<PAGE>
<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, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-457
GULFMARK INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 74-1203713
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 POST OAK PARK, SUITE 1170 77027
Houston, Texas
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(713) 963-9522
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 / /
Number of shares of Common Stock, $1.00 Par Value, outstanding as of
May 13, 1996: 3,336,352.<PAGE>
<PAGE>2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements
included herein have been prepared by the Registrant (the "Company")
pursuant to the rules and regulations of the Securities and Exchange
Commission. These condensed consolidated financial statements reflect
all adjustments, consisting of normal recurring adjustments, which the
Company considers necessary for the fair presentation of such
financial statements for the periods indicated. 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. However,
the Company believes that the disclosures herein are adequate to make
the information presented not misleading. It is suggested that these
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, and the information
included in the Proxy Statement dated April 1, 1996.
2<PAGE>
<PAGE>3
GULFMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> March 31, December 31,
1996 1995
(Unaudited) (Audited)
--------- -------
<S> <C> <C>
ASSETS (In thousands)
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 5,511 $ 5,163
Accounts receivable..................................................... 7,128 6,148
Inventory, prepaids and other........................................... 1,227 1,399
------- -------
Total current assets.................................................. 13,866 12,710
------- -------
INVESTMENT IN ENERGY VENTURES, INC; including unrealized gain of
$13,172,000 in 1996 and $12,151,000 in 1995............................. 35,342 34,321
------- -------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $15,523,000 in 1996 and $14,959,000 in 1995............. 70,838 61,582
------- -------
OTHER ASSETS.............................................................. 1,974 2,322
------- -------
$ 122,020 $ 110,935
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long-term debt............. $ 5,458 $ 4,066
Accounts payable........................................................ 1,051 1,779
Accrued payroll and related expenses.................................... 404 564
Other accrued liabilities............................................... 1,285 1,245
------- -------
Total current liabilities............................................. 8,198 7,654
------- -------
LONG-TERM DEBT............................................................ 43,590 33,600
------- -------
DEFERRED TAXES AND OTHER.................................................. 10,555 10,308
------- -------
MINORITY INTEREST......................................................... 358 415
------- -------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 10,000,000 shares authorized;
3,336,352 shares issued and outstanding............................... 3,336 3,336
Additional paid-in capital.............................................. 23,501 23,501
Retained earnings....................................................... 28,284 28,237
Cumulative translation adjustment....................................... (4,505) (4,146)
Unrealized gain on investment........................................... 8,703 8,030
------- -------
Total stockholders' equity............................................ 59,319 58,958
------- -------
$ 122,020 $ 110,935
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
3<PAGE>
<PAGE>4
GULFMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1996 1995
-------- --------
(In thousands, except
per share amounts)
<S> <C> <C>
REVENUES.......................................................... $ 7,161 $ 7,500
COSTS AND EXPENSES:
Direct operating expenses....................................... 5,101 6,334
Selling, general and administrative expenses.................... 1,405 1,348
------- -------
6,506 7,682
------- -------
OPERATING INCOME (LOSS)........................................... 655 (182)
------- -------
OTHER INCOME (EXPENSES):
Interest expense................................................ (798) (587)
Interest income................................................. 55 48
Equity in earnings of Energy Ventures, Inc...................... -- 368
Minority interest............................................... 57 82
Other........................................................... 3 (2)
------- -------
(683) (91)
------- -------
LOSS BEFORE INCOME TAXES.......................................... (28) (273)
INCOME TAX BENEFIT................................................ 75 52
------- -------
NET INCOME (LOSS)................................................. $ 47 $ (221)
======= =======
EARNINGS (LOSS) PER SHARE......................................... $ .01 $ (0.07)
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING............................... 3,336 3,321
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
4<PAGE>
<PAGE>5
GULFMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1996 1995
------- --------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ 47 $ (221)
Adjustments to reconcile net income (loss) to net cash provided
by operations:
Depreciation and amortization............................................ 1,140 1,335
Equity in earnings of Energy Ventures, Inc............................... -- (368)
Deferred and other income tax benefit.................................... (106) (70)
Minority interest........................................................ (57) (82)
Change in assets and liabilities......................................... (380) 220
Other, net............................................................... 7 10
------ ------
Net cash provided by operating activities.................................. 651 824
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment...................................... (12,196) (648)
Expenditures for drydocking and main engine overhaul..................... (68) (429)
------ ------
Net cash used in investing activities...................................... (12,264) (1,077)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt, net of direct financing costs........................ 12,411 440
Repayments of debt....................................................... (450) (751)
------ ------
Net cash provided by (used in) financing activities........................ 11,961 (311)
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................... 348 (564)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD....................... 5,163 2,989
------ ------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD............................. $ 5,511 $ 2,425
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.............................................................. $ 655 $ 844
====== ======
Income taxes paid.......................................................... $ 21 $ 22
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
5<PAGE>
<PAGE>6
GULFMARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
During the first quarter of 1996, management completed an
evaluation of the useful life used for depreciating vessels in light
of recent vessel performance, changes in the materials available to
protect vessel hulls and industry practice. Based on the results, it
was determined that a useful life of twenty-five years for its vessels
was a better estimate than the twenty years used previously.
Therefore effective January 1, 1996 the useful life was extended to
twenty-five years. For the quarter ended March 31, 1996, the effect
of this change in accounting estimate lowered depreciation expense by
$468,000. The impact of the change on net income was $313,000 or
$0.09 per share.
New Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued
SFAS No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of", which is effective for the
Company on January 1, 1996. The statement sets forth guidelines
regarding when to recognize an impairment of long-lived assets,
including goodwill, and how measure such impairment. Adoption of SFAS
No. 121 did not have any effect on the Company's consolidated
financial statements.
As of January 1, 1996, SFAS No. 123, "Accounting for Stock-Based
Compensation", is effective for the Company. SFAS No. 123 permits,
but does not require, a fair value based method of accounting for
employee stock option plans which results in compensation expense
recognition when stock options are granted. The Company will continue
the use of its current intrinsic value based method of accounting for
such plans.
6<PAGE>
<PAGE>7
(2) VESSEL ACQUISITIONS
In 1995, the Company contracted with a shipyard in Norway for the
construction of two new UT 755 design vessels for deployment in the
North Sea. The first vessel, named the Highland Piper, was delivered
on March 15, 1996. The second vessel is expected to be delivered in
early 1997. Included in capital expenditures for the three months
ended March 31, 1996, is $10,757,000 related to the final construction
payment on the Highland Piper. Funding for this payment was provided
through additional borrowings of approximately $12,400,000 under a
British Pound Sterling ("GBP") 16,500,000 facility with a bank.
(3) INVESTMENT IN ENERGY VENTURES, INC.
At March 31, 1996, the Company owned 14% of the outstanding stock
of Energy Ventures, Inc. ("Energy Ventures"), a publicly-traded (NYSE
trading symbol "EVI") international oilfield equipment and service
company which manufactures artificial lift and completion systems,
drill pipe and premium tubulars and provides rig contracting services.
The Company's ownership interest was diluted from 20% to 17% on June
30, 1995 as a result of Energy Ventures issuing 2.25 million shares in
connection with an acquisition and from 17% to 14% in September 1995
with the issuance of 3.45 million shares through a public stock
offering.
The shares of Energy Ventures owned by the Company are held for
investment purposes. Because of, among other things, the Company's
14% ownership of Energy Ventures as well as the two common directors
between the two companies, the Company may be considered an
"affiliate" of Energy Ventures under federal securities rules and
regulations. As such, these shares may not be able to be sold by the
Company absent registering such shares under the Securities Act of
1933 or an exemption therefrom.
Prior to June 30, 1995, the Company accounted for Energy Ventures
on the equity method; however, the reduction in the Company's
ownership interest on June 30, 1995 necessitated a change from the
equity method to the cost and the application of certain requirements
of Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" ("SFAS No.
115"). Under the cost method the Company no longer records its
proportionate share of Energy Ventures' earnings as was done prior to
June 30, 1995 under the equity method. Any dividends paid by an
investee under the cost method are reported as income to the extent
that such amounts are not in excess of net accumulated earnings
subsequent to the date the Company began following the cost method.
7<PAGE>
<PAGE>8
In addition, under SFAS No. 115,"...the portion of the security
that can reasonably be expected to qualify for sale within one
year..." must be reported at its "fair value." If the Company is
considered an "affiliate" under the federal securities rules and
regulations, approximately 736,800 shares represents the number of
shares which may be sold by the Company without registration pursuant
to Rule 144 promulgated under the Securities Act of 1933. Accordingly
the Company has reflected in the accompanying balance sheet
approximately 736,800 shares of the Energy Ventures holding at the
closing price quoted on the New York Stock Exchange as of March 31,
1996. The related unrealized gains and losses on those shares,
effective June 30, 1995, are reflected as a separate component of
stockholders' equity, net of the related deferred taxes until
realized. The remaining 1,798,792 shares are carried at historical
cost.
The quoted market value of Energy Ventures' shares held by the
Company may not be the value that would be realized should the Company
dispose of some or all of the shares. As of May 13, 1996, the quoted
market value of Energy Ventures' shares held by the Company was
$74,800,000.
The following represents unaudited summarized income statements
for Energy Ventures. For more information regarding Energy Ventures'
financial condition and operations, reference is made to Energy
Ventures' March 31, 1996 Form 10-Q filed with the Securities and
Exchange Commission.
<TABLE>
<CAPTION>
SUMMARIZED INCOME STATEMENTS
(Unaudited)
------------------------------------------------------------------------
Three Months Ended
March 31,
--------------------
1996 1995
-------- --------
(In thousands)
<S> <C> <C>
Revenues.......................................... $110,042 $72,660
Expenses.......................................... (99,272) (66,006)
Other expenses, net............................... (4,084) (4,024)
------- -------
Income before income taxes........................ 6,686 2,630
Income tax provision.............................. (2,339) (999)
------- -------
Net income........................................ $ 4,347 $ 1,631
======= =======
</TABLE>
8<PAGE>
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At March 31, 1996, the Company had $5.5 million in cash and cash
equivalents as compared to $5.2 million at December 31, 1995.
In 1995, the Company contracted with a shipyard in Norway for the
construction of two UT 755 design vessels for deployment in the North
Sea. The first vessel, named the Highland Piper, was delivered March
15, 1996. The second vessel is expected to be delivered in early
1997. The Company made a final construction payment during the
quarter ended March 31, 1996, of $10,757,000 and expects to make
additional interim payments on the second vessel of $750,000 in 1996.
Funding of approximately $12,400,000 was provided by additional
borrowings under a existing credit facility.
During the period ended March 31, 1996, expenditures for
scheduled drydockings of vessels were $68,000 while expenditures for
vessel upgrades and modifications were $57,000. The Company estimates
that capital and maintenance expenditures, excluding any expenditures
to build or acquire additional vessels, will be approximately $1.4
million for the remainder of 1996, of which $1.3 million relates to
drydockings. The remainder relates to vessel upgrades and non-marine
expenditures that are not subject to firm commitments, and the Company
may modify its plans as appropriate.
At March 31, 1996, the Company had outstanding long-term debt of
$47 million borrowed under various facilities. These facilities are
secured by first preferred ship mortgages on thirteen of the Company's
vessels and assignments of such vessels' earnings. Interest on the
borrowings accrues at rates between LIBOR plus 1 1/4% and LIBOR plus 1
5/8% per annum. Scheduled long-term debt repayments are expected to
be $3.0 million in 1996. The loan facility agreements place certain
restrictions on the ability of the subsidiaries subject to these
agreements to pay dividends. Cash held by these subsidiaries was
$4,874,000 as of March 31, 1996. As of May 13, 1996, the Company could
borrow up to $4.6 million under its short-term credit facilities and
$0.5 million under its long-term credit facility without providing
additional security to its lenders. An additional $9.2 million is
available under a revolving credit facility with the provision of
further security through vessel mortgages. This available credit is
expected to be used in connection with the building of the second UT
755 vessel discussed above.
9<PAGE>
<PAGE>10
The Company believes that current reserves of cash and short-term
investments, cash flows from operations and access to various credit
arrangements will provide sufficient resources to finance internal
operating requirements. The Company continues, however, to actively
seek further investment opportunities. Such investments may require
the expenditure of significant resources, either in cash, notes, stock
or a combination thereof.
RESULTS OF OPERATIONS
The Company's net income was $47,000 or $0.01 per share for the
quarter ended March 31, 1996 as compared to a net loss of $(221,000)
or $(0.07) per share in the same period last year. Revenues for the
quarter were $7,161,000 as compared to $7,500,000 for the comparative
prior year period.
Marine operating income improved significantly over that of the
1995 first quarter. The primary contributing factor to the increase
was the impact on depreciation of a change in the estimated useful
life of the vessels in the fleet (See Note 1 to the Condensed Notes to
the Consolidated Financial Statements) which resulted in an increase
in operating income of $468,000. Improvements in earnings also
resulted from the December 1995 purchase of the Atlantic Warrior which
had previously only been under bareboat charter and earnings from the
Seapower, which was out of service from January to May of 1995 while
being readied for a two year contract in Brazil. These improvements
were somewhat offset by higher operating expenses for vessels deployed
in the North Sea.
The erosion control segment reported a loss for the 1996 first
quarter similar to the loss for the 1995 first quarter. Historically
first quarter results for this segment are impacted by unfavorable
weather conditions. Included in the 1995's first quarter results is
$368,000 attributable to equity in earnings of the Company's 14%
(formerly 20%) owned Energy Ventures, Inc. As discussed in Note 3 to
the Condensed Notes to Consolidated Financial Statements, the Company
no longer accounts for this holding using the equity method and
accordingly there is no equity pickup component included in results
for 1996. Substantially all of the Company's tax provision is for
deferred taxes.
CURRENCY FLUCTUATIONS AND INFLATION
A significant portion of the Company's operations are overseas,
therefore the Company is potentially exposed to currency fluctuations
and exchange risks. Charters for vessels in the Company's North Sea
10<PAGE>
<PAGE>11
fleet are primarily denominated in British Pounds Sterling ("GBP") as
are substantially all the operating costs. North Sea operations
generated $4,967,000 in revenues, $1,274,000 in operating income and
$1,348,000 of cash flows from operations during the quarter ended
March 31, 1996. Fluctuations in the GBP/Dollar exchange rate for 1996
thus far have been minimal as was also the case in 1995 with a high of
GBP=U.S.$1.55 to a low of GBP=U.S.$1.49 for the period from January 1,
1996 to May 13, 1996 for an average of GBP = $1.53 for the period.
The Company hedged the effect on cash flows of these fluctuations in
the GBP/Dollar exchange rates through GBP denominated borrowings which
account for 89% or $43.7 million of total debt. All of the estimated
$3.0 million in long-term debt repayments for 1996 are attributable to
GBP denominated debt.
Reflected in the accompanying balance sheet for March 31, 1996 is
a $(4,505,000) cumulative translation adjustment primarily relating to
the lower GBP exchange rate as of March 31, 1996 and to the Company's
equity share of translation adjustments reported by Energy Ventures.
Changes in the cumulative translation adjustment are non-cash items
that are primarily attributable to investments in vessels and are
partially offset by GBP denominated debt in the North Sea.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on May 8,
1996, the stockholders of the Company approved the election of all
nominated directors as follows:
<TABLE>
<CAPTION>
Nominee In Favor Withheld
------- -------- --------
<S> <C> <C>
David J. Butters 2,711,109 5,263
Norman G. Cohen 2,711,005 5,367
Marshall A. Crowe 2,710,993 5,379
Louis S. Gimbel, 3rd 2,711,005 5,367
Robert B. Millard 2,711,113 5,259
</TABLE>
11<PAGE>
<PAGE>12
In addition the stockholders approved the Company's proposed
Amendments to the Company's 1993 Non-Employee Director Stock Option
Plan. The results of the voting with respect to the matter were
2,557,744 for, 29,738 against, 120,503 abstained and 8,387 broker non-votes.
12<PAGE>
<PAGE>13
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.
GulfMark International, Inc.
(Registrant)
By: /s/ Frank R. Pierce
-----------------------------
Frank R. Pierce
Executive Vice President
(Principal Financial Officer)
By: /s/ Elizabeth D. Brumley
------------------------------
Elizabeth D. Brumley
Controller
(Principal Accounting Officer)
Date: May 14, 1996
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FOLLOWING SETS FORTH CERTAIN SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF GULFMARK INTERNATIONAL, INC.
AS OF MARCH 31, 1996, AND THE CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR
THE THREE MONTHS ENDED MARCH 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,511
<SECURITIES> 0
<RECEIVABLES> 7,128
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,866
<PP&E> 86,361
<DEPRECIATION> 15,523
<TOTAL-ASSETS> 122,020
<CURRENT-LIABILITIES> 8,198
<BONDS> 0
0
0
<COMMON> 26,837
<OTHER-SE> 4,198
<TOTAL-LIABILITY-AND-EQUITY> 122,020
<SALES> 7,161
<TOTAL-REVENUES> 7,161
<CGS> 5,101
<TOTAL-COSTS> 6,506
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 798
<INCOME-PRETAX> (28)
<INCOME-TAX> (75)
<INCOME-CONTINUING> 47
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
