<PAGE> 1
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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 MARCH 31, 1999
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)
<TABLE>
<S> <C>
DELAWARE 72-1353528
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
4900 WOODWAY, SUITE 500, HOUSTON, TEXAS 77056
(Address of principal executive offices)
(Zip Code)
(713) 626-8899
(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 [X] No [ ]
The number of shares of Common Stock of the registrant, par value $.001 per
share, outstanding at May 11, 1999 was 10,198,441.
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<PAGE> 2
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1 -- Financial Statements
Consolidated Balance Sheets as of December 31, 1998 and
March 31, 1999........................................ 3
Consolidated Statements of Operations and Comprehensive
Income for the three months ended March 31, 1998 and
1999.................................................. 4
Consolidated Statements of Cash Flows for the three
months ended March 31, 1998 and 1999.................. 5
Notes to Consolidated Financial Statements............. 6
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 9
PART II -- OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K................ 12
SIGNATURE................................................... 13
</TABLE>
2
<PAGE> 3
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999
------------ -----------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 9,020 $ 7,181
Contracts and accounts receivable, net of allowance of
$1,182 and $1,303, respectively........................ 31,470 29,716
Costs and estimated earnings in excess of billings on
uncompleted contracts.................................. 6,629 6,418
Other current assets...................................... 7,941 7,692
-------- --------
Total current assets.............................. 55,060 51,007
PROPERTY AND EQUIPMENT, net................................. 96,135 96,341
GOODWILL, net of amortization of $2,195 and $2,711,
respectively.............................................. 80,430 79,914
OTHER NONCURRENT ASSETS, net................................ 4,972 5,946
-------- --------
Total Assets...................................... $236,597 $233,208
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 6,018 $ 5,491
Accounts payable.......................................... 16,949 12,047
Accrued expenses.......................................... 9,836 8,747
Billings in excess of costs and estimated earnings on
uncompleted contracts.................................. 6,741 5,670
-------- --------
Total current liabilities......................... 39,544 31,955
LONG-TERM DEBT, net of current maturities................... 35,096 39,352
SUBORDINATED DEBT........................................... 20,000 20,000
DEFERRED INCOME TAXES....................................... 21,729 21,421
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 2,000,000 shares
authorized, none issued and outstanding................ -- --
Common stock, $.001 par value 20,000,000 shares
authorized, 10,198,441 shares issued and outstanding... 10 10
Restricted common stock, $.001 par value, 3,000,000 shares
authorized, 250,000 shares issued and outstanding...... -- --
Additional paid-in-capital................................ 133,899 134,281
Accumulated deficit....................................... (13,699) (13,811)
Accumulated other comprehensive income.................... 18 --
-------- --------
Total stockholders' equity........................ 120,228 120,480
-------- --------
Total liabilities and stockholders' equity........ $236,597 $233,208
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
REVENUES.................................................... $30,778 $45,037
COSTS AND EXPENSES:
Costs of revenues......................................... 24,111 38,041
Selling, general and administrative expenses.............. 3,118 2,855
Depreciation and amortization............................. 2,256 3,201
------- -------
OPERATING INCOME............................................ 1,293 940
OTHER INCOME (EXPENSE), net
Interest expense, net..................................... (839) (1,224)
Other income, net......................................... 47 97
------- -------
INCOME (LOSS) BEFORE INCOME TAXES........................... 501 (187)
PROVISION (BENEFIT) FOR INCOME TAXES........................ 225 (75)
------- -------
NET INCOME (LOSS)........................................... $ 276 $ (112)
======= =======
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Reclassification adjustments for gains included in net
income, net of tax of $0 and $8, respectively.......... -- (18)
------- -------
COMPREHENSIVE INCOME (LOSS)................................. $ 276 $ (130)
======= =======
EARNINGS (LOSS) PER SHARE:
Basic..................................................... $ 0.03 $ (0.01)
======= =======
Diluted................................................... $ 0.03 $ (0.01)
======= =======
NUMBER OF SHARES USED IN PER SHARE COMPUTATIONS:
Basic..................................................... 9,148 10,448
======= =======
Diluted................................................... 9,169 10,448
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1998 1999
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 276 $ (112)
Adjustments to reconcile net income (loss) to net cash
used in operating activities --
Depreciation and amortization.......................... 2,256 3,201
Gain on sale of investments............................ -- (29)
Deferred income taxes.................................. (213) (308)
Other.................................................. 390 --
Changes in operating assets and liabilities --
(Increase) decrease in --
Contracts and accounts receivable................. (6,253) 1,754
Costs and estimated earnings in excess of billings
on uncompleted contracts......................... (2,695) 211
Other current assets.............................. (29) 249
Other noncurrent assets........................... (376) (599)
Increase (decrease) in --
Accounts payable and accrued expenses............. (2,615) (5,991)
Billings in excess of costs and estimated earnings
on uncompleted contracts......................... 986 (1,071)
Other current liabilities......................... (50) --
-------- -------
Net cash used in operating activities........... (8,323) (2,695)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment.............. 207 48
Capital expenditures...................................... (13,954) (2,921)
Cash paid for acquisitions, including related costs....... (41) --
-------- -------
Net cash used in investing activities........... (13,788) (2,873)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on Credit Agreement........................ 24,000 --
Proceeds from long-term debt.............................. -- 4,677
Principal payments on notes payable....................... -- (948)
Principal payments on long-term debt...................... (1,296) --
-------- -------
Net cash provided by financing activities....... 22,704 3,729
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 593 (1,839)
CASH AND CASH EQUIVALENTS, beginning of period.............. 2,416 9,020
-------- -------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,009 $ 7,181
======== =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 558 $ 961
======== =======
Cash paid for income taxes................................ $ 458 $ 1,225
======== =======
Non-cash financing activities:
Issuance of warrant in connection with refinancing........ $ -- $ 382
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
The consolidated financial statements herein have been prepared by the
TransCoastal Marine Services, Inc. ("TransCoastal or the Company") without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission that permit certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles to be condensed or omitted. The Company believes the
presentation and disclosures herein are adequate to make the information not
misleading. The consolidated financial statements reflect all elimination
entries and normal recurring adjustments that are necessary for a fair
presentation of the results for the three months ended March 31, 1998 and 1999.
Operating results for interim periods are not necessarily indicative of the
results for a full year. It is suggested that these consolidated financial
statements be read in conjunction with the consolidated financial statements of
the Company and the related notes thereto included in TransCoastal's Annual
Report on Form 10-K for the year ended December 31, 1998, as filed with the
Securities and Exchange Commission.
There have been no significant changes in the accounting policies of the
Company during the periods presented. For a description of these policies, see
Note 2 of the Notes to Consolidated Financial Statements of the Company in
TransCoastal's Annual Report on Form 10-K for the year ended December 31, 1998.
2. EARNINGS PER SHARE
The following table summarizes weighted average basic shares outstanding
for each of the periods presented (in thousands).
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
--------------
1998 1999
----- ------
<S> <C> <C>
Shares issued in the acquisition of Woodson................. 1,031 1,031
Shares issued in the formation of TCMS...................... 975 975
Shares issued to the stockholders of the remaining Founding
Companies................................................. 1,111 1,111
Shares sold to certain employees............................ 275 275
Shares issued to consultants................................ 6 6
Shares issued in the acquisition of Dickson Group........... -- 1,300
Shares sold in the Offering................................. 5,750 5,750
----- ------
Weighted average shares outstanding for basic earnings per
share calculation......................................... 9,148 10,448
===== ======
</TABLE>
The calculation of diluted earnings per share is similar to basic earnings
per share except that the denominator includes dilutive common stock equivalents
such as stock options and warrants. Weighted average shares outstanding for
calculation of diluted earnings per share totaled 9,169,000 and 10,448,000 for
the three months ended March 31, 1998 and 1999, respectively.
3. DICKSON ACQUISITION
On September 1, 1998, the Company acquired Dickson GMP International, Inc.
and four affiliated companies ("Dickson") which specialize in the fabrication of
production systems that incorporate sophisticated piping, electrical and
instrumentation components used in the oil and gas, refinery, petrochemical and
chemical industries. Under the terms of the Agreement, TransCoastal acquired all
outstanding stock of Dickson for $10 million in cash and approximately 1.3
million shares of TransCoastal common stock. The Agreement provides the
potential for Dickson to receive an additional $7.3 million in cash and
approximately
6
<PAGE> 7
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
400,000 common shares if it achieves certain financial targets by the third
quarter of 1999. The Company is currently negotiating the early settlement of
the Dickson earn-out. The terms under negotiation provide for a reduction in the
cash payment to $4.7 million, the issuance of common and preferred stock and the
issuance of an additional 0.4 million shares of common stock subject to the
approval of the Company's stockholders. The Company financed the acquisition
with credit available under its existing credit facilities. The Dickson
acquisition has been accounted for as a purchase, therefore, the accompanying
statements of operations reflect the results of operations of Dickson since the
date of acquisition.
Set forth below are the unaudited pro forma consolidated results of
operations for the three months ended March 31, 1998, and are prepared as though
Dickson had been acquired as of January 1, 1998. These pro forma results are not
necessarily indicative of the actual results which would have occurred if the
acquisition of Dickson had taken place at the beginning of the periods
presented, nor are they necessarily indicative of future results (amounts in
thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1998
------------------
<S> <C>
Revenues........................................... $42,454
Net income......................................... $ 492
Basic and diluted earnings per share............... $ 0.05
</TABLE>
4. SEGMENT INFORMATION
The Company has two primary operating segments the Pipeline & Marine Group
and the Fabrication & Offshore Group. The Pipeline & Marine Group's operations
focus on the construction, burial and testing of pipelines on land, through the
transition zone out to 800 feet of water. The Fabrication & Offshore Group's
primary operations focus on the fabrication of shallow water barges, drilling
rigs and oil and gas production platforms. The two segments are managed
separately because each business requires different technology and marketing
strategies. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Annual Report
on Form 10-K) except that certain corporate expenses such as amortization of
goodwill as well as interest expense and interest income are not allocated
between the segments. At December 31, 1998, the Company did not allocate income
tax expenses or benefit to the individual segments in its measurement of a
segment's profit or loss.
The following table shows segment information for the reportable segments
for the three months ended March 31, 1998 and 1999, respectively (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Revenues to unaffiliated customers:
Pipeline & Marine......................................... $20,399 $14,293
Fabrication & Offshore.................................... 10,318 30,722
Other..................................................... 61 22
------- -------
$30,778 $45,037
======= =======
Net (loss) income:
Pipeline & Marine......................................... $ 1,662 $ 289
Fabrication & Offshore.................................... 1,653 447
Other..................................................... (3,039) (848)
------- -------
$ 276 $ (112)
======= =======
</TABLE>
7
<PAGE> 8
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company operated principally in three geographic segments during the
first quarter of 1999: the United States, Venezuela and Mexico. The following
table shows segment information for the geographic segments for the three months
ended March 31, 1998 and 1999, respectively (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Revenues to unaffiliated customers:
United States............................................. $28,558 $14,172
Venezuela................................................. -- 20,998
Mexico.................................................... -- 7,356
Other Foreign............................................. 2,220 2,511
------- -------
$30,778 $45,037
======= =======
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
INTRODUCTION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in Item 1 of this
Report and the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998.
TransCoastal is a marine construction company with worldwide operations
onshore, in the transition zone and offshore (up to 800 feet). The Company has
two operating groups: the Pipeline and Marine Group and the Fabrication and
Offshore Group. The Pipeline and Marine group performs pipeline installation and
repair worldwide utilizing a fleet of company owned vessels. This group also
provides construction support services, including hydrostatic testing and
commissioning of pipelines. The Fabrication and Offshore Group fabricates,
refurbishes and installs production platforms, offshore drilling rigs, barges
and performs other related fabrication services. The Company currently conducts
its operations from port facilities and fabrication yards strategically
positioned along the U.S. Gulf Coast. In order to conduct its international
activities, the Company currently has offices in West Africa, Venezuela, and
Mexico.
This discussion includes certain forward-looking statements, which are
identified by the use of the words "believes," "expects," "anticipates" and
similar expressions that contemplate future events. Numerous important factors,
risks and uncertainties affect the Company's operating results and could cause
the Company's actual results to differ materially from the results implied by
these or any other forward-looking statements made by, or on behalf of the
Company. There can be no assurance that future results will meet expectations.
RESULTS OF OPERATIONS
The following table sets forth certain selected financial data of the
Company and shows data as a percentage of the Company's revenues for the periods
indicated (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1998 1999
--------------- ---------------
<S> <C> <C> <C> <C>
Revenues....................................... $30,778 100.0% $45,037 100.0%
Cost of revenues............................... 24,111 78.3% 38,041 84.5%
Selling, general and administrative expenses... 3,118 10.1% 2,855 6.3%
Depreciation and amortization.................. 2,256 7.3% 3,201 7.1%
------- ----- ------- -----
Operating income............................... 1,293 4.2% 940 2.1%
Interest expense, net.......................... (839) (2.7)% (1,224) (2.7)%
Other income, net.............................. 47 0.2% 97 0.2%
------- ----- ------- -----
Income (loss) before income taxes.............. 501 1.6% (187) (0.4)%
Provision (benefit) for income taxes........... 225 0.7% (75) (0.2)%
------- ----- ------- -----
Net income (loss).................... $ 276 0.9% $ (112) (0.2)%
======= ===== ======= =====
</TABLE>
Results for the three months ended March 31, 1998 compared to the three months
ended March 31, 1999
Revenues. Revenues increased $14.3 million, or 46.3%, from $30.8 million
for the three months ended March 31, 1998 to $45.0 million for the three months
ended March 31, 1999. The Fabrication and Offshore Group's revenues increased
$20.4 million, or 198.1%, from $10.3 million for the three months ended March
31, 1998 to $30.7 million for the three months ended March 31, 1999. Dickson,
which was acquired in September 1998, accounted for $23.7 million of the
Fabrication and Offshore Group's revenues in the first quarter of 1999. The
Pipeline and Marine Group's revenues decreased $6.1 million, or 30.0% from $20.4
million for the first quarter of 1998 to $14.3 million for the same period in
1999. The decline in revenues for the Pipeline and Marine Group is the result of
delays in pipeline construction projects due the fall of oil and gas prices
during 1998. With recent increases in oil and gas prices, the Company
anticipates increased levels of pipeline activity in the second half of 1999.
9
<PAGE> 10
Cost of revenues. Cost of revenues increased $13.9 million, or 57.8%, from
$24.1 million for the three months ended March 31, 1998 to $38.0 million for the
same period in 1999. Overall cost of revenues increased as a percentage or
revenues from 78.3% in the first quarter of 1998 to 84.5% in the first quarter
of 1999. This decrease in gross profit percentage in the first three months of
1999 as compared to the first three months of 1998 was primarily due to two
factors. First, in 1999 a higher percentage of the Company's revenues were
generated by the Fabrication and Offshore Group whose gross profit is lower than
the typical gross profit on revenues generated by the Pipeline and Marine Group.
Secondly, the Pipeline and Marine Group's gross margin decreased as the
competition intensified for fewer pipeline installation projects in the first
three months of 1999.
Selling, general and administrative expenses. Selling, general and
administrative (S,G&A) expenses decreased $0.3 million, or 8.4%, for the three
months ended March 31, 1999 as compared to the same period in 1998. As a
percentage of revenues, S,G&A expenses were 6.3% during the first quarter of
1999, compared to 10.1% during the first quarter of 1998. The reduction in
selling, general and administrative expenses in the first quarter of 1999 as
compared to the first quarter of 1998 was accomplished primarily through
headcount reduction in the administrative staff. This reduction in S,G&A
expenses in both gross dollars and as a percentage of revenues is significant as
it was accomplished while supporting a revenue increase of 46.3% and the
addition of Dickson's S,G&A expenses.
Depreciation and amortization. Depreciation and amortization expenses
increased $0.9 million from $2.3 million in 1998 to $3.2 million in 1999. The
increase was primarily due to two factors. First, in 1998 the Company had $36.1
million dollars in capital expenditures, the majority of which were not placed
in service until after to March 31, 1998. Secondly, and to a lesser extent, the
depreciation and amortization recorded in connection with the acquisition of
Dickson during the third quarter of 1998 also contributed to the increase.
Interest income (expense), net. Interest expense, net of interest income,
totaled $1.2 million during the first quarter of 1999 as compared to $0.9
million of interest expense during the same period in 1998. This increase was
primarily due to higher average debt levels resulting from increases in the
corporate revolver to fund capital expenditures, the acquisition of Dickson and
working capital requirements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital improved by $3.5 million during the first
quarter of 1999, increasing to $19.0 million at March 31, 1999 from $15.5
million at December 31, 1998. Net cash used in operating activities during the
three months ended March 31, 1999 was $2.7 million. Net cash used in investing
activities during the three months ended March 31, 1999 was $2.9 million.
Capital expenditures accounted for substantially all of the cash used in
investing activities during the period and primarily related to the
refurbishment of two vessels, the Atchafalaya Bay and the BH-400. Net cash
consumed by operating and investing activities was funded through additional
borrowings under the new revolving credit facility.
In January 1999, the Company entered into a new credit facility with
financial institutions, replacing the existing credit agreement with an
aggregate credit facility of $70 million. The new credit facility is a $10
million increase in borrowing capacity over the credit facility in place at
December 31, 1998. The New Credit Facility is divided into three credit
agreements: (a) a three-year revolving credit agreement for up to $15.0 million;
(b) a seven-year term credit agreement for $35.0 million; and (c) a five-year
subordinated debt agreement of $20.0 million. During the first quarter of 1999,
net long-term debt borrowings were $3.7 million, resulting in an outstanding
long-term debt balance of $44.8 million at March 31, 1999. Additional borrowing
availability under the Company's long-term credit facility at the end of March
31, 1999 totaled $3.5 million.
At March 31, 1999, the Company had commitments of approximately $1.0
million for the purchase or refurbishment of capital equipment. Under the terms
of the Stock Purchase and Merger Agreement for the Dickson acquisition, the
Company is contingently liable for a cash payment of $7.3 million and the
issuance of 400,000 shares of its common stock in the fourth quarter of 1999 if
Dickson were to achieve certain financial goals by August 31, 1999. The Company
is currently negotiating the early settlement of the Dickson earn-out. The terms
under negotiation provide for a reduction in the cash payment to $4.7 million,
the issuance of common and preferred stock and the issuance of an additional
400,000 shares of common stock subject to the
10
<PAGE> 11
approval of the Company's stockholders. The Company plans to fund these capital
expenditures and purchase commitments through cash flow from operations and
additional borrowings under the credit facilities.
The Company intends to continue to pursue attractive asset and corporate
acquisition opportunities; however, 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 issuance 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.
YEAR 2000 ISSUES
The Company is currently working to resolve the potential impact of the
Year 2000 on the processing of date-sensitive data by the Company's computerized
information systems and equipment. The Year 2000 may be critical to these
systems as many computer programs were written and equipment manufactured using
two digits rather than four to define the applicable year. As a result, any of
the Company's computer applications or equipment that have date-sensitive
programs may recognize a date using "00" as the year 1900 rather than the Year
2000. This could result in system failures in the fabrication area that could
cause serious production-related issues. In addition, miscalculations or system
failures could result in a temporary inability to process transactions, issue
invoices, remit payments, communicate with financial institutions and other
entities electronically and update internal accounting systems. If not corrected
in a timely manner, such business disruptions could be detrimental to the
continuing operations of the Company.
The Company has initiated a program to prepare its computer systems and
applications for the Year 2000. Based on present information, management
believes that while many of the systems are already Year 2000 compliant, other
systems will require modification or replacement with new programs. The Company
will utilize both internal and external resources to reprogram, replace and test
software for Year 2000 compliance.
Beyond the computer hardware and software systems, the Company has a
variety of operating equipment that may be impacted by the Year 2000 issue. This
equipment may have embedded microchips that use time and dates. The time and
date functions may control the equipment, provide time and date stamps of
records or data generated by the equipment, or may schedule events or actions.
The Company has inventoried its critical equipment and believes it has taken all
steps necessary to properly addressed Year 2000 issues.
The Company plans to complete the Year 2000 conversion tasks well in
advance of the end of 1999. The total project costs are presently estimated not
to exceed $750,000, to be funded through working capital, and will be expensed
as incurred unless new software and computer hardware is purchased in which case
certain costs will be capitalized.
The Company is taking steps to identify Year 2000 compliance issues that
may be created by key customers, suppliers, other service providers, and
financial institutions with which the Company does business. The loss of any key
customer or the inability of any of the Company's key vendors to provide its
goods or services to the Company would have a negative impact on the Company's
operations until those entities return to normal operations.
The anticipated future costs of the Year 2000 conversion project and the
date on which the Company anticipates project completion are based on
management's best estimates, which were derived using numerous assumptions of
future events including the continued availability of certain resources, third
party modification plans and other factors. There can be no guarantee that these
estimates will be achieved and actual results could vary significantly from
current estimates.
The Company is developing a written contingency plan to address the issues
that could arise should the Company or any of its significant suppliers,
customers, service providers or financial institutions not be prepared to
accommodate Year 2000 issues timely. The Company believes that in an emergency
situation it could revert to the use of manual systems that do not rely on
computers. Through these manual systems, the Company could perform the minimum
functions required to maintain the flow of goods and services and
11
<PAGE> 12
provide a minimum level of information reporting to maintain a level of control
over the business cycle. Should the Company have to utilize manual systems, it
is uncertain that it could maintain current levels of operations and this could
have a material adverse impact on the business. The Company intends to maintain
constant surveillance on Year 2000 issues and will adapt its plans as required.
PART II -- OTHER INFORMATION
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<C> <S>
27. -- Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
NONE
12
<PAGE> 13
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.
By: /s/ WARREN L. WILLIAMS
----------------------------------
Warren L. Williams
Director of Finance and Treasurer
Dated: May 11, 1999
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
27. -- Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 MAR-31-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> MAR-31-1998 MAR-31-1999
<CASH> 9,020 7,181
<SECURITIES> 0 0
<RECEIVABLES> 31,470 29,716
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 55,060 51,007
<PP&E> 96,135 96,341
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 236,597 233,208
<CURRENT-LIABILITIES> 39,544 31,955
<BONDS> 0 0
0 0
0 0
<COMMON> 10 10
<OTHER-SE> 120,218 120,470
<TOTAL-LIABILITY-AND-EQUITY> 236,597 233,208
<SALES> 30,778 45,037
<TOTAL-REVENUES> 30,778 45,037
<CGS> 24,111 38,041
<TOTAL-COSTS> 29,485 44,097
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (839) (1,224)
<INCOME-PRETAX> 501 (187)
<INCOME-TAX> 225 (75)
<INCOME-CONTINUING> 276 (112)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 276 (112)
<EPS-PRIMARY> 0.03 (0.01)
<EPS-DILUTED> 0.03 (0.01)
</TABLE>
