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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------------
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-16961
PRIDE PETROLEUM SERVICES, INC.
(Exact name of registrant as specified in its charter)
Louisiana 76-0069030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 City West Boulevard, Suite 400
Houston, Texas 77042
(Address of principal executive offices) (Zip Code)
(713) 789-1400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practical date.
Outstanding at
Class of Common Stock May 1 , 1995
--------------------- --------------
no par 24,227,652 shares
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PRIDE PETROLEUM SERVICES, INC.
INDEX
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994. . . . . . . . . . . . 3
Consolidated Statement of Operations -
Three months ended March 31, 1995 and 1994. . . . . . . . . 4
Consolidated Statement of Cash Flows-
Three months ended March 31, 1995 and 1994. . . . . . . . . 5
Notes to Unaudited Consolidated Financial Statements . . . . . 6
Report of Independent Accountants. . . . . . . . . . . . . . . 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . 16
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Page 2<PAGE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>
<PAGE>
PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MARCH 31, DECEMBER 31,
1995 1994
--------- ---------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . $ 3,490 $ 5,970
Short-term investments . . . . . . . . . . . . . 2,009 3,001
Trade receivables, net of allowance for
doubtful accounts of $440 and $394,
respectively . . . . . . . . . . . . . . . . 45,610 38,334
Parts and supplies . . . . . . . . . . . . . . . 5,358 4,468
Deferred income taxes. . . . . . . . . . . . . . 2,532 2,388
Other current assets . . . . . . . . . . . . . . 8,163 6,128
--------- ---------
Total current assets. . . . . . . . . . . 67,162 60,289
--------- ---------
PROPERTY AND EQUIPMENT, AT COST . . . . . . . . . . 269,489 246,365
ACCUMULATED DEPRECIATION. . . . . . . . . . . . . . (109,104) (106,466)
--------- ---------
Net property and equipment . . . . . . . . 160,385 139,899
--------- ---------
GOODWILL AND OTHER INTANGIBLES, NET . . . . . . . . 3,483 3,580
OTHER ASSETS. . . . . . . . . . . . . . . . . . . . 2,061 1,425
--------- ---------
$ 233,091 $ 205,193
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . $ 13,604 $ 14,715
Accrued expenses . . . . . . . . . . . . . . . . 16,180 15,332
Current portion of long-term debt. . . . . . . . 8,234 3,602
--------- ---------
Total current liabilities. . . . . . . . . 38,018 33,649
--------- ---------
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . 5,486 5,327
LONG-TERM DEBT, net of current portion. . . . . . . 58,207 42,096
DEFERRED INCOME TAXES . . . . . . . . . . . . . . . 15,983 12,736
COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY
Common stock, no par value; 40,000,000 shares
authorized; 24,281,872 and 24,081,872 shares
issued and 24,227,652 and 24,027,652 shares
outstanding, respectively. . . . . . . . . . . 1 1
Paid-in capital. . . . . . . . . . . . . . . . . 92,256 91,256
Treasury stock, at cost. . . . . . . . . . . . . (191) (191)
Retained earnings. . . . . . . . . . . . . . . . 23,331 20,319
--------- ---------
Total shareholders' equity . . . . . . . . 115,397 111,385
--------- ---------
$ 233,091 $ 205,193
========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
Page 3<PAGE>
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PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
--------- ---------
REVENUES. . . . . . . . . . . . . . . . . . . . . . $ 62,512 $ 36,805
--------- ---------
COSTS AND EXPENSES
Operating costs. . . . . . . . . . . . . . . . . 45,171 28,527
Depreciation and amortization. . . . . . . . . . 3,578 1,993
Selling, general and administrative. . . . . . . 8,042 5,021
--------- ---------
Total costs and expenses. . . . . . . . . . . 56,791 35,541
--------- ---------
Earnings from operations . . . . . . . . . 5,721 1,264
OTHER INCOME (EXPENSE)
Other income (expense) . . . . . . . . . . . . . 10 (83)
Interest income. . . . . . . . . . . . . . . . . 125 282
Interest expense . . . . . . . . . . . . . . . . (1,247) (19)
--------- ---------
Total other income (expense), net. . . . . (1,112) 180
--------- ---------
EARNINGS BEFORE INCOME TAXES. . . . . . . . . . . . 4,609 1,444
INCOME TAX PROVISION. . . . . . . . . . . . . . . . 1,597 515
--------- ---------
NET EARNINGS. . . . . . . . . . . . . . . . . . . . $ 3,012 $ 929
========= =========
NET EARNINGS PER SHARE. . . . . . . . . . . . . . . $ .12 $ .06
========= =========
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING . . . . . . 24,675 16,727
========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
Page 4<PAGE>
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PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
--------- ---------
OPERATING ACTIVITIES
Net earnings . . . . . . . . . . . . . . . . . . $ 3,012 $ 929
Adjustments to reconcile net earnings to net
cash provided (used) by operating activities -
Depreciation and amortization. . . . . . . . 3,578 1,993
Deferred interest. . . . . . . . . . . . . . 894 --
Gain on sale of assets . . . . . . . . . . . (55) (56)
Effect of exchange rates . . . . . . . . . . 6 106
Deferred tax provision . . . . . . . . . . . 303 192
Changes in assets and liabilities, net of
effects of acquisitions -
Trade receivables . . . . . . . . . . . . (5,023) (1,030)
Parts and supplies. . . . . . . . . . . . (679) (109)
Other current assets. . . . . . . . . . . (3,852) (1,811)
Accounts payable. . . . . . . . . . . . . (1,815) 2,498
Accrued expenses and other. . . . . . . . 154 (810)
--------- ---------
Net cash provided (used) by
operating activities . . . . . . . . (3,477) 1,902
--------- ---------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities,
including acquisition costs, less cash
acquired . . . . . . . . . . . . . . . . . . . (1,662) (1,609)
Purchases of property and equipment. . . . . . . (11,841) (4,958)
Proceeds from short-term investments . . . . . . 1,000 1,004
Proceeds from sale of property and equipment . . 124 60
Other . . . . .. . . . . . . . . . . . . . . . . 69 2
--------- ---------
Net cash used in investing activities . (12,310) (5,501)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock . . . . . -- 2
Proceeds from debt borrowings. . . . . . . . . . 15,023 --
Reduction of debt. . . . . . . . . . . . . . . . (1,829) (50)
Other . . . . .. . . . . . . . . . . . . . . . . 113 --
--------- ---------
Net cash provided (used) by
financing activities . . . . . . . . 13,307 (48)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . (2,480) (3,647)
CASH AND CASH EQUIVALENTS, beginning of period. . . 5,970 7,509
--------- ---------
CASH AND CASH EQUIVALENTS, end of period. . . . . . $ 3,490 $ 3,862
========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
Page 5<PAGE>
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PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
The unaudited consolidated financial statements included herein have
been prepared without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted,
pursuant to such rules and regulations. These unaudited consolidated
financial statements should be read in conjunction with Pride Petroleum
Services, Inc.'s (the "Company's") audited consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1994. Certain reclassifications have been made
to prior year amounts to conform with the current year presentation.
The unaudited consolidated financial information included herein
reflect all adjustments, consisting only of normal recurring adjustments,
which are necessary, in the opinion of management, for a fair presentation of
the Company's financial position, results of operations and cash flows for
the interim periods presented. The results of operations for the interim
periods presented herein are not necessarily indicative of the results to be
expected for full years.
2. COMMITMENTS AND CONTINGENCIES
The Company is routinely involved in litigation incidental to its
business, which often involves claims for significant monetary amounts, some
of which would not be covered by insurance. In the opinion of management,
none of the existing litigation will have any material adverse effect on the
Company's financial position or results of operations.
The Company is self-insured with respect to physical damage or loss to
its domestic vehicles, land rigs, and equipment (except for thirteen of its
largest domestic land rigs). Thirteen of the Company's largest domestic land
rigs and all of the Company's international land rigs are insured, with
deductibles of generally $25,000 per occurrence. The Company's offshore
platform rigs and barge rigs are insured with deductibles of $50,000 and
$150,000, respectively. Presently, the Company has insurance deductibles of
$250,000 per occurrence for domestic workers' compensation claims, $100,000
per occurrence for domestic automobile liability claims, and $250,000 for
general liability claims. The Company further limits its workers'
compensation exposure by maintaining an accident and health insurance policy
with respect to its domestic employees with a deductible of $10,000 per
occurrence. Coverages with respect to foreign operations for workers'
compensation and automobile claims are subject to deductibles of $40,000 to
$100,000 per occurrence. The Company accrues for its estimated share of
insured claims. As of March 31, 1995 and December 31, 1994, the Company had
accrued approximately $11,195,000 and $11,111,000, respectively for claims
liabilities, of which $6,064,000 and $6,047,000, respectively was included in
current liabilities and $5,131,000 and $5,064,000, respectively, was
reflected as other long-term liabilities in the accompanying unaudited
consolidated balance sheet.
Page 6
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PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
As of March 31, 1995, the Company had letters of credit outstanding
totaling $16,929,000. These letters of credit guarantee principally the
funding of the Company's share of insured claims. Cash and cash equivalents
and a portion of accounts receivable have been pledged as security for these
letters of credit. The credit facility provides flexibility to reduce the
pledge of cash and cash equivalents by pledging additional accounts
receivable.
3. LONG-TERM DEBT
Long-term debt at March 31, 1995 and December 31, 1994 consists of the
following:
MARCH 31, DECEMBER 31,
1995 1994
--------- ---------
(IN THOUSANDS)
Non-recourse secured term loans. . . . . . . $ 43,450 $ 33,311
Secured term loans . . . . . . . . . . . . . 12,060 8,860
Acquisition note payable . . . . . . . . . . 5,964 --
Revolving line of credit . . . . . . . . . . 2,303 3,325
Notes payable. . . . . . . . . . . . . . . . 1,964 200
Bank overdraft facility. . . . . . . . . . . 700 2
--------- ---------
66,441 45,698
Less: current portion. . . . . . . . . . . . 8,234 3,602
--------- ---------
$ 58,207 $ 42,096
========= =========
The balance of the non-recourse secured term loans at March 31, 1995
includes $8,689,000 of construction advances and $1,450,000 of accrued
interest which was added to the principal amount of the loans during the
first quarter of 1995. Pursuant to the terms of the loan agreements,
interest, which accrues at a rate of 9.61% per annum, will be added to the
principal amount of the loans until the first scheduled payment in July 1995,
and will be payable from the proceeds of the related charter contracts in 109
equal monthly installments of principal and interest. In addition, a portion
of contract proceeds are to be held in trust to assure that timely payment of
future debt service obligations is made. At March 31, 1995, $561,000 of such
contract proceeds, which amount is included in cash and cash equivalents on
the accompanying unaudited consolidated balance sheet, are being held in
trust for the benefit of the lenders, and is not presently available for use
by the Company.
Borrowings pursuant to the secured term loans were increased by
$3,200,000 during the first quarter of 1995 to finance certain additions to
property and equipment.
In March 1995, the Company entered into a note payable to two
individuals in the amount of $5,964,000 as partial consideration for a
business acquisition. The note bears interest at the rate of 8.5% per annum
and is repayable in quarterly installments through March 2000. The
acquisition note is collateralized by certain of the property and equipment
of the acquired business.
Page 7
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PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Notes payable include financed insurance premiums in the amount of
$1,003,000, four notes payable to lending institutions totaling an aggregate
$911,000 which are collateralized by selected property and equipment, and a
note payable in the amount of $50,000 issued to the sellers of a business
acquired by the Company during the first quarter of 1995.
The Company had domestic bank lines of credit of $23,000,000 as of
March 31, 1995, and letters of credit totaling $16,929,000 outstanding
against these facilities. Additionally, $2,303,000 of borrowings were
outstanding thereunder.
4. NET EARNINGS PER SHARE
Net earnings per share has been computed based on the weighted average
number of common shares outstanding during the applicable period. Common
share equivalents have been included in periods in which their effect is
dilutive. Common share equivalents include the number of shares issuable
upon the exercise of stock options, less the number of shares that could have
been repurchased with the exercise proceeds, using the treasury stock method.
Fully diluted net earnings per share have not been presented as the results
are not materially different.
5. ACQUISITIONS
COMPLETED ACQUISITIONS
In March 1995, the Company acquired all of the outstanding capital
stock of X-Pert Enterprises, Inc. ("X-Pert") for aggregate consideration of
approximately $10,000,000, consisting of $3,000,000 cash, a note payable to
the selling shareholders in the amount of $5,964,000, and 200,000 shares of
the Company's common stock.
The assets acquired and liabilities assumed in the X-Pert acquisition
were as follows:
ASSETS (LIABILTIES)
------------------
(IN THOUSANDS)
Cash and cash equivalents. . . . . . . . . . $ 1,719
Trade receivables. . . . . . . . . . . . . . 2,254
Other current assets . . . . . . . . . . . . 80
Property and equipment . . . . . . . . . . . 10,000
Other assets . . . . . . . . . . . . . . . . 725
Accounts payable . . . . . . . . . . . . . . (648)
Accrued expenses . . . . . . . . . . . . . . (761)
Long-term debt . . . . . . . . . . . . . . . (569)
Deferred income taxes. . . . . . . . . . . . (2,800)
---------
$ 10,000
=========
Page 8
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PRIDE PETROLEUM SERVICES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - Continued
Unaudited pro forma results of operations assuming the acquisition of
X-Pert had occurred on January 1, 1994, are as follows:
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
Revenues . . . . . . . . . . . . . . . . . . $ 65,308 $ 40,098
Net Earnings . . . . . . . . . . . . . . . . $ 3,207 $ 1,203
Earnings per share . . . . . . . . . . . . . $ .13 $ .07
The pro forma results of operations presented above do not purport to
be indicative of the results of operations of the Company that might have
occurred nor are they indicative of future results.
Also in March 1995, the Company acquired substantially all of the
assets used in the fluids hauling business of McNeel Company, Inc. for total
consideration of $400,000, consisting of $350,000 cash and a note payable to
the sellers in the amount of $50,000.
Each of the acquisitions discussed above was recorded using the
purchase method of accounting. The operating results of each acquisition
have been included in the Company's consolidated results of operations from
the date of acquisition.
PENDING ACQUISITIONS
In March 1995, the Company entered into a letter of intent to acquire
Horizon Directional Systems, Inc. ("Horizon"), a Houston, Texas based
horizontal and directional drilling company. In April 1995, the Company was
notified of litigation recently filed against Horizon which will likely delay
or impair the acquisition of Horizon by the Company. The Company is
reviewing the matter currently.
In April 1995, the Company entered into a letter of intent to acquire
substantially all of the assets of Reeled Tubing, Inc. ("Reeled Tubing") of
Harvey, Louisiana. Consummation of the transaction is subject to
satisfactory completion of the Company's due diligence procedures and
execution of a definitive purchase agreement.
Page 9<PAGE>
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Pride Petroleum Services, Inc.:
We have reviewed the accompanying consolidated balance sheet of Pride
Petroleum Services, Inc. as of March 31, 1995, the related consolidated
statements of operations and cash flows for the three-month periods ended
March 31, 1995 and 1994. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying financial statements for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet as of December 31, 1994,
and the related consolidated statements of operations, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 20, 1995, we expressed an
unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying balance sheet as of December 31,
1994 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Houston, Texas
May 5, 1995
Page 10<PAGE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction
with the unaudited consolidated financial statements of Pride Petroleum
Services, Inc. (the "Company") as of March 31, 1995 and for the three month
periods ended March 31, 1995 and 1994 included elsewhere herein, and with the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Increases and decreases in domestic well servicing activity
historically have had a significant correlation with changes in oil and
natural gas prices. International well servicing activity is also affected
by fluctuations in oil and natural gas prices, but historically to a lesser
extent than domestic activity. International well servicing contracts are
typically for terms of one year or more, while domestic contracts are
typically entered into for one or multiple wells. Accordingly, international
well servicing activities are not as sensitive to changes in oil and gas
prices as domestic operations.
Since 1991, the Company has actively sought to diversify beyond
domestic land based operations into international and offshore markets. In
July 1993, the Company purchased established well servicing and drilling
operations in Argentina and Venezuela and, in February 1994, acquired four
additional rigs in Argentina. The Company has also deployed 18 rigs from its
U.S. fleet to Argentina and two rigs from its U.S. fleet to Venezuela. Also,
during the first half of 1993, the Company mobilized three rigs to Western
Siberia, where operations commenced in June 1993. The Company is continuing
to pursue opportunities to expand internationally, particularly in situations
where it can deploy underutilized assets from its domestic fleet.
In June 1994, the Company acquired substantially all of the assets of
Offshore Rigs, L.L.P. ("Offshore Rigs") as the Company continued to diversify
its operations beyond domestic land-based markets and became the largest
operator of offshore platform workover rigs in the Gulf of Mexico. The rig
fleet acquired from Offshore Rigs consisted of 22 offshore platform rigs,
representing approximately 45% of the offshore platform workover rigs located
in the Gulf of Mexico.
During 1994, the Company entered into contracts with Lagoven, S.A.
("Lagoven"), a subsidiary of the Venezuelan national oil company, to
construct and operate two drilling/workover barge rigs. Upon completion in
late 1994, both barge rigs were mobilized to Lake Maracaibo where, in January
1995, they began operations pursuant to ten-year contracts with Lagoven. The
Company estimates that annual revenues of approximately $14,000,000 will be
generated under the contracts.
In March 1995, the Company acquired all of the outstanding capital
stock of X-Pert Enterprises, Inc. ("X-Pert"). X-Pert operates 35 well
servicing rigs in New Mexico and also provides lease maintenance services to
oilfield operators. X-Pert had annual revenues of approximately
$15,000,000. The operating results of the acquired business have been
included beginning in March 1995. The Company also acquired an oilfield
truck fleet in East Texas during March 1995 to complement its existing fluids
hauling business.
Page 11
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Deterioration in economic conditions in Venezuela resulted in
significant devaluation of the country's currency during the first half of
1994. To a large extent, the Company has been able to insulate its ongoing
operations from currency exchange losses by matching the local currency
component of contracts to the amount of operating costs transacted in local
currency. The Company is continuing its efforts to maximize the dollar
component of its Venezuelan contracts. During the first two quarters of
1994, the devaluation of the Venezuela bolivar resulted in currency
translation losses for the Company. These losses resulted principally from
the translation of the net Venezuelan monetary assets (that is, essentially
accounts receivable in excess of trade payables) at devaluing exchange rates
from month to month.
In the latter part of June 1994, the Venezuelan government imposed
exchange control policies and established an official fixed exchange rate
relative to the U.S. dollar. As a result, should the Venezuelan government
maintain the present rate from month to month, no currency translation losses
should result in those periods. If the official rate is subsequently revised
or a market exchange mechanism is re-implemented so that the bolivar "floats"
relative to the U.S. dollar, the Company could be susceptible to further
currency translation losses with respect to its Venezuelan operations. The
Company intends to continue to monitor developments in this regard and to
take such measures as may be practical to limit its exposure to currency
translation losses in future periods.
RESULTS OF OPERATIONS
The following table sets forth selected consolidated financial
information of the Company expressed as percentages for the periods
indicated:
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1994
-------- --------
Revenues:
Domestic land. . . . . . . . . . . . . . . . . . 42.8% 64.7%
Domestic offshore. . . . . . . . . . . . . . . . 20.9 0.0
International. . . . . . . . . . . . . . . . . . 36.3 35.3
-------- --------
Total revenues. . . . . . . . . . . . . . . . 100.0% 100.0%
======== ========
Earnings from operations:
Domestic land. . . . . . . . . . . . . . . . . . 20.3% 43.4%
Domestic offshore. . . . . . . . . . . . . . . . 32.7 0.0
International. . . . . . . . . . . . . . . . . . 47.0 56.6
-------- --------
Total earnings from operations. . . . . . . . 100.0% 100.0%
======== ========
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31,
1994.
REVENUES. Revenues for the three months ended March 31, 1995 increased
$25,707,000, or 70%, as compared to the corresponding period in 1994. Of
this increase, $13,058,000 was attributable to domestic offshore operations,
Page 12
<PAGE>
which the Company acquired in June 1994, and $9,720,000 was a result of
expansion of the Company's international operations, primarily in Venezuela
and Argentina. Revenues from Venezuelan operations increased primarily as a
result of the commencement of operations for the Company's two
drilling/workover barge rigs. Revenues from domestic land operations
increased $2,929,000, primarily as a result of increased business activity.
OPERATING COSTS. Operating costs for the three months ended March 31,
1995 increased $16,644,000, or 58%, as compared to the corresponding period
in 1994. Of this increase, $9,274,000 was attributable to the Company's
recently acquired domestic offshore operations, and $5,564,000 was a result
of expansion of the Company's international operations, as discussed above.
Operating costs related to domestic land operations increased $1,806,000,
corresponding to increased business activity.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended March 31, 1995 increased $1,585,000, or 80%, as compared
to the corresponding period in 1994, primarily as a result of provisions for
recently acquired domestic offshore and international assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses for the three months ended March 31, 1995 increased
$3,021,000, or 60%, as compared to the corresponding period in 1994,
primarily as a result of the inclusion of such costs for acquired domestic
offshore and international operations. As a percentage of revenues, however,
total selling, general and administrative costs declined to 13% for the first
quarter of 1995 from 14% for the first quarter of 1994, as such costs have
been spread over a larger revenue base.
EARNINGS FROM OPERATIONS. The Company generated earnings from
operations for the three months ended March 31, 1995 of $5,721,000. Of this
amount, $2,685,000 was generated by international operations, $1,873,000 was
generated by domestic offshore operations and $1,163,000 was generated by
domestic land operations. For the corresponding quarter of 1994,
international operations generated earnings from operations of $716,000 and
domestic land operations generated earnings from operations of $548,000.
OTHER INCOME (EXPENSE). Other income (expense) for the first quarter
of 1995 included $6,000 of foreign currency translation and transaction
losses versus $106,000 of losses for the corresponding 1994 quarter.
Interest income decreased to $125,000 for the three months ended March 31,
1995 from $282,000 for the corresponding 1994 period. The three months ended
March 31, 1994 benefited from the inclusion of $196,000 of income resulting
from the disposition of a short-term investment. Interest expense for the
three months ended March 31, 1995 increased by $1,228,000, as a result of
borrowings related to the two drilling/workover barge rigs and other
additions to property and equipment. During the corresponding quarter of
1994, the Company had no such borrowings or interest expense.
INCOME TAX PROVISION. The Company's consolidated effective income tax
rate for the three months ended March 31, 1995, declined to approximately 35%
from approximately 36% for the corresponding period in 1994, primarily as a
result of changes in the Company's overall earnings mix.
Page 13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $29,144,000 and $26,640,000 at
March 31, 1995 and December 31, 1994, respectively. The Company's current
ratio was 1.8 to 1.0 at March 31, 1995 and December 31, 1994. The Company
expects to meet its operational and normal ongoing capital expenditure
requirements from internally generated cash flows and from existing bank
credit lines.
As of March 31, 1995, the Company had domestic bank lines of credit of
$23,000,000, against which letters of credit of $16,929,000 and borrowings of
$2,303,000 were outstanding. Substantially all of these letters of credit
have been issued in favor of the Company's insurance carriers to guarantee
payment of the Company's share of insured claims. As of March 31, 1995, the
Company had accrued approximately $11,195,000 of claims liabilities, of which
$6,064,000 was included in current liabilities and $5,131,000 was reflected
as other long-term liabilities in the accompanying unaudited consolidated
balance sheet. The Company has estimated the amount and timing of payment of
these liabilities based on actuarial studies provided by the insurance
carriers and past experience. Due to the nature of the Company's business
and the structure of its insurance program, the occurrence of a significant
event against which the Company is not fully insured, or of a number of
lesser events against which the Company is insured, but subject to
substantial deductibles, could significantly impact the operating results of
the Company for a given period.
During 1994, the Company entered into long-term financing arrangements
with two Japanese trading companies in connection with the construction and
operation of two drilling/workover barge rigs. The aggregate amount of the
collateralized term loans was initially $42,000,000. As of March 31, 1995,
$1,450,000 of accrued interest has been added to the principal amount of the
loans. Pursuant to the terms of the loan agreements, interest, which accrues
at a rate of 9.61% per annum, will be added to the principal amount of the
loans until the first scheduled payment in July 1995, and will be payable
from the proceeds of the related charter contracts in 109 equal monthly
installments of principal and interest. In addition, a portion of contract
proceeds are to be held in trust to assure that timely payment of future debt
service obligations is made. At March 31, 1995, $561,000 of such contract
proceeds are being held in trust for the benefit of the lenders, and is not
presently available for use by the Company. The terms of the financing
agreement limit the lenders' recourse essentially to the barge rigs and
contract proceeds and the assets of the Company's Venezuelan subsidiary. The
Company also provided the lenders a limited guaranty with respect to certain
political risks. The Company has obtained political risks insurance policies
from the Overseas Private Investment Corporation ("OPIC"), a U.S. government
entity, to protect against political risks that could result in potential
payments under the terms of the Company's guaranty. At March 31, 1995, the
Company had borrowed $43,450,000 pursuant to this financing arrangement.
In connection with the acquisition and planned upgrading of its
acquired offshore platform rig fleet in 1994, the Company established credit
facilities with a lending institution in the aggregate amount of $14,400,000.
In February 1995, this credit facility was amended to, among other things,
increase the aggregate borrowing availability to $30,000,000. As of March
31, 1995, $14,574,000 was outstanding pursuant to this facility. The Company
plans to continue a program to upgrade its offshore platform rig fleet
throughout 1995. Approximately $4,500,000 of additional expenditures are
Page 14
<PAGE>
planned during the second and third quarters of 1995 to construct a new
"flagship" state-of-the-art diesel electric platform rig. Additional 1995
capital expenditures of up to $6,500,000 are planned, of which approximately
$4,500,000 had been incurred at March 31, 1995, to increase operational
capabilities of the existing offshore platform rigs by adding equipment such
as top-drive drilling systems and larger capacity pumps and generators, as
well as improved living quarters.
Capital expenditures (excluding acquisitions, offshore platform rig
upgrades, international rig deployment and drilling/workover barge costs) for
the three months ended March 31, 1995 and 1994 were approximately $1,700,000
and $1,100,000, respectively. International rig refurbishment and deployment
costs for the three months ended March 31, 1995 and 1994 were approximately
$3,000,000 and $3,400,000, respectively.
In March 1995, the Company acquired all of the outstanding capital
stock of X-Pert for consideration of approximately $10,000,000, consisting of
$3,000,000 cash, a note payable to the selling shareholders in the amount of
approximately $6,000,000 and 200,000 shares of the Company's common stock.
X-Pert had working capital and other monetary assets in excess of
liabilities of approximately $3,000,000.
The Company has entered into letters of intent to acquire two
businesses for an aggregate purchase price of approximately $20 million. If
these transactions are concluded as proposed the Company anticipates the
issuance of common stock of approximately $14 million and cash of
approximately $6 million. One of the Company's lenders has indicated that it
will provide debt financing covering the majority of the cash component
above. One of the two proposed transactions has been postponed as a result
of litigation pending against the business. In connection with the other
proposed acquisition, the Company is presently performing its due diligence
investigation and negotiating terms of definitive purchase agreements with
the business owners. There is no assurance that either or both of these
transactions will be concluded pursuant to the proposed terms.
The Company expects to continue to review opportunities to pursue its
international and offshore equipment and technology expansion. From time to
time, the Company has one or more bids outstanding for contracts that could
require significant capital expenditures and mobilization costs. While the
Company has no other definitive plans to acquire additional equipment,
suitable opportunities may arise in the future. The timing, size or success
of any acquisition effort and the associated potential capital commitments
are unpredictable. The Company expects to fund project opportunities and
acquisitions primarily through a combination of working capital, cash flow
from operations and full or limited recourse debt or equity financing.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
("SFAS No. 121"). SFAS No. 121, which is effective for fiscal years
beginning after December 15, 1995, requires that long-lived assets and
certain identifiable intangibles to be held and used by the entity, be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company is
currently reviewing the statement, and at this time, is unable to determine
the impact of its adoption, if any.
Page 15<PAGE>
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
- - ------------
15 - Awareness Letter of Independent Accountants
(b) Reports on Form 8-K
In a report filed on Form 8-K dated March 22, 1995, the Company
reported the acquisition of X-Pert Enterprises, Inc.
Page 16<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PRIDE PETROLEUM SERVICES, INC.
By: RAY H. TOLSON
----------------------------------
(RAY H. TOLSON)
President, Chief Executive Officer
and Chairman of the Board
By: PAUL A. BRAGG
--------------------------------
(PAUL A. BRAGG)
Vice President, Chief Financial
Officer and Treasurer
By: EARL W. MCNIEL
--------------------------------
(EARL W. MCNIEL)
Chief Accounting Officer
Date: May 5, 1995
Page 17<PAGE>
<PAGE>
<PAGE>
EXHIBIT 15
AWARENESS LETTER OF INDEPENDENT ACCOUNTANTS.
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Pride Petroleum Services, Inc.
Registration Statements on Form S-8
We are aware that our report dated May 5, 1995 on our review of interim
consolidated financial information of Pride Petroleum Services, Inc. for the
periods ended March 31, 1995 and 1994 and included in this Form 10-Q is
incorporated by reference in the Company's registration statements on Form S-
8 filed with the Securities and Exchange Commission on February 6, 1989 and
December 30, 1991. Pursuant to Rule 436(c) under the Securities Act of 1933,
this report should not be considered a part of the registration statements
prepared or certified by us within the meanings of Sections 7 and 11 of that
Act.
COOPERS & LYBRAND L.L.P.
Houston, Texas
May 5, 1995
<PAGE>
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