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, 1995
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 0-7265
ENERGY VENTURES, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 04-2515019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 POST OAK PARK, HOUSTON, TEXAS 77027-3415
(Address of principal executive offices) (Zip Code)
(713) 297-8400
(Registrant's telephone number, include area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
TITLE OF CLASS OUTSTANDING AT MAY 9, 1995
-------------- --------------------------
Common Stock, par value $1.00 12,657,076
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENERGY VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1995 1994
--------- ---------
ASSETS (in thousands)
CURRENT ASSETS:
Cash and Cash Equivalents ........................ $ 1,310 $ 3,144
Accounts Receivable, Net of Allowance for
Doubtful Accounts of $605,000 at
March 31, 1995 and $564,000 at
December 31, 1994 ............................... 72,823 72,790
Inventories ...................................... 83,105 74,938
Materials and Supplies ........................... 8,108 7,687
Prepaid Expenses and Other ....................... 7,003 6,244
--------- ---------
172,349 164,803
PROPERTY, PLANT AND EQUIPMENT, AT COST,
NET OF ACCUMULATED DEPRECIATION ................... 155,835 150,895
EXCESS OF COST OVER FAIR VALUE OF NET TANGIBLE
ASSETS OF BUSINESSES ACQUIRED, NET ................ 15,411 15,606
OTHER ASSETS ....................................... 12,456 12,930
--------- ---------
$ 356,051 $ 344,234
========= =========
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings, Primarily Under
Revolving Lines of Credit ........................ $ 22,046 $ 17,265
Current Maturities of Long-Term Debt .............. 4,136 3,189
Accounts Payable .................................. 40,160 30,741
Other Accrued Liabilities ......................... 17,274 19,270
--------- ---------
83,616 70,465
--------- ---------
LONG-TERM DEBT ..................................... 124,867 125,690
DEFERRED INCOME TAXES .............................. 30,961 30,785
OTHER LIABILITIES .................................. 5,414 6,381
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' INVESTMENT:
Common Stock ..................................... 12,754 12,754
Capital in Excess of Par Value ................... 55,142 55,142
Retained Earnings ................................ 50,487 48,856
Cumulative Foreign Currency
Translation Adjustment .......................... (5,849) (4,536)
Treasury Stock, at Cost .......................... (1,341) (1,303)
--------- ---------
111,193 110,913
--------- ---------
$ 356,051 $ 344,234
========= =========
The accompanying notes are an integral part of these
consolidated condensed financial statements.
2
<PAGE>
ENERGY VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended March 31,
----------------------
1995 1994
-------- --------
(In thousands, except
per share amounts)
REVENUES ........................................... $ 72,660 $ 55,118
-------- --------
COSTS AND EXPENSES:
Cost of Sales ..................................... 53,156 40,191
Selling, General and Administrative
Attributable to Segments ......................... 11,594 10,449
Corporate General and Administrative .............. 1,256 1,056
-------- --------
OPERATING INCOME ................................... 6,654 3,422
-------- --------
OTHER INCOME (EXPENSE):
Interest Expense .................................. (3,965) (2,385)
Other, Net ........................................ (59) 299
-------- --------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
CHARGE ............................................ 2,630 1,336
PROVISION FOR INCOME TAXES ......................... 999 481
-------- --------
INCOME BEFORE EXTRAORDINARY CHARGE ................. 1,631 855
EXTRAORDINARY CHARGE, NET OF TAXES ................. -- (3,784)
-------- --------
NET INCOME (LOSS) .................................. $ 1,631 $ (2,929)
======== ========
EARNINGS PER SHARE:
Income Before Extraordinary Charge ................ $ 0.13 $ 0.07
Extraordinary Charge .............................. -- (0.30)
-------- --------
Net Income (Loss) Per Share ....................... $ 0.13 $ (0.23)
======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING ....................................... 12,659 12,494
======== ========
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
<PAGE>
ENERGY VENTURES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1995 1994
------- ---------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ................................. $ 1,631 $ (2,929)
Adjustments to Reconcile Net Income to Cash
Provided (Used) by Operations:
Depreciation and Amortization .................. 4,463 3,059
Deferred Income Tax Provision (Benefit) ........ 197 (2,017)
Extraordinary Charge on Prepayment
of Debt, Net .................................. -- 3,784
(Gain) Loss on Sale of Assets .................. (19) 13
Provision for Uncollectible Accounts Receivable 72 63
Change in Operating Assets and Liabilities,
Net of Effects of Businesses Acquired ........ (6,839) (5,890)
------- ---------
Net Cash Used by Operating Activities .......... (495) (3,917)
------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Businesses, Net of Cash Acquired ... -- (1,485)
Capital Expenditures for Property, Plant
and Equipment ................................... (5,296) (7,026)
Other, Net ........................................ 302 24
------- ---------
Net Cash Used by Investing Activities .......... (4,994) (8,487)
------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt .......... -- 120,000
Borrowings (Repayments) Under Revolving
Lines of Credit .................................. 4,781 (38,549)
Borrowings Under Term Debt ........................ -- 2,141
Repayments on Term Debt ........................... (895) (40,188)
Penalty on Early Retirement of Debt ............... -- (4,872)
Debt Issuance Costs ............................... -- (3,757)
Other, Net ........................................ (38) (33)
------- ---------
Net Cash Provided by Financing Activities ...... 3,848 34,742
------- ---------
EFFECT OF TRANSLATION ADJUSTMENT
ON CASH ........................................... (193) 224
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .................................. (1,834) 22,562
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD ......................................... 3,144 4,799
------- ---------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD ......................................... $ 1,310 $ 27,361
======= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest Paid, Net of Amounts Capitalized ......... $ 6,962 $ 3,302
Income Taxes Paid ................................. $ 392 $ 731
The accompanying notes are an integral part of these
consolidated condensed financial statements.
4
<PAGE>
ENERGY VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(1) General
The unaudited consolidated condensed financial statements included herein
have been prepared by Energy Ventures, Inc. (the "Company") pursuant to the
rules and regulations of the Securities and Exchange Commission. These financial
statements reflect all adjustments, consisting only of normal recurring
adjustments, which the Company considers necessary for the fair presentation of
such financial statements for the interim periods presented. Although the
Company believes that the disclosures in these financial statements are adequate
to make the interim information presented not misleading, certain information
relating to the Company's organization and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles has been condensed or omitted in this Form 10-Q pursuant
to such rules and regulations. These financial statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
The results of operations for the three month period ended March 31, 1995 are
not necessarily indicative of the results expected for the full year.
(2) Inventories
Major components of inventories include:
March 31, December 31,
1995 1994
------- ------------
(in thousands)
Raw materials and components ............. $38,772 $34,759
Work in process .......................... 13,476 12,861
Finished goods ........................... 30,857 27,318
------- -------
$83,105 $74,938
======= =======
(3) Long-Term Debt
On March 24, 1994, the Company sold pursuant to a private placement of $120
million 10.25% Senior Notes due 2004. In July 1994, substantially all of these
notes were exchanged for a substantially identical series of 10.25% Senior Notes
due 2004 with semi-annual interest payments in March and September. Both issues
of Senior Notes were issued pursuant to the terms of an Indenture dated as of
March 15, 1994. Certain subsidiaries of the Company have unconditionally
guaranteed the Company's obligations under the Senior Notes. See Note 6. The
placement of the $120 million Senior Notes provided the Company with $116
million in net proceeds that were used to prepay the $34 million 12.25% senior
notes due 1997 and to repay substantially all of the Company's outstanding
indebtedness other than the Senior Notes. The remaining funds were used for
working capital and other general purposes. In connection with the early
retirement, the Company incurred in the first quarter of 1994, an extraordinary
charge of approximately $3.8 million, net of taxes of approximately $1.9
million, or $.30 per share. The extraordinary charge represented the difference
between the reacquisition price and the net carrying value of the $34 million
senior notes, including unamortized debt issuance costs.
Accrued interest payable, which is included in Other Accrued Liabilities in
the financial statements, was approximately $613,000 and $3.7 million at March
31, 1995 and December 31, 1994, respectively.
5
(4) Contingencies
In August of 1994, the Company received a letter from the IRS proposing to
increase the gain recognized by the Company upon the dissolution in October 1990
of COLEVE with Columbia Gas and Development Corporation. In general, the IRS'
proposal seeks payment of a tax liability of approximately $14.1 million plus
accrued interest thereon, and includes $3.4 million of taxes relating to the
proposed disallowance of certain interest deductions taken by the Company with
respect to COLEVE that was the subject of a similar letter received by the
Company in the fourth quarter of 1993. The tax liability with respect to these
matters has been previously provided for as a deferred tax liability in the
Company's financial statements. The Company disagrees with the IRS' position and
is currently pursuing its rights of administrative review and appeal and intends
to vigorously contest this matter. Although the resolution of this matter could
affect the timing of the payment of previously accrued tax liabilities and
require the use of a portion of its available capital, the Company does not
believe that the results of the audit or the ultimate resolution of the IRS'
proposed adjustments will have a material impact on its results of operations or
financial position.
5) Reclassifications
Certain reclassifications of prior period balances have been made to
conform such amounts to appropriate March 31, 1995 classifications.
6
<PAGE>
ENERGY VENTURES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(6) Condensed Consolidating Financial Statements
The $120 million Senior Notes which are described in Note 3 are
unconditionally guaranteed on a joint and several basis, by certain subsidiaries
of the Company. Accordingly, the following condensed consolidating balance
sheets as of March 31, 1995 and December 31, 1994 and the related condensed
consolidating statements of income and cash flows for the three month period
ended March 31, 1995 and 1994 have been provided. The condensed consolidating
financial statements herein are followed by notes which are an integral part of
these statements.
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents ....................... $ 5 $ 548 $ 757 $ -- $ 1,310
Other Current Assets ............................ 2,269 142,182 26,588 -- 171,039
--------- --------- --------- --------- --------
2,274 142,730 27,345 -- 172,349
--------- --------- --------- --------- --------
PROPERTY, PLANT AND EQUIPMENT,
AT COST, NET OF ACCUMULATED
DEPRECIATION .................................. 208 144,051 11,576 -- 155,835
INTERCOMPANY AND INVESTMENT
IN SUBSIDIARIES, NET .......................... 223,681 (125,156) 17,669 (116,194) --
OTHER ASSETS .................................... 4,746 22,165 956 -- 27,867
--------- --------- --------- --------- --------
$ 230,909 $ 183,790 $ 57,546 $(116,194) $356,051
========= ========= ========= ========= ========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings ......................... $ -- $ 17,258 $ 4,788 $ -- $ 22,046
Current Maturities of Long-Term Debt .......... 63 3,185 888 -- 4,136
Accounts Payable and Other Accrued
Liabilities ................................. 733 50,020 6,681 -- 57,434
--------- --------- --------- --------- --------
796 70,463 12,357 -- 83,616
--------- --------- --------- --------- --------
LONG-TERM DEBT .................................. 120,062 3,042 1,763 -- 124,867
DEFERRED TAXES, NET ............................. (1,476) 17,713 14,724 -- 30,961
OTHER LIABILITIES .............................. 334 3,691 1,389 -- 5,414
--------- --------- --------- --------- --------
STOCKHOLDERS' INVESTMENT ........................ 111,193 88,881 27,313 (116,194) 111,193
--------- --------- --------- --------- --------
$ 230,909 $ 183,790 $ 57,546 $(116,194) $356,051
========= ========= ========= ========= ========
</TABLE>
7
<PAGE>
CONDENSED CONSOLIDATING BALANCE SHEETS
DECEMBER 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ -------------
ASSETS
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents ..................... $ 166 $ 1,593 $ 1,385 $ -- $ 3,144
Other Current Assets .......................... 1,549 135,170 24,940 -- 161,659
--------- --------- --------- --------- --------
1,715 136,763 26,325 -- 164,803
--------- --------- --------- --------- --------
PROPERTY, PLANT AND EQUIPMENT,
AT COST, NET OF ACCUMULATED
DEPRECIATION ................................... 230 140,024 10,641 -- 150,895
INTERCOMPANY AND INVESTMENT
IN SUBSIDIARIES, NET ........................... 229,873 (134,749) 18,058 (113,182) --
OTHER ASSETS .................................... 4,124 23,496 916 -- 28,536
--------- --------- --------- --------- --------
$ 235,942 $ 165,534 $ 55,940 $(113,182) $344,234
========= ========= ========= ========= ========
LIABILITIES AND STOCKHOLDERS'
INVESTMENT
CURRENT LIABILITIES:
Short-Term Borrowings ......................... $ -- $ 13,627 $ 3,638 $ -- $ 17,265
Current Maturities of Long-Term Debt .......... -- 1,480 1,709 -- 3,189
Accounts Payable and Other Accrued
Liabilities ................................. 5,291 37,748 6,972 -- 50,011
--------- --------- --------- --------- --------
5,291 52,855 12,319 -- 70,465
--------- --------- --------- --------- --------
LONG-TERM DEBT .................................. 120,062 4,605 1,023 -- 125,690
DEFERRED TAXES, NET ............................. (1,903) 18,161 14,527 -- 30,785
OTHER LIABILITIES ............................... 1,579 3,668 1,134 -- 6,381
--------- --------- --------- --------- --------
STOCKHOLDERS' INVESTMENT ........................ 110,913 86,245 26,937 (113,182) 110,913
--------- --------- --------- --------- --------
$ 235,942 $ 165,534 $ 55,940 $(113,182) $344,234
========= ========= ========= ========= ========
</TABLE>
<PAGE>
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES ........................................ $ -- $ 60,413 $ 12,247 $ -- $ 72,660
COSTS AND EXPENSES .............................. 1,256 54,537 10,213 -- 66,006
------- -------- -------- ------- --------
OPERATING INCOME (LOSS) ......................... (1,256) 5,876 2,034 -- 6,654
------- -------- -------- ------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net ................ (2,133) (1,927) 102 -- (3,958)
Equity in Subsidiaries, Net Taxes ............. 4,082 -- -- (4,082) --
Other, Net .................................... 3 158 (227) -- (66)
------- -------- -------- ------- --------
INCOME BEFORE INCOME TAXES ...................... 696 4,107 1,909 (4,082) 2,630
PROVISION (BENEFIT) FOR INCOME TAXES ............ (935) 1,471 463 -- 999
------- -------- -------- ------- --------
NET INCOME ...................................... $ 1,631 $ 2,636 $ 1,446 $(4,082) $ 1,631
======= ======== ======== ======= ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES ...................................... $ -- $ 46,496 $8,622 $ -- $ 55,118
COSTS AND EXPENSES ............................ 1,056 43,082 7,558 -- 51,696
------- -------- ------ ------- --------
OPERATING INCOME (LOSS) ....................... (1,056) 3,414 1,064 -- 3,422
------- -------- ------ ------- --------
OTHER INCOME (EXPENSE)
Interest Income (Expense), Net .............. (224) (2,117) 13 -- (2,328)
Equity in Subsidiaries, Net Taxes ........... 1,704 -- -- (1,704) --
Other, Net .................................. (11) 42 211 -- 242
------- -------- ------ ------- --------
INCOME BEFORE INCOME TAXES .................... 413 1,339 1,288 (1,704) 1,336
PROVISION (BENEFIT) FOR INCOME TAXES .......... (442) 502 421 -- 481
------- -------- ------ ------- --------
INCOME FROM CONTINUING OPERATIONS ............. 855 837 867 (1,704) 855
EXTRAORDINARY CHARGE, NET
OF TAXES ..................................... (3,784) -- -- -- (3,784)
------- -------- ------ ------- --------
NET INCOME (LOSS) ............................. $(2,929) $ 837 $ 867 $(1,704) $ (2,929)
======= ======== ====== ======= ========
</TABLE>
9
<PAGE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C> <C>
Net Income ........................................ $ 1,631 $ 2,636 $ 1,446 $(4,082) $ 1,631
Equity in Earnings of Subsidiaries ................ (4,082) -- -- 4,082 --
Other Adjustments and Changes ..................... (6,823) 5,070 (373) -- (2,126)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Operations .......... (9,274) 7,706 1,073 -- (495)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from Sale of Business and Assets ......... -- 290 12 -- 302
Capital Expenditures for Property, Plant
and Equipment ................................... -- (4,368) (928) -- (5,296)
------- ------- ------- ------- -------
Net Cash Used by Investing Activities ........... -- (4,078) (916) -- (4,994)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Short-Term Borrowings, Net ........................ -- 3,631 1,150 -- 4,781
Repayments on Term Debt, Net ...................... -- (727) (168) -- (895)
(Increase) Decrease in amounts Due to and
from Subsidiaries, Net .......................... 9,151 (7,577) (1,574) -- --
Other, Net ........................................ (38) -- -- -- (38)
------- ------- ------- ------- -------
Net Cash Provided (Used) by Financing
Activities ...................................... 9,113 (4,673) (592) -- 3,848
------- ------- ------- ------- -------
Effect of Translation Adjustment on Cash ........... -- -- (193) -- (193)
------- ------- ------- ------- -------
Net Decrease in Cash and Cash
Equivalents ....................................... (161) (1,045) (628) -- (1,834)
Cash and Cash Equivalents at Beginning of
Period ............................ 166 1,593 1,385 -- 3,144
------- ------- ------- ------- -------
Cash and Cash Equivalents at End of Period ......... $ 5 $ 548 $ 757 $ -- $ 1,310
======= ======= ======= ======= =======
</TABLE>
10
<PAGE>
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
NON-
PARENT GUARANTORS GUARANTORS ELIMINATIONS CONSOLIDATED
--------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (Loss) ...................................... $ (2,929) $ 837 $ 867 $(1,704) $ (2,929)
Equity in Earnings of Subsidiaries ..................... (1,704) -- -- 1,704 --
Other Adjustments and Changes .......................... 5,534 (3,245) (3,277) -- (988)
--------- -------- ------- ------- ---------
Net Cash Provided (Used) by Operations ................. 901 (2,408) (2,410) -- (3,917)
--------- -------- ------- ------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of Businesses .............................. -- 15 (1,500) -- (1,485)
Capital Expenditures for Property, Plant
and Equipment ........................................ (5) (6,149) (872) -- (7,026)
Other, Net ............................................. -- 14 10 -- 24
--------- -------- ------- ------- ---------
Net Cash Provided (Used) by Investing
Activities ............................... (5) (6,120) (2,362) -- (8,487)
--------- -------- ------- ------- ---------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Short-Term Borrowings, Net ............................. -- (34,078) (4,471) -- (38,549)
Borrowings of Debt ..................................... 120,000 2,002 139 -- 122,141
Repayments of Debt ..................................... (34,000) (5,513) (675) -- (40,188)
(Increase) Decrease in Amounts Due to and
from Subsidiaries, Net ............................... (57,228) 48,830 8,398 -- --
Other, Net ............................................. (8,662) -- -- -- (8,662)
--------- -------- ------- ------- ---------
Net Cash Provided by Financing Activities ............ 20,110 11,241 3,391 -- 34,742
--------- -------- ------- ------- ---------
Effect of Translation Adjustment on Cash ................ -- -- 224 -- 224
--------- -------- ------- ------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents ............................................ 21,006 2,713 (1,157) -- 22,562
Cash and Cash Equivalents at Beginning of
Period ................................................. 1,444 2,200 470 -- 4,799
--------- -------- ------- ------- ---------
Cash and Cash Equivalents at End of Period .............. $ 22,450 $ 4,913 $ (687) $ -- $ 27,361
========= ======== ======= ======= =========
</TABLE>
11
A. SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATIONS
Certain reclassifications of prior year balances have been made to conform
such amounts to appropriate 1995 classifications.
ELIMINATION ENTRIES
Revenues and related Cost of Sales by individual category have been
presented net of intercompany transactions.
B. OTHER
Notes 1 through 5 should be read in conjunction with the Condensed
Consolidating Financial Statements.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
CONDITION
GENERAL
For the first quarter of 1995, income before extraordinary charge was
$1,631,000 or $0.13 per share on revenues of $72,660,000 compared to income
before extraordinary charge of $855,000 or $0.07 per share on revenues of
$55,118,000 for the first quarter of 1994.
Operating income for the first quarter of 1995 was $6,654,000 as compared
to $3,422,000 for the first quarter of 1994. The significant increase in
operating income in the first quarter of 1995 was primarily the result of a
significant increase in revenues in the Company's artificial lift segment as
well as favorable comparisons within the international segment of the Company's
contract drilling business. These increases in revenues were realized
notwithstanding a decline in the U.S. and international rig count during the
first quarter and low natural gas prices.
Interest expense for the first quarter of 1995 of $3,965,000 represents an
increase of $1,580,000 from the first quarter of 1994, reflecting the increased
cost associated with the Company's $120 million Senior Notes issued in March
1994. The net proceeds from the $120 million Senior Notes were used to prepay
the Company's $34 million Senior Notes due 1997 and other debt. The prepayment
resulted in an extraordinary charge, net of taxes, of $3,784,000 or $.30 per
share during the first quarter of 1994 and resulted in a net loss for the first
quarter of 1994 of $2,929,000 or $.23 per share.
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1995 VERSUS
THREE MONTHS ENDED MARCH 31, 1994
RESULTS OF OPERATIONS
OILFIELD EQUIPMENT SEGMENT
Revenues and gross profit for the oilfield equipment segment were $53.3
million and $14.0 million, respectively, for the three months ended March 31,
1995 as compared to $42.5 million and $11.9 million, respectively, for the three
months ended March 31, 1994. The increase in revenues and gross profit was
primarily attributable to the contribution from the Fluid Packed Pump and sucker
rod businesses acquired from National Oilwell in August 1994. In addition, the
oilfield equipment segment benefited from cost reductions throughout the
distribution system of the Company's artificial lift division.
CONTRACT DRILLING SEGMENT
Revenues and gross profit for the contract drilling segment were $19.4
million and $5.6 million, respectively for the three months ended March 31, 1995
as compared to $12.6 million and $3.0 million, respectively, for the three
months ended March 31, 1994. The improved results in this segment reflect higher
international operating income versus last year as new contracts in Peru and
Nigeria did not take effect until the second quarter of 1994. The operations in
Nigeria and Peru contributed $7.0 million in revenues and $1.5 million in
operating income for the 1995 period.
The Company's Nigerian rig was recently damaged during operations. The
Company is currently in the process of effecting repairs to this rig and the rig
is expected to be out of operation for approximately two months, pending the
completion of repairs. The Company currently expects that the loss of operating
income associated with its Nigerian operations together with repairs being
effected to its Nigerian rig will reduce Nigerian operating income for the
second quarter of 1995 by approximately $0.9 million less than the first
quarter 1995 operating income as a result of the damage to the rig.
The Company is currently in the process of deploying four land rigs for
operations in Argentina. These rigs are expected to commence operations late in
the second quarter and contribute to operating income for the remainder of the
year.
GENERAL
Selling, general and administrative expenses increased approximately 11% to
$12.9 million for the period ended March 31, 1995 from $11.5 million for the
three months ended March 31, 1994. The increase in 1995 as compared to 1994 was
attributable to $17.5 million increase in revenues. As a percentage of revenues,
selling general and administrative expenses decreased 3% during the first
quarter of 1995, compared to the first quarter of 1994.
13
Results for the remainder of 1995 will continue to be affected by
prevailing industry conditions, both domestically and internationally. In this
regard, the Company expects that demand and pricing for the Company's tubular
products, artificial lift equipment and contract drilling services will be
dependent upon changes in the price levels for oil and natural gas. In addition,
the Company's contract for the Nigerian operation will be up for renewal in June
1995. The Company believes that the contract will be renewed; however, should
the contract not be renewed, the reduced revenues and operating income from this
operation will unfavorably impact the Company until such time a new contract is
procured.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company had cash and cash equivalents of
approximately $1.3 million compared to approximately $3.1 million at December
31, 1994. In addition, as of March 31, 1995, the Company had approximately $32.2
million in available borrowings under its various lines of credit. At March 31,
1995, approximately $22.0 million had been borrowed under the revolving lines of
credit and approximately $1.1 million was outstanding on letters of credit.
Borrowings under the Company's lines of credit are generally based on the
lender's determination of the collateral value of the current assets securing
the lines of credit. The lines of credit bear interest at floating rates ranging
from prime to prime plus 1.25% and are secured by substantially all of the
borrowing subsidiary's accounts receivable and inventory. The Company and its
subsidiaries are required to comply with various affirmative and negative
covenants relating to working capital, earnings and net worth. The facilities
also impose certain limitations on the use of funds by the Company and its
subsidiaries for acquisitions and capital expenditures, the incurrence of
additional indebtedness and other operational matters and certain prohibitions
on the declaration or payment of dividends by the Company.
The Company also has outstanding $120 million in 10.25% Senior Notes due
2004. The Indenture relating to the Senior Notes contains various customary
affirmative and negative covenants that, among other things, limit the ability
of the Company and certain of its subsidiaries to (i) incur certain additional
indebtedness unless the Company's Consolidated Fixed Charge Coverage Ratio (as
defined in the Indenture) is at least 2.0 to 1.0, (ii) make dividends,
distributions and certain other restricted payments, (iii) create certain liens,
(iv) engage in certain transactions with its affiliates, (v) engage in sale and
leaseback transactions, (vi) make certain asset dispositions and (vii) merge or
consolidate with, or transfer all or substantially all of its assets to another
person. The Indenture also limits the ability of the Company and certain of its
subsidiaries to issue preferred stock and creates restrictions on the ability of
certain of its subsidiaries to pay dividends and make other distributions.
In August of 1994, the Company received a letter from the IRS proposing to
increase the gain recognized by the Company upon the dissolution in October 1990
of the Company's joint venture ("COLEVE") with Columbia Gas and Development
Corporation. In general, the IRS' proposal seeks payment of a tax liability of
approximately $14.1 million plus accrued interest thereon, and includes $3.4
million of previously accrued taxes relating to the proposed disallowance of
certain interest deductions taken by the Company with respect to COLEVE that was
the subject of a similar letter received by the Company in the fourth quarter of
1993. The tax liability with respect to these matters has been previously
provided for as a deferred tax liability in the Company's financial statements.
The Company disagrees with the IRS' position and is currently pursuing its
rights of administrative review and appeal and intends to vigorously contest
this matter. Although the resolution of these remaining issues could affect the
timing of the payment of previously accrued tax liabilities and require the use
of a portion of its available capital, the Company does not believe that the
results of the audit or the ultimate resolution of the IRS' proposed adjustments
will have a material impact on its results of operations or financial position.
Substantially all of the Company's customers are engaged in the petroleum
industry. This concentration of customers may impact the Company's overall
exposure to credit risk, either positively or negatively, in that customers may
be similarly affected by changes in economic and industry conditions. The
Company performs ongoing credit evaluations of its customers and does not
generally require collateral in support of its trade receivables. The Company
maintains reserves for potential credit losses, and actual losses have
historically been within the Company's expectations. Foreign sales also present
various risks, including risks of war, civil disturbances and governmental
activities that may limit or disrupt markets, restrict the movement of funds or
result in the deprivation of contract rights or the taking of property without
fair consideration. Most of the Company's foreign sales, however, are to large
international companies or are secured by letter of credit or similar
arrangements.
14
The Company's current sources of capital are cash generated from operations
and borrowings under its working capital lines of credit. The Company believes
that current reserves of cash and short-term investments, access to existing
credit lines and internally generated cash from operations are sufficient to
finance the projected cash requirements of its current operations.
The Company is continually evaluating new acquisitions with a focus on
proprietary technology and underutilized assets to enhance operations. Future
acquisitions may be funded through cash flow from operations and other
borrowings and financings.
CAPITAL EXPENDITURES, ACQUISITIONS AND DISPOSITIONS
Capital expenditures by the Company totaled approximately $7.1 million for
the three months ended March 31, 1995, compared to approximately $7.0 million
for the three months ended March 31, 1994. During the first three months of
1995, capital expenditures included approximately $3.1 million relating to the
acquisition of a land rig and equipment additions to the three existing land
rigs being deployed to Argentina. Capital expenditures for the comparative 1994
period included approximately $4.0 million relating to equipment additions to
the Company's rig in Nigeria.
Capital expenditures are budgeted at approximately $11.0 million for the
remainder of 1995 which includes $4.7 million for Argentina.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENERGY VENTURES, INC.
By: /s/ JAMES G. KILEY
---------------------------------
James G. Kiley
Vice President, Finance
and Treasurer
(Principal Financial Officer)
By: /s/ FRANCES R. POWELL
---------------------------------
Frances R. Powell
Vice President, Accounting
and Controller
(Principal Accounting Officer)
Date: May 12, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED CONDENSED BALANCE SHEETS AND CONSOLIDATED CONDENSED
STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,310
<SECURITIES> 0
<RECEIVABLES> 72,823
<ALLOWANCES> 605
<INVENTORY> 83,105
<CURRENT-ASSETS> 172,349
<PP&E> 155,835
<DEPRECIATION> 0<F1>
<TOTAL-ASSETS> 356,051
<CURRENT-LIABILITIES> 83,616
<BONDS> 124,867
<COMMON> 12,754
0
0
<OTHER-SE> 98,439
<TOTAL-LIABILITY-AND-EQUITY> 356,051
<SALES> 72,660<F2>
<TOTAL-REVENUES> 72,660
<CGS> 53,156<F2>
<TOTAL-COSTS> 53,156
<OTHER-EXPENSES> 12,850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,965
<INCOME-PRETAX> 2,630
<INCOME-TAX> 999
<INCOME-CONTINUING> 1,631
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,631
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
<FN>
<F1>This amount is not disclosed in the financial statements and thus a value of
zero has been shown for purposes of this financial data schedule.
<F2>These line items include certain amounts related to non-tangible products
(i.e.,) services) however, since the amounts related to services are not
disclosed in the financial statements, the total revenue and CGS figures,
respectively, have been shown on these line items for purposes of this financial
data schedule.
</FN>
</TABLE>
