UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-10945
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2628227
---------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
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 June 22, 2000 based upon the closing sale price of the Common
Stock on the New York Stock Exchange: $437,140,000
Number of shares of Common Stock outstanding at June 22, 2000: 22,910,275
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the proxy statement relating to the registrant's 2000 annual meeting
of shareholders, to be filed on or before July 31, 2000 pursuant to Regulation
14A of the Securities and Exchange Act of 1934 are incorporated by reference to
the extent set forth in Part III, Items 10-13 of this report.
<PAGE>
PART 1
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Oceaneering International, Inc. is an advanced applied technology company that
provides a comprehensive range of integrated technical services and hardware to
customers who operate in marine, space and other harsh environments. Oceaneering
was organized in 1969 out of the combination of three diving service companies
founded in the early 1960s. Since our establishment, we have concentrated on the
development and marketing of underwater services and products requiring the use
of advanced deepwater technology. We are one of the world's largest underwater
services contractors. We provide most of our services and products to the oil
and gas industry. These include drilling support, subsea construction, design,
lease and operation of production systems, facilities maintenance and repair,
specialty subsea hardware and specialized onshore and offshore engineering and
inspection. We operate in the United States and 22 other countries. Our
international operations, principally in the North Sea, Africa and the Far East,
accounted for approximately 50% of our 2000 revenues, or $209 million.
This year we are increasing our reporting segments from three to five to
assist the investment community in better understanding our company. The
segments are contained within two businesses - services and products provided to
the offshore oil and gas industry ("Offshore Oil and Gas") and all other
services and products ("Advanced Technologies" or "ADTECH"). Our business
segments within the Offshore Oil and Gas business are Remotely Operated Vehicles
("ROVs"), Subsea Products, Mobile Offshore Production Systems ("MOPS") and Other
Services. We are reporting our ADTECH business as one segment.
In each of our businesses, we have been concentrating on expanding our
capabilities to provide technical solutions to customers operating in harsh
environments.
Unless the context indicates otherwise, references to years indicate fiscal
years. For example, 2000 refers to the twelve-month period ended March 31, 2000.
OFFSHORE OIL AND GAS. In the last few years, the focus of our Offshore Oil and
Gas business has been toward increasing our asset base for servicing deepwater
projects and subsea completions. Prior to 1996, we purchased most of our
remotely operated vehicles ("ROVs"), which are submersible vehicles operated
from the surface and widely used in the offshore oil and gas industry. However,
in response to increased demand for more powerful systems operating in deeper
water, we expanded our capabilities and established an in-house facility to
design and build ROVs to meet the continued expansion of our ROV fleet. We have
built over 50 ROV systems and we are producing all our new ROVs in-house.
In addition to the ROV expansion, we also committed to the construction of
two dynamically positioned multiservice vessels ("MSVs"), the OCEAN INTERVENTION
and the OCEAN INTERVENTION II, the first of which went into service in November
1998. These vessels can carry and install significant lengths of coiled tubing
or umbilicals required to bring subsea well completions into production
(tie-back to production facilities). The MSVs have been designed for use in
pipeline or flowline tie-ins, pipeline crossings, subsea hardware interventions
and riser and jumper spool installations.
Through Oceaneering Multiflex ("Multiflex"), we are the world's largest
provider of subsea hydraulic and electrohydraulic thermoplastic umbilicals.
These umbilicals are the means by which offshore operators control subsea
wellhead hydrocarbon flow rates. We entered this market in March 1994 through
our purchase of the operating subsidiaries of Multiflex International Inc.
During 1999, we constructed a new umbilical plant in Brazil and relocated,
modernized and increased the capabilities of our umbilical manufacturing
facility in Scotland. The plant in Brazil began operations in fiscal year 1999
and the plant in Scotland was commissioned in early fiscal year 2000.
We own two mobile offshore production systems ("MOPS"), the PB SAN JACINTO,
acquired in December 1997 and under contract offshore Indonesia, and the
floating production, storage and offloading system ("FPSO") OCEAN PRODUCER,
which has been operating offshore West Africa since December 1991. In November
1999, we contracted to provide a MOPS unit for development of oil fields
offshore Western Australia. We are presently converting a jackup drilling rig to
a MOPS unit for this contract. We anticipate having the unit on location by
January 2001 and our customer oil companies expect production to begin in
mid-calendar 2001. In November 1995, we contracted with a major oil company for
the provision of an FPSO. We converted a crude oil tanker and delivered the FPSO
ZAFIRO PRODUCER to its first operational location off West Africa in August
1996. In December 1996, the customer exercised an option to purchase the FPSO.
We continue to participate as a member of the customer's integrated team to
operate and enhance the FPSO's production facilities.
K2
<PAGE>
ADVANCED TECHNOLOGIES. In 1992 and 1993, we purchased two businesses that formed
the basis of our Advanced Technologies segment. The first business designed,
developed and operated robotic systems and ROVs specializing in the non-oilfield
market. This business is the basis for our expansion into telecommunications
cable laying and burial and commercial theme park animation. The second business
designed, developed and fabricated spacecraft hardware and high temperature
insulation products.
We intend to continue our strategy of acquiring, as opportunities arise,
additional assets or businesses, to improve our market position or expand into
related service and product lines, either directly through merger, consolidation
or purchase, or indirectly through joint ventures. We are also applying our
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.
FINANCIAL INFORMATION ABOUT SEGMENTS
For financial information about our business segments, please see the table in
Note 6 of the Notes to Consolidated Financial Statements in this report, which
presents revenues, income from operations, identifiable assets, capital
expenditures and depreciation and amortization by business segment for the years
ended March 31, 2000, 1999 and 1998.
DESCRIPTION OF BUSINESS
OFFSHORE OIL AND GAS
Our Offshore Oil and Gas business consists of ROVs, Subsea Products, MOPS and
Other Services.
ROVS. ROVs are submersible vehicles operated from the surface. They are widely
used in the offshore oil and gas industry for a variety of underwater tasks
including drill support, installation and construction support, pipeline
inspection and surveys and subsea production facility operation and maintenance.
ROVs may be outfitted with manipulators, sonar, video cameras, specialized
tooling packages and other equipment or features to facilitate the performance
of specific underwater tasks. We use ROVs at water depths or in situations where
the use of divers would be uneconomical or infeasible. We own 95 work class ROVs
and are the industry leader in providing ROV services on deepwater wells, which
are the most technically demanding. We believe we operate the largest and most
technically advanced fleet of ROVs in the world.
SUBSEA PRODUCTS. We manufacture a variety of build-to-order specialty subsea
hardware to ISO 9001 quality requirements. These products include hydraulic,
electro-hydraulic and steel tube umbilicals; production control equipment;
pipeline repair systems; and ROV tooling and work packages. We market these
products under the trade names Multiflex and Oceaneering Intervention
Engineering ("OIE").
Subsea umbilicals and production control equipment are the means by which
offshore well operators control subsea wellhead hydrocarbon flow, monitor
downhole and wellhead conditions and perform chemical injection. Pipeline repair
systems make the effective repair of pipelines and risers possible without
requiring underwater welding. ROV tooling and work packages provide the
operational link between an ROV and permanently installed equipment located on
the sea floor.
MOBILE OFFSHORE PRODUCTION SYSTEMS. We presently own two operating MOPS units,
the OCEAN PRODUCER and the SAN JACINTO and are converting a third, the OCEAN
LEGEND, from a jackup drilling rig. In addition, we operate and maintain the
ZAFIRO PRODUCER on behalf of a major oil company.
We also undertake engineering and project management of MOPS-related
projects. We have managed the conversion of a jackup to a production unit and
in-field modifications to the ZAFIRO PRODUCER. We also perform engineering
studies for customers evaluating MOPS field development projects. In addition,
we own two out-of-service semi-submersible offshore rigs and a tanker, each
capable of being converted to a MOPS unit or other suitable service.
OTHER SERVICES. We provide oilfield diving, non-destructive inspection and
testing services and supporting vessel operations, which are utilized
principally in inspection, repair and maintenance activities. We also perform
subsea intervention and hardware installation services from our Ocean
Intervention-class vessels. These services include: subsea well tie-backs;
pipeline/flowline tie-ins and repairs; pipeline crossings; and umbilical, riser
and jumper spool installations.
We supply commercial diving services to the oil and gas industry using the
traditional techniques of air, mixed gas and saturation diving, all of which use
surface-supplied breathing gas. We do not use divers in water depths greater
than 1,000 feet. We also use atmospheric diving systems, which enclose the
operator in a surface pressure diving suit, in water depths up to 2,300 feet.
K3
<PAGE>
Through our Solus Schall division ("Solus Schall"), we offer a wide range of
inspection services to customers required to obtain third-party inspections to
satisfy contractual structural specifications, internal safety standards or
regulatory requirements. We focus 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.
ADVANCED TECHNOLOGIES
Our ADTECH segment provides underwater intervention, engineering services and
related manufacturing to meet a variety of industrial requirements, including
ship husbandry, search and recovery, subsea telecommunications cable
installation, maintenance and repair, civil works projects and commercial theme
park animation. We do this in part by extending the use of existing assets and
technology developed in oilfield operations to new applications.
We work for customers having specialized requirements in underwater or other
environments outside the oil and gas industry. We provide deep ocean search and
recovery services for governmental bodies, including the U.S. Navy. In other
services for the Navy, we provide 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. Through a joint
venture, we also maintain and operate deepwater cable lay and maintenance
vehicles.
We design and operate ROVs that are capable of being worked in water depths
to 25,000 feet. Our other specialized equipment includes ROV cable lay and
maintenance equipment rated to 5,000 feet and deep tow, side scan sonar systems
designed for use in depths to 20,000 feet. In 2000, we located and recovered the
Mercury space capsule LIBERTY BELL 7 from a water depth of 16,100 feet.
We also design and develop specialized tools and build ROV systems to
customer specifications for use in deepwater and hazardous environments.
As part of ADTECH, Oceaneering Space and Thermal Systems ("OSTS") directs
our efforts towards applying undersea technology and experience in the space
industry. We have worked with the National Aeronautics and Space Administration
("NASA") and NASA subcontractors on a variety of projects including portable
life-support systems, tools and robotic systems and standards and guidelines to
ensure robotic compatibility for space station equipment and payloads. OSTS also
supports 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. OSTS'
activities substantially depend on continued government funding for space
programs.
MARKETING
OFFSHORE OIL AND GAS. Oil and gas exploration and development expenditures
fluctuate from year to year. In particular, budgetary approval for more
expensive drilling and production in deepwater, an area in which we have a high
degree of focus, may be postponed or suspended during periods when exploration
and production companies reduce their offshore capital spending.
We market our ROVs, Subsea Products and Other Services to domestic,
international and foreign national oil and gas companies engaged in offshore
exploration, development and production. We also provide services as a
subcontractor to other oilfield service companies operating as prime
contractors. Customers for these services typically award contracts on a
competitive bid basis. These contracts are typically short-term in duration.
We market our Mobile Offshore Production Systems primarily to international
and foreign national oil and gas companies. We offer MOPS for extended well
testing, early production and development of marginal fields and prospects in
areas lacking pipelines and processing infrastructure. MOPS contracts are
typically awarded on a competitive basis, generally for periods of one or more
years.
ADVANCED TECHNOLOGIES. We market our marine services and related engineering
services to government agencies, major defense contractors, NASA subcontractors
and telecommunications, construction and other industrial customers outside the
energy sector. We also market to insurance companies, salvage associations and
other customers who have requirements for specialized operations in deep water.
MAJOR CUSTOMERS. Our top five customers in each of 2000, 1999 and 1998 accounted
for approximately 25%, 25% and 26%, respectively, of our consolidated revenues.
No single customer accounted for more than 10% of our consolidated revenues in
any of those three years. While we do not depend on any one customer, the loss
of one of our significant customers could, at least on a short-term basis, have
an adverse effect on our results of operations.
K4
<PAGE>
COMPETITION
Our businesses are highly competitive.
OFFSHORE OIL AND GAS. ROVS. We are the world's largest owner/operator of work
class ROVs employed in oil and gas related operations, with an estimated 28%
market share. At March 31, 2000 we had 95 work class ROVs in service. We compete
with several major companies on a worldwide basis and with numerous others
operating locally in various areas. We have fewer competitors in deeper water
depths, as more sophisticated equipment and technology is needed in deeper
water. We estimate that we provided ROV drilling support on approximately 50% of
the wells drilled worldwide in water depths of 1,000 feet or more and
approximately 65% of the wells drilled worldwide in water depths of 3,000 feet
or more.
Competition for ROV services historically has been based on equipment
availability, location of or ability to deploy the 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 our markets.
MOPS. We believe we are well positioned to compete in the MOPS market through
our ability to identify and offer optimum solutions, supply equipment and
utilize the expertise in associated subsea technology and offshore construction
and operations gained through our extensive operational experience worldwide. We
are one of many companies that offer leased MOPS units.
SUBSEA PRODUCTS. Although there are many competitors offering either specialized
products or operating in limited geographic areas, we believe we are one of two
companies that compete on a worldwide basis for the provision of thermoplastic
subsea control umbilical cables.
OTHER SERVICES. We believe we are one of several companies that provide
underwater services on a worldwide basis. We compete for contracts with the
other worldwide companies and numerous others operating locally in various
areas. We believe that our ability to provide a wide range of underwater
services, including technological applications in deeper water (greater than
1,000 feet) on a worldwide basis, should enable us to compete effectively in the
oilfield exploration and development market. In some cases involving projects
that require less sophisticated equipment, small companies have been able to bid
for contracts at prices uneconomic to us.
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. We believe that our 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 us to compete effectively in our selected
inspection services market segments.
Frequently, oil and gas companies use prequalification procedures that
reduce the number of prospective bidders for their projects. In some countries,
political considerations tend to favor local contractors.
ADVANCED TECHNOLOGIES. We believe our specialized ROV assets and experience in
deepwater operations give us an advantage in obtaining contracts in water depths
greater than 5,000 feet. We have fewer competitors in deeper water depths, due
to the advanced technical knowledge and sophisticated equipment required for
deepwater operations.
Engineering services is a very broad market with a large number of
competitors. We compete in specialized areas in which we can combine our
extensive program management experience, mechanical engineering expertise and
the capability to continue the development of conceptual project designs into
the manufacture of prototype equipment.
We also use the administrative and operational support structures of our
Offshore Oil and Gas business to identify opportunities in foreign countries and
to provide additional local support for services provided to ADTECH's customers.
SEASONALITY, BACKLOG AND RESEARCH AND DEVELOPMENT
A material amount of our consolidated revenues is generated from contracts for
marine services in the Gulf of Mexico and North Sea, which are usually more
active from April through November compared to the rest of the year. However,
our exit from the diving sector in the North Sea in early 1998 and the
substantial number of multi-year ROV contracts we entered into since 1997 have
reduced the seasonality of our ROV and Other Services operations. Revenues in
our MOPS, Subsea Products and Advanced Technologies segments are generally not
seasonal.
K5
<PAGE>
The amounts of backlog orders we believe to be firm as of March 31, 2000 and
1999 were as follows:
AS OF MARCH 31, 2000 AS OF MARCH 31, 1999
----------------------- -----------------------
(IN MILLIONS) (IN MILLIONS)
Offshore Oil and Gas TOTAL 1 + YR* TOTAL 1 + YR*
---------- ---------- ---------- ----------
ROVs ..................... $ 208 $ 129 $ 125 $ 77
Subsea Products .......... 39 -- 17 --
MOPS ..................... 108 94 11 --
Other Services ........... 42 15 55 26
---------- ---------- ---------- ----------
Total Offshore Oil and Gas ... 397 238 208 103
ADTECH ....................... 51 1 48 8
---------- ---------- ---------- ----------
Total ................... $ 448 $ 239 $ 256 $ 111
========== ========== ========== ==========
* Represents amounts that were not expected to be performed within one year.
No material portion of our business is subject to renegotiation of profits
or termination of contracts by the United States government.
Our research and development expenditures were approximately $4 million, $5
million and $4 million during 2000, 1999 and 1998, respectively. These amounts
do not include the expenditures by others in connection with joint research
activities in which we participated or expenditures we incurred in connection
with research conducted during the course of performing our operations.
REGULATION
Our 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. Those developments may directly or indirectly affect our operations
and those of our 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 our capital expenditures, earnings
or competitive position.
While not a formal requirement, within our Offshore Oil and Gas business we
maintain various quality management systems. Our quality management systems in
the United Kingdom and Norway are certified to the equivalent of ISO 9001 and
cover all our Offshore Oil and Gas products and services. The quality management
systems of OIE, Multiflex-US, Multiflex-UK and Multiflex-Brazil units of our
Subsea Products segment are each certified to ISO 9001 for their products and
services. The quality systems of both the OSTS and Oceaneering Technologies
units of ADTECH are also certified to ISO 9001. ISO 9001 is an internationally
recognized verification system for quality management established by the
International Standards Organization.
RISKS AND INSURANCE
Our 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. We insure our real and personal
property and equipment. Our vessels are insured against damage or loss including
war and pollution risks. We also carry workers' compensation, maritime
employer's liability, general liability, including third-party pollution and
other insurance customary in our businesses. We carry our insurance at levels of
coverage and deductibles which we consider financially prudent. On some
contracts, we may have certain risks for loss or damage to the customer's
facilities or for unexpected weather delays, which we may cover by special
insurance when we deem it advisable. In some jurisdictions, claims in personal
injury actions against us may include claims for amounts of punitive damages
that may not be covered by insurance.
The primary industry that we serve, oil and gas exploration and production,
is a cyclical industry and remains volatile, resulting in potentially large
fluctuations in demand for our Offshore Oil and Gas business, which could result
in significant changes in our revenues and profits. Although this industry
continues to be our principal market, we also perform services for government
agencies and firms in the telecommunications, aerospace and marine engineering
and construction industries.
We operate primarily as a services company under dayrate contracts. However,
we also own 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.
We conduct a significant part of our operations outside the United States.
For the years ended March 31, 2000, 1999 and 1998, foreign operations accounted
for 50%, 48% and 51% of our consolidated revenues, respectively.
K6
<PAGE>
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. Certain of the
countries in which we operate have enacted exchange controls to regulate foreign
currency exchange. Exchange controls in some of the countries in which we
operate 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. Typically, we are 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 our expense requirements in local
currencies.
EMPLOYEES
As of March 31, 2000, we had approximately 3,200 employees. Our workforce varies
seasonally and peaks during the summer months. Approximately 7% of our employees
are represented by unions. We consider our relations with our employees to be
satisfactory.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
For financial information about our geographic areas of operation, please see
the table in Note 6 of the Notes to Consolidated Financial Statements in this
report, which presents revenues and assets attributable to each of our
geographic areas for the years ended March 31 2000, 1999 and 1998.
ITEM 2. PROPERTIES.
See Item 1 - "Business - Description of Business - Offshore Oil and Gas" and
"Business - Description of Business - Advanced Technologies" for a description
of equipment and manufacturing facilities used in providing our services and
products.
We maintain office, shop and yard facilities in various parts of the world
to support our operations. We consider these facilities, described below, to be
suitable for their intended use. In these locations, we typically lease or own
office facilities for our 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. All sites
are available to support any of our business segments as the need arises. The
groupings which follow associate our significant offices with the primary
business segment they serve.
OFFSHORE OIL AND GAS. In general, the ROV and Other Services segments share
facilities. The largest location is in Morgan City, Louisiana and consists of
ROV manufacturing and training facilities, open and covered storage space and
offices. The Morgan City facilities primarily support operations in the United
States. The regional support offices for our North Sea and Southeast Asia
operations are located in Aberdeen, Scotland and Singapore, respectively. We
also have operational bases in various other locations, the most significant of
which are in Norway, the United Arab Emirates and Nigeria. These facilities are
located on leased properties.
We use workshop and office space in Houston, Texas in both our MOPS and
Subsea Products business segments. Our manufacturing facilities are located in
the Houston, Texas, Edinburgh, Scotland and Rio de Janeiro, Brazil areas.
Operations of the FPSO OCEAN PRODUCER and PB SAN JACINTO are supported through
our regional offices in Aberdeen and Singapore, respectively. Operations of the
MOPU OCEAN LEGEND will be supported from our office in Perth, Australia that we
opened in 2000. The manufacturing facilities are located on properties we own;
the other facilities are on properties we lease.
ADVANCED TECHNOLOGIES. ADTECH's primary facilities are leased offices and
workshops in Upper Marlboro, Maryland, which support our services for the U.S.
Navy and our commercial theme park animation activities. We also lease
facilities in Houston, Texas, which primarily support OSTS and our subsea
telecommunications installation joint venture.
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, we are subject to actions for damages
alleging personal injury under the general maritime laws of the United States,
including the Jones Act, for alleged negligence. We report actions for personal
injury to our insurance carriers and believe that the settlement or disposition
of such suits will not have a material effect on our financial position or
results of operations. For additional information, see "Commitments and
Contingencies - Litigation" in Note 5 of the Notes to Consolidated Financial
Statements included in this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of our security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the year
ended March 31, 2000.
K7
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EXECUTIVE OFFICERS OF THE REGISTRANT.
EXECUTIVE OFFICERS. The following information relates to our executive officers
as of June 1, 2000:
<TABLE>
<CAPTION>
OFFICER EMPLOYEE
NAME AGE POSITION SINCE SINCE
-------------- --- ------------------------------ ------- --------
<S> <C> <C> <C> <C>
John R. Huff 54 Chairman of the Board and 1986 1986
Chief Executive Officer
T. Jay Collins 53 President and
Chief Operating Officer 1993 1993
Marvin J. Migura 49 Senior Vice President and 1995 1995
Chief Financial Officer
Bruce L. Crager 47 Senior Vice President 1988 1988
M. Kevin McEvoy 49 Senior Vice President 1990 1979
George R. Haubenreich, Jr. 52 Senior Vice President, General 1988 1988
Counsel and Secretary
John L. Zachary 46 Controller and Chief 1998 1988
Accounting Officer
</TABLE>
Each executive officer serves at the discretion of our Chief Executive Officer
and our Board of Directors and is subject to reelection or reappointment each
year after the annual meeting of our shareholders. We do 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.
There are no family relationships between any director or executive officer.
BUSINESS EXPERIENCE. John R. Huff joined Oceaneering as a director, President
and Chief Executive Officer in 1986. He was elected Chairman of the Board in
August 1990. He is a director of BJ Services Company, Suncor Energy Inc. and
Triton Energy Limited.
T. Jay Collins, President and Chief Operating Officer, joined Oceaneering in
October 1993 as Senior Vice President and Chief Financial Officer. In May 1995,
he was appointed Executive Vice President - Oilfield Marine Services and held
that position until attaining his present position in November 1998. He is a
director of Friede Goldman Halter, Inc.
Marvin J. Migura, Senior Vice President and Chief Financial Officer, joined
Oceaneering 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 Oceaneering 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.
M. Kevin McEvoy, Senior Vice President, joined Oceaneering in 1984 when we
acquired Solus Ocean Systems, Inc. Since 1984, he has held various senior
management positions in each of our operating groups and geographic areas. He
was appointed a Vice President in 1990 and Senior Vice President in November
1998.
George R. Haubenreich, Jr., Senior Vice President, General Counsel and
Secretary, joined Oceaneering in 1988.
John L. Zachary, Controller and Chief Accounting Officer, joined Oceaneering in
1988 as Controller for the Advanced Technologies and MOPS divisions. From 1993
until 1998, he was Controller for the Americas Region and was appointed to his
present position in October 1998.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.
We are including the following discussion to inform our existing and potential
security holders generally of some of the risks and uncertainties that can
affect our company and to take advantage of the "safe harbor" protection for
forward-looking statements that applicable federal securities law affords.
K8
<PAGE>
From time to time, our management or persons acting on our behalf make
forward-looking statements to inform existing and potential security holders
about our company. These statements may include projections and estimates
concerning the timing and success of specific projects and our future backlog,
revenues, income and capital spending. Forward-looking statements are generally
accompanied by words such as "estimate," "project," "predict," "believe,"
"expect," "anticipate," "plan," "goal" or other words that convey the
uncertainty of future events or outcomes. In addition, sometimes we will
specifically describe a statement as being a forward-looking statement and refer
to this cautionary statement.
In addition, various statements this report contains, including those that
express a belief, expectation or intention, as well as those that are not
statements of historical fact, are forward-looking statements. Those
forward-looking statements appear in Item 1 - "Business," Item 2 - "Properties"
and Item 3 - "Legal Proceedings" in Part I of this report and in Item 7 -
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," Item 7A - "Quantitative and Qualitative Disclosures About Market
Risk" and in the Notes to Consolidated Financial Statements incorporated into
Item 8 of Part II of this report and elsewhere in this report. These
forward-looking statements speak only as of the date of this report, we disclaim
any obligation to update these statements, and we caution you not to rely unduly
on them. We have based these forward-looking statements on our current
expectations and assumptions about future events. While our management considers
these expectations and assumptions to be reasonable, they are inherently subject
to significant business, economic, competitive, regulatory and other risks,
contingencies and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and uncertainties
relate to, among other matters, the following:
o general economic and business conditions and industry trends;
o the continued strength of the industry segments in which we are involved;
o decisions about offshore developments to be made by oil and gas
companies;
o the highly competitive nature of our businesses;
o our future financial performance, including availability, terms and
deployment of capital;
o the continued availability of qualified personnel;
o operating risks normally incident to offshore exploration, development
and production operations;
o changes in, or our ability to comply with, government regulations,
including those relating to the environment;
o rapid technological changes; and
o social, political and economic situations in foreign countries where we
do business.
We believe the items we have outlined above are important factors that could
cause our actual results to differ materially from those expressed in a
forward-looking statement made in this report or elsewhere by us or on our
behalf. We have discussed most of these factors in more detail elsewhere in this
report. These factors are not necessarily all the important factors that could
affect us. Unpredictable or unknown factors we have not discussed in this report
could also have material adverse effects on actual results of matters that are
the subject of our forward-looking statements. We do not intend to update our
description of important factors each time a potential important factor arises.
We advise our security holders that they should (1) be aware that important
factors we do not refer to above could affect the accuracy of our
forward-looking statements and (2) use caution and common sense when considering
our forward-looking statements.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Oceaneering's common stock is listed on the New York Stock Exchange under the
symbol OII. The following table sets forth, for the periods indicated, the high
and low sales prices for our common stock as reported on the New York Stock
Exchange (consolidated transaction reporting system) (the "NYSE"):
FISCAL 2000 FISCAL 1999
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
For the quarter ended:
June 30 ....... $18 1/8 $13 3/16 $ 24 $17 3/8
September 30 .. 23 5/8 16 18 1/8 8 3/4
December 31 ... 18 12 1/8 15 3/4 10 11/16
March 31 ...... 20 9/16 13 9/16 15 3/4 9 1/2
K9
<PAGE>
On June 22, 2000, there were 517 holders of record of our Common Stock. On
that date, the closing sales price, as quoted on the NYSE, was $19.75. We have
not made any Common Stock dividend payments since 1977 and we currently have no
plans to pay cash dividends. Our credit agreements contain restrictions on the
payment of dividends. See Note 3 to Notes to Consolidated Financial Statements
included in this report.
ITEM 6. SELECTED FINANCIAL DATA.
RESULTS OF OPERATIONS:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ................................................ $416,820 $400,322 $358,121 $368,773 $289,506
Cost of services (1) .................................... 345,178 314,638 282,830 290,801 234,731
-------- -------- -------- -------- --------
Gross margin ............................................ 71,642 85,684 75,291 77,972 54,775
Selling, general and administrative expenses ............ 39,343 41,328 39,009 36,363 34,589
-------- -------- -------- -------- --------
Income from operations .................................. $ 32,299 $ 44,356 $ 36,282 $ 41,609 $ 20,186
======== ======== ======== ======== ========
Net income .............................................. $ 16,784 $ 25,707 $ 22,001 $ 19,445 $ 12,357
Diluted earnings per share .............................. 0.73 1.12 0.93 0.81 0.53
Depreciation and amortization (2) ....................... 33,948 29,961 23,176 32,687 20,567
Capital expenditures .................................... 80,758 102,014 94,413 79,599 57,171
</TABLE>
OTHER FINANCIAL DATA:
<TABLE>
<CAPTION>
AS OF MARCH 31,
--------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT RATIOS) 2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Working capital ratio .................... 1.55 1.47 1.52 1.55 1.62
Working capital .......................... $ 52,775 $ 41,398 $ 44,890 $ 52,962 $ 42,427
Total assets ............................. 450,976 387,343 316,543 268,255 256,096
Long-term debt ........................... 128,000 100,312 54,626 -- 48,000
Total debt ............................... 128,312 100,618 54,919 -- 48,183
Shareholders' equity ..................... 195,700 179,439 160,322 156,334 127,098
</TABLE>
(1) 1997 includes a $25,047 gain on the disposition of an FPSO, a $7,980
impairment adjustment and a $7,980 provision for special drydocking.
(2) 1997 includes a $7,980 impairment adjustment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
All statements in this Form 10-K, other than statements of historical facts,
including, without limitation, statements regarding our 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. These forward-looking statements are subject to various
risks, uncertainties and assumptions, including those we refer to under the
heading "Cautionary Statement Concerning Forward-Looking Statements" in Part I
of this report. Although we believe 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
industries in which we operate, we can give no assurance that those expectations
will prove to have been correct. Accordingly, evaluation of our future prospects
must be made with caution when relying on forward-looking information.
LIQUIDITY AND CAPITAL RESOURCES
We consider our liquidity and capital resources adequate to support our
operations and internally generated growth initiatives. At March 31, 2000, we
had working capital of $53 million. Additionally, we had $102 million available
under committed credit facilities and $12 million was unused under uncommitted
lines of credit.
We expect operating cash flow to meet our ongoing annual cash requirements,
including debt service. Net income plus depreciation and amortization (commonly
referred to as cash flow from operations) was $51 million for 2000 compared to
$56 million and $45 million for 1999 and 1998, respectively.
Working capital was $53 million at the end of 2000 compared to $41 million
at the end of 1999 and $45 million at the end of 1998.
K10
<PAGE>
Capital expenditures for the years ended March 31, 2000, 1999 and 1998 were
$81 million, $102 million and $94 million, respectively. Capital expenditures in
2000 consisted of construction costs for our second dynamically positioned
multiservice support vessel ("MSV"), additions to our ROV fleet and the start of
the conversion of a jackup drilling rig to a mobile offshore production unit
("MOPU") for initial use offshore Western Australia under a three-year contract.
Capital expenditures in 1999 consisted of additions to our ROV fleet,
construction costs for two MSVs, one of which was placed in service prior to
March 31, 1999, a new umbilical plant in Brazil and the relocation and upgrading
of our umbilical plant in Scotland.
Capital expenditures in 1998 consisted of additions to our ROV fleet,
construction costs for the two MSVs 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 offshore rigs for potential
conversion to production systems or alternative service and expenditures on
leasehold improvements related to the relocation and consolidation of some of
our office and workshop facilities in the U.S.
Commitments for capital expenditures at the close of 2000 were approximately
$65 million for completion of the MOPU and $5 million for completion of our
second MSV.
In April 1997, we approved a plan to purchase up to a maximum of 3 million
shares of our common stock and 2.9 million shares were purchased under this plan
through March 31, 2000, at a total cost of $40 million.
At March 31, 2000, we had long-term debt of $128 million, which equated to a
40% debt to total capitalization ratio. In September 1998, we issued $100
million of 6.72% Senior Notes. We used the proceeds to repay the then
outstanding indebtedness under our prior revolving credit facility, which had
been incurred in the funding of capital expenditures and treasury stock
purchases. In October 1998, we replaced that revolving credit agreement with a
new five-year $80 million revolving credit facility. In March 2000, we added a
$50 million term loan facility which is available for drawing until March 30,
2001. Our debt to total capitalization ratio will vary from time to time
depending primarily upon our level of capital spending.
Because of our significant foreign operations, we are exposed to currency
fluctuations and exchange risks. We generally minimize these risks primarily
through matching, to the extent possible, revenues and expenses in the various
currencies in which we operate. However, due to the weakness in certain Asian
currencies during 1998, we recognized $1.0 million of losses as Other Expense.
Cumulative translation adjustments as of March 31, 2000 relate primarily to our
permanent investments in and loans to our foreign subsidiaries. Inflation has
not had a material effect on us 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
Our revenues were $417 million for 2000 compared to $400 million for 1999 and
$358 million for 1998. Our gross margins were $72 million for 2000 compared to
$86 million for 1999 and $75 million for 1998. As a percentage of revenue, gross
margins for the three years were 17%, 21% and 21%, respectively. Our net income
in 2000 was $16.8 million, a decrease of 35% from our net income of $25.7
million in 1999, which was 17% higher than the $22 million we reported for 1998.
Information on our business segments is shown in Note 6 of the Notes to
Consolidated Financial Statements included in this report.
OFFSHORE OIL AND GAS. Revenues for our Offshore Oil and Gas business for 2000
were $294 million compared to $301 million in 1999 and $272 million in 1998. The
income from operations ("Operating Income") from this business for 2000
decreased to $20.0 million compared to $35.9 million in 1999 and $25.2 million
in 1998.
In response to (1) continued increasing demand to support deepwater drilling
and (2) identified future construction and production maintenance work, we
extended our ROV fleet expansion program in 1997 by announcing plans for
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. We have added over
50 ROVs to our fleet during the last several years and we plan to add additional
vehicles at a rate dependent on market demand.
In 2000, we decided to sell our West Africa diving and related vessel assets
to focus on the growing deepwater service and specialty hardware markets in this
area which have potential for higher margins. In 1997, we decided to discontinue
offering diving services in the North Sea. Based on a review of actual and
expected operating results, we concluded that we would generate greater returns
by focusing on other business lines in the North Sea area. In March 1997 we
entered into an agreement to sell our 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. We continue to
provide diving services in other areas.
K11
<PAGE>
The table below sets out revenues and profitability for our Offshore Oil and
Gas business for 2000, 1999 and 1998.
FOR THE YEARS ENDED MARCH 31,
------------------------------------
(DOLLARS IN THOUSANDS) 2000 1999 1998
--------- --------- ---------
Offshore Oil and Gas
Remotely Operated Vehicles
Revenues ................ $ 94,617 $ 100,854 $ 83,729
Gross Margin ............ 22,832 25,657 23,665
Gross Margin % .......... 24% 25% 28%
Operating Income ........ 14,064 16,722 15,897
Operating Income % ...... 15% 17% 19%
Subsea Products
Revenues ................ 69,744 72,919 59,732
Gross Margin ............ 8,784 14,192 10,087
Gross Margin % .......... 13% 19% 17%
Operating Income ........ 1,499 6,389 3,270
Operating Income % ...... 2% 9% 5%
Mobile Offshore Production Systems
Revenues ................ 23,983 31,559 30,716
Gross Margin ............ 8,236 10,930 5,784
Gross Margin % .......... 34% 35% 19%
Operating Income ........ 7,629 9,478 4,216
Operating Income % ...... 32% 30% 14%
Other Services
Revenues ................ 105,505 95,748 97,638
Gross Margin ............ 11,391 19,256 17,842
Gross Margin % .......... 11% 20% 18%
Operating Income (Loss) . (3,169) 3,308 1,818
Operating Income (Loss) % (3)% 3% 2%
Total Offshore Oil and Gas
Revenues ................ 293,849 301,080 271,815
Gross Margin ............ 51,243 70,035 57,378
Gross Margin % .......... 17% 23% 21%
Operating Income ........ 20,023 35,897 25,201
Operating Income % ...... 7% 12% 9%
In 2000, ROV revenues declined 6% despite our additions to the ROV fleet.
Utilization declined from 82% to 62%. Both of our major oilfield ROV markets,
drill support and construction support, were adversely affected as oil and gas
companies had lower capital spending levels than those in the prior year. We
anticipate higher utilization and better results starting in the second half of
our Fiscal 2001. In 1999, ROV revenues increased 20% over 1998 due to the
increase in the number of units.
Subsea Products revenues were down 4% in 2000 despite the addition of an
umbilical plant in Brazil and the opening of our upgraded facility in Scotland.
Umbilical sales and margins were adversely affected by low market demand as oil
and gas companies had lower capital spending levels than those in the prior
years, particularly in Brazil. We anticipate an improved umbilical market in
2001 from increased subsea completion activity. In 1999, Subsea Products
revenues were up 22% over 1998 due to better market conditions for umbilical
sales; margins were also higher from improved utilization of plants and better
pricing.
MOPS 2000 revenues were 24% lower than 1999 as we completed a major
modification project for the ZAFIRO PRODUCER during the year. In addition,
production-based revenues from the OCEAN PRODUCER were lower due to declining
production levels. The ZAFIRO PRODUCER modification project contributed to the
higher margin percentage in 1999 as compared to 1998. We anticipate 2001 to be
relatively flat compared to 2000, with improved results the following year when
the OCEAN LEGEND commences operations.
K12
<PAGE>
Other Services revenues were up 10% in 2000 from 1999, primarily due to a
full year of operations from the MSV OCEAN INTERVENTION. However, margins
reflected very competitive market conditions resulting from reduced oilfield
capital spending. The net operating loss was attributed to two large fixed-price
jobs in India. Other Services revenues were relatively flat in 1999 compared to
1998. Slightly higher margins reflected better market conditions.
We anticipate improved revenues and margins in 2001 for our Offshore Oil and
Gas business from the continued expansion of the ROV fleet and an increased
contribution from the MSV OCEAN INTERVENTION, which we placed in service in
November 1998, and the OCEAN INTERVENTION II, which will be placed in service in
the second quarter of 2001.
ADVANCED TECHNOLOGIES. The table below sets out revenues and profitability for
this segment for 2000, 1999 and 1998.
FOR THE YEARS ENDED MARCH 31,
--------------------------------------
(DOLLARS IN THOUSANDS) 2000 1999 1998
-------- -------- --------
Revenues .......................... $122,971 $ 99,242 $ 86,306
Gross Margin ...................... 20,399 15,649 17,913
Gross Margin % .................... 17% 16% 21%
Operating Income .................. 12,276 8,459 11,081
Operating Income % ................ 10% 9% 13%
ADTECH revenues in 2000 were 24% higher than in 1999 due to increased work
levels for the Navy, an outfall job in Southeast Asia and more search and
recovery work. Margin percentages were relatively unchanged.
Revenues for this segment in 1999 increased from 1998 due to higher activity
in subsea telecommunications cable services and the design and assembly of
large, dynamic, animated figures for theme parks. Margins for this segment in
1999 declined due to lower profitability from search and recovery projects and
space-related product and service activities.
We anticipate lower revenues from ADTECH in the next fiscal year based on
the transfer of our subsea telecommunications cable activity to a joint venture.
OTHER. Interest expense increased over the three year period as a result of our
increased borrowings to fund capital expenditures. Interest expense is net of
capitalized interest of $1.8 million for 2000, $2.5 million for 1999 and
$800,000 for 1998.
Our effective tax rate, determined after consideration of valuation
allowances, foreign, state and local taxes, was 36%, 38% and 38% in 2000, 1999
and 1998, respectively.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are currently exposed to certain market risks arising from transactions we
have entered into in the normal course of business. These risks relate to
interest rate changes and fluctuations in foreign exchange rates. We do not
believe these risks are material. We have not entered into any market risk
sensitive instruments for trading purposes. We manage our exposure to interest
rate changes through the use of a combination of fixed and floating rate debt.
See Note 3 of Notes to Consolidated Financial Statements included in this report
for a description of our long-term debt agreements, interest rates and
maturities. We believe that significant interest rate changes will not have a
material near-term impact on our future earnings or cash flows. We manage our
exposure to changes in foreign exchange rates primarily through arranging
compensation in U.S. dollars or freely convertible currency and, to the extent
possible, by limiting compensation received in other currencies to amounts
necessary to meet obligations denominated in those currencies. We believe that a
significant fluctuation in the foreign exchange rates would not have a material
near-term effect on our future earnings or cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In this report, our consolidated financial statements and supplementary data
appear following the signature page of this report and are hereby incorporated
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
K13
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and nominees for election to our
Board of Directors is incorporated by reference from our definitive proxy
statement relating to our 2000 Annual Meeting of Shareholders to be filed on or
before July 31, 2000 pursuant to Regulation 14A under the Securities Exchange
Act of 1934. The information with respect to our executive officers is provided
under the heading "Executive Officers of the Registrant" following Item 4 of
Part I of this report.
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:
<TABLE>
<CAPTION>
REGISTRATION
OR FILE FORM OR REPORT EXHIBIT
NUMBER REPORT DATE NUMBER
------------ ------- ---------- -------
<S> <C> <C> <C> <C>
3 Articles of Incorporation and By-laws
*3.01 Certificate of Incorporation, as amended 0-8418 10-K March 1988 3(a)
*3.02 Amended and Restated By-Laws 1-10945 10-Q Dec. 1999 3.1
*3.03 Amendment to Certificate of Incorporation 33-36872 S-8 Sept. 1990 4(b)
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 Note Purchase Agreement dated as of September 8, 1998 relating to
$100,000,000 6.72% Senior Notes due September 8, 2010 1-10945 10-Q Sept. 1998 4.01
*4.04 Loan Agreement ($80,000,000 Revolving Credit Facility)
dated as of October 23, 1998 1-10945 10-Q Sept. 1998 4.02
</TABLE>
K14
<PAGE>
4.05 Loan Agreement ($50,000,000 Term Loan) dated as of
March 30, 2000
We and certain of our consolidated subsidiaries are parties to debt instruments
under which the total amount of securities authorized does not exceed 10 percent
of our total consolidated assets. Pursuant to paragraph 4(ii)(A) of Item 601(b)
of Regulation S-K, we agree to furnish a copy of those instruments to the
Securities and Exchange Commission on request.
<TABLE>
<CAPTION>
REGISTRATION
OR FILE FORM OR REPORT EXHIBIT
NUMBER REPORT DATE NUMBER
------------ ------- ---------- -------
<S> <C> <C> <C> <C>
10 Material contracts
*10.01+ Oceaneering Retirement Investment Plan, as amended 1-10945 10-K March 1996 10.02
*10.02+ Employment Agreement dated August 15, 1986 between
John R. Huff and Oceaneering 0-8418 10-K March 1987 10(l)
*10.03+ Addendum to Employment Agreement dated
February 22, 1996 between John R. Huff and Oceaneering 1-10945 10-K March 1997 10.04
*10.04+ Amended and Restated Supplemental Executive Retirement Plan 1-10945 10-Q Dec. 1999 10.1
*10.05+ 1999 Restricted Stock Award Incentive Agreements
dated August 19, 1999 1-10945 10-Q Sept. 1999 10.1
*10.06+ Senior Executive Severance Plan, as amended 0-8418 10-K March 1989 10(k)
*10.07+ Supplemental Senior Executive Severance Agreements, as amended 0-8418 10-K March 1989 10(l)
10.08+ 1999 Incentive Plan
10.09+ 2000 Bonus Award Plan
*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)
*10.14+ 1996 Incentive Plan of Oceaneering International, Inc. 1-10945 10-Q Sept. 1996 10.02
*10.15+ 1996 Restricted Stock Award Incentive Agreements
dated August 23, 1996 1-10945 10-Q Sept. 1996 10.03
*10.16+ 1997 Bonus Restricted Stock Award Agreements
dated April 22, 1997 1-10945 10-K March 1997 10.20
*10.17+ Amendment No. 1 to the Oceaneering
Retirement Investment Plan 1-10945 10-Q Sept. 1996 10.01
*10.18+ Amendment No. 1 to 1990 Nonemployee Director Stock
Option Plan 1-10945 10-K March 1999 10.19
*10.19+ 1998 Bonus Restricted Stock Award Agreements 1-10945 10-K March 1999 10.20
10.20+ 1999 Bonus Restricted Stock Award Agreements
21 Subsidiaries of the Registrant
23 Consent of Independent Public Accountants
24 Powers of Attorney
27 Financial Data Schedule
</TABLE>
* 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 pursuant to the requirements of 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.
K15
<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 28, 2000 By: JOHN R. HUFF
-------------------------------------------
John R. Huff
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------------------------------- -------------------------------- -------------
<S> <C> <C>
JOHN R. HUFF Principal Executive Officer, June 28, 2000
--------------------------------- Director
John R. Huff
MARVIN J. MIGURA Senior Vice President, June 28, 2000
--------------------------------- Principal Financial Officer
Marvin J. Migura
JOHN L. ZACHARY Controller, Principal June 28, 2000
-------------------------------- Accounting Officer
John L. Zachary
CHARLES B. EVANS* Director
DAVID S. HOOKER* Director
D. MICHAEL HUGHES* Director
HARRIS J. PAPPAS* Director
*By: GEORGE R. HAUBENREICH, JR. June 28, 2000
--------------------------
George R. Haubenreich, Jr.
Attorney-in-Fact
</TABLE>
K16
<PAGE>
OCEANEERING INTERNATIONAL, INC. & 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
All schedules for which provision is made in the applicable regulations of the
Securities and Exchange Commission have been omitted because they are not
required under the relevant instructions or because the required information is
included in the financial statements included herein or in the 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,
2000 and 1999 and the related consolidated statements of income, cash flows and
shareholders' equity for each of the three years in the period ended March 31,
2000. 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 auditing standards generally
accepted in the United States. 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, 2000 and 1999 and the
results of their operations and their cash flows for each of the three years in
the period ended March 31, 2000, in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
May 17, 2000
K17
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA) MARCH 31, 2000 MARCH 31, 1999
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................................ $ 11,001 $ 8,367
Accounts receivable, net of allowances for doubtful accounts
of $500 and $398 ...................................................................... 118,572 103,838
Prepaid expenses and other ............................................................... 18,990 16,859
--------------- ---------------
Total current assets .................................................................. 148,563 129,064
--------------- ---------------
PROPERTY AND EQUIPMENT, AT COST:
Marine services equipment ................................................................ 311,639 285,801
Mobile offshore production equipment ..................................................... 68,646 53,808
Manufacturing facilities ................................................................. 37,858 36,811
Other .................................................................................... 43,142 36,312
--------------- ---------------
461,285 412,732
Less accumulated depreciation ............................................................ 184,918 170,993
--------------- ---------------
Net property and equipment ............................................................ 276,367 241,739
--------------- ---------------
INVESTMENTS AND OTHER ASSETS:
Goodwill, net of amortization of $6,612 and $5,478 ....................................... 11,611 9,426
Other .................................................................................... 14,435 7,114
--------------- ---------------
TOTAL ASSETS ................................................................................. $ 450,976 $ 387,343
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ......................................................................... $ 34,593 $ 23,481
Accrued liabilities ...................................................................... 53,645 54,608
Income taxes payable ..................................................................... 7,238 9,271
Current portion of long-term debt 312 306
--------------- ---------------
Total current liabilities ............................................................. 95,788 87,666
--------------- ---------------
LONG-TERM DEBT, NET OF CURRENT PORTION ....................................................... 128,000 100,312
--------------- ---------------
OTHER LONG-TERM LIABILITIES .................................................................. 31,488 19,926
--------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, par value $0.25 per share; 90,000,000 shares
authorized; 24,017,046 shares issued ................................................. 6,004 6,004
Additional paid-in capital ............................................................... 77,972 82,421
Treasury stock; 1,197,705 and 1,653,922 shares at cost ................................... (16,050) (22,803)
Retained earnings ........................................................................ 140,493 123,709
Cumulative translation adjustments ....................................................... (12,719) (9,892)
--------------- ---------------
Total shareholders' equity ............................................................ 195,700 179,439
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................................... $ 450,976 $ 387,343
=============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
K18
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS MARCH 31,
-----------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES .................................................................. $ 416,820 $ 400,322 $ 358,121
COST OF SERVICES .......................................................... 345,178 314,638 282,830
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES .............................. 39,343 41,328 39,009
--------------- --------------- ---------------
Income from operations ................................................ 32,299 44,356 36,282
INTEREST INCOME ........................................................... 533 846 877
INTEREST EXPENSE, NET ..................................................... (5,936) (3,425) (637)
OTHER INCOME (EXPENSE), NET ............................................... (330) (447) (886)
MINORITY INTERESTS ........................................................ (341) 163 (41)
--------------- --------------- ---------------
Income before income taxes ............................................ 26,225 41,493 35,595
PROVISION FOR INCOME TAXES ................................................ (9,441) (15,786) (13,594)
--------------- --------------- ---------------
NET INCOME ................................................................ $ 16,784 $ 25,707 $ 22,001
=============== =============== ===============
BASIC EARNINGS PER SHARE .................................................. $ 0.74 $ 1.13 $ 0.95
DILUTED EARNINGS PER SHARE ................................................ $ 0.73 $ 1.12 $ 0.93
WEIGHTED AVERAGE NUMBER OF COMMON SHARES .................................. 22,757 22,708 23,233
INCREMENTAL SHARES FROM STOCK OPTIONS ..................................... 279 180 313
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND EQUIVALENTS .................. 23,036 22,888 23,546
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
K19
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------------------
(IN THOUSANDS) 2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................................ $ 16,784 $ 25,707 $ 22,001
--------------- --------------- ---------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ......................................... 33,948 29,961 23,176
Currency translation adjustments and other ............................ 1,582 (3,067) 5,090
Decrease (increase) in accounts receivable, net ....................... (14,734) 11,085 5,172
Increase in prepaid expenses and other current assets ................. (2,131) (9,782) (1,399)
Increase in other assets .............................................. (2,922) (571) (85)
Increase (decrease) in accounts payable ............................... 11,112 (2,590) (1,068)
Increase (decrease) in accrued liabilities ............................ (962) 3,223 (6,798)
Increase (decrease) in income taxes payable ........................... (2,801) 849 (792)
Increase (decrease) in other long-term liabilities .................... 13,192 4,505 (655)
--------------- --------------- ---------------
Total adjustments to net income ....................................... 36,284 33,613 22,641
--------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................. 53,068 59,320 44,642
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................... (80,758) (102,014) (94,413)
Dispositions of property and equipment ................................ 5,309 2,207 --
Decrease (increase) in investments .................................... (593) 1,058 --
--------------- --------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES ..................................... (76,042) (98,749) (94,413)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings, net of costs ...................... -- 98,537 54,626
Net proceeds (payments) on revolving credit and other long-term debt .. 27,419 (54,301) --
Proceeds from issuance of common stock ................................ 6,246 3,026 4,515
Purchases of treasury stock ........................................... (8,057) (8,530) (23,340)
--------------- --------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES ................................. 25,608 38,732 35,801
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...................... 2,634 (697) (13,970)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR ............................. 8,367 9,064 23,034
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS - END OF YEAR ................................... $ 11,001 $ 8,367 $ 9,064
=============== =============== ===============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
K20
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON STOCK ISSUED PAID-IN TREASURY RETAINED TRANSLATION
(IN THOUSANDS) SHARES AMOUNT CAPITAL STOCK EARNINGS ADJUSTMENTS TOTAL
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1997 ...... 24,017 $ 6,004 $ 81,153 $ (986) $ 76,001 $ (5,838) $ 156,334
Comprehensive Income:
Net Income ................ -- -- -- -- 22,001 -- 22,001
Translation adjustments ... -- -- -- -- -- (1,654) (1,654)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Comprehensive Income-- . -- -- -- -- 22,001 (1,654) 20,347
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
Comprehensive Income:
Net Income ............... -- -- -- -- 25,707 -- 25,707
Translation adjustments .. -- -- -- -- -- (2,400) (2,400)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Comprehensive Income-- . -- -- -- -- 25,707 (2,400) 23,307
Restricted Stock issued ...... -- -- (289) 289 -- -- --
Stock options exercised ...... -- -- (42) 250 -- -- 208
Restricted Stock plan
compensation expense ..... -- -- 1,310 -- -- -- 1,310
Treasury Stock purchases ..... -- -- -- (8,530) -- -- (8,530)
Treasury Stock issued
to Company Benefit
Plan, at average cost .... -- -- -- 2,822 -- -- 2,822
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 1999 ...... 24,017 6,004 82,421 (22,803) 123,709 (9,892) 179,439
Comprehensive Income:
Net Income ................ -- -- -- -- 16,784 -- 16,784
Translation adjustments ... -- -- -- -- -- (2,827) (2,827)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Total Comprehensive Income ... -- -- -- -- 16,784 (2,827) 13,957
Restricted Stock issued ...... -- -- (8,165) 8,165 -- -- --
Stock options exercised ...... -- -- 461 4,233 -- -- 4,694
Restricted Stock plan
compensation expense ..... -- -- 3,255 -- -- -- 3,255
Treasury Stock purchases ..... -- -- -- (8,057) -- -- (8,057)
Treasury Stock issued
to Company Benefit
Plan, at average cost .... -- -- -- 2,412 -- -- 2,412
------------ ------------ ------------ ------------ ------------ ------------ ------------
BALANCE, MARCH 31, 2000 ...... 24,017 $ 6,004 $ 77,972 $ (16,050) $ 140,493 $ (12,719) $ 195,700
============ ============ ============ ============ ============ ============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
K21
<PAGE>
OCEANEERING INTERNATIONAL, INC. & 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
("Oceaneering"). Oceaneering 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
Oceaneering's fiscal years.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include demand deposits and highly liquid investments
with original maturities of three months or less from the date of the
investment.
PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
MARCH 31,
---------------------
(IN THOUSANDS) 2000 1999
------- -------
Spare parts for remotely operated vehicles ......... $ 7,950 $ 8,384
Inventories ........................................ 5,593 4,646
Other .............................................. 5,447 3,829
------- -------
Total ........................................ $18,990 $16,859
======= =======
DEPRECIATION AND AMORTIZATION
Oceaneering provides for depreciation of Property and Equipment primarily on the
straight-line method over estimated useful lives of three to 20 years for marine
services equipment, ten years for mobile offshore production equipment and three
to 25 years for buildings, improvements and other equipment. Goodwill arising
from business acquisitions is amortized on the straight-line method over 15
years.
The costs of repair and maintenance of Property and Equipment are charged
to operations as incurred, while the costs of improvements are capitalized.
Interest is capitalized on assets where the construction period is anticipated
to be more than three months. Oceaneering does not allocate general
administrative costs to capital projects. 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.
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 Statement of
Financial Accounting Standards Board Standard Number ("SFAS") 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of." No impairment adjustments were made during the three years ended March 31,
2000.
REVENUE RECOGNITION
Oceaneering'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.
K22
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
INCOME TAXES
Oceaneering accounts for income taxes in accordance with SFAS 109, "Accounting
for Income Taxes."
FOREIGN CURRENCY TRANSLATION
The functional currency for several of Oceaneering's foreign subsidiaries is the
applicable local currency. Results of operations for foreign subsidiaries with
functional currencies other than the U.S. dollar are translated into U.S.
dollars using average exchange rates during the period. Assets and liabilities
of these foreign subsidiaries are translated into U.S. dollars using the
exchange rates in effect at the balance sheet date and the resulting translation
adjustments are accumulated as a component of Shareholders' Equity. All foreign
currency transaction gains and losses are recognized currently in the
Consolidated Statements of Income.
EARNINGS PER SHARE
Oceaneering has computed earnings per share in accordance with SFAS 128,
"Earnings Per Share," which became effective in the third quarter of 1998.
OTHER LONG-TERM LIABILITIES
At March 31, 2000 and 1999, Other Long-term Liabilities include $9.3 million and
$8.1 million, respectively, for self-insurance reserves not expected to be paid
out in the following year and $19.1 and $10.1 million, respectively, for
deferred income taxes.
RECLASSIFICATIONS
Certain amounts from prior years, particularly segment information, 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, 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.
NEW ACCOUNTING STANDARD
In June 1999, the Financial Accounting Standards Board amended SFAS 133
"Accounting for Derivative Instruments and Hedging Activities," by issuing SFAS
137 to defer the effective date of SFAS 133 to fiscal years beginning after June
15, 2000. Oceaneering believes the adoption of this statement will not have a
significant impact on its results of operations or financial position.
2. INCOME TAXES
Oceaneering and its domestic subsidiaries, including acquired companies from
their respective dates of acquisition, file a consolidated U.S. federal income
tax return. Oceaneering 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. On a geographic basis,
income before minority interests and income taxes attributable to the United
States was $10.5 million, $18.4 million and $14.7 million for 2000, 1999 and
1998, respectively. Income taxes are provided at the appropriate tax rates in
accordance with Oceaneering'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.
Oceaneering'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.
K23
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
The provisions for income taxes for the years ended March 31, 2000, 1999
and 1998 were as follows:
(IN THOUSANDS) 2000 1999 1998
-------- -------- --------
U.S. federal and state .................. $ 4,988 $ 12,205 $ 11,721
Foreign ................................. 4,453 3,581 1,873
-------- -------- --------
Total provision ......................... $ 9,441 $ 15,786 $ 13,594
======== ======== ========
Current ................................. $ 2,135 $ 13,040 $ 13,548
Deferred ................................ 7,306 2,746 46
-------- -------- --------
Total provision ......................... $ 9,441 $ 15,786 $ 13,594
======== ======== ========
Cash taxes paid ......................... $ 7,906 $ 12,191 $ 14,340
======== ======== ========
As of March 31, 2000, Oceaneering's United Kingdom subsidiary had net
operating loss carryforwards ("NOLs") of approximately $11 million which are
available to reduce future United Kingdom Corporation Tax which would otherwise
be payable.
As of March 31, 2000 and 1999, Oceaneering's worldwide deferred tax assets
and liabilities and related valuation reserves were as follows:
MARCH 31,
--------------------------
(IN THOUSANDS) 2000 1999
-------- --------
Gross deferred tax assets ........... $ 9,600 $ 13,858
Valuation allowance ................. (4,376) (10,384)
-------- --------
Net deferred tax assets ........ $ 5,224 $ 3,474
======== ========
Deferred tax liabilities ....... $ 19,123 $ 10,067
======== ========
Oceaneering's deferred tax assets consist primarily 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 primarily of depreciation and amortization book/tax differences and
provisions for income of foreign subsidiaries expected to be repatriated.
Oceaneering has established a valuation allowance for deferred tax assets
after taking into account factors that are likely to affect Oceaneering's
ability to utilize the tax assets. In particular, Oceaneering conducts its
business through several foreign subsidiaries and, although Oceaneering 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, 1997, 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:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
--------------------------------------------------
(IN THOUSANDS) 2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Computed U.S. statutory expense .............................. $ 9,298 $ 14,466 $ 12,473
Change in valuation allowances ............................... (6,008) (1,057) 1,122
Withholding taxes and foreign earnings taxed
at rates different from U.S. statutory rates ............. 3,375 1,172 (467)
State and local taxes and other, net ......................... 2,776 1,205 466
-------- -------- --------
Total provision for income taxes ............................. $ 9,441 $ 15,786 $ 13,594
======== ======== ========
</TABLE>
K24
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
3. DEBT
Long-term Debt consisted of the following:
MARCH 31,
-------------------------
(IN THOUSANDS) 2000 1999
--------- ---------
6.72% Senior Notes ...................... $ 100,000 $ 100,000
Revolving credit agreement .............. 28,000 --
Capital lease ........................... 312 618
Term loan agreement ..................... -- --
--------- ---------
Long-term Debt ..................... 128,312 100,618
Current portion ......................... (312) (306)
--------- ---------
Long-term Debt, net of current portion .. $ 128,000 $ 100,312
========= =========
In September 1998, Oceaneering issued $100 million aggregate principal
amount of 6.72% Senior Notes due 2010. The net proceeds were $98.6 million after
issuance costs and were used to retire existing debt. The notes have an average
life of ten years and are scheduled to be paid in five equal annual installments
beginning September 2006.
In October 1998, Oceaneering entered into an $80 million revolving credit
facility (the "Credit Agreement") to replace its prior one. There is a
commitment fee ranging from .20% to .25% per annum, depending on Oceaneering's
debt to capitalization ratio, on the unused portion of the banks' commitments.
Principal maturity is in October 2003. Under the Credit Agreement, Oceaneering
has the option to borrow dollars at the London Interbank Offered Rate ("LIBOR")
plus a margin ranging from .50% to 1.00%, depending on Oceaneering's debt to
capitalization ratio, or at the agent bank's prime rate.
In March 2000, Oceaneering entered into a four year, $50 million term loan
agreement (the "Term Loan"). Borrowings under the Term Loan can be made until
March 2001 and principal repayments commence in October 2001 with final maturity
in April 2004. There are no commitment fees on the Term Loan. Under the Term
Loan, Oceaneering has the option to borrow dollars at LIBOR plus a margin
ranging from .75% to 1.25%, depending on Oceaneering's debt to capitalization
ratio, or at the agent bank's prime rate.
All three agreements contain similar restrictive covenants as to minimum net
worth, debt to capitalization ratio, fixed charge coverage, interest coverage
and restricted payments. Restricted payments, which include dividends and
treasury stock purchases, are limited from April 1, 1998, on a net basis, to the
sum of $25 million plus 50% of Oceaneering's consolidated net income after April
1, 1998, plus cash proceeds from any sales of common stock.
Oceaneering has uncommitted credit agreements with banks totaling $29
million for use for borrowings and letters of credit. As of March 31, 2000,
Oceaneering had approximately $17 million in letters of credit outstanding under
these agreements.
Cash interest payments of $7.7 million, $5.7 million and $1.2 million were
made in 2000, 1999 and 1998, respectively. Interest charges of $1.8 million in
2000, $2.5 million in 1999 and $800,000 in 1998 were capitalized as part of
construction in progress.
4. EMPLOYEE BENEFIT PLANS AND SHAREHOLDER RIGHTS PLAN
RETIREMENT INVESTMENT PLANS
Oceaneering has three separate employee retirement investment plans which, taken
together, cover most of 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
Oceaneering to contribute the deferred amount to the plan. Oceaneering matches a
portion of the deferred compensation. Oceaneering's contributions to the plan
were $2,867,000, $2,508,000 and $1,960,000 for the plan years ended December 31,
1999, 1998 and 1997, respectively.
K25
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
The second plan is the Oceaneering International Services Pension Scheme for
employees in the United Kingdom. Under this plan, employees may contribute a
portion of their gross monthly salary. Oceaneering also contributes an amount
equal to a portion of the participant's gross monthly salary. The plan assets
exceed vested benefits and are not material to the assets of Oceaneering.
Company contributions to this plan for the years ended March 31, 2000, 1999 and
1998 were $32,000, $34,000 and $160,000, respectively.
The third plan is the Oceaneering International, Inc. Supplemental Executive
Retirement Plan, which covers selected key management employees and executives
of Oceaneering as approved by the Compensation Committee of Oceaneering's Board
of Directors (the "Compensation Committee"). This plan replaced a prior
Executive Retirement Plan effective June 30, 1997. Expense related to the prior
plan during the year ended March 31, 1998 was $576,000. Under the new plan,
Oceaneering 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. Expense related to this plan during the years
ended March 31, 2000, 1999 and 1998 was $972,000, $980,000 and $668,000,
respectively.
INCENTIVE AND STOCK OPTION PLANS
Oceaneering has in effect shareholder-approved incentive plans.
Under the 1996 and 1999 Incentive Plans, a total of 1,165,000 and 1,450,000
shares of Common Stock of Oceaneering, respectively, were made available for
awards to employees and other persons (excluding nonemployee directors except
with respect to automatic grants as described below) having an important
business relationship or affiliation with Oceaneering. Under the 1999 Incentive
Plan, each director of Oceaneering is automatically granted an option to
purchase 10,000 shares of Common Stock on the date the director becomes a
nonemployee director and each year thereafter at an exercise price per share
equal to the fair market value of a share of Common Stock on the date the option
was granted. These options become fully exercisable six months following the
date of grant. The 1996 and 1999 Incentive Plans and a similar
shareholder-approved 1990 Incentive Plan (the "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 and
stock and cash awards. The exercise price for each option is not less than the
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, generally, 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.
During 1999 and 2000, the Compensation Committee granted restricted Common
Stock of Oceaneering to certain of its key executives. In 1998, no such
restricted stock grants were made. These grants are subject to earning
requirements on the basis of a percentage change between the price of the Common
Stock of Oceaneering versus the average of the common stock price of a peer
group of companies over three- and one-year time periods, respectively. Up to
one-third of the total grant made in 2000 may be earned each year depending on
Oceaneering's cumulative Common Stock performance, with any amount earned
subject to vesting in four equal installments over a four-year period
conditional upon continued employment. All of the total grant made in 1999 may
be similarly earned at the end of one year, subject to vesting. At the time of
each vesting, a participant receives a tax assistance payment for which the
participant must reimburse Oceaneering if the vested Common Stock is sold by the
participant within three years after the vesting date. As of March 31, 2000,
none of the grant made in 2000 was earned and the entire grant made in 1999 was
earned. As of March 31, 2000, a total of 763,250 shares of restricted stock was
outstanding under these and former, similar grants, of which 214,250 shares were
earned, subject to vesting requirements. The numbers and weighted average grant
date fair values of restricted stock granted were 549,000 and $17.06,
respectively, during 2000 and 9,000 and $16.83, respectively, during 1999. In
April 1997, June 1998 and June 1999, certain key executives also elected to
receive restricted Common Stock of Oceaneering totaling 44,968, 35,920 and
42,812 shares with grant date fair values of $14.63, $17.94 and $16.56 per
share, respectively, subject to similar vesting requirements and tax assistance
payments, in lieu of cash for all or part of their 1997, 1998 and 1999 bonus
awards. Each grantee of shares of restricted stock mentioned in this paragraph
is deemed to be the record owner of those shares during the restriction period,
with the right to vote and receive any dividends on those shares.
K26
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
Oceaneering accounts for stock options issued under plans pursuant to APB
Opinion No. 25, under which no compensation cost is recognized unless options
are granted at an option price below the fair market value of the stock at the
date of the grant. Had compensation cost for these stock options been determined
consistent with SFAS 123," Accounting for Stock-Based Compensation,"
Oceaneering's pro forma net income and diluted earnings per share for 2000, 1999
and 1998 would have been $15,442,000, $24,735,000 and $21,373,000, respectively,
and $0.67, $1.08 and $0.92, respectively.
Information regarding these option plans for 2000, 1999 and 1998 is as
follows:
WEIGHTED
SHARES AVERAGE
UNDER EXERCISE
OPTION PRICE
---------- ----------
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 14.56
Granted ........................................ 481,900 10.43
Exercised ...................................... (18,090) 12.63
Forfeited ...................................... (61,980) 15.40
---------- ----------
Balance at March 31, 1999 ......................... 1,685,170 13.37
Granted ........................................ 384,000 16.88
Exercised ...................................... (319,760) 12.48
Forfeited ...................................... (45,280) 14.12
---------- ----------
Balance at March 31, 2000 ......................... 1,704,130 $ 14.31
========== ==========
The weighted average fair value of options granted in 2000, 1999 and 1998
was $8.90, $5.86 and $9.20, respectively. The fair value of the stock options
granted was estimated on the date of grant using the Black-Scholes option
pricing model with the following assumptions:
2000 1999 1998
----- ----- -----
Risk-free interest rate ..................... 5.87% 5.34% 6.47%
Expected dividend yield ..................... 0% 0% 0%
Expected life ............................... 6 years 6 years 6 years
Expected volatility ......................... 46.14% 42.27% 38.48%
Options outstanding at March 31, 2000 are composed of the following:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
---------------------------------------------------- -----------------------------------
WEIGHTED
NUMBER OF AVERAGE WEIGHTED NUMBER OF WEIGHTED
RANGE OF SHARES AT REMAINING AVERAGE SHARES AT AVERAGE
EXERCISE MARCH 31, CONTRACTUAL EXERCISE MARCH 31, EXERCISE
PRICES 2000 LIFE (YEARS) PRICE 2000 PRICE
------------------------------------- --------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$4.72 - 10.24 ....................... 523,625 3.15 $ 9.88 228,500 $ 9.44
$10.25 - 16.55 ...................... 559,105 4.54 14.12 393,295 13.65
$16.56 - 20.34 ...................... 621,400 3.56 18.21 161,150 20.13
</TABLE>
At March 31, 2000, there were 638,400 shares under these plans available for
grant, of which 636,400 could be used for awarding stock options, stock
appreciation rights, stock and cash awards to employees, subject to no more than
76,600 shares being used for awards other than stock options or stock
appreciation rights to employees.
SHAREHOLDER RIGHTS PLAN
On November 20, 1992, Oceaneering's Board of Directors adopted a Shareholder
Rights Plan and, in accordance with the plan, declared a dividend of one
preferred share purchase right for each outstanding share of Oceaneering's
Common Stock. The plan will cause substantial dilution to a party that attempts
to acquire Oceaneering 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.
K27
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
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, 2000, Oceaneering occupied several facilities under noncancellable
operating leases expiring at various dates through 2023. Future minimum rentals
under these leases are as follows:
(in thousands)
2001 $ 4,280
2002 3,071
2003 2,179
2004 1,958
2005 1,625
Thereafter 7,524
-------
Total Lease Commitments $20,637
=======
Rental expense, which includes hire of vessels, specialized equipment and
real estate rental, was approximately $22 million, $18 million and $19 million
for the years ended March 31, 2000, 1999 and 1998, respectively.
INSURANCE
Oceaneering self-insures for workers' compensation, maritime employer's
liability and comprehensive general liability claims to levels it considers
financially prudent and carries insurance after it reaches the initial claim
levels, which can be by occurrence or in the aggregate. Oceaneering determines
the level of accruals by reviewing its historical experience and current year
claim activity. It does not record accruals 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 Oceaneering is established for each year using management estimates
and based on prior experience. Oceaneering's management believes that
Oceaneering has established adequate accruals for expected liabilities arising
from those obligations.
LITIGATION
Various actions and claims are pending against Oceaneering, most of which are
covered by insurance. In the opinion of Oceaneering's 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
Oceaneering.
LETTERS OF CREDIT
Oceaneering had $17 million and $10 million in letters of credit outstanding as
of March 31, 2000 and 1999, respectively, as guarantees in force for
self-insurance requirements and 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 Oceaneering to concentrations of
credit risk are primarily cash and cash equivalents, long-term bank and other
borrowings and accounts receivable. The carrying values of cash and cash
equivalents and bank borrowings approximates their fair values due to the short
maturity of those instruments or the short-term duration of the associated
interest rate periods. Accounts receivable are generated from a broad and
diverse group of customers primarily from within the energy industry, which is
Oceaneering's major source of revenues. Oceaneering maintains an allowance for
doubtful accounts based on expected collectibility.
Oceaneering estimated the fair value of its $100 million of 6.72% Senior
Notes (see Note 3) to be $92 million as of March 31, 2000. This estimate was
arrived at by computing the present value of the future principal and interest
payments using a yield-to-maturity interest rate for securities of similar
quality and term.
K28
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
6. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
BUSINESS SEGMENT INFORMATION
Oceaneering supplies a comprehensive range of integrated technical services to a
variety of industries and is one of the world's largest underwater services
contractors. Oceaneering's Offshore Oil and Gas business consists of remotely
operated vehicles ("ROVs"), Subsea Products, Mobile Offshore Production Systems
and Other Services. Oceaneering's Advanced Technologies business provides
project management, engineering services and equipment for applications in harsh
environments in non-oilfield markets.
The following table summarizes certain financial data by business segment:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------------------
(IN THOUSANDS) 2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
REVENUES
Offshore Oil and Gas
Remotely Operated Vehicles ........................................ $ 94,617 $ 100,854 $ 83,729
Subsea Products ................................................... 69,744 72,919 59,732
Mobile Offshore Production Systems ................................ 23,983 31,559 30,716
Other Services .................................................... 105,505 95,748 97,638
--------------- --------------- ---------------
Total Offshore Oil and Gas ........................................... 293,849 301,080 271,815
Advanced Technologies ................................................ 122,971 99,242 86,306
--------------- --------------- ---------------
Total ............................................................. $ 416,820 $ 400,322 $ 358,121
=============== =============== ===============
INCOME (LOSS) FROM OPERATIONS
Offshore Oil and Gas
Remotely Operated Vehicles ........................................ $ 14,064 $ 16,722 $ 15,897
Subsea Products ................................................... 1,499 6,389 3,270
Mobile Offshore Production Systems ................................ 7,629 9,478 4,216
Other Services .................................................... (3,169) 3,308 1,818
--------------- --------------- ---------------
Total Offshore Oil and Gas ........................................... 20,023 35,897 25,201
Advanced Technologies ................................................ 12,276 8,459 11,081
--------------- --------------- ---------------
Total ............................................................. $ 32,299 $ 44,356 $ 36,282
=============== =============== ===============
ASSETS
Offshore Oil and Gas
Remotely Operated Vehicles ........................................ $ 145,486 $ 132,709 $ 88,405
Subsea Products ................................................... 78,993 71,679 55,582
Mobile Offshore Production Systems ................................ 58,553 45,938 61,521
Other Services .................................................... 90,562 69,826 59,011
--------------- --------------- ---------------
Total Offshore Oil and Gas ........................................... 373,594 320,152 264,519
Advanced Technologies ................................................ 45,608 46,698 35,423
Other ................................................................ 31,774 20,493 16,601
--------------- --------------- ---------------
Total ............................................................. $ 450,976 $ 387,343 $ 316,543
=============== =============== ===============
</TABLE>
K29
<PAGE>
OCEANEERING INTERNATIONAL, INC. & SUBSIDIARIES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31,
------------------------------------------------------
(IN THOUSANDS) 2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
CAPITAL EXPENDITURES
Offshore Oil and Gas
Remotely Operated Vehicles ......................................... $ 29,614 $ 41,783 $ 33,924
Subsea Products .................................................... 4,700 25,951 3,800
Mobile Offshore Production Systems ................................. 16,590 1,854 29,636
Other Services ..................................................... 20,320 25,528 19,025
--------------- --------------- ---------------
Total Offshore Oil and Gas ............................................ 71,224 95,116 86,385
Advanced Technologies ................................................. 9,534 6,898 8,028
--------------- --------------- ---------------
Total .............................................................. $ 80,758 $ 102,014 $ 94,413
=============== =============== ===============
DEPRECIATION AND AMORTIZATION EXPENSES
Offshore Oil and Gas
Remotely Operated Vehicles ......................................... $ 13,827 $ 11,609 $ 9,021
Subsea Products .................................................... 4,212 3,215 2,684
Mobile Offshore Production Systems ................................. 4,239 4,409 3,456
Other Services ..................................................... 7,906 6,313 4,619
--------------- --------------- ---------------
Total Offshore Oil and Gas ............................................ 30,184 25,546 19,780
Advanced Technologies ................................................. 3,764 4,415 3,396
--------------- --------------- ---------------
Total .............................................................. $ 33,948 $ 29,961 $ 23,176
=============== =============== ===============
</TABLE>
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, certain prepaid expenses and other
current assets, certain investments and other assets have not been allocated to
particular business segments.
No individual customer accounted for more than 10% of revenues in 2000, 1999
or 1998.
GEOGRAPHIC OPERATING AREAS
The following table summarizes certain financial data by geographic area:
FOR THE YEARS ENDED MARCH 31,
-----------------------------------------------------------
(IN THOUSANDS) 2000 1999 1998
--------------- --------------- ---------------
REVENUES
United States ..... $ 207,415 $ 206,703 $ 173,878
Norway ............ 26,934 30,162 18,440
United Kingdom .... 26,504 34,641 33,615
Indonesia ......... 25,983 19,153 11,979
Other Asia ........ 41,381 33,451 27,652
Africa ............ 49,673 50,033 60,180
Other ............. 38,930 26,179 32,377
--------------- --------------- ---------------
TOTAL ............. $ 416,820 $ 400,322 $ 358,121
=============== =============== ===============
LONG-LIVED ASSETS
United States ..... $ 205,861 $ 156,457 $ 117,896
Europe ............ 46,614 44,043 20,789
Africa ............ 10,088 17,167 20,472
Asia .............. 22,494 21,625 22,398
Other ............. 14,738 15,547 1,743
--------------- --------------- ---------------
TOTAL ............. $ 299,795 $ 254,839 $ 183,298
=============== =============== ===============
K30
<PAGE>
7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
MARCH 31,
-----------------
(IN THOUSANDS) 2000 1999
------- -------
Payroll and related costs ...................... $15,583 $18,629
Accrued job costs .............................. 19,972 16,846
Other .......................................... 18,090 19,133
------- -------
Total Accrued Liabilities ...................... $53,645 $54,608
======= =======
K31
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended March 31, 2000
------------------------------------------------------------------------
QUARTER ENDED JUNE 30 SEPT. 30 DEC. 31 MAR. 31 TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues ........................................... $ 98,860 $100,405 $106,512 $111,043 $416,820
Gross profit ....................................... 18,527 17,455 18,183 17,477 71,642
Income from operations ............................. 8,978 7,745 8,328 7,248 32,299
Net income ......................................... 5,034 4,116 3,995 3,639 16,784
Diluted earnings per share ......................... $ 0.22 $ 0.18 $ 0.17 $ 0.16 $ 0.73
Weighted average number of
common shares and equivalents .................. 22,667 23,079 23,323 23,074 23,036
<CAPTION>
Year Ended March 31, 1999
------------------------------------------------------------------------
QUARTER ENDED JUNE 30 SEPT. 30 DEC. 31 MAR. 31 TOTAL
-------- -------- -------- -------- --------
Revenues ........................................... $ 98,911 $110,042 $ 98,275 $ 93,094 $400,322
Gross profit ....................................... 21,487 23,532 21,493 19,172 85,684
Income from operations ............................. 11,126 13,227 11,154 8,849 44,356
Net income ......................................... 6,575 7,895 6,351 4,886 25,707
Diluted earnings per share ......................... $ 0.28 $ 0.34 $ 0.28 $ 0.22 $ 1.12
Weighted average number of
common shares and equivalents .................. 23,282 22,987 22,722 22,562 22,888
</TABLE>
K32
