FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-10945
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2628227
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16001 Park Ten Place, Suite 600
Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (281) 578-8868
Not Applicable
(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.
Class Outstanding at July 25, 1997
Common Stock, $.25 Par Value 23,281,292 shares
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, March 31,
1997 1997
(unaudited) (audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 22,653 $ 23,034
Accounts receivable (net of allowance
for doubtful accounts of $881 at
June 30 and $962 at March 31) 99,215 120,095
Prepaid expenses and other 8,431 5,678
-----------------------
Total Current Assets 130,299 148,807
-----------------------
Property and Equipment, at cost:
Marine services equipment 182,793 198,798
Mobile offshore production equipment 38,142 31,231
Buildings, improvements and other 33,257 32,915
-----------------------
254,192 262,944
Less: Accumulated Depreciation 143,595 161,053
-----------------------
Net Property and Equipment 110,597 101,891
-----------------------
Goodwill (net of amortization
of $3,749 and $3,502) 11,155 11,402
Investments and Other Assets 6,402 6,155
-----------------------
TOTAL ASSETS $258,453 $268,255
=======================
LIABILITIES and SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 20,670 $ 27,432
Accrued liabilities 58,821 58,183
Income taxes payable 12,200 10,230
-----------------------
Total Current Liabilities 91,691 95,845
-----------------------
Long-Term Liabilities 16,860 16,076
-----------------------
Shareholders' Equity 149,902 156,334
-----------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $258,453 $268,255
=======================
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
For the Three Months Ended
June 30,
1997 1996
(in thousands, except per
share amounts)
Revenues $ 95,163 $ 80,535
Cost of services 76,230 65,685
Selling, general and administrative expenses 9,277 8,908
-----------------------
Income from operations 9,656 5,942
Interest income 333 503
Interest expense, net (65) (430)
Other income (expense), net (65) 80
-----------------------
Income before income taxes 9,859 6,095
Provision for income taxes (3,895) (2,348)
-----------------------
Net income $ 5,964 $ 3,747
=======================
Earnings per common share equivalent $0.25 $0.16
Weighted average number of common share
equivalents outstanding 23,494 23,591
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
For the Three Months Ended
June 30,
1997 1996
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,964 $ 3,747
Adjustments to reconcile net income to net
cash provided by/(used in)operating activities:
Depreciation and amortization 5,162 5,349
Currency translation adjustments and other 3,794 672
Decrease in accounts receivable 20,880 9,267
Increase in prepaid expenses and
other current assets (2,753) (1,922)
Increase in other assets -- (260)
Decrease in current liabilities (4,154) (2,851)
Increase/(decrease) in other long-term
liabilities 784 (172)
----------------------
Total adjustments to net income 23,713 10,083
----------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 29,677 13,830
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment and
other assets (17,654) (22,472)
----------------------
NET CASH USED IN INVESTING ACTIVITIES (17,654) (22,472)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings,
net of payments -- 9,000
Proceeds from issuance of common stock 99 1,336
Purchases of Treasury Stock (12,503) --
----------------------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES (12,404) 10,336
----------------------
NET INCREASE (DECREASE) IN CASH (381) 1,694
----------------------
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 23,034 9,351
----------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $22,653 $11,045
======================
See Notes to Consolidated Financial Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation and Significant Accounting Policies
These Consolidated Financial Statements are unaudited and have been
prepared pursuant to instructions for the Quarterly Report on Form
10-Q required to be filed with the Securities and Exchange
Commission and do not include all information and footnotes
normally included in financial statements prepared in accordance
with generally accepted accounting principles. Management has
reflected all adjustments which it believes are necessary to
present fairly the Company's financial position at June 30, 1997
and its results of operations and cash flows for the periods
presented. All such adjustments are of a normal recurring nature.
The financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Registrant's Annual Report on Form 10-K for its fiscal year ended
March 31, 1997. The results for interim periods are not
necessarily indicative of annual results.
2. Cash and Cash Equivalents
Cash and cash equivalents includes demand deposits and highly
liquid investments with original maturities of three months or
fewer from the date of the investment. Approximately $1.5 million
of the Company's cash at June 30, 1997 and March 31, 1997 was
restricted and is deposited in interest bearing accounts as
security in connection with legal proceedings.
3. Shareholders' Equity
Shareholders' Equity consisted of the following:
June 30, March 31,
1997 1997
(unaudited) (audited)
(in thousands, except
share data)
Shareholders' Equity:
Common Stock, par value $0.25;
90,000,000 shares authorized;
24,017,046 shares issued $ 6,004 $ 6,004
Additional paid-in capital 80,692 81,153
Treasury stock, 836,789 and 110,017
shares, at average cost (11,990) (986)
Retained earnings 81,965 76,001
Cumulative translation adjustments (6,769) (5,838)
-----------------------
Total Shareholders' Equity $149,902 $156,334
=======================
4. Income Taxes
Cash taxes paid were $1.9 million and $800,000 for the first quarters
of 1998 and 1997, respectively.
5. Earnings Per Share
The Financial Accounting Standards Board has issued SFAS 128,
"Earnings Per Share", which establishes standards for computing and
presenting earnings per share. The Company will adopt SFAS in the
third quarter of 1998, as required, and believes that diluted earnings
per share, as defined in SFAS 128, will approximate EPS as shown in
these financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
All statements in this Form 10-Q, other than statements of historical
facts, including, without limitation, statements regarding the
Company's business strategy, plans for future operations, and industry
conditions, are forward-looking statements made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company utilizes a variety of internal and external data
and management judgement in order to develop such forward-looking
information. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, because
of the inherent limitations in the forecasting process, as well as the
relatively volatile nature of the industry in which the Company
operates, it can give no assurance that such expectations will prove
to have been correct. Accordingly, evaluation of future prospects of
the Company must be made with caution when relying on forward-looking
information.
Material Changes in Financial Condition
The Company considers its liquidity and capital resources adequate to
support continuing operations and capital commitments. At June 30,
1997, the Company had working capital of $39 million, including $21
million of unrestricted cash. Receivables were reduced during the
first quarter of 1998 as proceeds from the sale of the Company's North
Sea diving assets were received. Additionally, the Company had all of
its $80 million credit facility available and $37 million was unused
under uncommitted lines of credit.
In April 1997, the Company approved a plan to purchase up to a maximum
of 3,000,000 shares of its Common Stock. At the end of the first
quarter of 1998, a total of 839,000 shares had been purchased under
this plan. The Company expects to continue to fund such purchases
from existing resources and operating cash flow.
Capital expenditures were $18 million during the first three months of
1998, as compared to $22 million during the corresponding period of
the prior fiscal year. Capital expenditures in 1998 consisted of
additions to the Company's fleet of remotely operated vehicles
("ROV"), additional support vessels and two out-of-service mobile
offshore platforms for potential conversion to production systems or
alternative service. Prior fiscal year expenditures included
construction costs of $15 million for the Floating Production, Storage
and Offloading system ("FPSO") ZAFIRO PRODUCER and ROV fleet
expansion.
There were no material commitments for capital expenditures at June
30, 1997.
Results of Operations
Consolidated revenue and margin information is as follows:
Three Months Ended
June 30,
1997 1996
(in thousands)
Revenues $95,163 $80,535
Gross Margin 18,933 14,850
Gross margin % 20% 18%
Operating Margin % 10% 7%
The quarters ending June 30 and September 30 have generally been the
Company's peak in both revenues and net income for its Oilfield Marine
business. However, the Company's exit from the diving sector in the
North Sea in early 1998 and the substantial number of multi-year ROV
contracts which were entered into during 1997 should reduce the
seasonality of the Company's Oilfield Marine Services operations.
Revenues and net income in the Offshore Field Development and Advanced
Technologies businesses are generally not seasonal.
Oilfield Marine Services
Revenue and gross margin information is as follows:
Three Months Ended
June 30,
1997 1996
(in thousands, except percentages)
Revenues $49,561 $41,639
Gross margins 10,362 7,344
Gross margin % 21% 18%
During the three-month period ended June 30, 1997, revenues for the
Oilfield Marine Services segment increased compared to the
corresponding period of the prior year primarily as a result of
additional ROVs placed in service. Gross margins improved in both ROV
and diving services.
Offshore Field Development
Revenue and gross margin information is as follows:
Three Months Ended
June 30,
1997 1996
(in thousands, except percentages)
Revenues $24,628 $16,564
Gross margins 4,300 3,346
Gross margin % 17% 20%
Revenues and gross margins for offshore production systems were higher
in the first quarter of 1998 compared to the corresponding period of
the prior year as a result of increased product sales and project
management work. During the first quarter of 1998, the previously
announced special drydocking on the Company's FPSO OCEAN PRODUCER
commenced. As the FPSO continues to earn a base dayrate for a period
of time, the repair work is not expected to have a material impact on
revenue or income from operations in 1998. The FPSO is expected to be
back in service offshore West Africa by the end of the second quarter
of 1998 under a contract which expires in January 2000.
Advanced Technologies
Revenue and gross margin information is as follows:
Three Months Ended
June 30,
1997 1996
(in thousands, except percentages)
Revenues $20,974 $22,332
Gross margins 4,271 4,160
Gross margin % 20% 19%
Revenues for the first quarter of 1998 compared to the corresponding
period of the prior year reflect lower activity on civil works
projects and subsea cable burial partially offset by increased
activity in search and recovery projects for the U.S. Navy.
Other
Interest income for the three-month period ended June 30, 1997
declined compared to the corresponding period of the prior year
primarily as a result of interest earned by financing the conversion
costs of a mobile offshore production unit for an oilfield customer in
the prior year. The total amount of principal and interest
outstanding under this financing arrangement was paid in full by the
customer in June 1996.
Interest expense for the three-month period ended June 30, 1997
declined compared to the corresponding period of the prior year as the
Company repaid all outstanding debt in December 1996. Interest
expense for the three-month period ended June 30, 1996 was net of
capitalized interest of $600,000 relating to the FPSO ZAFIRO PRODUCER
conversion project.
The provisions for income taxes were related to U.S. income taxes
which were provided at estimated annual effective rates using
assumptions as to earnings and other factors which would affect the
tax calculation for the remainder of the fiscal year, and to the
operations of foreign branches and subsidiaries which were subject to
local income and withholding taxes.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter for which this report is filed.
SIGNATURES
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.
OCEANEERING INTERNATIONAL, INC.
(Registrant)
Date: August 7, 1997 By: //s// JOHN R. HUFF
John R. Huff, President and
Chief Executive Officer
Date: August 7, 1997 By: //s// MARVIN J. MIGURA
Marvin J. Migura, Senior Vice
President and Chief Financial Officer
Date: August 7, 1997 By: //s// RICHARD V. CHIDLOW
Richard V. Chidlow, Controller
and Chief Accounting Officer
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This schedule contains summary financial information extracted from the
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