<PAGE> 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 MARCH 31, 2000
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 OR ORGANIZATION) IDENTIFICATION NO.)
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 15, 2000 WAS 11,248,441.
1
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PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1 - Financial Statements
Consolidated Balance Sheets as of December 31, 1999 and March 31, 2000 (unaudited)........... 3
Consolidated Statements of Operations and Comprehensive Loss for the three months
ended March 31, 1999 and 2000 (unaudited).................................................... 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and
2000 (unaudited)............................................................................. 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
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TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31, MARCH 31,
1999 2000
------------- -------------
<S> <C> <C>
CURRENT ASSETS: (Unaudited)
Cash and cash equivalents $ 443 $ 1,637
Contracts and accounts receivable, net of allowance of $4,960 and $4,912,
respectively 28,779 21,219
Costs and estimated earnings in excess of billings on uncompleted contracts 4,039 2,101
Other current assets 8,206 6,766
------------ -----------
Total current assets 41,467 31,723
PROPERTY AND EQUIPMENT, net 82,075 81,594
OTHER NONCURRENT ASSETS, net 6,332 5,739
------------ -----------
Total Assets $ 129,874 $ 119,056
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 47,272 $ 46,104
Subordinated debt 20,000 20,000
Accounts payable 15,379 15,282
Accrued expenses 21,798 22,876
Billings in excess of costs and estimated earnings on uncompleted
contracts 3,597 2,899
------------ -----------
Total current liabilities 108,046 107,161
LONG-TERM DEBT, net of current maturities 2,153 1,990
REDEEMABLE PREFERRED STOCK 146 149
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, 11,248,441
shares issued and outstanding 11 11
Additional paid-in-capital 137,566 137,641
Accumulated deficit (118,048) (127,896)
------------ -----------
Total stockholders' equity 19,529 9,756
------------ -----------
Total liabilities and stockholders' equity $ 129,874 $ 119,056
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
3
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TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
1999 2000
---------------- -------------
<S> <C> <C>
REVENUES $ 45,037 $ 15,739
COSTS AND EXPENSES:
Costs of revenues 38,041 19,250
Selling, general and administrative expenses 2,855 1,973
Depreciation and amortization 3,065 2,434
----------- -----------
OPERATING INCOME (LOSS) 1,076 (7,918)
OTHER INCOME (EXPENSE), net
Interest expense, net (1,360) (1,969)
Other income, net 97 39
----------- -----------
LOSS BEFORE INCOME TAXES (187) (9,848)
PROVISION (BENEFIT) FOR INCOME TAXES (75) --
----------- -----------
NET LOSS $ (112) $ (9,848)
=========== ===========
COMPREHENSIVE LOSS, net of tax:
Unrealized holding loss arising during the period net of tax
of $8 (18) --
----------- -----------
COMPREHENSIVE LOSS $ (130) $ (9,848)
=========== ===========
LOSS PER SHARE:
Basic $ (0.01) $ (0.88)
=========== ===========
Diluted $ (0.01) $ (0.88)
=========== ===========
NUMBER OF SHARES USED IN PER SHARE COMPUTATIONS:
Basic 10,448 11,248
=========== ===========
Diluted 10,448 11,248
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
4
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TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1999 2000
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (112) $ (9,848)
Adjustments to reconcile net loss to net cash used in operating
activities--
Depreciation and amortization 3,065 2,434
Amortization of debt issuance costs 136 265
Allowance for doubtful accounts 121 (48)
Compensation expense on stock issuance to senior
management -- 75
Deferred income taxes (308) --
Other (29) 4
Changes in operating assets and liabilities-
(Increase) decrease in--
Contracts and accounts receivable 1,633 7,608
Costs and estimated earnings in excess of billings on
uncompleted contracts 211 1,938
Other current assets 249 1,417
Other noncurrent assets (599) 287
Increase (decrease) in--
Accounts payable and accrued expenses (5,991) 981
Billings in excess of costs and estimated earnings on
uncompleted contracts (1,071) (698)
----------- -----------
Net cash provided by (used in) operating activities (2,695) 4,415
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 48 --
Capital expenditures (2,921) (1,890)
----------- -----------
Net cash used in investing activities (2,873) (1,890)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt 4,677 1,645
Principal payments on notes payable (948) (809)
Principal payments on long-term debt -- (2,167)
----------- -----------
Net cash provided by (used in) financing activities 3,729 (1,331)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,839) 1,194
CASH AND CASH EQUIVALENTS, beginning of period 9,020 443
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 7,181 $ 1,637
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 961 $ 2,234
=========== ===========
Cash paid for income taxes $ 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
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TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BUSINESS
The consolidated financial statements herein have been prepared by
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, 1999 and 2000.
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, 1999, 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, 1999.
2. GOING CONCERN
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The report of the
independent public accountants on the consolidated financial statements of the
Company as of and for the year ended December 31, 1999, included an explanatory
paragraph, which emphasized substantial doubt about the Company's ability to
continue as a going concern. See Note 4 (Dickson Bankruptcy) and Liquidity and
Capital Resources (Item 2) below.
3. EARNINGS PER SHARE
Basic loss per share excludes dilution and is computed by dividing net loss
by the weighted average number of common shares outstanding for the period.
Diluted loss per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock.
The weighted average number of common shares outstanding used to compute
basic and diluted loss per share for the three months periods ended March 31,
1999 and 2000 were 10,448,000 and 11,248,000 shares, respectively. 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. Common stock equivalents are excluded from fully
diluted calculations in those periods in which a net loss is reported as they
would be anti-dilutive.
6
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TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
4. DICKSON BANKRUPTCY
On May 1, 2000 the Company announced that Dickson GMP International, Inc.
("Dickson" or "Fabrication & Offshore Group"), a wholly-owned subsidiary, had
filed a voluntary petition for Chapter 11 Reorganization in the U.S. Bankruptcy
Court for the Southern District of Texas. This action was triggered by claims
made by Chevron Global Technology Services Company ("Chevron") in the amount of
approximately $28 million against Dickson. These claims relate to Dickson's
fabrication of platforms and wellheads totaling $86 million which were installed
and are operating offshore Venezuala. While the Company is unable to estimate
precisely the ultimate dollar amount of exposure, if any, related to this
matter, it has made accruals for management's estimated exposure. Due to the
evolving nature of the disputed items with Chevron, the inherent shortcomings of
the estimation process and other factors, amounts accrued could vary
significantly from amounts paid, if any. Chevron's pursuit of these claims has
severely limited the Company's ability to complete a recapitalization that would
allow an equity infusion into Dickson. All of the Company's other operating
subsidiaries, including the Pipeline & Marine Group, are not involved in the
filing.
5. INCOME TAXES
As of December 31, 1999, the Company had a net operating loss (NOL) of
approximately $42.0 million, which is available to offset future taxable income.
Due to uncertainties regarding the Company's ability to fully utilize the NOL
during the carry forward period, the Company provided a valuation allowance of
approximately $9.3 million at December 31, 1999.
During the three months ended March 31, 2000 the Company incurred an
operating loss of $9.8 million. Due to the continuing uncertainties regarding
the Company's ability to fully utilize the $51.8 million NOL during the carry
forward period, the Company provided an additional valuation allowance of $3.3
million during the three months ended March 31, 2000 which completely offset the
tax benefit associated with the operating loss incurred during the period.
6. 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).
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TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
The following table shows segment information for the reportable segments for
the three months ended March 31, 1999 and 2000, respectively (in thousands):
<TABLE>
<CAPTION>
1999 2000
--------------- ---------------
<S> <C> <C>
Revenues to unaffiliated customers:
Pipeline & Marine $ 14,293 $ 9,030
Fabrication & Offshore 30,722 6,709
Other 22 --
--------------- ---------------
$ 45,037 $ 15,739
=============== ===============
Net income:
Pipeline & Marine $ 289 $ (5,189)
Fabrication & Offshore 447 (2,899)
Other (848) (1,760)
--------------- ---------------
$ (112) $ (9,848)
=============== ===============
</TABLE>
The following table shows segment information for the geographic segments
for the three months ended March 31, 1999 and 2000, respectively (in thousands):
<TABLE>
<CAPTION>
1999 2000
--------------- ---------------
<S> <C> <C>
Revenues to unaffiliated customers:
United States $ 14,172 $ 15,579
Venezuela 20,998 6
Mexico 7,356 --
Other Foreign 2,511 154
--------------- ---------------
$ 45,037 $ 15,739
=============== ===============
</TABLE>
8
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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, 1999.
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. The Company's principal executive offices
are located at 4900 Woodway, Suite 500, Houston, Texas 77056, and its telephone
is (713) 626-8899.
This discussion includes certain forward-looking statements, which are
identified by the use of the words "believes", "expects" 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 (unaudited) 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,
---------------------------------------------------------------
1999 2000
------------------------------ -------------------------
<S> <C> <C> <C> <C>
Revenues $ 45,037 100.0 % $15,739 100.0 %
Cost of revenues 38,041 84.5 % 19,250 122.3 %
Selling, general and administrative expenses 2,855 6.3 % 1,973 12.5 %
Depreciation and amortization 3,065 6.8 % 2,434 15.5 %
-------- ------- ------- ------
Operating income (loss) 1,076 2.4 % (7,918) (50.3)%
Interest expense, net (1,360) (3.0)% (1,969) (12.5)%
Other income, net 97 0.2 % 39 0.2 %
-------- ------- ------- ------
Loss before income taxes (187) (0.4)% (9,848) (62.6)%
Provision (benefit) for income taxes (75) (0.2)% -- -- %
-------- ------- ------- ------
Net loss $ (112) (0.2)% $(9,848) (62.6)%
======== ======= ======= ======
</TABLE>
Results for the three months ended March 31, 1999 compared to the three months
ended March 31, 2000
Revenues. Revenues decreased $29.3 million, or 65.1%, from $45.0 million for the
three months ended March 31, 1999 to $15.7 million for the three months ended
March 31, 2000. The Fabrication and Offshore Group's revenues decreased $24.0
million, or 78.2%, from $30.7 million for the three months ended March 31, 1999
to $6.7 million for the three months ended March 31, 2000. This decrease in
revenues for the Fabrication and Offshore Group was the result of continued
downturn in oilfield fabrication projects that commenced in 1999 with a decrease
in capital expenditure budgets by the Company's customers. The decrease in
capital expenditure budgets was a result of the fall of oil and gas prices in
1998. The Fabrication and Offshore Group's revenues in the first quarter of 1999
included $18.8 million in revenue associated with a Chevron contract awarded in
the second quarter of 1998. The Pipeline and Marine Group's revenues decreased
$5.3 million, or 37.1% from $14.3 million for the first quarter of 1999 to $9.0
million for the same period in 2000. The decline in revenues
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for the Pipeline and Marine Group was the net result of a $2.1 million increase
in revenues domestically and a $7.4 million decrease in revenues generated in
Mexico under a bareboat charter. With recent increases in oil and gas prices,
the Company anticipates increased levels of pipeline activity in the second half
of 2000.
Cost of revenues. Cost of revenues decreased $18.8 million, or 49.4%, from $38.0
million for the three months ended March 31, 1999 to $19.3 million for the same
period in 2000. Overall cost of revenues increased as a percentage of revenues
from 84.5% in the first quarter of 1999 to 122.3% in the first quarter of 2000.
This decrease in gross profit percentage in the first three months of 2000 as
compared to the first three months of 1999 was primarily due to lower overall
utilization of both fabrication facilities and pipeline vessels and equipment.
Selling, general and administrative expenses. Selling, general and
administrative (S,G&A) expenses decreased $0.9 million, or 31.7%, for the three
months ended March 31, 2000 as compared to the same period in 1999. As a
percentage of revenues, S,G&A expenses were 12.5% during the first quarter of
2000, compared to 6.4% during the first quarter of 1999. The reduction in
selling, general and administrative expenses in the first quarter of 2000 as
compared to the first quarter of 1999 was accomplished primarily through
headcount reduction in the administrative staff and support services. The
increase in S,G&A expenses as a percentage of revenues was a result of lower
revenues available to support fixed G&A costs.
Depreciation and amortization. Depreciation and amortization expenses decreased
$0.6 million from $3.1 million in 1999 to $2.4 million in 2000. The decrease was
primarily due to the loss on asset impairment recorded in December 1999
resulting from the write-off of $86.3 million of goodwill and $10.3 million
related to the Company's vessels, barges and certain leasehold improvements.
Interest income (expense), net. Interest expense, net of interest income,
totaled $2.0 million during the first quarter of 2000 as compared to $1.4
million of interest expense during the same period in 1999. This increase was
due to higher average debt levels resulting primarily from working capital
requirements and an increase in the weighted average interest rate in 2000 as
compared to 1999.
LIQUIDITY AND CAPITAL RESOURCES
Uncertainty and volatility in oil and natural gas commodity pricing during
1998 and 1999 caused the Company's customer base to significantly reduce capital
spending. As a result, the Company experienced significantly reduced revenues
and operating cash flows. Revenues for the three months ended March 31, 2000
decreased 65.1% while costs of revenues decreased 49.4%. Additionally, the
Company's earnings before interest, taxes, depreciation and amortization
(EBITDA) declined by $9.6 million from the same period in 1999. The decline in
cash flow combined with the delayed collection on a foreign receivable (the
"Foreign Receivable") discussed below negatively impacted the Company's
liquidity. The uncertainty surrounding collection of the Foreign Receivable and
the Chevron Claim materially impacted the Company's ability to obtain additional
financing to remedy the liquidity issues and to satisfy the requirements to
raise additional equity contained in the agreements with the Company's lenders.
The Company currently is in default under its Credit Facility and as a result
has classified all of such debt as a current liability on its balance sheet. In
the absence of collecting a significant amount on the Foreign Receivable, or a
recapitalization and a waiver or amendment to its agreements with the banks, the
Company may not continue as a going concern.
At March 31, 2000, the Company has a contract receivable in the amount of
$16.6 million with a foreign joint venture in financial difficulty. The Company
has continued to negotiate with the joint venture and has received assurances
regarding future payments. The Company has provided a reserve for management's
estimate of amounts that may not be collected. In addition, the Company has two
letters of credit outstanding issued in the favor of Chevron Global Technologies
Services Company ("Chevron") in lieu of retainage on two fabrication projects
totaling $8.6 million. In December of 1999, Chevron informed the Company that it
had approximately $27.0 million in billing disputes on the two fabrication
contracts. Chevron has subsequently increased these claims to $30 million. The
Company has entered into an arbitration procedure with Chevron with respect to
the Chevron Claims. Under agreements related to the arbitration, Chevron has
agreed not to draw on the letters of credit before September 15, 2000. If
Chevron were to call on either of the two letters of credit or the Company was
unable to collect on the $16.6 million receivable from the foreign joint
venture, it would have a material adverse impact on the Company's operations,
financial position, and cash flow.
In January 1999, the Company entered into a Credit Facility with financial
institutions, replacing the existing credit agreement with an aggregate credit
facility of $70 million. The Credit Facility was a $10 million increase in
borrowing capacity over the credit facility in place at December 31, 1998. The
Credit Facility is comprised of three separate credit
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<PAGE> 11
agreements: (a) a three-year revolving credit agreement ("Revolving Facility")
for up to $15.0 million; (b) a seven-year term credit agreement ("Term Loan")
for $35.0 million; and (c) a five-year subordinated debt agreement
("Subordinated Debt") for $20.0 million.
In November 1999, the Company amended the Revolving Facility and the Term
Loan which reduced the borrowing capacity under the Revolving Facility by $5.0
million and increased the borrowings under the Term Loan by $5.0 million. The
Company also amended the financial covenants in the Credit Facility to take into
consideration then existing operating results and the market environment in
which the Company operates. The revised financial covenants required a $7.5
million equity investment by January 31, 2000 and either an additional $7.5
million equity infusion or increased earnings of a similar amount in the first
quarter of the year 2000. The Company has not secured any commitments for
additional financing and is currently in default of the financial covenants of
the Credit Facility. The Company is currently pursuing possible investors of
capital from third parties, waivers of covenant failures, amendments to the debt
covenants or forbearance from its lenders as well as other recapitalization
opportunities that might become available and has retained an investment bank to
assist in these endeavors. The Company is also exploring the possible sales of
certain of its assets or subsidiaries. There is no assurance that the Company
will actually complete any transaction and the Company may be forced to seek
protection from its creditors if workable arrangements are not forthcoming.
Subsequent to March 31, 2000, the Company has failed to meet the debt service
requirements of the Revolving Facility and the Term Loan.
At March 31, 2000, the Company had a working capital deficit of $75.4
million, which represented an $8.8 million increase from the $66.6 million
working capital deficit at December 31, 1999. The indebtedness of the Company at
March 31, 2000, consisted of $9.1 million of borrowings under the Revolving
Facility, $35.1 million of borrowings under the Term Loan, $20.0 million of
borrowings under the Subordinated Debt, and $3.8 million of borrowings under
other term loans. This indebtedness totaled approximately $68.0 million as of
March 31, 2000, of which $66.1 million has been classified as a current
liability in the accompanying financial statements due to noncompliance with
various debt covenants.
In addition, the Company has notified its bonding company, on May 16, 2000,
of its inability to complete two fabrication projects to double hull two barges
in the New Orleans yard due to its significant cash constraints. The Company
believes that any attempt to complete these two projects would result in
additional cash commitments that are not currently available to the Company. The
obligations to the bonding company are guaranteed by the Company and its
subsidiaries. The Company is in discussion with the bonding company regarding an
orderly transition of the projects to other facilities. The Company is currently
evaluating the future operating viability of Dickson.
Net cash from operating activities during the three months ended March 31,
2000 was $4.4 million, primarily resulting from net collections on accounts
receivable. Net cash used in investing activities during the three months ended
March 31, 2000 was $1.9 million. Capital expenditures accounted for all of the
cash used in investing activities during the period and primarily related to
required refurbishments to the Vermilion Bay, pipelay barge. Cash generated by
operating activities and additional borrowings under the revolving credit
facility were used to fund capital expenditures and pay down notes payable and
long-term debt. The Company had no additional borrowing availability under the
Company's long-term credit facility at the end of March 31, 2000.
YEAR 2000 ISSUES
The Company successfully completed its program to prepare its computer
systems and applications for the Year 2000 and experienced no significant system
or application failures. Based on present information, management does not
believe there are any ongoing business risks associated with processing of
date-sensitive data by the Company's computerized information systems and
equipment as it relates to the Year 2000. The Company was able to complete the
Year 2000 conversion tasks within the total projected cost of approximately
$750,000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
In the normal course of business, the Company is exposed to market risk,
primarily from changes in interest rates. The Company continually monitors
exposure to market risk and develops appropriate strategies to manage this risk.
Accordingly, the Company may enter into certain derivative financial instruments
for trading or to speculate on changes in interest rates.
11
<PAGE> 12
Interest Rate Exposure
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt. At March 31, 2000, $64.2 million of
the Company's indebtedness was subject to variable interest rates with a
weighted average effective interest rate of 10.55% for the three months then
ended. The detrimental effect of a hypothetical 100 basis point increase in
interest rates would be to reduce income before taxes by $0.2 million for the
three month period. At March 31, 2000, the Company's fixed rate debt
approximated fair market value based upon discounted future cash flows using
current market prices.
Foreign Currency Exposure
The Company believes its exposure to foreign currency fluctuations is
minimal in that contracts for work performed in or to be delivered to countries
outside the United States ("Foreign Contracts") are primarily denominated in
U.S. dollars. It is Company policy to limit the portion of any Foreign Contracts
denominated in local currency to that portion of the total revenue required to
be spent in country to complete the project. The Company's operations outside
the United States currently are in Latin America and West Africa and all current
Foreign Contracts are denominated in U.S. dollars.
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. - Financial Data Schedule
(b) Reports on Form 8-K
NONE
12
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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: May 19, 2000 By: /s/Warren L. Williams
Warren L. Williams
Chief Financial Officer and
Treasurer
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-2000
<PERIOD-START> JAN-01-1999 JAN-01-2000
<PERIOD-END> MAR-31-1999 MAR-31-2000
<CASH> 443 1,637
<SECURITIES> 0 0
<RECEIVABLES> 28,779 21,219
<ALLOWANCES> 4,960 4,912
<INVENTORY> 0 0
<CURRENT-ASSETS> 41,467 31,723
<PP&E> 82,075 81,594
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 129,874 119,056
<CURRENT-LIABILITIES> 108,046 107,161
<BONDS> 0 0
146 149
0 0
<COMMON> 11 11
<OTHER-SE> 137,566 137,641
<TOTAL-LIABILITY-AND-EQUITY> 129,874 119,056
<SALES> 45,037 15,739
<TOTAL-REVENUES> 45,037 15,739
<CGS> 38,041 19,250
<TOTAL-COSTS> 43,961 23,657
<OTHER-EXPENSES> (97) (39)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,360 1,969
<INCOME-PRETAX> (187) (9,848)
<INCOME-TAX> (75) 0
<INCOME-CONTINUING> (112) (9,848)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (112) (9,848)
<EPS-BASIC> (0.01) (0.88)
<EPS-DILUTED> (0.01) (0.88)
</TABLE>
