 basis
points (8.37 percent at October 3, 1997), payable quarterly, and borrowings
under the Term Loan Facility bear interest at LIBOR plus 375 basis points (9.37
percent at October 3, 1997), payable quarterly. Borrowings under the Credit
Agreement are secured by liens on substantially all the Company's assets
(including accounts receivable and after-acquired property) and a pledge of the
capital stock of the Founding Companies and each of the Company's other
subsidiaries. Borrowings under the Credit Agreement are intended to be used to
pay a portion of the aggregate purchase price for the Acquisitions and for
general corporate purposes, which may include future acquisitions. The Credit
Agreement requires the Company to comply with various loan covenants, including
(a) maintenance of certain financial ratios, (b) restrictions on additional
indebtedness and (c) restrictions on liens, guarantees, advances and dividends.
The Credit Agreement extends through October 1999 and all outstanding principal
and accrued and unpaid interest under the Revolving Credit Facility and the
Term Loan Facility as of that date is due and payable on that date. The Credit
Agreement contains mandatory prepayment provisions requiring prepayment of
outstanding borrowings from the issuance of debt or equity securities for cash
and any proceeds from other borrowings. In connection with the Credit
Agreement, the Company issued to the Lender a warrant to acquire 175,000 shares
of Common Stock at an exercise price equal to the initial per share price ($18)
to the public in the Offering. The consideration for that warrant was $1,750
and the warrant is exercisable for five years from its date of issuance.
4. CAPITAL STOCK:
Common Stock
In March and April 1997, 175,000 and 100,000 shares of Common Stock,
respectively, were sold to management at $.001 per share. As a result, the
Company recorded a nonrecurring, noncash compensation charge of $2.2 million
effective with the closing of the Offering, representing the difference between
the amount paid for the shares and the estimated fair value of the shares on
the date of sale of such Common Stock.
Common Stock Purchase Warrant
During the first quarter of 1997, the Company entered into an advisory agreement
with an investment banking firm, which was amended in June 1997 to provide for
the sale of a warrant to acquire 50,000 shares of Common Stock (the MG Warrant)
for $.001 per share. The MG Warrant has an exercise price of $8 per share and is
exercisable from time to time, in whole or in part, at any time during the five
year period beginning on the issuance date of the Warrant. of the Offering.
-10-
11
Offering
On November 4, 1997, TCMS closed on the Offering, which involved the sale by
TCMS of 5,000,000 shares of Common Stock at a price to the public of $18.00 per
share. The net proceeds to TCMS from the Offering (after deducting underwriting
discounts, commissions and offering expenses) were approximately $81.6 million.
On November 4, 1997, the Company completed the sale of an additional 750,000
shares of Common Stock at a price to the public of $18.00 per share (generating
net proceeds to the Company of $12.6 million after underwriting discounts and
commissions) pursuant to an over-allotment option granted by the Company to the
underwriters in connection with the Offering. Of these amounts, $85.7 million
was used to pay the cash portion of the purchase prices relating to the
acquisitions of the Founding Companies with the remainder being used to pay
certain indebtedness of the Founding Companies.
5. EARNINGS PER SHARE:
The historical periods presented represent the results of operations of The
Woodson Companies under its historical capital structure. Accordingly, earnings
per share of The Woodson Companies are not presented as they are not
meaningful. The computation of pro forma net income per share for the nine and
three months ended September 30, 1996 and September 30, 1997, is based on
9,176,219 shares of Common Stock outstanding, which includes shares:
Issued to management, founders and consultants 1,256,000
Issued in consideration for acquisition of Founding Companies 2,142,441
Sold pursuant to the Offering 5,750,000
Effect of assumed exercise of Common Stock purchase warrant 27,778
---------
Shares used in computing pro forma income per share 9,176,219
=========
The computation excludes options for 442,000 shares granted to management,
directors and key employees on the Offering date at an exercise price of $18
per share.
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128
"Earnings Per Share," revising the methodology to be used in computing earnings
per share (EPS) requiring that the computations required for primary and fully
diluted EPS be replaced with "basic" and "diluted" EPS. The Company will adopt
SFAS No. 128 effective December 31, 1997, and will restate EPS for all periods
presented. The Company anticipates that the implementation of SFAS No. 128 will
not have a material effect on the Company's earnings per share as determined
under current accounting rules.
6. INCOME TAXES:
Commencing with the Acquisitions, the Company will be taxed at applicable
federal and state income tax rates.
The Company intends to file a consolidated federal income tax return which
includes the operations of the Founding companies for periods subsequent to the
acquisition date. The Founding Companies will each file a "short period"
federal income tax return through their respective acquisition dates.
The provision for income taxes included in the Pro Forma Statements of
Operations for the nine and three months ended September 30, 1996, and
September 30, 1997, assumes the application of statutory federal and state
income tax rates and the nondeductibility of a portion of the amortization of
goodwill.
-11-
12
7. COMMITMENTS AND CONTINGENCIES:
Legal Proceedings
The Company is currently involved in two class action lawsuits for unspecified
personal injury and property damages arising from events in October 1991 and
January 1992 during the course of a pipeline installation project for a
third-party gas transmission company. One of the class actions, involving
approximately 9,840 class members, entitled "Rivera v. United Gas Pipeline
Co.," No. 28738, was instituted against Woodson Construction Company, Inc., on
October 29, 1991, in the 40th Judicial District Court, parish of St. John the
Baptist, state of Louisiana, and the other class action, involving
approximately 7,858 class members, entitled "Husseiney v. United Gas Pipeline
Co.," No. 29089, was instituted on January 27, 1992, against Woodson
Construction Company, Inc., in the 40th Judicial District Court, parish of St.
John the Baptist, state of Louisiana. The claims of 24 representative class
members in each case were tried in 1995, and judgments were rendered against
Woodson Construction Company, Inc., which were later affirmed by the court of
appeal. In the "Rivera" lawsuit, five of the 24 representative plaintiffs were
awarded compensatory damages of $7,500 in the aggregate, but punitive damages
were denied. In the "Husseiney" lawsuit, compensatory damages of $18,589 and
punitive damages of $9,500 in the aggregate were assessed against Woodson
Construction Company, Inc., in favor of 16 of the 24 representative plaintiffs.
In both lawsuits, the compensatory damages awarded are expected to be covered
by the Company's insurance, but punitive damage awards are not expected to be
covered by insurance. The compensatory and punitive damages awarded to the 16
representative class members varied according to the representatives' proximity
to the incident and individual experience with respect to it. The amount of
compensatory and punitive damages applicable to the remaining 7,834 class
members who seek to adjudicate their damage claims will be litigated on an
individual basis. Until those remaining damage claims are finally adjudicated,
settled, dismissed or otherwise terminated, the total amount of the punitive
damages to which the Company may be subject cannot reasonably be estimated, and
there can be no assurance that it will not be materially adverse to the
Company's financial position or results of operations. In July 1997, all
parties involved applied to the Louisiana Supreme Court for further
discretionary review of the existing judgments. The Company believes that there
are meritorious arguments favorable to its position, but is unable to predict
whether the Louisiana Supreme Court will grant relief from the judgments.
The Company is involved in various other lawsuits arising in the ordinary
course of business, some of which involve substantial claims for damages. While
the outcome of these other lawsuits cannot be predicted with certainty,
management believes these other matters will not have a material adverse effect
on the consolidated financial position or results of operations of the Company.
Insurance
The Company carries a broad range of insurance coverage, including general and
business auto liability, commercial property, workers' compensation and a
general umbrella policy. The Company has not incurred significant claims or
losses on any of its insurance policies during the periods presented in the
accompanying financial statements.
-12-
13
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Introduction
The following discussion should be read in conjunction with the Pro Forma
Financial Statements of the Company and related notes thereto, the Financial
Statements of TCMS, Woodson, CSI, HBH and RFCNI and related notes thereto which
are included in the Company's Registration Statement. Statements contained in
this discussion regarding future financial performance and results and other
statements that are not historical facts are forward-looking statements. The
forward-looking statements are subject to numerous risks and uncertainties to
the Company, including but not limited to, the availability of attractive
acquisition opportunities, the successful integration and profitable
management of acquired businesses, improvement of operating efficiencies, the
availability of working capital and financing for future acquisitions, the
Company's ability to grow internally through expansion of services and customer
bases and reduction of overhead, conditions in oil field services markets,
seasonality, weather conditions and other risk factors discussed in the
Registration Statement.
Results of Operations - Pro Forma
The unaudited pro forma results of operations do not purport to represent what
the Company's results of operations would actually have been if the
Acquisitions and the Offering had in fact occurred on the first day of each
period presented. Quarterly results may also be materially affected by the
timing and magnitude of acquisitions, assimilation costs, costs of opening new
facilities, gain or loss of a material customer and weather conditions.
Accordingly, the operating results for any nine or three-month period are not
necessarily indicative of the results that may be achieved for any subsequent
nine or three-month period or for a full fiscal year.
The following table sets forth certain selected proforma financial data as a
percentage of revenues for the periods indicated:
Three-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
Revenue $ 18,839 100.0% $ 32,012 100.0%
Cost of revenue 14,407 76.5 23,087 72.1
Costs and Expenses:
Selling, general and administrative 1,691 9.0 2,468 7.7
Depreciation and amortization 1,506 8.0 1,947 6.1
-------- ---- -------- -----
Operating Income $ 1,235 6.5% $ 4,510 14.1%
======== ==== ======== =====
Nine-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
Revenue $ 55,538 100.0% $ 86,918 100.0%
Cost of revenue 43,728 78.7 66,010 75.9
Costs and Expenses:
Selling, general and administrative 4,981 9.0 6,408 7.4
Depreciation and amortization 4,510 8.1 5,602 6.4
-------- ---- -------- -----
Operating Income $ 2,319 4.2% $ 8,898 10.3%
======== ==== ======== =====
-13-
14
Pro Forma results for the three-months ended September 30, 1997 compared to the
three-months ended September 30, 1996
Revenue. Revenue increased $13.2 million, or 70.0% for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996. The
increase resulted primarily from increased pipeline construction revenues at
Woodson and HBH. The pipeline construction revenue increase was attributable to
improved market activity in 1997.
Cost of revenue. Cost of revenue increased $8.7 million, or 60.2%. As a
percentage of revenue, cost of revenue was 72.1% for the three months ended
September 30, 1997 compared to 76.5% for the three months ended September 30,
1996. The improved margin was primarily due to reductions in standby time,
weather downtime and subcontract services.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.8 million, or 46.0%. As a percentage of
revenue, selling, general and administrative expenses were 7.7% for the three
months ended September 30, 1997 compared to 9.0% for the three months ended
September 30, 1996.
Depreciation and amortization. Depreciation and amortization expenses increased
$0.4 million, or 29.3%, for the three months ended September 30, 1997 compared
to the corresponding period in the prior year. The increase was related to
equipment purchases and acquisition of, and improvements to, M/V Discovery (a
multi-purpose service vessel) in early 1997.
Pro Forma results for the nine-months ended September 30, 1997 compared to the
nine months ended September 30, 1996
Revenue. Revenue increased $31.4 million, or 56.5%, for the nine months ended
September 30, 1997 compared to the corresponding period in the prior year. The
increase resulted primarily from improved pipeline construction activity at
Woodson and HBH. In addition, revenue increased at CSI with the newly acquired
(and recently refurbished) M/V Discovery generating most of this portion of the
increase, and at RFCNI, as a result of increased fabrication activity during
the 1997 period.
Cost of revenue. Cost of revenue increased $22.3 million, or 51.0%, for the
nine months ended September 30, 1997 compared to the corresponding period in
the prior year. The increase primarily resulted from increased costs of $17.7
million at Woodson and HBH, associated principally with increased pipeline
construction activity. In addition, costs associated with the operation of the
M/V Discovery were primarily responsible for a $3.5 million increase in cost of
revenue at CSI for the 1997 period. As a percentage of revenue, cost of revenue
was 75.9% for the nine months ended September 30, 1997 compared to 78.7% for
the corresponding period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.4 million, or 28.6%, for the nine months
ended September 30, 1997 compared to the corresponding period in the prior
year. As a percentage of revenue, selling, general and administrative expenses
were 7.4% for the nine months ended September 30, 1997 compared to 9.0% for the
corresponding period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses increased
$1.1 million, or 24.2%, for the nine months ended September 30, 1997 compared
to the corresponding period in the prior year. The increase was related to
equipment purchases and the acquisition of, and improvements to, the M/V
Discovery.
-14-
15
Results of Operations - TCMS
The following table sets forth certain selected financial data for TCMS
(Woodson as the accounting acquirer) as a percentage of revenues for the
periods indicated:
Three-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
Revenue $ 4,277 100.0% $ 13,886 100.0%
Cost of revenue 3,260 76.2 10,616 76.5
Costs and Expenses:
Selling, general and administrative 743 17.4 756 5.4
Depreciation and amortization 154 3.6 262 1.9
------- --------- --------- -----
Operating Income $ 120 2.8% $ 2,252 16.2%
======= ========= ========= =====
Nine-Month Periods Ended
---------------------------------------------
September 30, September 30,
1996 1997
-------------------- --------------------
Revenue $ 14,966 100.0% $ 31,990 100.0%
Cost of revenue 11,093 74.1 25,859 80.8
Costs and Expenses:
Selling, general and administrative 2,222 14.8 2,191
6.8
Depreciation and amortization 445 3.0 717 2.2
------- --------- --------- -----
Operating Income $ 1,206 8.1% $ 3,223 10.2%
======== ========= ======== ====
Results for the three-months ended September 30, 1997 compared to the
three-months ended September 30, 1996
Revenue. Revenue increased $9.6 million, or 225% for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996. The
increase is attributable to improved market activity in 1997.
Cost of revenue. Cost of revenue increased $7.4 million, or 226%. As a
percentage of revenue, cost of revenue was 76.5% for the three months ended
September 30, 1997 compared to 76.2% for the three months ended September 30,
1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses were essentially unchanged for the three months ended
September 30, 1997 compared to the three months ended September 30, 1996.
Depreciation and amortization. Depreciation and amortization expenses increased
$0.1 million, or 70%, due primarily to the acquisition of equipment.
-15-
16
Results for the nine-months ended September 30, 1997 compared to the
nine-months ended September 30, 1996
Revenue. Revenue increased $17.0 million, or 114%, for the nine months ended
September 30, 1997 compared to the corresponding period in the prior year. The
increase is attributable to improved market activity in 1997.
Cost of revenue. Cost of revenue increased $14.8 million, or 133%, for the nine
months ended September 30, 1997 compared to the corresponding period in the
prior year. The increase was primarily due to the increase in pipeline
construction activity in the 1997 period. As a percentage of revenue, cost of
revenue was 80.8% for the nine months ended September 30, 1997 compared to
74.1% for the corresponding period in the prior year.
Selling, general and administrative expenses. Selling, general and
administrative expenses were essentially unchanged for the nine months ended
September 30, 1997 compared to the corresponding period in the prior year. As a
percentage of revenue, selling, general and administrative expenses were 6.8%
for the nine months ended September 30, 1997 compared to 14.8% for the
corresponding period in the prior year.
Depreciation and amortization. Depreciation and amortization expenses increased
$0.3 million, or 61.1%, for the nine months ended September 30, 1997 compared
to the corresponding period in the prior year. The increase was due to the
additional property, plant and equipment placed in service in 1996 and 1997.
Liquidity and Capital Resources
During the nine-month period ended September 30, 1997, net cash used in
operating activities was $638,000, capital expenditures were $2,051,000,
proceeds from the sale of investments were $2,005,000, net proceeds from notes
payable amounted to $1,855,000 while net repayment of debt amounted to
$685,000.
On November 4, 1997, TCMS closed on the Offering, which involved the sale by
TCMS of 5,000,000 shares of Common Stock at a price to the public of $18.00 per
share. The net proceeds to TCMS from the Offering (after deducting underwriting
discounts, commissions and offering expenses) were approximately $81.6 million.
On November 4, 1997, the Company completed the sale of an additional 750,000
shares of Common Stock at a price to the public of $18.00 per share (generating
net proceeds to the Company of $12.6 million after underwriting discounts and
commissions) pursuant to an over-allotment option granted by the Company to the
underwriters in connection with the Offering. Of these amounts, $85.7 million
was used to pay the cash portion of the purchase prices relating to the
acquisitions of the Founding Companies with the remainder being used to repay
certain indebtedness of the Founding Companies.
On October 28, 1997, TCMS entered into a Credit Agreement with Joint Energy
Development Investments, Limited Partnership, an affiliate of Enron Capital &
Trade Resources Corp. (the Lender). The Credit Agreement provides for
borrowings up to $75.0 million, with the initial borrowing availability being
$50.0 million (the Initial Availability) and the remaining $25.0 million being
made available from time to time and in such amounts as the Lender shall
determine in its sole discretion. The Credit Agreement is divided into two
tranches: (a) a senior secured revolving credit facility (the Revolving Credit
Facility), providing for borrowings of up to $60.0 million ($40.0 million of
which comprises part of the Initial Availability) and (b) $15.0 million of
senior subordinated term loan borrowings (the Term Loan Facility) ($10.0
million of which comprises the remainder of the Initial Availability).
Borrowings under the Credit Agreement bear interest at LIBOR plus 275 basis
points (8.37 percent at October 3, 1997), payable quarterly, and borrowings
under the Term Loan Facility bear interest at LIBOR plus 375 basis points (9.37
percent at October 3, 1997), payable quarterly. Borrowings under the Credit
Agreement are secured by liens on substantially all the Company's assets
(including accounts receivable and after-acquired property) and a pledge of the
capital stock of the Founding Companies and each of the Company's other
subsidiaries. Borrowings under the Credit Agreement are intended to be used to
pay a portion of the aggregate purchase price for the Acquisitions and for
general corporate purposes, which may include future acquisitions. The Credit
Agreement requires the Company to comply with various loan covenants, including
(a) maintenance of certain financial ratios, (b) restrictions on additional
indebtedness and (c) restrictions on liens, guarantees, advances and dividends.
The Credit Agreement extends through October 1999 and all outstanding principal
and accrued and unpaid interest under the Revolving Credit Facility and the
Term Loan Facility as of that date is due and payable on that date. The Credit
Agreement contains mandatory prepayment provisions requiring prepayment of
outstanding borrowings from the issuance of debt or equity securities for cash
and any proceeds from other borrowings. In connection with the Credit
Agreement, the Company issued to the Lender a warrant to acquire 175,000 shares
of Common Stock at an exercise price equal to the initial per share price ($18)
to the public in the Offering. The consideration for that warrant was $1,750
and the warrant is exercisable for five years from its date of issuance.
-16-
17
The Company intends to pursue acquisitions. The timing, size or success of any
acquisitions and the resulting additional capital commitments are
unpredictable. The Company expects to fund future acquisitions primarily
through a combination of issuances of additional equity, working capital, cash
flow from operations and borrowings, including the unused portion of the Credit
Facility. There can be no assurance that the Company can secure such additional
financing if and when it is needed or on terms deemed acceptable to the
Company.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDING
The Company is currently involved in two class action lawsuits for unspecified
personal injury and property damages arising from events in October 1991 and
January 1992 during the course of a pipeline installation project for a
third-party gas transmission company. One of the class actions, involving
approximately 9,840 class members, entitled "Rivera v. United Gas Pipeline
Co.," No. 28738, was instituted against Woodson Construction Company, Inc., on
October 29, 1991, in the 40th Judicial District Court, parish of St. John the
Baptist, state of Louisiana, and the other class action, involving
approximately 7,858 class members, entitled "Husseiney v. United Gas Pipeline
Co.," No. 29089, was instituted on January 27, 1992, against Woodson
Construction Company, Inc., in the 40th Judicial District Court, parish of St.
John the Baptist, state of Louisiana. The claims of 24 representative class
members in each case we tried in 1995, and judgments were rendered against
Woodson Construction Company, Inc., which were later affirmed by the court of
appeal. In the "Rivera" lawsuit, five of the 24 representative plaintiffs were
awarded compensatory damages of $7,500 in the aggregate, but punitive damages
were denied. In the "Husseiney" lawsuit, compensatory damages of $18,589 and
punitive damages of $9,500 in the aggregate were assessed against Woodson
Construction Company, Inc., in favor of 16 of the 24 representative plaintiffs.
In both lawsuits, the compensatory damages awarded are expected to be covered
by the Company's insurance, but punitive damage awards are not expected to be
covered by insurance. The compensatory and punitive damages awarded to the 16
representative class members varied according to the representatives' proximity
to the incident and individual experience with respect to it. The amount of
compensatory and punitive damages applicable to the remaining 7,834 class
members who seek to adjudicate their damage claims will be litigated on an
individual basis. Until those remaining damage claims are finally adjudicated,
settled, dismissed or otherwise terminated, the total amount of the punitive
damages to which the Company may be subject cannot reasonably be estimated, and
there can be no assurance that it will not be materially adverse to the
Company's financial position or results of operations. In July 1997, all
parties involved applied to the Louisiana Supreme Court for further
discretionary review of the existing judgments. The Company believes that there
are meritorious arguments favorable to its position, but is unable to predict
whether the Louisiana Supreme Court will grant relief from the judgments.
The Company is involved in various other lawsuits arising in the ordinary
course of business, some of which involve substantial claims for damages. While
the outcome of these other lawsuits cannot be predicted with certainty,
management believes these other matters will not have a material adverse effect
on the consolidated financial position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 annual meeting of shareholders was held on September 24, 1997
in Houston, Texas. Listed below are the proposals submitted to the
shareholders in the Company's Notice of Meeting dated September 8, 1997 and the
results of the shareholder votes.
Election of six directors to commence serving as directors immediately
upon election until their successors are elected and qualified:
For Against
Bill E. Stallworth 1,181,000 0
Thad Smith 1,181,000 0
Patrick B. Collins 1,181,000 0
Clifford E. McFarland 1,181,000 0
D. Glenn Richardson 1,181,000 0
Jean Savoy 1,181,000 0
Election of four directors to commence serving as directors effective
as of the successful completion of the Company's initial public offering of
common stock (November 4, 1997) until their successors are elected and
qualified:
For Against
Nathan Avery 1,181,000 0
Steven Wells 1,181,000 0
Daniel N. Hargett, Sr. 1,181,000 0
H. Daniel Hughes II 1,181,000 0
Election of certified public accountants:
For Against
Arthur Andersen LLP 1,181,000 0
ITEM 5. OTHER INFORMATION
Steven Wells, elected by the shareholders of the Company on September
24, 1997 to serve as a director of the Company effective November 4, 1997, chose
not to serve. To fill the vacancy, on November 20, 1997, the Company's Board of
Directors elected Beldon E. Fox to serve as director effective November 26, 1997
to serve until his successor is elected and qualified.
Effective November 4, 1997, the Company executed and delivered the
Share Exchange Agreement whereby Company shareholders J&D Capital Investments,
L.C., Beldon E. Fox, and James B. Thompson, Jr. exchanged an aggregate of
250,000 shares of their registered Company common stock for restricted Company
common stock effective with the closing of the Company's initial public offering
of common stock (November 4, 1997) to ensure that the shareholders of the
Woodson Companies, collectively, were the largest holder of Company common stock
entitled to vote immediately following the closing of the Company's initial
public offering of common stock.
-17-
18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1997 annual meeting of shareholders was held on September 24, 1997
in Houston, Texas. Listed below are the proposals submitted to the
shareholders in the Company's Notice of Meeting dated September 8, 1997 and the
results of the shareholder votes.
Election of six directors to commence serving as directors immediately
upon election until their successors are elected and qualified:
For Against
Bill E. Stallworth 1,181,000 0
Thad Smith 1,181,000 0
Patrick B. Collins 1,181,000 0
Clifford E. McFarland 1,181,000 0
D. Glenn Richardson 1,181,000 0
Jean Savoy 1,181,000 0
Election of four directors to commence serving as directors effective
as of the successful completion of the Company's initial public offering of
common stock (November 4, 1997) until their successors are elected and
qualified:
For Against
Nathan Avery 1,181,000 0
Steven Wells 1,181,000 0
Daniel N. Hargett, Sr. 1,181,000 0
H. Daniel Hughes II 1,181,000 0
Election of certified public accountants:
For Against
Arthur Andersen LLP 1,181,000 0
ITEM 5. OTHER INFORMATION
Steven Wells, elected by the shareholders on September 24, 1997 to
serve as a director of the Company effective November 4, 1997, chose not to
serve. To fill the vacancy, on November 20, 1997, the Company's Board of
Directors elected Beldon E. Fox to serve as director effective November 26,
1997 to serve until his successor is elected and qualified.
Effective November 4, 1997, the Company executed and delivered the
Share Exchange Agreement whereby Company shareholders J&D Capital Investments,
L.C., Beldon E. Fox, and James B. Thompson, Jr. exchanged an aggregate of
250,000 shares of their registered Company common stock for restricted Company
common stock effective with the closing of the Company's initial public
offering of common stock (November 4, 1997) to ensure that shareholders of the
Woodson Companies, collectively, were the largest holder of Company common
stock entitled to vote immediately following the closing of the Company's
initial public offering of common stock.
19
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*3.1 -- Amended and Restated Certificate of Incorporation of TCMS.
*3.2 -- Bylaws of TCMS.
*4.1 -- Form of Certificate representing Common Stock.
4.2 -- Share Exchange Agreement among TCMS, J&D Capital Investments,
L.C., James B. Thompson and Beldon B. Fox, Jr.
*4.3 -- Secured Promissory Note to be issued in the acquisition of RFCNI.
*10.1 -- TCMS 1997 Stock Option Plan.
*10.2 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Bill E. Stallworth.
*10.3 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Thad Smith.
*10.4 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Johnnie W. Domingue.
*10.5 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Bill E. Stallworth.
*10.6 -- Stock Repurchase Agreement dated as of April 25, 1997, between
TCMS and Thad Smith.
*10.7 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Johnnie Domingue.
*10.8 -- Form of Employment Agreement between HBH, Inc. and H. Daniel
Hughes II.
*10.9 -- Form of Employment Agreement between CSI Hydrostatic Testers,
Inc. and Daniel N. Hargett, Sr.
*10.10 -- Agreement for Consulting Services dated April 24, 1997,
between TCMS and Stallworth, Frankhouser & Associates, as amended
August 6, 1997.
*10.11 -- Employment Letter dated April 21, 1997, between TCMS and
Johnnie W. Domingue, as amended August 6, 1997.
*10.12 -- Form of warrant issued to McFarland, Grossman & Company, Inc.
*10.13 -- Purchase and Sale Agreement dated as of August 28, 1997, by and
among TCMS, Laine Construction Company, Inc., Paula Woodson,
Linda Woodson and Cheryl Woodson.
*10.14 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Woodson Acquisition Corp., Woodson Construction,
Inc., and Louis Woodson.
*10.15 -- Agreement and Plan of Merger dated August 28, 1997, by and among
TCMS, Kori Acquisition Corp., Kori Corporation, Paula Woodson,
Linda Woodson, and Cheryl Woodson.
*10.16 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Enviro Acquisition Corp., Envirosystems, Inc., Paula
Woodson, Linda Woodson, and Cheryl Woodson.
*10.17 -- Purchase and Sale Agreement dated as of August 28, 1997, among
TCMS, CSI Hydrostatic Testers, Inc., Hargett Mooring and Marine,
Inc., Daniel N. Hargett, Sr., Yvette Hargett and Richard Hargett.
*10.18 -- Purchase and Sale Agreement dated as of August 20, 1997, by and
among TCMS, HBH, Inc. and the Succession of Herbert D. Hughes.
*10.19 -- Agreement and Plan of Merger dated as of August 27, 1997, by and
among TCMS, RNI Acquisition Corp., The Red Fox Companies of New
Iberia, Inc. and The Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.20 -- Form of Agreement to Purchase and Sell dated as of August 28,
1997, by and among TCMS and Linda Woodson, Cheryl Woodson, and
Paula Woodson.
*10.21 -- Agreement to Purchase and Sell dated as of August 20, 1997, by
and between TCMS and the Succession of Herbert D. Hughes.
*10.22 -- Leasehold Purchase Agreement dated as of August 11, 1997, by and
between TCMS and the Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.23 -- Amendment and Restated Consulting and Financial Advisory Services
Agreement dated September 24, 1997, between TCMS and J&D Capital
Investments, L.C.
*10.24 -- Form of Senior Revolving Credit Agreement by and among TCMS and
Joint Energy Development Investments, Limited Partnership, and
the Lenders Signatory thereto.
*10.25 -- Form of Subordinated Credit Agreement by and among TCMS and Joint
Energy Development Investments, Limited Partnership, and the
Lenders Signatory thereto.
*10.26 -- Form of Warrant Agreement by and between TCMS and Joint Energy
Development Investments, Limited Partnership
27 -- Financial Data Schedule
* Previously filed.
(b) Reports on Form 8-K
None
-18-
20
SIGNATURE
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.
TransCoastal Marine Services, Inc.
Dated: December 15, 1997
By: /s/ JOHNNIE W. DOMINGUE
--------------------------------
Johnnie W. Domingue
Authorized Officer
and Principal Financial
Officer
-19-
21
INDEX TO EXHIBITS
Exhibit
No. Description
------ -----------
*3.1 -- Amended and Restated Certificate of Incorporation of TCMS.
*3.2 -- Bylaws of TCMS.
*4.1 -- Form of Certificate representing Common Stock.
4.2 -- Share Exchange Agreement among TCMS, J&D Capital Investments,
L.C., James B. Thompson and Beldon B. Fox, Jr.
*4.3 -- Secured Promissory Note to be issued in the acquisition of RFCNI.
*10.1 -- TCMS 1997 Stock Option Plan.
*10.2 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Bill E. Stallworth.
*10.3 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Thad Smith.
*10.4 -- Employment Agreement dated as of August 6, 1997, between TCMS and
Johnnie W. Domingue.
*10.5 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Bill E. Stallworth.
*10.6 -- Stock Repurchase Agreement dated as of April 25, 1997, between
TCMS and Thad Smith.
*10.7 -- Stock Repurchase Agreement dated as of March 24, 1997, between
TCMS and Johnnie Domingue.
*10.8 -- Form of Employment Agreement between HBH, Inc. and H. Daniel
Hughes II.
*10.9 -- Form of Employment Agreement between CSI Hydrostatic Testers,
Inc. and Daniel N. Hargett, Sr.
*10.10 -- Agreement for Consulting Services dated April 24, 1997,
between TCMS and Stallworth, Frankhouser & Associates, as amended
August 6, 1997.
*10.11 -- Employment Letter dated April 21, 1997, between TCMS and
Johnnie W. Domingue, as amended August 6, 1997.
*10.12 -- Form of warrant issued to McFarland, Grossman & Company, Inc.
*10.13 -- Purchase and Sale Agreement dated as of August 28, 1997, by and
among TCMS, Laine Construction Company, Inc., Paula Woodson,
Linda Woodson and Cheryl Woodson.
*10.14 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Woodson Acquisition Corp., Woodson Construction,
Inc., and Louis Woodson.
*10.15 -- Agreement and Plan of Merger dated August 28, 1997, by and among
TCMS, Kori Acquisition Corp., Kori Corporation, Paula Woodson,
Linda Woodson, and Cheryl Woodson.
*10.16 -- Agreement and Plan of Merger dated as of August 28, 1997, by and
among TCMS, Enviro Acquisition Corp., Envirosystems, Inc., Paula
Woodson, Linda Woodson, and Cheryl Woodson.
*10.17 -- Purchase and Sale Agreement dated as of August 28, 1997, among
TCMS, CSI Hydrostatic Testers, Inc., Hargett Mooring and Marine,
Inc., Daniel N. Hargett, Sr., Yvette Hargett and Richard Hargett.
*10.18 -- Purchase and Sale Agreement dated as of August 20, 1997, by and
among TCMS, HBH, Inc. and the Succession of Herbert D. Hughes.
*10.19 -- Agreement and Plan of Merger dated as of August 27, 1997, by and
among TCMS, RNI Acquisition Corp., The Red Fox Companies of New
Iberia, Inc. and The Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.20 -- Form of Agreement to Purchase and Sell dated as of August 28,
1997, by and among TCMS and Linda Woodson, Cheryl Woodson, and
Paula Woodson.
*10.21 -- Agreement to Purchase and Sell dated as of August 20, 1997, by
and between TCMS and the Succession of Herbert D. Hughes.
*10.22 -- Leasehold Purchase Agreement dated as of August 11, 1997, by and
between TCMS and the Beldon E. Fox, Sr. Grandchildren's Trust No.
1.
*10.23 -- Amendment and Restated Consulting and Financial Advisory Services
Agreement dated September 24, 1997, between TCMS and J&D Capital
Investments, L.C.
*10.24 -- Form of Senior Revolving Credit Agreement by and among TCMS and
Joint Energy Development Investments, Limited Partnership, and
the Lenders Signatory thereto.
*10.25 -- Form of Subordinated Credit Agreement by and among TCMS and Joint
Energy Development Investments, Limited Partnership, and the
Lenders Signatory thereto.
*10.26 -- Form of Warrant Agreement by and between TCMS and Joint Energy
Development Investments, Limited Partnership
27 -- Financial Data Schedule
* Previously filed.