FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
11911 FM 529
Houston, Texas 77041
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 329-4500
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.25 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X, No .
Aggregate market value of the voting stock held by non-affiliates of the
registrant at May 29, 1998 based upon the closing sale price of the Common
Stock on the New York Stock Exchange $477,550,454
Number of shares of Common Stock outstanding at May 29, 1998 22,958,633
Documents Incorporated by Reference:
Portions of the proxy statement to be filed on or before July 29, 1998,
pursuant to Regulation 14A of the Securities and Exchange Act of 1934 to
the extent set forth in Part III, Items 10-13 of this report.
<PAGE>
OCEANEERING INTERNATIONAL, INC.
Annual Report on Form 10-K
INDEX
PART I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of
Security Holders
Item 4a Executive Officers of the Registrant
PART II
Item 5 Market for the Registrant's Common Equity
and Related Shareholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations
* Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
PART III
Item 10 Directors and Executive Officers of the
Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Related Transactions
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K
SIGNATURES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
* Refers the reader to Part IV, Item 14.
PART I
Item 1. BUSINESS.
General Development of Business
Oceaneering International, Inc., (together with its subsidiaries,
"Oceaneering" or the "Company") is an advanced applied technology
company that provides engineered services and hardware to customers
who operate in marine, space and other harsh environments. The
Company supplies a comprehensive range of integrated technical
services to a wide array of industries and is one of the world's
largest underwater services contractors. Principal services are
provided to the oil and gas industry and include drilling support,
subsea construction, production systems, facilities maintenance and
repair, survey and positioning and specialized onshore and offshore
engineering and inspection. Oceaneering was organized in 1969 out of
the combination of three diving service companies founded in the early
1960s. Since its establishment, the Company has concentrated on the
development and marketing of underwater services requiring the use of
advanced deepwater technology. The Company conducts operations in the
United States and 28 other countries. The Company's international
operations, principally in the North Sea, Africa and Far East,
accounted for approximately 51% of its 1998 revenues, or $184 million.
Since 1990, the Company has concentrated on expanding its capabilities
to provide technical solutions to customers operating in harsh
environments. It has accomplished this through acquisitions and
internal growth.
In January 1990, the Company acquired all of the outstanding capital
stock of Sonsub Limited, a United Kingdom company, whose principal
assets were ten work class Remotely Operated Vehicles ("ROVs"). ROVs
are unmanned submersible vehicles operated from the surface that are
used widely in the offshore oil and gas industry.
In December 1990, the Company was awarded a contract by a major oil
company to provide and maintain a Floating Production, Storage and
Offloading system ("FPSO"). This represented the first major project
for the Company's Offshore Production Systems division ("OPS"), which
was formed to develop economical production alternatives for offshore
oil and gas fields. A 78,000 deadweight ton ("dwt") tanker was
purchased and converted into an FPSO, the OCEAN PRODUCER, for this
project. The unit was delivered to its first location in December
1991 and is currently under contract for operations offshore West
Africa.
In August 1992, the Company acquired Eastport International, Inc.,
("Eastport"), a designer, developer and operator of advanced robotic
systems and ROVs specializing in the non-oilfield market, in a
transaction accounted for as a pooling of interests. Eastport's
assets included two specialized ROVs, one of which is rated for water
depths to 25,000 feet, a deep tow sonar system and two other work
class ROVs.
In May 1993, the Company purchased the business and assets of the
Space Systems Division of ILC Dover, Inc., ("ILC") which were
consolidated with the Company's Oceaneering Space Systems division.
This business designs, develops and fabricates spacecraft hardware and
high temperature insulation products.
In July 1993, the Company purchased Oil Industry Engineering, Inc., a
designer and fabricator of subsea control systems, which now operates
as the Oceaneering Intervention Engineering division ("OIE"). In
March 1994, the Company purchased the operating subsidiaries of
Multiflex International Inc., a manufacturer of subsea control
umbilical cables, which now operates as the Oceaneering Multiflex
division ("Multiflex"). Together with the Company's existing OPS
division, these acquisitions form the basis of the Company's
continuing expansion in the offshore field development business.
In November 1995, the Company was awarded a contract with a major oil
company for the provision of an FPSO. The Company converted a 268,000
dwt tanker and delivered the unit to its first operational location
offshore West Africa in August 1996. The customer exercised an option
to purchase the unit in December 1996 and the Company is currently
continuing to manage the vessel and to supervise major modifications
to increase the production capacity of the unit.
The Company intends to continue its strategy of acquiring, as
opportunities arise, additional assets or businesses, either directly
through merger, consolidation or purchase, or indirectly through joint
ventures. The Company is also applying its skills and technology in
further developing business unrelated to the oil and gas industry and
performing services for government agencies and firms in the
telecommunications, aerospace, and civil engineering and construction
industries. The Company is continually seeking opportunities for
business combinations to improve its market position or expand into
related service lines.
Unless the context indicates otherwise, references to years indicate
fiscal year.
Financial Information about Industry Segments
The Company's business segments are Oilfield Marine Services, Offshore
Field Development and Advanced Technologies. The table containing
revenues, operating income, identifiable assets, capital expenditures,
and depreciation and amortization by business segment for the years
ended March 31, 1998, 1997 and 1996 is incorporated herein by
reference from Note 6 of the Notes to Consolidated Financial
Statements.
Description of Business
OILFIELD MARINE SERVICES
The Company's Oilfield Marine Services business consists of underwater
intervention and above-water inspection, maintenance and repair.
These services may be provided to customers on an integrated basis.
Underwater Intervention Services. The Company provides underwater
support services for all phases of offshore oil and gas operations -
exploration, development and production. During the exploration
phase, the Company provides positioning, placement and monitoring of
subsea exploration equipment, collects data on seafloor
characteristics at proposed drilling sites and assists with the
navigational positioning of drilling rigs. During the development
phase, the Company assists with the installation of production
platforms and the connection of subsea pipelines. During the
production phase, the Company inspects, maintains and repairs offshore
platforms, pipelines and subsea equipment.
Underwater intervention services are performed by ROVs or divers.
ROVs are used at depths or in situations in which diving would be
uneconomical or infeasible. The Company believes that it operates the
largest and most technically advanced fleet of work class ROVs in the
world, with over 25% market share. ROVs are used for a variety of
underwater tasks including drill support, installation and
construction support, pipeline inspections and surveys, and subsea
production facility installation, operation and maintenance. An ROV
may be outfitted with manipulators, sonar, television cameras,
specialized tooling packages and other equipment or features to
facilitate the performance of specific underwater tasks. The Company
currently owns more than 80 work class ROVs and is the industry leader
in providing ROV services on deepwater wells which are the most
technically demanding.
Prior to 1996, the Company purchased most of its ROVs from third-party
manufacturers although it designed and built specialized systems in
house. In response to increased demand for more powerful systems
capable of operating in deeper water, the Company expanded its
production capabilities and established a dedicated facility to design
and build ROVs to meet the continued expansion of the ROV fleet. Over
30 systems have been delivered and all new ROVs entering the Company's
fleet are now produced at this facility.
When a project requires manned intervention, the Company uses divers
or Atmospheric Diving Systems ("ADS") technology. An ADS encloses the
operator in a one-atmosphere (surface pressure) diving suit and is
suitable for use in water depths to 2,300 feet. The Company does not
use divers (as distinguished from ADS operators) to perform functions
in water depths greater than 1,000 feet.
The Company also provides a range of survey and navigational
positioning services for the oil and gas industry, as well as ocean
search and recovery projects. Applications include surface
positioning for rig moves and the installation of pipelines and
platforms, subsea positioning and acoustics, geophysical surveys, deep
tow surveys and pipeline surveys.
Underwater services using all of these techniques are performed from
drilling rigs, platforms, barges and vessels.
Above-Water Inspection Services. Through its Solus Schall division
("Solus Schall"), the Company offers a wide range of inspection
services to customers required to obtain third party inspections to
satisfy contractual structural specifications and requirements,
internal safety standards or regulatory requirements. The Company
focuses on the inspection of pipelines and onshore fabrication of
offshore facilities for the oil and gas industry. Certain of Solus
Schall's pipeline inspection activities are performed through the use
of specialized X-ray crawlers, which travel independently inside
pipelines, stopping to perform radiographic inspection of welds.
Solus Schall derives the majority of its revenues from foreign
operations.
OFFSHORE FIELD DEVELOPMENT
Mobile Offshore Production Systems. The Company established OPS as a
division during 1989 to provide subsea intervention services and the
engineering, procurement, construction, installation and operation of
mobile offshore production systems ("MOPS") to customers for marginal
and remote field production and extended well testing. The Company
has been awarded several contracts pertaining to MOPS activities and
subsea workover and maintenance needs, including deepwater extended
well testing in the Gulf of Mexico and has served as prime contractor
on an extended well testing project in the North Sea. The Company's
first FPSO, the OCEAN PRODUCER, has been operating offshore West
Africa since December 1991. In December 1997, the Company purchased a
production barge which is under contract offshore Indonesia. The
Company continues to operate the FPSO ZAFIRO PRODUCER under a
management agreement and is managing a major upgrade of the vessel.
The ZAFIRO PRODUCER, which was acquired in 1996 and converted to an
FPSO, was delivered to its first location offshore West Africa in
August 1996 to begin operations under a three-year contract with a
major oil company. The customer had an option to purchase the unit
and exercised this option in December 1996. Additionally, the Company
owns four out-of-service offshore rigs and a tanker capable of
conversion to MOPS units.
Subsea Products. OIE, Multiflex and the Pipeline Repair Systems unit
of the Company comprise the Subsea Products division which complements
the activities of OPS. OIE provides subsea intervention services,
design and fabrication of ROV interface tooling, including ROV
replaceable and ROV operable valves, and design and fabrication of
subsea control systems.
Multiflex, with facilities in Houston, Texas and Edinburgh, Scotland,
produces subsea control umbilical cables which are used for the remote
operation of subsea installations and equipment and typically
incorporate both electrical and hydraulic control lines.
ADVANCED TECHNOLOGIES
The Company's Advanced Technologies ("ADTECH") business segment
provides underwater intervention, topside inspection, and engineering
services to meet a variety of non-oilfield industrial requirements,
including ship husbandry, search and recovery, subsea
telecommunications cable installation, maintenance and repair, civil
works projects and commercial theme park animation. This is
accomplished in part by extending the use of existing assets and
technology developed in oilfield operations to new applications.
ADTECH performs work for customers having specialized requirements
underwater or in other environments. ADTECH provides deep ocean
search and recovery services for governmental bodies, including the
U.S. Navy. In other services for the Navy, ADTECH provides various
engineering and underwater services ranging from aircraft salvage and
recovery operations to inspection and maintenance of the Navy's fleet
of surface ships and submarines. The Company also maintains and
operates deepwater cable lay and maintenance vehicles for Tyco
Submarine Systems Ltd.
ADTECH designs and operates ROVs that are rated for work in water
depths to 25,000 feet. The Company's ROVs are equipped with umbilical
cords containing fiber optics which allow for improved communications
with the surface. Other specialized equipment owned by the Company
includes ROV cable lay and maintenance equipment rated to 5,000 feet
and deep tow, side scan sonar systems rated for use in 20,000 feet.
The Company's deep tow systems have been used to locate aircraft in
water depths to 14,700 feet.
ADTECH also designs and develops specialized tools and builds ROV
systems to customer specifications for use in deepwater and hazardous
environments.
As part of ADTECH, Oceaneering Space Systems ("OSS") directs the
Company's efforts towards applying undersea technology and experience
in the space industry. The Company has worked with the National
Aeronautics and Space Administration ("NASA") and NASA subcontractors
on a variety of projects including portable life-support systems,
decompression techniques, tools and robotic systems, and standards and
guidelines to ensure robotic compatibility for space station equipment
and payloads. OSS was expanded in 1994 by the purchase of the assets
of ILC. ILC had supported NASA by producing space shuttle crew
support equipment, including the design, development and fabrication
of spacecraft extravehicular and intravehicular hardware and soft
goods, air crew life-support equipment, mechanical and
electromechanical devices and high temperature insulation. These
activities have continued. The activities of OSS are substantially
dependent on continued government funding for space programs.
MARKETING
Oilfield Marine Services. The Company markets its services primarily
to international and foreign national oil and gas companies. It also
provides services as a subcontractor to companies operating as prime
contractors. Contracts are typically awarded on a competitive bid
basis and are for the most part short-term.
Offshore Field Development. The Company markets both its mobile
offshore production systems and subsea products primarily to
international and foreign national oil and gas companies, utilizing
the Company's existing administrative structure to identify potential
business opportunities. MOPS are offered for extended well testing,
early production and development of marginal fields and prospects in
areas lacking pipelines and processing infrastructure. Contracts are
typically awarded on a competitive basis, generally for periods of one
or more years. The Company owns two MOPS units and operates a third.
Further equipment will be added as profitable opportunities arise.
The Company also owns equipment which is capable of conversion to
MOPS. The Company believes that Multiflex enables it to identify
market opportunities at an earlier stage as umbilical design is
typically part of the initial planning phase in field development.
The Company is able to offer an integrated service consisting of
design, engineering, project management and provision of hardware.
Advanced Technologies. The Company markets its marine services and
related engineering services to government agencies, major defense
contractors, NASA subcontractors and to telecommunications,
construction and other industrial customers outside the energy sector.
The Company also markets to insurance companies, salvage associations
and other customers who have requirements for specialized operations
in deep water.
Major Customers. Five principal customers of the Company accounted
for approximately 26%, 33% and 29% of the Company's consolidated
revenues in 1998, 1997 and 1996, respectively. No single customer
accounted for more than 10% of the Company's consolidated revenues in
1998 or 1996. The Mobil Corporation group of companies accounted for
more than 10% of the Company's revenues in 1997. Also see Note 6 of
the Notes to Consolidated Financial Statements.
COMPETITION
The Company's businesses are highly competitive.
Oilfield Marine Services. The Company believes that it is one of five
companies that provides underwater services on a worldwide basis. The
Company competes for contracts with the other four worldwide companies
and with numerous companies operating locally in various areas.
Competition for underwater services historically has been based on the
type of underwater equipment available, location of or ability to
deploy such equipment, quality of service and price. The relative
importance of these factors can vary from year to year based on market
conditions. The ability to develop improved equipment and techniques
and to attract and retain skilled personnel is also an important
competitive factor in the Company's markets. The number of the
Company's competitors is inversely correlated with water depth, as
less sophisticated equipment and technology is required in shallow
water. With respect to projects that require less sophisticated
equipment or diving techniques, small companies have sometimes been
able to bid for contracts at prices uneconomic to the Company.
The Company believes that its ability to provide a wide range of
underwater services, including technological applications in deeper
water on a worldwide basis, should enable it to compete effectively in
the oilfield exploration and development market. Oil and gas
exploration and development expenditures fluctuate from year to year.
In particular, budgetary approval for more expensive drilling and
production in deeper water or harsh environments, areas in which the
Company believes it has a competitive advantage, may be postponed or
suspended. In some areas, the ability of the Company to obtain
contracts depends upon its ability to charter vessels for use as work
platforms. The Company will occasionally bid jointly with vessel
owners for service contracts.
The worldwide inspection market consists of a wide range of inspection
and certification requirements in many industries. Solus Schall
competes in only selected portions of this market. The Company
believes that its broad geographic sales and operational coverage,
long history of operations, technical reputation, application of X-ray
crawler pipeline radiography and accreditation to international
quality standards enable it to compete effectively in its selected
inspection services market segments.
Frequently, oil and gas companies utilize prequalification procedures
that reduce the number of prospective bidders for their projects. In
certain countries, political considerations tend to favor local
contractors.
Offshore Field Development. The Company believes that it is well
positioned to compete in the offshore field development market through
its ability to identify and offer optimum solutions, supply equipment,
provide capital on a limited basis and utilize the expertise in
associated subsea technology and offshore construction and operations
gained through its extensive operational experience worldwide. The
Company is one of many companies that offer leased MOPS units.
Although there are several competitors offering either specialized
products or operating in limited geographic areas, the Company
believes that it is one of two companies that compete on a worldwide
basis for the provision of subsea control umbilical cables.
Advanced Technologies. The Company believes that its specialized ROV
assets and experience in deep water operations give it a competitive
advantage in obtaining contracts in water depths greater than 5,000
feet. The number of the Company's competitors is inversely correlated
with water depth, due to the advanced technical knowledge and
sophisticated equipment required for deep water operations.
Engineering services is a very broad market with a large number of
competitors. The Company competes in specialized areas in which it
can combine its extensive program management experience, engineering
services and the capability to continue the development of conceptual
project designs into the manufacture of prototype equipment.
The Company also utilizes the administrative structure of the Oilfield
Marine Services business to identify opportunities in foreign
countries and to provide additional local support for non-oil and gas
customers.
SEASONALITY, BACKLOG AND RESEARCH AND DEVELOPMENT
A material amount of the Company's revenues is generated by contracts
for marine services in the Gulf of Mexico and North Sea, which are
usually seasonal from April through November. 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 have been entered
into since 1997 should reduce the seasonality of the Company's
Oilfield Marine Services operations. Revenues in the Offshore Field
Development and Advanced Technologies segments are generally not
seasonal.
The amounts of backlog orders believed to be firm for Oilfield Marine
Services as of March 31, 1998 and 1997 were $180 million and $154
million, respectively. Of these amounts, $59 million and $65 million,
respectively, were not expected to be performed within the year
following such respective dates. At March 31, 1998 and 1997, the
Company had approximately $51 million and $64 million, respectively,
in backlog for Offshore Field Development. Of these amounts, $10
million and $33 million, respectively, were not expected to be
performed within the year following such respective dates. At March
31, 1998 and 1997, the Company had approximately $37 million and $31
million, respectively, in backlog for Advanced Technologies. Of these
amounts, $2 million of the 1998 backlog was not expected to be
performed within the following year.
No material portion of the Company's business is subject to
renegotiation of profits or termination of contracts by the United
States government.
The Company's research and development expenditures were approximately
$4 million, $4 million and $6 million during 1998, 1997 and 1996,
respectively. These amounts do not include, nor is the Company able
to determine, the expenditures by others in connection with joint
research activities in which the Company participated or expenditures
by the Company in connection with research conducted during the course
of performing its operations.
REGULATION
The Company's operations are subject to various types of governmental
regulation. The Company's operations are affected from time to time
and in varying degrees by foreign and domestic political developments
and foreign, federal and local laws and regulations. In particular,
oil and gas production operations and economics are affected by tax,
environmental and other laws relating to the petroleum industry, by
changes in such laws and by constantly changing administrative
regulations. Such developments may directly or indirectly affect the
Company's operations and those of its customers.
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment or relating to the
protection of the environment has not had a material impact on the
Company's capital expenditures, earnings or competitive position.
In connection with its foreign operations, the Company is required in
some countries to obtain licenses or permits in order to bid on
contracts or otherwise to conduct business operations. Some foreign
countries require that the Company enter into a joint venture or
similar business arrangement with local individuals or businesses in
order to conduct business. While not a formal requirement, within the
Oilfield Marine Services segment, Oceaneering's quality management
systems covering the full range of subsea and topside services offered
in the United Kingdom are certified to the British Standard BS EN ISO
9001:1994 and the Norwegian office is certified to the Norwegian
Standard NS EN ISO 9001:1994, both of which are the equivalent of ISO
9001. The quality management systems of both the OIE and Multiflex
units of the Offshore Field Development segment are certified to ISO
9001 for their products and services. The quality systems of the
Space Systems and Oceaneering Technologies units of the Advanced
Technologies segment are certified to ISO 9001.
RISKS AND INSURANCE
The Company's operations are subject to all the risks normally
incident to offshore exploration, development and production,
including claims under U.S. maritime laws. These risks could result
in damage to or loss of property, suspension of operations and injury
to or death of personnel. The Company insures its real and personal
property and equipment. The Company's vessels are insured against
damage or loss, including war and pollution risks. The Company also
carries workers' compensation, maritime employer's liability, general
liability, including third party pollution, and other insurance
customary in its businesses. All insurance is carried at levels of
coverage and deductibles which the Company considers financially
prudent. On some contracts, the Company may have certain exposures
for loss or damage to the customer's facilities or for unexpected
weather delays, which the Company may cover by special insurance when
it deems advisable. Due to the costs for limited coverage and, in the
Company's opinion, limited exposure, the Company does not ordinarily
carry professional liability insurance. In some jurisdictions, legal
pleadings in personal injury actions may include a claim for an amount
of punitive damages which may not be covered by insurance.
The primary industry that the Company serves, oil and gas, is a
cyclical industry and remains volatile, resulting in potentially large
fluctuations in demand for the Company's primary services, which could
result in significant changes in the Company's revenues and profits.
Although the oil and gas industry continues to be the Company's
principal market, the Company also performs services for government
agencies, and firms in the telecommunications, aerospace, and civil
engineering and construction industries.
The Company operates primarily as a services company under dayrate
contracts. However, the Company also owns certain specialized capital
assets, which if not fully utilized could have a negative effect on
cash resources as a result of continuing fixed operating costs and
reduced revenues.
A significant part of the Company's operations is conducted outside
the United States. For the years ended March 31, 1998, 1997 and 1996,
foreign operations accounted for 51%, 58% and 58% of the Company's
revenues, respectively.
Foreign operations are subject to additional political and economic
uncertainties, including the possibility of repudiation of contracts
and confiscation of property, fluctuations in currency exchange rates,
limitations on repatriation of earnings and foreign exchange controls.
Typically, the Company is able to limit the currency risks by
arranging compensation in United States dollars or freely convertible
currency and, to the extent possible, limiting acceptance of blocked
currency to amounts which match its expense requirements in local
currencies.
Certain of the countries in which the Company operates have enacted
exchange controls to regulate foreign currency exchange. Exchange
controls in some of the countries in which the Company operates
provide for conversion of local currency into foreign currency for
payment of debts, equipment rentals, technology transfer, technical
assistance and other fees or repatriation of capital. Transfers of
profits and dividends can be restricted or limited by exchange
controls.
EMPLOYEES
As of March 31, 1998, the Company had approximately 2,600 employees.
The Company's work force varies seasonally and peaks during the summer
months. Approximately 3% of the Company's employees are represented
by unions. The Company considers its relations with its employees to
be satisfactory.
Foreign and Domestic Operations and Export Sales
The table presenting revenues, profitability and assets attributable
to each of Oceaneering's geographic areas for the years 1998, 1997 and
1996 is incorporated herein by reference from Note 6 of the Notes to
Consolidated Financial Statements.
Item 2. PROPERTIES.
See Item 1 - "Business - Description of Business - Oilfield Marine
Services, Offshore Field Development and Advanced Technologies" for a
description of equipment used in providing the Company's services.
Oceaneering maintains office, shop and yard facilities in various
parts of the world. In these locations, the Company typically leases
office facilities to house its administrative and engineering staff,
shops equipped for fabrication, testing, repair and maintenance
activities and warehouses and yard areas for storage and mobilization
of equipment to work sites. The largest facilities are located in
Morgan City, Louisiana and consist of approximately 600,000 total
square feet of open and covered storage space and offices, of which
218,000 square feet are owned by the Company and the remainder is
leased. The Company owns and leases property in Singapore of
approximately 28,700 square feet, of which 16,200 square feet are
owned. The Company leases 31,000 square feet of office space and
42,800 square feet of yard area in Aberdeen, Scotland. Other major
leased properties include approximately 24,600 square feet in Dubai,
United Arab Emirates, and 37,000 square feet in Port Harcourt,
Nigeria. These properties are used primarily by the Oilfield Marine
Services business segment of the Company. Leased properties utilized
primarily by the Offshore Field Development segment consist of
approximately 400,000 square feet of workshop and office space in
Houston, Texas and manufacturing facilities in Houston, Texas and
Edinburgh, Scotland, of 96,000 square feet and 70,000 square feet,
respectively. In addition, the Company owns manufacturing facilities
in Magnolia, Texas of 65,000 square feet. The Advanced Technologies
business segment leases approximately 116,000 square feet in Upper
Marlboro, Maryland, which includes 86,000 square feet of offices and
workshops, and approximately 50,000 square feet of offices and
workshops in Houston, Texas.
Item 3. LEGAL PROCEEDINGS.
In the ordinary course of business, Oceaneering encounters actions for
damages alleging personal injury under the general maritime laws of
the United States, including the Jones Act, for alleged negligence.
The Company reports actions for personal injury to its insurance
carriers and believes that the settlement or disposition of such suits
will not have a material effect on its financial position or results
of operations. The information set forth under "Commitments and
Contingencies - Litigation" in Note 5 of the Notes to Consolidated
Financial Statements is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
year ended March 31, 1998.
Item 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers. The following is information with respect to the
executive officers of Oceaneering International, Inc., as of June 1,
1998:
OFFICER EMPLOYEE
NAME AGE POSITIONS SINCE SINCE
John R. Huff 52 Chairman of the Board, 1986 1986
President and Chief Executive
Officer
T. Jay Collins 51 Executive Vice President - 1993 1993
Oilfield Marine Services
Marvin J. Migura 47 Senior Vice President and 1995 1995
Chief Financial Officer
Bruce L. Crager 45 Senior Vice President - 1988 1988
Production Systems
M. Kevin McEvoy 47 Vice President -
Integrated Services 1990 1979
George R. 50 Vice President, General 1988 1988
Haubenreich, Jr. Counsel and Secretary
Richard V. Chidlow 54 Controller and Chief 1990 1987
Accounting Officer
Each executive officer serves at the discretion of the Chief Executive
Officer and the Board of Directors and is subject to reelection or
reappointment each year after the annual meeting of shareholders.
Oceaneering does not know of any arrangement or understanding between
any of the above persons and any other person or persons pursuant to
which he was selected or appointed as an officer.
Family Relationships. There are no family relationships between any
director or executive officer.
Business Experience. John R. Huff has been a director, President and
Chief Executive Officer of the Company since 1986. He was elected
Chairman of the Board in August 1990. Prior to joining the Company in
1986, he served from 1980 until 1986 as Chairman and President of
Western Oceanic Inc., the offshore drilling subsidiary of The Western
Company of North America ("Western Oceanic"). He is a director of BJ
Services Company, Suncor Energy Inc. and Triton Energy Limited.
T. Jay Collins, Executive Vice President, joined the Company in
October 1993 as Senior Vice President and Chief Financial Officer. In
May 1995, he was appointed Executive Vice President - Oilfield Marine
Services. From 1986 to 1992 he was with Teleco Oilfield Services,
Inc., most recently as Executive Vice President of Finance and
Administration and previously as Senior Vice President of Operations.
Prior to Teleco, he spent twelve years with Sonat, Inc., serving as
Senior Vice President of Finance at Sonat Offshore Drilling and
President of Houston Systems Manufacturing. He is a director of
Friede Goldman International Inc.
Marvin J. Migura, Senior Vice President and Chief Financial Officer,
joined the Company in May 1995. From 1975 to 1994 he held various
financial positions with Zapata Corporation, then a diversified energy
services company, most recently as Senior Vice President and Chief
Financial Officer from 1987 to 1994.
Bruce L. Crager, Senior Vice President, joined the Company in 1988 as
Vice President - Offshore Production Systems. Since 1994, he also has
had responsibility for various subsea product groups. He was
appointed Senior Vice President - Production Systems in May 1997.
From 1983 until 1988 he held various positions, including General
Manager, with Hughes Offshore which merged with Vetco Gray during this
period. Prior to that time he spent three years with Seaflo Systems
and five years with The Offshore Company.
M. Kevin McEvoy, Vice President, joined the Company in 1984 when Solus
Ocean Systems, Inc. ("SOSI") was acquired. Since 1984, he has held
various senior management positions in each of the Company's operating
groups and geographic areas. He was appointed Vice President -
Integrated Services in May 1997. Prior to joining SOSI, he spent four
years in the U.S. Navy as a salvage and diving officer.
George R. Haubenreich, Jr., Vice President, General Counsel and
Secretary, joined the Company in 1988. From 1979 until joining the
Company, he held various legal positions with The Coastal Corporation,
a diversified energy company, his last being Senior Staff Counsel.
From 1974 until 1979, he was an attorney with Exxon Company, U.S.A.
Richard V. Chidlow, Controller and Chief Accounting Officer, joined
the Company in 1987 as Controller for the Americas Region. From 1988
until 1990, he was Controller for the Europe, Africa and Asia group in
Aberdeen, and was appointed to his present position in 1990. From
1975 until joining the Company he held various positions with Western
Oceanic, his last being Manager of Accounting.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
Oceaneering's Common Stock is listed on the New York Stock Exchange
(symbol OII). The following table sets forth, for the periods
indicated, the high and low sales prices for Oceaneering's Common
Stock as reported on the New York Stock Exchange (consolidated
transaction reporting system):
Fiscal 1998 Fiscal 1997
High Low High Low
For the quarter ended:
June 30 $18-7/8 $14 $17 $13-5/8
September 30 24-7/8 18-5/16 18-3/8 14-1/2
December 31 27-5/16 17-3/16 19-1/4 13-3/4
March 31 20-3/16 15-3/16 18-1/2 15
On May 29, 1998, Oceaneering had 575 holders of record of its Common
Stock, par value $0.25. On that date, the closing sales price of the
shares, as quoted on the New York Stock Exchange, was $21-1/2.
Oceaneering has made no Common Stock dividend payments since 1977.
Its present bank credit agreement restricts aggregate dividends to 50%
of cumulative net earnings from December 31, 1994.
Item 6. SELECTED FINANCIAL DATA.
Results of Operations:
Years Ended March 31,
1998 1997 1996 1995 1994
(in thousands, except per share figures)
Revenues $358,121 $368,773 $289,506 $239,936 $229,760
Cost of services(a) 282,830 290,801 234,731 190,772 177,199
Gross margin 75,291 77,972 54,775 49,164 52,561
Selling, general and
administrative expenses 39,009 36,363 34,589 36,410 31,631
Income from operations $ 36,282 $ 41,609 $ 20,186 $ 12,754 $ 20,930
Net income applicable
to common stock $ 22,001 $ 19,445 $ 12,357 $ 5,496 $ 14,931
Diluted earnings per share 0.93 0.81 0.53 0.23 0.62
Depreciation and
amortization(b) 23,176 32,687 20,567 16,232 12,196
Capital expenditures 94,413 79,599 57,171 32,057 36,730
Other Financial Data:
As of March 31,
1998 1997 1996 1995 1994
(in thousands, except ratios)
Working capital ratio 1.52 1.55 1.62 1.44 1.74
Cash and
cash equivalents $ 9,064 $ 23,034 $ 9,351 $ 12,865 $ 26,486
Working capital 44,890 52,962 42,427 23,106 34,425
Total assets 316,543 268,255 256,096 187,752 171,993
Long-term debt 54,626 -- 48,000 9,472 171
Total debt 54,919 -- 48,183 9,590 295
Shareholders' equity 160,322 156,334 127,098 115,140 113,353
(a) 1997 includes a $25,047 gain on the disposition of FPSO, a $7,980
impairment adjustment and a $7,980 provision for special drydocking.
(b) 1997 includes a $7,980 impairment adjustment.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
All statements in this Form 10-K, 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 judgment 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.
Liquidity and Capital Resources
The Company considers its liquidity and capital resources adequate to
support its core business and internally generated growth initiatives.
At March 31, 1998, the Company had working capital of $45 million,
including $7.6 million of unrestricted cash. Additionally, the
Company had $26 million of its $80 million credit facility available
and $40 million was unused under uncommitted lines of credit. The
Company is in the process of arranging $100 million of fixed-rate
long-term debt.
The Company is constructing two multi-service support vessels and is
continuing to expand its fleet of ROVs for use in the Oilfield Marine
Services segment. In the Offshore Field Development segment, the
Company has also purchased equipment for use in production systems
projects and additional subsea product manufacturing facilities are
planned.
The Company expects operating cash flow to meet its ongoing annual
cash requirements, including debt service. Net income plus
depreciation and amortization (commonly referred to as Cash Flow from
Operations) was $45 million for 1998 compared to $52 million and $33
million for 1997 and 1996, respectively.
Working capital at the end of 1998 was $45 million which compared to
$53 million at the end of 1997 and $42 million at the end of 1996.
The increased cash flow and higher working capital in 1997 was a
result of the disposition of the FPSO ZAFIRO PRODUCER.
Capital expenditures for the years ended March 31, 1998, 1997 and 1996
were $94 million, $80 million and $57 million, respectively.
Capital expenditures in 1998 consisted of additions to the Company's
fleet of ROVs, construction costs for the two dynamically-positioned
("DP") multi-service support vessels in progress, the purchase of a
production barge operating in Southeast Asia, a tanker for possible
future conversion to production systems use, two out-of-service mobile
drilling platforms for potential conversion to production systems or
alternative service, and expenditures on leasehold improvements
related to the relocation and consolidation of Company office and
workshop facilities in the U.S.
Capital expenditures in 1997 included $38 million to complete the
conversion of the ZAFIRO PRODUCER. Other expenditures consisted of
additions to the Company's fleet of ROVs and the purchase of two
support vessels. Capital expenditures for 1996 included $30 million
of acquisition and conversion costs of the FPSO ZAFIRO PRODUCER,
completion of upgrades on two DP vessels and additions to the
Company's fleet of ROVs.
Commitments for capital expenditures at the close of 1998 were
approximately $40 million for completion of multi-service support
vessel construction and subsea product manufacturing facilities
expansion.
In 1996, the Company was awarded a contract by a major oil company to
provide an FPSO under a dayrate lease arrangement with an initial term
of three years which commenced on delivery of the FPSO in August 1996.
The Company purchased and converted an existing 268,000 dwt crude oil
tanker into the FPSO ZAFIRO PRODUCER at a capital cost of $68 million.
The contract provided the customer with the option to purchase the
vessel and terminate the lease at any time during the initial three-
year period and the customer exercised its purchase option in December
1996. The Company utilized part of the proceeds to repay the debt
which had been incurred in conversion of the vessel.
In April 1997, the Company approved a plan to purchase up to a maximum
of 3 million shares of its Common Stock and 1.4 million shares were
purchased under this plan in 1998 at a total cost of $23 million. The
Company expects to fund any additional purchases from existing
resources and operating cash flows.
At March 31, 1998, the Company had long-term debt of $55 million which
was equivalent to a 34% debt to equity ratio. The debt was incurred
in the funding of capital expenditures and treasury stock purchases.
As a result of the disposition of the FPSO ZAFIRO PRODUCER, the
Company fully repaid its long-term debt in December 1996 and had no
long-term debt at March 31, 1997. The ratio of the Company's debt to
total capitalization will vary from time to time depending primarily
upon the level of capital spending.
Because of its significant foreign operations, the Company is exposed
to currency fluctuations and exchange risks. The Company generally
minimizes these risks primarily through matching, to the extent
possible, revenues and expenses in the various currencies in which it
operates. However, due to the weakness in certain Asian currencies
during 1998, the Company recognized $1.0 million of losses as Other
Expense. Cumulative translation adjustments as of March 31, 1998,
relate primarily to the Company's permanent investment in and loans to
its United Kingdom subsidiary. Inflation has not had a material
effect on the Company in the past two years and no such effect is
expected in the near future.
See Item 1 - "Business - Description of Business - Risks and
Insurance."
Results of Operations
Revenues were $358 million for 1998 compared to $369 million for 1997
and $290 million for 1996. Gross margins were $75 million for 1998
compared to $78 million for 1997 and $55 million for 1996. Gross
margin for 1997 included a gain on disposal of the FPSO ZAFIRO
PRODUCER of $25 million. As a percentage of revenue, gross margin for
1998 was 21%, compared to 21% for 1997 and 19% for 1996. Gross
margins as a percentage of revenues vary depending upon the mix of the
type of contracts (for example, subcontractor cost components) and may
not be indicative of business trends. Net income in 1998 was $22.0
million, an increase of 13% over net income of $19.4 million in 1997,
which was over 50% higher than the $12.4 million reported for 1996.
Information on the Company's business segments is shown in Note 6 of
the Notes to Consolidated Financial Statements.
Oilfield Marine Services.
Revenues for the Oilfield Marine Services segment for 1998 were $182
million compared to $176 million in 1997 and $132 million in 1996.
Income from operations for 1998 increased substantially to $16.3
million compared to $1.9 million in 1997 and a loss of $400,000 in
1996.
During 1997, in response to continued increasing demand to support
deepwater drilling and identified future construction and production
maintenance work, the Company extended its ROV fleet expansion program
begun in 1996 by announcing plans for over 30 additional new ROVs.
These new vehicles are designed for use around the world in water
depths to 10,000 feet and in severe weather conditions. This
expansion program was further extended in 1998 with the announcement
of plans to construct an additional 25 new ROVs.
In 1997, the Company also decided to discontinue offering diving
services in the North Sea. Based on a review of actual and expected
operating results, the Company concluded that there would be a greater
return in focusing on other business lines in the North Sea area. An
agreement was reached in March 1997 to sell its North Sea diving
assets, including a diving support vessel ("DSV"). The sale closed in
April 1997 and the sales proceeds approximated the net book value of
the assets sold. Diving services continue to be offered by the
Company in other areas.
The table below sets out revenues and profitability for the Oilfield
Marine Services segment for 1998, 1997 and 1996.
For the Years Ended March 31,
1998 1997 1996
(in thousands, except percentages)
Revenues $ 181,800 $176,395 $132,064
Gross Margin 40,064 24,139 21,154
Gross Margin % 22% 14% 16%
Operating Income (loss) 16,263 1,853 (369)
Operating Income (loss) % 9% 1% 0%
For 1998, increased revenues in the U.S. were partially offset by
lower revenues in the North Sea, which was impacted by the Company's
exit from the diving business, resulting in an overall 3% increase in
revenues. Gross margins increased to 22% in 1998 compared to 14% in
1997. Gross margins in 1997 were reduced by an impairment adjustment
of $8.0 million which was made to reduce the carrying value of a DSV.
Excluding the impairment adjustment, gross margin was 18% in 1997.
The increase for 1998 reflected continued strong demand for ROV
services. Additionally, diving profits improved on lower revenues.
Revenues increased 34% in 1997 compared to 1996, reflecting increased
activity in all operating areas. Revenues and gross margin
contribution from the ROV fleet increased as requirements for vehicles
to support exploration and development drilling activities from
floating drilling rigs increased and units were added to the fleet.
Revenues and gross margin for 1996 benefitted by $1.1 million from the
settlement of a contract dispute which had been provided for in 1995.
This adjustment increased gross margin percentage in 1996 by 1%.
Offshore Field Development.
This segment includes FPSO ownership and operations, engineering,
design and project management services for other MOPS-related work,
and subsea products.
The table below sets out revenues and profitability for this segment
for 1998, 1997 and 1996.
For the Years Ended March 31,
1998 1997 1996
(in thousands, except percentages)
Revenues $90,508 $101,028 $80,855
Gain on disposition of FPSO -- 25,047 --
Gross Margin 15,981 36,861 21,758
Gross Margin % 18% 36% 27%
Operating Income 7,595 30,242 15,567
Operating Income % 8% 30% 19%
Revenues and margins for 1998 were lower than 1997 as a result of the
sale of the FPSO ZAFIRO PRODUCER, partially offset by higher project
management revenues and product sales. Revenues and margins for 1997
include the results of operations for the ZAFIRO PRODUCER prior to its
purchase by the customer. During 1997 the Company completed
conversion of a 268,000 dwt tanker into an FPSO, the ZAFIRO PRODUCER,
which was delivered to a customer offshore West Africa in August 1996
under a three-year contract. The customer had an option to purchase
the vessel at any time during the three-year contract period and
elected to do so in December 1996. The Company recognized a gain of
$25.0 million on the disposition of this asset. The Company is
continuing to operate the vessel under a management agreement and is
managing major upgrades to the vessel.
In December 1997, the Company purchased a production barge which is
contracted for work offshore Indonesia until October 1999. The
Company also owns a tanker and four out-of-service mobile drilling
platforms which are being marketed for production systems or other
alternative use.
The Company's first FPSO, OCEAN PRODUCER, continued to work offshore
West Africa under a four-year contract expiring in January 2000.
During 1997, the Company determined that substantial repairs would be
necessary to maintain the unit in operating condition in compliance
with regulatory requirements. These repairs required a special
drydocking which was performed in 1998. The Company recorded an $8.0
million provision in 1997 which reduced gross margin by 8%.
Results for 1996 also included a $2.7 million gain on the involuntary
conversion of the semisubmersible rig, OCEAN DEVELOPER, which sank in
August 1995 while under tow.
The Company expects to continue to invest in other MOPS assets as
profitable opportunities arise.
Advanced Technologies.
The table below sets out revenues and profitability for this segment
for 1998, 1997 and 1996.
For the Years Ended March 31,
1998 1997 1996
(in thousands, except percentages)
Revenues $85,813 $91,350 $76,587
Gross Margin 19,246 16,972 11,863
Gross Margin % 22% 19% 15%
Operating Income 12,424 9,514 4,988
Operating Income % 14% 10% 7%
Revenues for 1998 declined as a result of lower telecommunications and
civil projects compared to 1997, partially offset by higher
engineering services activity. Gross margins improved in 1998
compared to 1997 reflecting improved profitability on search and
recovery operations and higher demand for engineering services.
Revenues for search and recovery operations for 1997 were higher than
for 1996 as a result of increased activity in U.S. Navy support
although gross margin percentage was lower as a result of a higher
component of reimbursable costs. Subsea telecommunications cable
burial activities had higher revenues in 1997 than in 1996 and
improved gross margins.
Other.
Interest income declined in 1998 compared to 1997 as a result of lower
cash balances available for investment. Interest expense declined in
1998 as a result of lower average borrowings and lower interest rates.
Interest income and interest expense for 1997 did not change
significantly from 1996. Interest expense is net of capitalized
interest of $800,000 for 1998, $1.1 million for 1997 and $300,000 for
1996.
The Company's effective tax rate was 38%, 53% and 38% in 1998, 1997
and 1996, respectively. The rate for 1997 was higher as a result of
provisions made for asset impairment and a special drydocking in its
United Kingdom subsidiary, where the Company derives no tax benefit as
it already has net operating loss carryforwards ("NOLs").
Year 2000.
The Year 2000 problem is the result of computer programs which were
written using two digits rather than four to define the applicable
year. Programs that have time sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. The Company
has conducted a review of its computer systems to identify potential
problem areas. Much of the cost of compliance is included in regular
system and equipment upgrades which are planned or are in progress.
The Company does not expect the cost of compliance to have a material
effect on its financial position, results of operations or liquidity.
However, there is no assurance that the systems of other companies on
which the Company relies will be converted timely and will not have an
adverse effect on the Company.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In this report, the consolidated financial statements and
supplementary data of the Company appear in Part IV, Item 14 and are
hereby incorporated by reference. See Index to Financial Statements
and Schedules.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and nominees for
election to the Board of Directors of Oceaneering International, Inc.,
is incorporated by reference from Oceaneering International, Inc.'s
definitive proxy statement to be filed on or before July 29, 1998,
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
The information with respect to the executive officers of Oceaneering
International, Inc., is provided under Item 4a of Part I of this
Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated by reference from
the proxy statement described in Item 10 above.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information required by Item 12 is incorporated by reference from
the proxy statement described in Item 10 above.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated by reference from
the proxy statement described in Item 10 above.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report.
1. Financial Statements.
(i) Report of Independent Public Accountants
(ii) Consolidated Balance Sheets
(iii) Consolidated Statements of Income
(iv) Consolidated Statements of Cash Flows
(v) Consolidated Statements of Shareholders' Equity
(vi) Notes to Consolidated Financial Statements
2. Exhibits:
Registration
or File Form or Exhibit
Exhibit Number Report Date Number
3 Articles of Incorporation
and By-laws
*3.01 Certificate of Incorporation,
as amended 0-8418 10-K March 1988 3(a)
*3.02 By-laws, as amended 0-8418 10-K March 1987 3(b)
*3.03 Amendment to Certificate
of Incorporation 33-36872 S-8 Sept. 1990 4(b)
*3.04 Amendment to By-laws 0-8418 10-K March 1991 3(d)
*3.05 Amendment to By-laws 1-10945 8-K Nov. 1992 2
4 Instruments defining the rights
of security holders, including
indentures
*4.01 Specimen of Common Stock
Certificate 1-10945 10-K March 1993 4(a)
*4.02 Shareholder Rights Agreement
dated November 20, 1992 1-10945 8-K Nov. 1992 1
*4.03 Bank Credit Agreement dated
April 12, 1995 1-10945 10-K March 1995 4.04
*4.04 Amended and Restated Bank Credit
Agreement dated June 12, 1996 1-10945 10-K March 1996 4.05
4.05 Extension Agreement dated
April 12, 1998 related to
Exhibit 4.04
10 Material contracts
*10.01+ 1981 Incentive Stock Option
Plan, as amended 2-80506 S-8 Sept. 1987 28(e)
*10.02+ Oceaneering Retirement
Investment Plan, as amended 1-10945 10-K March 1996 10.02
*10.03+ Employment Agreement dated
August 15, 1986 between
John R. Huff and Registrant 0-8418 10-K March 1987 10(l)
*10.04+ Addendum to Employment Agreement
dated February 22, 1996 between
John R. Huff and Registrant 1-10945 10-K March 1997 10.04
*10.05+ 1987 Incentive and Non-
Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o)
*10.06+ Oceaneering International, Inc.
Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n)
*10.07+ Senior Executive Severance
Plan, as amended 0-8418 10-K March 1989 10(k)
*10.08+ Supplemental Senior Executive
Severance Agreements, as
amended 0-8418 10-K March 1989 10(l)
*10.09+ Oceaneering International, Inc.
Executive Retirement Plan,
as amended 1-10945 10-K March 1995 10.08
*10.10+ 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f)
*10.11+ 1990 Nonemployee Directors
Stock Option Plan 33-36872 S-8 Sept. 1990 4(g)
*10.12+ Indemnification Agreement
between Registrant and its
Directors 0-8418 10-Q Sept. 1991 10(a)
*10.13+ 1991 Executive Incentive
Agreements 0-8418 10-K March 1992 10(p)
*10.14+ 1993 Restricted Stock Award
Incentive Agreements 1-10945 10-K March 1994 10(q)
*10.15+ 1993 Restricted Stock Award
Incentive Agreement 1-10945 10-K March 1996 10.16
10.16+ 1998 Bonus Award Plan
*10.17+ Amendment No. 1 to the Oceaneering
Retirement Investment Plan 1-10945 10-Q Sept. 1996 10.01
*10.18+ 1996 Incentive Plan of Oceaneering
International, Inc. 1-10945 10-Q Sept. 1996 10.02
*10.19+ 1996 Restricted Stock Award Incentive
Agreements between Registrant
and Executive Officers dated
August 23, 1996. 1-10945 10-Q Sept. 1996 10.03
*10.20+ 1997 Bonus Restricted Stock Award
Agreements between Registrant
and Executive Officers dated
April 22, 1997. 1-10945 10-K March 1997 10.20
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
24 Powers of Attorney
27 Financial Data Schedule
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
+ Indicates management contract or compensatory plan or arrangement
required to be filed as an Exhibit to this form pursuant to Item 14(c)
of this Annual Report on Form 10-K.
(b) Reports on Form 8-K.
The registrant filed no reports on Form 8-K during the last quarter of
the period covered by this report.<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: June 19, 1998 By: //s//JOHN R. HUFF
John R. Huff
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
//s// JOHN R. HUFF President, Principal June 19, 1998
John R. Huff Executive Officer, Director
//s// MARVIN J. MIGURA Senior Vice President, June 19, 1998
Marvin J. Migura Principal Financial Officer
//s// RICHARD V. CHIDLOW Controller, Principal June 19, 1998
Richard V. Chidlow Accounting Officer
CHARLES B. EVANS* Director
DAVID S. HOOKER* Director
D. MICHAEL HUGHES* Director
HARRIS J. PAPPAS* Director
*By: //s// GEORGE R. HAUBENREICH, JR. June 19, 1998
George R. Haubenreich, Jr.
Attorney-in-Fact
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Index to Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data
Index to Schedules
The schedules have been omitted because of the absence of the
condition under which they are required or because the required
information is included in the financial statements or related
footnotes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Oceaneering International, Inc.:
We have audited the accompanying consolidated balance sheets of
Oceaneering International, Inc. (a Delaware corporation) and
subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended March 31,
1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Oceaneering International, Inc. and subsidiaries as of
March 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended
March 31, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Houston, Texas
May 15, 1998
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31, 1998 March 31, 1997
CURRENT ASSETS:
Cash and cash equivalents $ 9,064 $ 23,034
Accounts receivable, net of
allowances for doubtful accounts
of $240 and $962 114,923 120,095
Prepaid expenses and other 7,077 5,678
------- -------
Total current assets 131,064 148,807
------- -------
PROPERTY AND EQUIPMENT, at cost:
Marine services equipment 221,311 198,798
Mobile offshore production equipment 52,856 31,231
Other 44,542 32,915
------- -------
318,709 262,944
Less accumulated depreciation 149,874 161,053
------- -------
Net property and equipment 168,835 101,891
------- -------
INVESTMENTS AND OTHER ASSETS:
Goodwill, net of amortization of
$4,490 and $3,502 10,414 11,402
Other 6,230 6,155
-------- --------
TOTAL ASSETS $316,543 $268,255
======== ========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 1998 March 31, 1997
CURRENT LIABILITIES:
Accounts payable $ 26,071 $ 27,432
Accrued liabilities 51,385 58,183
Income taxes payable 8,425 10,230
Current portion of long-term debt 293 --
------- -------
Total current liabilities 86,174 95,845
------- -------
LONG-TERM DEBT, NET OF CURRENT PORTION 54,626 --
OTHER LONG-TERM LIABILITIES 15,421 16,076
COMMITMENTS AND CONTINGENCIES
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 81,442 81,153
Treasury stock; 1,075,303 and
110,017 shares at cost (17,634) (986)
Retained earnings 98,002 76,001
Cumulative translation adjustments (7,492) (5,838)
------- -------
Total shareholders' equity 160,322 156,334
------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $316,543 $268,255
======== ========
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
For the Years Ended March 31,
1998 1997 1996
REVENUES $358,121 $368,773 $289,506
GAIN ON DISPOSITION OF FPSO -- 25,047 --
COST OF SERVICES 282,830 299,888 234,731
IMPAIRMENT ADJUSTMENT AND PROVISION
FOR SPECIAL DRYDOCKING -- 15,960 --
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 39,009 36,363 34,589
------- ------- -------
Income from operations 36,282 41,609 20,186
INTEREST INCOME 877 1,358 1,774
INTEREST EXPENSE, NET (637) (2,048) (2,286)
OTHER INCOME (EXPENSE), NET (886) (15) 286
MINORITY INTERESTS (41) 390 (108)
------- ------- -------
Income before income taxes 35,595 41,294 19,852
PROVISION FOR INCOME TAXES (13,594) (21,849) (7,495)
------- ------- -------
NET INCOME $ 22,001 $ 19,445 $ 12,357
======= ======= =======
Basic Earnings per Share $ 0.95 $ 0.82 $ 0.53
Diluted Earnings per Share $ 0.93 $ 0.81 $ 0.53
Weighted average number of
common shares 23,233 23,651 23,120
Incremental shares from stock
options 313 303 138
Weighted average number of
common shares and equivalents 23,546 23,954 23,258
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended
March 31,
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $22,001 $19,445 $ 12,357
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on dispositions of property and equipment -- (29,605) --
Depreciation and amortization 23,176 24,707 20,567
Impairment adjustment -- 7,980 --
Currency translation adjustments and other 5,090 1,718 1,308
Decrease (increase) in accounts receivable 5,172 (23,704) (38,031)
Increase in prepaid expenses
and other current assets (1,399) (945) (120)
Increase in other assets ( 85) (271) (512)
Increase (decrease) in accounts payable (1,068) 1,825 10,379
Increase (decrease) in accrued liabilities (6,798) 22,360 6,023
Increase (decrease) in income taxes payable ( 792) 3,826 (1,125)
Increase (decrease) in other long-term
liabilities ( 655) 3,126 2,542
------ ------ ------
Total adjustments to net income 22,641 11,017 1,031
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 44,642 30,462 13,388
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (94,413) (79,599) (57,171)
Dispositions of property and equipment -- 108,253 --
Increase in investments -- (926) --
NET CASH (USED IN) PROVIDED BY ------- ------ -------
INVESTING ACTIVITIES (94,413) 27,728 (57,171)
------- ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 54,626 33,000 38,600
Payments on long-term debt -- (81,000) (72)
Proceeds from issuance of common stock 4,515 3,493 1,741
Purchases of treasury stock (23,340) -- --
------ ------ ------
NET CASH (USED IN) PROVIDED BY
FINANCING ACTIVITIES 35,801 (44,507) 40,269
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (13,970) 13,683 (3,514)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 23,034 9,351 12,865
------ ------ ------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 9,064 $23,034 $ 9,351
====== ====== ======
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
<TABLE>
<CAPTION>
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended March 31, 1998, 1997 and 1996
(in thousands)
Common Stock Issued Additional Treasury Retained Cumulative Total
Shares Amount Paid-in Stock Earnings Translation
Capital Adjustment
-------------------- --------- --------- --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,March 31,1995 24,017 $ 6,004 $80,800 $ (8,596) $ 44,199 $ (7,267) $115,140
Net Income - - - - 12,357 - 12,357
Translation adjustments - - - - - (3,140) (3,140)
Stock options exercised - - 113 497 - - 610
Restricted Stock plan
compensation expense - - 1,008 62 - - 1,070
Treasury stock issued
to Company Benefit
Plan, at average cost - - - 1,061 - - 1,061
------ ------ ------- -------- ------- ------- -------
Balance,March 31,1996 24,017 6,004 81,921 (6,976) 56,556 (10,407) 127,098
Net Income - - - - 19,445 - 19,445
Translation adjustments - - - - - 4,569 4,569
Restricted Stock issued - - (2,797) 2,797 - - -
Stock options exercised - - 577 2,264 - - 2,841
Restricted Stock plan
compensation expense - - 1,452 - - - 1,452
Treasury stock issued
to Company Benefit
Plan, at average cost - - - 929 - - 929
------- ------ ------- -------- ------- -------- --------
Balance,March 31,1997 24,017 6,004 81,153 (986) 76,001 (5,838) 156,334
Net Income - - - - 22,001 - 22,001
Translation adjustments - - - - - (1,654) (1,654)
Restricted Stock issued - - (641) 496 - - (145)
Stock options exercised - - (587) 4,626 - - 4,039
Restricted Stock plan
compensation expense - - 1,517 - - - 1,517
Treasury Stock purchases (23,340) - - (23,340)
Treasury stock issued
to Company Benefit
Plan, at average cost - - - 1,570 - - 1,570
------ ------- ------- -------- ------- -------- --------
Balance,March 31,1998 24,017 $ 6,004 $81,442 $(17,634) $98,002 $ (7,492) $160,322
------- ------- ------- -------- ------- -------- --------
</TABLE>
The accompanying Notes are an integral part of these Consolidated Financial
Statements.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF MAJOR ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of
Oceaneering International, Inc., and its 50% or more owned and
controlled subsidiaries (the "Company"). The Company accounts for its
investments in unconsolidated affiliated companies under the equity
method. All significant intercompany accounts and transactions have
been eliminated.
Unless the context indicates otherwise, references to years indicate
fiscal year.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and highly liquid
investments with original maturities of three months or fewer from the
date of the investment. At March 31, 1998 and 1997 approximately $1.5
million of the Company's cash was restricted and is deposited in
interest bearing accounts as security in connection with legal
proceedings.
Depreciation and Amortization
The Company provides for depreciation of Property and Equipment
primarily on the straight-line method over estimated useful lives of 3
to 12 years for marine services equipment, 10 years for mobile
offshore production equipment and 3 to 25 years for buildings,
improvements and other equipment.
The costs of repair and maintenance of Property and Equipment are
charged to operations as incurred, while the costs of improvements are
capitalized. Upon the disposition of property and equipment, the
related cost and accumulated depreciation accounts are relieved and
the resulting gain or loss is included as an adjustment to cost of
services.
Goodwill arising from business acquisitions is amortized on the
straight-line method over 15 years.
Management periodically and upon the occurrence of a triggering event,
reviews the realizability of goodwill and other long-term assets and
makes any appropriate impairment adjustments and disclosures required
by generally accepted accounting principles.
Effective 1997, the Company adopted Statement of Financial Accounting
Standards Board standard number ("SFAS") 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of," as required. SFAS 121 requires that certain long-lived
assets be reviewed for impairment whenever events indicate that the
carrying amount of an asset may not be recoverable and that an
impairment loss be recognized under certain circumstances in the
amount by which the carrying value exceeds the fair value of the
asset. Initially, the adoption did not have a material effect on the
Company's results of operations or financial position.
During the third quarter of fiscal 1997 it became apparent that
operating results for the Company's diving support vessel ("DSV")
operating in the North Sea were below expectations. The vessel was
originally acquired as a construction support vessel but changing
market conditions necessitated utilizing the vessel in an inspection
and maintenance mode at lower margins. After review of the first full
work season the Company concluded that the manner in which the vessel
was being used had changed significantly from its originally intended
purpose and the recoverability of the carrying amount of the asset
should be assessed. The Company determined that an impairment loss of
$8.0 million should be recorded. The amount was determined by
comparing the carrying value of the vessel with the net present value
of the expected cash flows from the vessel over its remaining life.
The impairment adjustment was recorded and included in the Company's
Oilfield Marine Services business segment. Subsequently, the vessel
along with the other assets used in the North Sea diving operations
were sold and the sales proceeds approximated net book value.
Revenue Recognition
The Company's revenues are primarily derived from billings under
contracts that provide for specific time, material and equipment
charges, which are accrued daily and billed monthly. Significant
lump-sum contracts are accounted for using the
percentage-of-completion method. Revenues on contracts with a
substantial element of research and development are recognized to the
extent of cost until such time as the probable final profitability can
be determined. Anticipated losses on contracts, if any, are recorded
in the period that such losses are first determinable.
Income Taxes
The Company accounts for income taxes according to SFAS 109,
"Accounting for Income Taxes".
Foreign Currency Translation
All balance sheet asset and liability accounts of foreign subsidiaries
are translated into U.S. dollars at the rate of exchange in effect at
the balance sheet date. Adjustments arising from these translations
are accumulated in a separate account within Shareholders' Equity.
All income statement accounts are translated at average exchange rates
during the year.
Earnings Per Share
The Company has computed earnings per share in accordance with
Financial Accounting Standards Board standard number ("SFAS") 128,
"Earnings Per Share", which became effective in the third quarter of
1998. Prior periods comparative figures have been re-stated.
Other Long-Term Liabilities
At March 31, 1998 and 1997 other long-term liabilities include $7.2
million and $8.0 million, respectively, for self-insurance reserves
not expected to be paid out in the following year and $7.2 and $7.8
million, respectively, for deferred income taxes.
Reclassifications
Certain amounts from prior years have been reclassified to conform
with the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Property and Equipment
In 1997, a major oil company customer exercised its option to purchase
the Floating Production, Storage and Offloading system ("FPSO"),
ZAFIRO PRODUCER. Upon disposition, the related property and equipment
cost and accumulated depreciation accounts were relieved and the
resulting gain of $25 million was included in the Company's
consolidated statement of income as Gain on Disposition of FPSO.
During the fourth quarter of 1997, the Company reached an agreement to
sell the assets of its North Sea diving business including its DSV
operating in the North Sea, various saturation and air diving systems
and related equipment. Proceeds of $15 million, which were received
after the year end, were included in accounts receivable at the end of
1997. Sales proceeds approximated net book value and impact on net
income was not material.
New accounting pronouncements
The Financial Accounting Standards Board has issued SFAS 130,
"Reporting Comprehensive Income", and SFAS 131, "Disclosures about
Segments of an Enterprise and Related Information". SFAS 130
establishes standards for reporting and display of comprehensive
income and its components. The primary component of other
comprehensive income for the Company is the foreign currency
translation adjustment accounted for under SFAS 52. SFAS 131
establishes standards for the way that public business enterprises
report information about operating segments in interim and annual
financial statements. The Company will adopt SFAS 130 and SFAS 131 in
1999, as required.
2. INCOME TAXES
The Company and its domestic subsidiaries, including acquired
companies from the respective dates of acquisition, file a
consolidated U.S. federal income tax return. The Company conducts its
international operations in a number of locations which have varying
codes and regulations with regard to income and other taxes, some of
which are subject to interpretation. Income taxes are provided at the
appropriate tax rates in accordance with the Company's interpretation
of the respective tax regulations after review and consultation with
its internal tax department, tax consultants and, in some cases, legal
counsel in the various jurisdictions. Management believes that
adequate provisions have been made for all taxes which will ultimately
be payable.
Deferred income taxes are provided for temporary differences in the
recognition of income and expenses for financial and tax reporting
purposes. The Company's policy is to provide for deferred U.S. income
taxes on unrepatriated foreign income only to the extent such income
is not to be invested indefinitely in the related foreign entity.
The provisions for income taxes for the years ended March 31, 1998,
1997 and 1996 were as follows:
1998 1997 1996
(in thousands)
U.S. federal and state $11,721 $15,886 $5,443
Foreign 1,873 5,963 2,052
------ ------ -----
Total provision $13,594 $21,849 $7,495
------ ------ -----
Current $13,548 $17,731 $6,448
Deferred 46 4,118 1,047
------ ------ -----
Total provision $13,594 $21,849 $7,495
------ ------ -----
Cash taxes paid $14,340 $14,119 $7,465
------ ------ -----
As of March 31, 1998, the Company had net operating loss carryforwards
("NOLs") of approximately $29 million which are available to reduce
future United Kingdom Corporation Tax which would otherwise be
payable.
As of March 31, 1998 and 1997, the Company's worldwide deferred tax
assets and liabilities and related valuation reserves were as follows:
March 31,
1998 1997
(in thousands)
Gross deferred tax assets $14,832 $14,302
Valuation allowance (11,441) (10,319)
------ ------
Net deferred tax assets $ 3,391 $ 3,983
------ ------
Deferred tax liabilities $ 7,238 $ 7,784
------ ------
The Company's deferred tax assets consist of NOLs in its United
Kingdom subsidiary, which have no expiration date, and insurance claim
reserves for which a tax deduction has not yet been allowed. Deferred
tax liabilities consist of depreciation and amortization and
provisions for income of foreign subsidiaries expected to be
repatriated.
The Company has established a valuation allowance for deferred tax
assets after taking into account factors that are likely to affect the
Company's ability to utilize the tax assets. In particular, the
Company conducts its business through several foreign subsidiaries
and, although the Company expects its consolidated operations to be
profitable, there is no assurance that profits will be earned in
entities or jurisdictions which have NOLs available. Since April 1,
1994, changes in the valuation allowance primarily relate to the
expected utilization of foreign NOLs and realization of foreign tax
credits.
Income taxes, computed by applying the federal statutory income tax
rate to income before income taxes and minority interests, are
reconciled to the actual provisions for income taxes as follows:
For the Years Ended
March 31,
1998 1997 1996
(in thousands)
Computed U.S. statutory expense $12,473 $14,316 $ 6,986
Change in valuation allowances 1,122 136 1,039
Withholding taxes and foreign
earnings taxed at rates different
from U.S. statutory rates (467) 5,696 --
State and local taxes and other, net 466 1,701 (530)
------ ------ ------
Total provision for income taxes $13,594 $21,849 $ 7,495
------ ------ ------
The provision for 1997 includes the effect of provisions made for
asset impairment and special drydocking in its United Kingdom
subsidiary, where the Company derives no tax benefit as it already has
NOLs.
3. DEBT
Credit Agreement
On April 12, 1995, the Company and a group of banks signed a credit
agreement in the amount of $75 million (the "Credit Agreement"). As a
result of amendments, the present amount of and availability under
this agreement is $80 million. There is a commitment fee of 0.225%
per annum on the unused portion of the banks' commitment. At March
31, 1998 and 1997, there was $54 million and $0, respectively, of debt
outstanding under this agreement.
Under the Credit Agreement, the Company has the option to borrow
dollars through Euro-Dollar loans at the London Interbank Offered Rate
("LIBOR") plus 5/8%, certificate of deposit loans at the reserve
adjusted certificate of deposit rate plus 3/4%, or base rate loans at
the agent bank's prime rate. The agreement contains certain
restrictive covenants relative to consolidated debt, tangible net
worth and fixed charge coverage. Loans under the agreement are
unsecured. Under the agreement, dividends may not exceed 50% of
cumulative consolidated net income from December 31, 1994.
The Company has uncommitted credit agreements with banks totaling $48
million for use for borrowings and letters of credit. As of March 31,
1998, the Company had approximately $8 million in letters of credit
outstanding under these agreements.
Cash interest payments of $1.2 million, $3.6 million and $2.2 million
were made in 1998, 1997 and 1996, respectively. Interest charges of
$800,000 in 1998, $1.1 million in 1997 and $300,000 in 1996 were
capitalized as part of construction in progress.
4. EMPLOYEE BENEFIT PLANS AND STOCKHOLDER RIGHTS PLAN
Retirement Investment Plans
The Company has three separate employee retirement investment plans
which cover its full-time employees. The Oceaneering Retirement
Investment Plan is a deferred compensation plan in which domestic
employees may participate by deferring a portion of their gross
monthly salary and directing the Company to contribute the deferred
amount to the plan. The Company matches a portion of the deferred
compensation. The Company's contributions to the plan were
$1,960,000, $1,780,000 and $1,294,000 for the plan years ended
December 31, 1997, 1996 and 1995, respectively. The second plan is
the Oceaneering International Services Pension Scheme for employees in
the United Kingdom. During 1998, another plan for such employees, the
Personal Pension Plan, was converted to a Contracted in Money Purchase
Scheme within the Oceaneering International Services Pension Scheme.
Under the combined plan, employees may contribute a portion of their
gross monthly salary. The Company also contributes a portion of the
participants' gross monthly salary. The plan assets exceed vested
benefits and are not material to the assets of the Company. Company
contributions to this plan for the years ended March 31, 1998, 1997
and 1996 were $160,000, $202,000 and $172,000, respectively.
During the first quarter of 1998, the third plan was the Oceaneering
International, Inc. Executive Retirement Plan, which covered selected
key management employees and executives of the Company. The
participants in this plan contributed a portion of their gross monthly
salary and the Company matched 100% of that contribution. Company
expense related to this plan during the years ended March 31, 1998,
1997 and 1996, was $576,000, $457,000 and $362,000, respectively.
Effective June 30, 1997, the plan was terminated and replaced by a
Supplemental Executive Retirement Plan. This plan also covers
selected key management employees and executives of the Company as
approved by the Compensation Committee of the Company's Board of
Directors ("Compensation Committee"). The Company accrues a portion
of the participants' gross monthly salary and the amounts accrued are
treated as if they are invested in one or more investment vehicles
pursuant to this plan. Company expense related to this plan during
the year ended March 31, 1998 was $668,000.
Incentive and Stock Option Plans
The Company has in effect shareholder approved nonemployee director
stock option and incentive plans. Under the 1990 Nonemployee Director
Stock Option Plan ("Nonemployee Director Plan"), options to purchase
up to an aggregate of 100,000 shares of the Company's Common Stock may
be granted to nonemployee directors of the Company. Each director of
the Company is automatically granted an option to purchase 2,000
shares of Common Stock on the date the director becomes a nonemployee
director of the Company and each year thereafter at an exercise price
per share equal to 50% of the fair market value of a share of Common
Stock on the date the option is granted. The options granted are not
exercisable until the later to occur of six months from the date of
grant or the date the optionee has completed two years of service as a
director of the Company. Expense is recorded related to these options
which have an exercise price less than fair market value on the date
the option is granted. Expense in 1998, 1997 and 1996 was not
material.
In August 1996 the shareholders of the Company approved a 1996
Incentive Plan under which a total of 1,165,000 shares of Common Stock
of the Company were made available for awards to employees and other
persons (excluding nonemployee directors) having an important business
relationship or affiliation with the Company. The 1996 Incentive Plan
and a similar shareholder approved 1990 Incentive Plan ("Incentive
Plans") are administered by the Compensation Committee, which
determines the type or types of award(s) to be made to each
participant and sets forth in the related award agreement the terms,
conditions and limitations applicable to each award. The Compensation
Committee may grant stock options, stock appreciation rights, stock
and cash awards. Options are normally granted at not less than fair
market value of the optioned shares at the date of grant. Options
outstanding are exercisable over a period of five or ten years after
the date of grant or five years after the date of vesting at the rate
of 20% per year for three years beginning one year after grant and 40%
at the end of the fourth year, or 25% per year for four years
beginning one year after grant.
The Company also has in effect one other stock plan under which
options to purchase have been issued to employees and other persons
affiliated with the Company. Since approval of the 1990 Incentive
Plan, no further grants or awards under this stock plan have been made
or can be made or granted. This stock plan is also administered by
the Compensation Committee. Options were granted at not less than the
fair market value of the optioned shares at the date of grant.
Options outstanding under this plan which were granted in 1990, are
exercisable over a ten-year term with vesting at the rate of 20% per
year for three years beginning one year after the date of grant and
40% at the end of the fourth year.
During 1996 and 1997, the Compensation Committee granted to certain
key executives of the Company restricted Common Stock of the Company
designed (i) to make a material portion of their potential future
compensation contingent on performance of the Company's Common Stock
and (ii) to retain their employ with the Company. These grants are
subject to earning requirements on the basis of a percentage change
between the price of the Common Stock of the Company versus the
average of the Common Stock price of a peer group of companies over a
three-year time period. Up to one-third of the total grant made in
1997 may be earned each year depending upon the Company's cumulative
Common Stock performance, with any amount earned subject to vesting in
four equal installments over a three or four year period conditional
upon continued employment. At the time of each vesting, a participant
receives a tax assistance payment which the participant must reimburse
the Company if the vested Common Stock is sold by the participant
within three years after the vesting date. In 1998, no such
restricted stock grants were made. As of March 31, 1998, the entire
grant made in 1996 has been earned, subject to vesting requirements,
and one-third of the grant made in 1997 was earned, subject to vesting
requirements. As of March 31, 1998, a total of 373,250 shares of
restricted stock was outstanding under these and former, similar
grants, of which 177,250 shares were earned, subject to vesting
requirements. In April 1997 certain key executives also elected to
receive restricted Common Stock of the Company totaling 44,968 shares
with a grant date fair value of $14.63 per share, subject to similar
vesting requirements and tax assistance payments, in lieu of cash for
all or part of their 1997 bonus award. The numbers and weighted
average grant date fair value of restricted stock granted during 1997
and 1996 were 312,000 and $17.00, and 7,000 and $10.38, respectively.
The Company accounts for stock options issued under plans under APB
Opinion No. 25, under which no compensation cost has been recognized.
Had compensation cost for these stock options been determined
consistent with SFAS 123 "Accounting for Stock-Based Compensation",
the Company's pro forma net income and diluted earnings per share for
1998, 1997 and 1996 would have been $21,373,000, $19,170,000 and
$12,357,000 respectively, and $0.92, $0.80 and $0.53, respectively.
Because the SFAS 123 method of accounting has not been applied to
options issued prior to April 1 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in
future years.
Information regarding these option plans for 1998, 1997 and 1996 is as
follows:
Shares under Weighted Average
Option Exercise Price
Balance at March 31, 1995 1,422,080 12.07
Granted 68,500 9.63
Exercised (66,500) 8.17
Forfeited (69,250) 11.88
Balance at March 31, 1996 1,354,830 10.82
Granted 304,300 15.60
Exercised (270,950) 8.84
Forfeited (40,800) 11.29
Balance at March 31, 1997 1,347,380 12.23
Granted 390,700 18.64
Exercised (367,140) 10.51
Forfeited (87,600) 14.20
Balance at March 31, 1998 1,283,340 14.61
The weighted average fair value of options granted in 1998 and 1997
was $9.20 and $8.73, respectively. No significant grants were made in
1996. The fair value of the stock options granted in 1998 and 1997
was estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions:
1998 1997
Risk-free interest rate 6.42% 6.67%
Expected dividend yield 0% 0%
Expected life 6 years 6 years
Expected volatility 38.48% 47.97%.
Options outstanding at March 31, 1998 is composed of the following:
Outstanding Exercisable
------------------------------------ -------------------
Range of Number of Weighted Weighted Number of Weighted
Exercise shares at Average Average Shares at Average
Prices March 31, Remaining Exercise March 31, Exercise
1998 Contractual Price 1998 Price
Life (years)
- -------- --------- ------------ -------- --------- --------
$4.72-
11.97 446,600 6.02 $10.60 291,500 $10.15
$12.06-
15.75 297,450 5.27 14.23 197,250 13.95
$15.81-
20.34 539,290 5.34 18.02 52,320 15.88
At March 31, 1998, there were 511,300 shares under these plans
available for grant, of which 469,000 could be used for awarding stock
options, stock appreciation rights, stock and cash awards to
employees.
Stockholder Rights Plan
On November 20, 1992, the Company's Board of Directors adopted a
Stockholder Rights Plan and, in accordance with such Plan, declared a
dividend of one preferred share purchase right for each outstanding
share of Company common stock. The Plan will cause substantial
dilution to a party that attempts to acquire the Company in a manner
or on terms not approved by the Board of Directors, except pursuant to
an offer conditioned on a substantial number of rights being acquired.
The rights, which do not have voting rights and are not entitled to
dividends until such time as they become exercisable, expire in
December 2002.
5. COMMITMENTS AND CONTINGENCIES
Lease Commitments
At March 31, 1998, the Company occupied several facilities under
noncancellable operating leases expiring at various dates through
2065. Future minimum rentals under these leases are as follows:
(in thousands)
1999 $ 3,366
2000 3,057
2001 2,715
2002 1,952
2003 1,498
Thereafter 13,060
------
Total Lease Commitments $25,648
------
Rental expense, which includes hire of vessels, specialized equipment
and real estate rental, was approximately $19 million, $25 million and
$19 million for the years ended March 31, 1998, 1997 and 1996,
respectively.
Insurance
The Company self-insures for workers' compensation, maritime
employer's liability and comprehensive general liability claims to
levels it considers financially prudent and carries insurance after
the initial claim levels, which can be by occurrence or in the
aggregate, are met by the Company. The Company determines the level
of accruals by reviewing its historical experience and current year
claim activity; accruals are not recorded on a present value basis.
Each claim is reviewed with insurance adjusters and specific reserves
are established for all known liabilities. An additional reserve for
incidents incurred but not reported to the Company is established for
each year using management estimates and based on prior experience.
Management believes that adequate accruals have been established for
expected liabilities arising from such obligations.
Litigation
Various actions and claims are pending against the Company, most of
which are covered by insurance. In the opinion of management, the
ultimate liability, if any, which may result from these actions and
claims will not materially affect the financial position or results of
operations of the Company.
Letters of Credit
The Company had $8.0 million and $7.3 million in letters of credit
outstanding as of March 31, 1998 and 1997, respectively, as guarantees
in force for various performance and bid bonds which are usually for a
period of one year or the duration of the contract.
Financial Instruments and Risk Concentration
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents,
bank borrowings and accounts receivable. The carrying value of cash
and cash equivalents and bank borrowings approximates fair value due
to the short maturity of those instruments. Accounts receivable are
generated from a broad and diverse group of customers primarily from
within the energy industry, which is the Company's major source of
revenues. The Company maintains an allowance for doubtful accounts
based upon expected collectibility.
6. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Business Segment Information
The Company supplies a comprehensive range of integrated technical
services to a wide array of industries and is one of the world's
largest underwater services contractors. The Company's Oilfield
Marine Services business consists of underwater intervention and
above-water inspection, maintenance and repair. The Company's
Offshore Field Development business includes the engineering,
procurement, construction and installation of mobile offshore
production systems, subsea intervention services and the production of
subsea control umbilical cables. The Company's Advanced Technologies
business provides project management, engineering services and
equipment for applications in harsh environments, primarily in
non-oilfield markets.
The following summarizes certain financial data by business segment:
For the Years Ended March 31,
1998 1997 1996
(in thousands)
Revenues
Oilfield Marine Services $181,800 $176,395 $132,064
Offshore Field Development 90,508 101,028 80,855
Advanced Technologies 85,813 91,350 76,587
Total $358,121 $368,773 $289,506
Income from Operations
Oilfield Marine Services $ 16,263 $ 1,853 $ (369)
Offshore Field Development 7,595 30,242 15,567
Advanced Technologies 12,424 9,514 4,988
Total $ 36,282 $ 41,609 $ 20,186
Identifiable Assets
Oilfield Marine Services $155,456 $135,375 $102,776
Offshore Field Development 114,306 74,455 103,538
Advanced Technologies 30,180 28,135 32,466
Total $299,942 $237,965 $238,780
Capital Expenditures
Oilfield Marine Services $ 53,352 $ 32,951 $ 21,868
Offshore Field Development 33,168 42,696 32,531
Advanced Technologies 7,893 3,952 2,772
Total $ 94,413 $ 79,599 $ 57,171
Depreciation and Amortization Expenses
Oilfield Marine Services $ 13,640 $ 20,682 $ 10,996
Offshore Field Development 6,140 7,510 5,127
Advanced Technologies 3,396 4,495 4,444
Total $ 23,176 $ 32,687 $ 20,567
Income from operations for each business segment is determined before
interest income or expense, other expense, minority interests and the
provision for income taxes. An allocation of these items is not
considered practical. All assets specifically identified with a
particular business segment have been segregated. Cash and cash
equivalents, prepaid expenses and other current assets, investments
and certain other assets have not been allocated to particular
business segments. Income from operations for 1997 for Oilfield
Marine Services is after charging an impairment adjustment of $7,980
which is included in depreciation and amortization expense. Income
from operations for Offshore Field Development for 1997 includes a
$25,047 gain on disposition of an FPSO and an $7,980 provision for a
special drydocking.
No individual customer accounted for more than 10% of revenues in 1998
or 1996. Revenues of approximately $44 million in 1997 were from the
Mobil Corporation group of companies.
Geographic Operating Areas
Financial data by geographic area is summarized as follows:
For the Years Ended March 31,
1998 1997 1996
(in thousands)
Revenues
United States $173,878 $154,613 $122,561
Europe 57,029 74,488 53,289
Africa 60,180 62,863 39,747
Asia 39,631 50,036 48,642
Other 27,403 26,773 25,267
TOTAL $358,121 $368,773 $289,506
Income before Income Taxes and Minority Interests
United States $ 14,685 $ 3,327 $ 1,756
Europe 3,184 (4,818) (164)
Africa 5,117 29,976 9,519
Asia 3,696 5,923 2,842
Other 8,954 6,496 6,007
TOTAL $ 35,636 $ 40,904 $ 19,960
Total Assets
United States $191,967 $133,728 $152,859
Europe 42,135 68,512 51,521
Africa 40,268 39,589 29,733
Asia 34,162 17,429 12,185
Other 8,011 8,997 9,798
TOTAL $316,543 $268,255 $256,096
7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
March 31,
1998 1997
(in thousands)
Payroll and related costs $19,042 $17,831
Accrued job costs 18,159 28,886
Other 14,184 11,466
TOTAL ACCRUED LIABILITIES $51,385 $58,183
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share data)
(unaudited)
Year Ended March 31, 1998
Quarter Ended
June 30 Sept. 30 Dec. 31 Mar. 31 Total
Revenues $95,163 $90,578 $86,234 $86,146 $358,121
Gross profit 18,933 20,632 18,285 17,441 75,291
Income from operations 9,656 11,052 8,488 7,086 36,282
Net income 5,964 6,714 4,995 4,328 22,001
Diluted earnings
per share $ 0.25 $ 0.28 $ 0.21 $ 0.19 $ 0.93
Weighted average number
of common shares
and equivalents 23,494 23,812 23,748 23,130 23,546
Year Ended March 31, 1997
Quarter Ended
June 30 Sept. 30 Dec. 31 Mar. 31 Total
Revenues $80,535 $96,764 $94,117 $97,357 $368,773
Gain on disposition
of FPSO -- -- 25,047 -- 25,047
Gross profit 14,850 16,824 30,364 15,934 77,972
Income from operations 5,942 8,508 21,440 5,719 41,609
Net income 3,747 5,080 6,740 3,878 19,445
Diluted earnings
per share $ 0.16 $ 0.21 $ 0.28 $ 0.16 $ 0.81
Weighted average number
of common shares
and equivalents 23,595 23,896 24,142 24,183 23,954
EXHIBIT INDEX
Registration
or File Form or Exhibit
Exhibit Number Report Date Number
3 Articles of Incorporation
3 Articles of Incorporation
and By-laws
*3.01 Certificate of Incorporation,
as amended 0-8418 10-K March 1988 3(a)
*3.02 By-laws, as amended 0-8418 10-K March 1987 3(b)
*3.03 Amendment to Certificate
of Incorporation 33-36872 S-8 Sept. 1990 4(b)
*3.04 Amendment to By-laws 0-8418 10-K March 1991 3(d)
*3.05 Amendment to By-laws 1-10945 8-K Nov. 1992 2
4 Instruments defining the rights
of security holders, including
indentures
*4.01 Specimen of Common Stock
Certificate 1-10945 10-K March 1993 4(a)
*4.02 Shareholder Rights Agreement
dated November 20, 1992 1-10945 8-K Nov. 1992 1
*4.03 Bank Credit Agreement dated
April 12, 1995 1-10945 10-K March 1995 4.04
*4.04 Amended and Restated Bank Credit
Agreement dated June 12, 1996 1-10945 10-K March 1996 4.05
4.05 Extension Agreement dated
April 12, 1998 related to
Exhibit 4.04
10 Material contracts
*10.01+ 1981 Incentive Stock Option
Plan, as amended 2-80506 S-8 Sept. 1987 28(e)
*10.02+ Oceaneering Retirement
Investment Plan, as amended 1-10945 10-K March 1996 10.02
*10.03+ Employment Agreement dated
August 15, 1986 between
John R. Huff and Registrant 0-8418 10-K March 1987 10(l)
*10.04+ Addendum to Employment Agreement
dated February 22, 1996 between
John R. Huff and Registrant 1-10945 10-K March 1997 10.04
*10.05+ 1987 Incentive and Non-
Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o)
*10.06+ Oceaneering International, Inc.
Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n)
*10.07+ Senior Executive Severance
Plan, as amended 0-8418 10-K March 1989 10(k)
*10.08+ Supplemental Senior Executive
Severance Agreements, as
amended 0-8418 10-K March 1989 10(l)
*10.09+ Oceaneering International, Inc.
Executive Retirement Plan,
as amended 1-10945 10-K March 1995 10.08
*10.10+ 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f)
*10.11+ 1990 Nonemployee Directors
Stock Option Plan 33-36872 S-8 Sept. 1990 4(g)
*10.12+ Indemnification Agreement
between Registrant and its
Directors 0-8418 10-Q Sept. 1991 10(a)
*10.13+ 1991 Executive Incentive
Agreements 0-8418 10-K March 1992 10(p)
*10.14+ 1993 Restricted Stock Award
Incentive Agreements 1-10945 10-K March 1994 10(q)
*10.15+ 1993 Restricted Stock Award
Incentive Agreement 1-10945 10-K March 1996 10.16
10.16+ 1998 Bonus Award Plan
*10.17+ Amendment No. 1 to the Oceaneering
Retirement Investment Plan 1-10945 10-Q Sept. 1996 10.01
*10.18+ 1996 Incentive Plan of Oceaneering
International, Inc. 1-10945 10-Q Sept. 1996 10.02
*10.19+ 1996 Restricted Stock Award Incentive
Agreements between Registrant
and Executive Officers dated
August 23, 1996. 1-10945 10-Q Sept. 1996 10.03
*10.20+ 1997 Bonus Restricted Stock Award
Agreements between Registrant
and Executive Officers dated
April 22, 1997. 1-10945 10-K March 1997 10.20
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
24 Powers of Attorney
27 Financial Data Schedule
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
+ Indicates management contract or compensatory plan or arrangement
required to be filed as an Exhibit to this form pursuant to Item 14(c)
of this Annual Report on Form 10-K.
EXHIBIT 4.05
EXHIBIT D
EXTENSION AGREEMENT
Oceaneering International, Inc.
16001 Park Ten Place, Suite 650
Houston, Texas 77084
Morgan Guaranty Trust Company
of New York, as Agent under
the Credit Agreement
referred to below
60 Wall Street
New York, NY 10260
Gentlemen:
The undersigned hereby agree to extend, effective April 12, 1998,
the Revolving Credit Period under the Credit Agreement dated as of
June 12, 1996 among Oceaneering International, Inc. (the "Borrower"),
the Banks parties thereto and Morgan Guaranty Trust Company of New York,
as agent (the "Credit Agreement") for one year to April 12, 1999.
Terms defined in the Credit Agreement are used herein as therein defined.
This Extension Agreement shall be construed in accordance
with and governed by the law of the State of New York.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By //Kathryn Sayko-Yanes//
Title: Vice President
ABN AMRO BANK N.V.
By //C. Lipshutz/S Balette//
Title: SVP/AVP
CHASE BANK OF TEXAS, N.A.
By //Mona M. Foch//
Title:
WELLS FARGO BANK (TEXAS), NA
By //Frank W. Schageman//
Title: Vice President
Agreed and accepted:
OCEANEERING INTERNATIONAL, INC.
By //Robert P. Mingoia//
Title: Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By //Kathryn Sayko-Yanes//
Title: Vice President
EXHIBIT 10.16
OCEANEERING INTERNATIONAL, INC.
1998 BONUS AWARD PLAN
The 1998 Bonus Award Plan is approved by the Company's Board of Directors and
administered by its Compensation Committee. Individuals who are nominated and
approved for inclusion in the Plan will be reviewed after final year end
results are completed. Recommendations for cash bonus awards will be based on
the accomplishment of results (Individual, Profit Center and Total Company) in
order to determine the amount of award, if any, to be made. People must be
amongst the nominated group for eligibility, and be employed by the Company at
the time of funding. Bonuses will be earned when paid. Individuals, as
designated, will be subject to a maximum bonus eligibility of 10% - 100% of
current base salary.
The 1998 Bonus Award Plan is based on achieving specific results by the
Individual, his Profit Center and the Total Company. In order to integrate
each of these performances in a fashion that benefits the Shareholders and
Employees, each item is interrelated. The amount of award recommendation will
be based on the following methodology:
Individual Coefficient
The Individual Coefficient is determined by taking the individual's weighted
average evaluation of objectives achieved times the individual's salary
maximum. This is the beginning step in determining the final award. An
individual's performance must meet certain minimum criteria or he is
eliminated from bonus award consideration.
Profit Center Results Contribution
The Profit Center Contribution is determined by comparing the Profit Center
Net Income Objective with the results achieved and determining the
Contribution to the Individual Coefficient.
Should the Profit Center results be below a specified amount, all the
individuals in that Profit Center may be eliminated from the Award Program.
The President may review the performance of areas within the region on a
case-by-case basis and take appropriate action. Should the actual results be
equal to or greater than such specified amount, the individual becomes
eligible for an award.
Oceaneering International, Inc. Results Contribution
The Company Results Contribution is determined by comparing the Company's FY98
Net Income Result with the Objective planned. The results achieved determine
the multiplier that will be used. Thus, an individual may, subject to the
determined maximum, be recommended for an award equal to the Individual
Coefficient times the Profit Center Contribution times the Company Results
Contribution times current base salary.
Participants in the 1996 Restrictive Stock Incentive Program have the option
to receive any bonus subsequently awarded by the Compensation Committee under
the 1998 Bonus Award Plan in cash, cash and restricted stock or restricted
stock. Any restricted stock would be awarded pursuant to all terms and
conditions, including vesting and tax assistance payments of the 1996
Restricted Stock Incentive Program, except that one-quarter of such restricted
amount would vest at the time of the bonus award and the remainder would vest
in equal installments at the end of each of the following three years in
accordance with agreement.
The 1998 Bonus Award Plan is in effect FY98. A similar plan may or may not be
approved for FY99. It is extremely important that the Company continue
improved results in FY98. All participants must be committed to a reward
system based on achieving results. The Company is entrepreneurially oriented
and must use its maximum creativity, effort and determination in achieving
individual results that collectively increases its Shareholders' Net Wealth.
The 1998 Bonus Award Plan is structured to foster that position.
April 22, 1997
EXHIBIT 21
SUBSIDIARIES OF OCEANEERING INTERNATIONAL, INC.
Percentage of Ownership Jurisdiction
by Oceaneering of
Subsidiary International, Inc. Organization
Eastport International, Inc. 100% Delaware
Marine Production Systems do Brasil Ltda. 100% Brazil
Marine Production Systems, Ltd. 100% Delaware
Marine Production Systems Servicos Ltda. 100% Brazil
Multiflex, Inc. 100% Texas
Multiflex Limited 100% Scotland
Norsk Subsea Cable A/S 49% Norway
Ocean Systems Engineering, Inc. 100% Texas
Ocean Systems Engineering Limited 100% England
Oceaneering Arabia Ltd. 50% Saudi Arabia
Oceaneering A/S 100% Norway
Oceaneering Australia Pty. Limited 100% Australia
Oceaneering FSC, Inc. 100% Barbados
Oceaneering International AG 100% Switzerland
Oceaneering International (M) Sdn. Bhd. 100% Malaysia
Oceaneering International Pte Ltd 100% Singapore
Oceaneering International, S.A. de C.V. 100% Mexico
Oceaneering International Services Limited 100% England
Oceaneering International (Sharjah) Limited 100% Sharjah
Oceaneering Limited 100% Canada
Oceaneering Technologies, Inc. 100% Delaware
Oceaneering Underwater GmbH 100% Switzerland
Oceanteam A/S 50% Norway
Oil Industry Engineering, Inc. 100% Texas
P. T. Calmarine 50% Indonesia
Solus Emirates 49% U.A.E.
Solus Ocean Systems, Inc. 100% Delaware
Solus Oceaneering (Malaysia) Sdn. Bhd. 49% Malaysia
Solus Schall Limited 100% England
Solus Schall (Nigeria) Limited 50% Nigeria
Specialty Wire and Cable Company, Inc. 100% Texas
Steadfast Oceaneering, Inc. 100% Virginia
Stolt-Comex Seaway Tecnologia Submarina S.A. 20% Brazil
UEC 789 Limited 100% Scotland
(1) The names of certain subsidiaries have been omitted since the unnamed
subsidiaries considered in the aggregate would not constitute a
significant subsidiary as defined by Item 601(b)(21).
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 10-K, into the Company's
previously filed Form S-8 Registration Statements filed on July 13, 1988 (Reg.
No. 33-23059), September 24, 1990 (Reg. No. 33-36872) and September 9,1997
(Reg. No. 333-35225).
ARTHUR ANDERSEN LLP
Houston, Texas
June 18, 1998
EXHIBIT 24
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation
("Company"), intends to file with the Securities and Exchange Commission
("Commission") under the Securities Exchange Act of 1934, as amended ("Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998
("10-K"), with any and all exhibits and/or amendments to such 10-K, and other
documents in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF,
MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally,
his true and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution, to execute
in his name, place and stead in his capacity as a director, officer or both,
as the case may be, of the Company, said 10-K and any and all amendments
thereto and all instruments necessary or incidental in connection therewith
and to file the same with the Commission. Each of said attorneys shall have
full power and authority to do and perform in the name and on behalf of the
undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
18th day of June, 1998.
//s//
D. Michael Hughes
<PAGE>POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"
), intends to file with the Securities and Exchange Commission ("Commission")
under the Securities Exchange Act of 1934, as amended ("Act"), an Annual
Report on Form 10-K for the fiscal year ended March 31, 1998 ("10-K"), with
any and all exhibits and/or amendments to such 10-K, and other documents in
connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF,
MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally,
his true and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution, to execute
in his name, place and stead in his capacity as a director, officer or both,
as the case may be, of the Company, said 10-K and any and all amendments
thereto and all instruments necessary or incidental in connection therewith
and to file the same with the Commission. Each of said attorneys shall have
full power and authority to do and perform in the name and on behalf of the
undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
18th day of June, 1998.
//s//
Charles B. Evans
<PAGE>POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation
("Company"), intends to file with the Securities and Exchange Commission
("Commission") under the Securities Exchange Act of 1934, as amended ("Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998
("10-K"), with any and all exhibits and/or amendments to such 10-K, and other
documents in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF,
MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally,
his true and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution, to execute
in his name, place and stead in his capacity as a director, officer or both,
as the case may be, of the Company, said 10-K and any and all amendments
thereto and all instruments necessary or incidental in connection therewith
and to file the same with the Commission. Each of said attorneys shall have
full power and authority to do and perform in the name and on behalf of the
undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
18th day of June, 1998.
//s//
David S. Hooker
<PAGE>
POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation
("Company"), intends to file with the Securities and Exchange Commission
("Commission") under the Securities Exchange Act of 1934, as amended ("Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998
("10-K"), with any and all exhibits and/or amendments to such 10-K, and other
documents in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a director or officer or
both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF,
MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally,
his true and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution, to execute
in his name, place and stead in his capacity as a director, officer or both,
as the case may be, of the Company, said 10-K and any and all amendments
thereto and all instruments necessary or incidental in connection therewith
and to file the same with the Commission. Each of said attorneys shall have
full power and authority to do and perform in the name and on behalf of the
undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
18th day of June, 1998
//s//
John R. Huff
<PAGE>POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation
("Company"), intends to file with the Securities and Exchange Commission
("Commission") under the Securities Exchange Act of 1934, as amended ("Act"),
an Annual Report on Form 10-K for the fiscal year ended March 31, 1998
("10-K"), with any and all exhibits and/or amendments to such 10-K, and other
documents in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a director or officer
or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF,
MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally,
his true and lawful attorney or attorneys with power to act with or without
the other and with full power of substitution and resubstitution, to execute
in his name, place and stead in his capacity as a director, officer or both,
as the case may be, of the Company, said 10-K and any and all amendments
thereto and all instruments necessary or incidental in connection therewith
and to file the same with the Commission. Each of said attorneys shall have
full power and authority to do and perform in the name and on behalf of the
undersigned in any and all capacities every act whatsoever necessary or
desirable to be done in the premises as fully and to all intents and purposes
as the undersigned might or could do in person, the undersigned hereby
ratifying and approving the acts of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this instrument on this
18th day of June, 1998.
//s//
Harris J. Pappas
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements filed as part of the Company's 10-K and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 9,064
<SECURITIES> 0
<RECEIVABLES> 115,163
<ALLOWANCES> 240
<INVENTORY> 0
<CURRENT-ASSETS> 131,064
<PP&E> 318,709
<DEPRECIATION> 149,874
<TOTAL-ASSETS> 316,543
<CURRENT-LIABILITIES> 86,174
<BONDS> 54,626
0
0
<COMMON> 6,004
<OTHER-SE> 154,318
<TOTAL-LIABILITY-AND-EQUITY> 316,543
<SALES> 358,121
<TOTAL-REVENUES> 358,121
<CGS> 282,830
<TOTAL-COSTS> 282,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 637
<INCOME-PRETAX> 35,595
<INCOME-TAX> 13,594
<INCOME-CONTINUING> 22,001
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,001
<EPS-PRIMARY> .95
<EPS-DILUTED> .93
</TABLE>
