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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 June 30, 1996
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 August 1, 1996
--------------------- -----------------
no par 28,509,656 shares
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PRIDE PETROLEUM SERVICES, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 1996 and December 31, 1995 . . . . . . . . . . . . . . 3
Consolidated Statement of Operations -
Three months ended June 30, 1996 and 1995 . . . . . . . . . . . 4
Consolidated Statement of Operations -
Six months ended June 30, 1996 and 1995 . . . . . . . . . . . . 5
Consolidated Statement of Cash Flows -
Six months ended June 30, 1996 and 1995 . . . . . . . . . . . . 6
Notes to Unaudited Consolidated Financial Statements . . . . . . . 7
Report of Independent Accountants. . . . . . . . . . . . . . . . . 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders. . . . . 22
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 22
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<PAGE>
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PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
JUNE 30, DECEMBER 31,
1996 1995
--------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . $ 8,728 $ 9,295
Short-term investments. . . . . . . . . . . . . . 363 2,612
Trade receivables, net of allowance for doubtful
accounts of $521 and $426, respectively. . . . 93,374 43,767
Parts and supplies. . . . . . . . . . . . . . . . 26,247 9,473
Deferred income taxes . . . . . . . . . . . . . . 2,695 1,518
Other current assets. . . . . . . . . . . . . . . 12,573 6,488
--------- ---------
Total current assets. . . . . . . . . . . . 143,980 73,153
--------- ---------
PROPERTY AND EQUIPMENT, AT COST. . . . . . . . . . . 477,132 296,939
ACCUMULATED DEPRECIATION . . . . . . . . . . . . . . (129,206) (118,451)
--------- ---------
Net property and equipment. . . . . . . . . 347,926 178,488
--------- ---------
GOODWILL AND OTHER INTANGIBLES, NET. . . . . . . . . 3,371 3,699
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . 8,016 2,265
--------- ---------
$ 503,293 $ 257,605
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . . . . . $ 33,761 $ 15,010
Accrued expenses. . . . . . . . . . . . . . . . . 30,137 16,550
Current portion of long-term debt . . . . . . . . 42,389 10,291
--------- ---------
Total current liabilities . . . . . . . . . 106,287 41,851
--------- ---------
OTHER LONG-TERM LIABILITIES. . . . . . . . . . . . . 13,719 4,127
LONG-TERM DEBT, net of current portion . . . . . . . 115,155 61,136
CONVERTIBLE SUBORDINATED DEBENTURES. . . . . . . . . 80,500 --
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . 47,485 19,252
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, no par value; 40,000,000 shares
authorized: 25,113,876 and 24,863,072 shares
issued and 25,059,656 and 24,808,852 shares
outstanding, respectively. . . . . . . . . . . 1 1
Paid-in capital . . . . . . . . . . . . . . . . . 97,084 95,751
Treasury stock, at cost . . . . . . . . . . . . . (191) (191)
Retained earnings . . . . . . . . . . . . . . . . 43,253 35,678
--------- ---------
Total shareholders' equity. . . . . . . . . 140,147 131,239
--------- ---------
$ 503,293 $ 257,605
========= =========
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
JUNE 30,
---------------------
1996 1995
--------- ---------
REVENUES . . . . . . . . . . . . . . . . . . . . . . . $ 101,989 $ 68,856
--------- ---------
COSTS AND EXPENSES
Operating costs . . . . . . . . . . . . . . . . . . 73,914 50,377
Depreciation and amortization . . . . . . . . . . . 7,045 4,131
Selling, general and administrative . . . . . . . . 11,669 7,267
--------- ---------
Total costs and expenses . . . . . . . . . . . . 92,628 61,775
--------- ---------
Earnings from operations. . . . . . . . . . . 9,361 7,081
OTHER INCOME (EXPENSE)
Other income. . . . . . . . . . . . . . . . . . . . 469 18
Interest income . . . . . . . . . . . . . . . . . . 623 267
Interest expense. . . . . . . . . . . . . . . . . . (4,124) (1,660)
--------- ---------
Total other expense, net. . . . . . . . . . . (3,032) (1,375)
--------- ---------
EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . . . 6,329 5,706
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . 1,534 2,124
--------- ---------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . $ 4,795 $ 3,582
========= =========
NET EARNINGS PER SHARE:
Primary . . . . . . . . . . . . . . . . . . . . . . $ .18 $ .14
Fully diluted . . . . . . . . . . . . . . . . . . . $ .17 $ .14
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING:
Primary . . . . . . . . . . . . . . . . . . . . . . 26,583 25,496
Fully diluted . . . . . . . . . . . . . . . . . . . 33,052 25,382
The accompanying notes are an integral part of
the consolidated financial statements.
Page 4
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PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1995
--------- ---------
REVENUES . . . . . . . . . . . . . . . . . . . . . . . $ 168,224 $ 131,368
--------- ---------
COSTS AND EXPENSES
Operating costs . . . . . . . . . . . . . . . . . . 121,860 95,548
Depreciation and amortization . . . . . . . . . . . 11,819 7,709
Selling, general and administrative . . . . . . . . 19,826 15,309
--------- ---------
Total costs and expenses . . . . . . . . . . . . 153,505 118,566
--------- ---------
Earnings from operations. . . . . . . . . . . 14,719 12,802
OTHER INCOME (EXPENSE)
Other income. . . . . . . . . . . . . . . . . . . . 696 28
Interest income . . . . . . . . . . . . . . . . . . 1,397 392
Interest expense. . . . . . . . . . . . . . . . . . (6,678) (2,907)
--------- ---------
Total other expense, net. . . . . . . . . . . (4,585) (2,487)
--------- ---------
EARNINGS BEFORE INCOME TAXES . . . . . . . . . . . . . 10,134 10,315
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . 2,559 3,721
--------- ---------
NET EARNINGS . . . . . . . . . . . . . . . . . . . . . $ 7,575 $ 6,594
========= =========
NET EARNINGS PER SHARE:
Primary . . . . . . . . . . . . . . . . . . . . . . $ .29 $ .26
Fully diluted . . . . . . . . . . . . . . . . . . . $ .28 $ .26
WEIGHTED AVERAGE COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING:
Primary . . . . . . . . . . . . . . . . . . . . . . 26,370 25,082
Fully diluted . . . . . . . . . . . . . . . . . . . 32,056 25,249
The accompanying notes are an integral part of
the consolidated financial statements.
Page 5<PAGE>
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PRIDE PETROLEUM SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
---------------------
1996 1995
--------- ---------
OPERATING ACTIVITIES
Net earnings. . . . . . . . . . . . . . . . . . . . $ 7,575 $ 6,594
Adjustments to reconcile net earnings to net
cash provided by operating activities -
Depreciation and amortization. . . . . . . . . . 11,819 7,709
Deferred interest. . . . . . . . . . . . . . . . -- 1,947
Gain on sale of assets . . . . . . . . . . . . . (268) (171)
Effect of exchange rates . . . . . . . . . . . . (543) 6
Deferred tax provision . . . . . . . . . . . . . 1,706 904
Changes in assets and liabilities, net of
effects of acquisitions -
Trade receivables . . . . . . . . . . . . . . (14,418) (7,171)
Parts and supplies. . . . . . . . . . . . . . (1,181) (1,289)
Other current assets. . . . . . . . . . . . . (1,979) (2,692)
Accounts payable. . . . . . . . . . . . . . . 2,327 2,667
Accrued expenses and other. . . . . . . . . . (2,179) 355
--------- ---------
Net cash provided by
operating activities . . . . . . . . . . 2,859 8,859
--------- ---------
INVESTING ACTIVITIES
Purchase of net assets of acquired entities,
including acquisition costs, less cash acquired . (106,286) (1,662)
Purchases of property and equipment . . . . . . . . (24,424) (22,058)
Proceeds from sales of short-term investments . . . 5,100 1,009
Proceeds from sales of property and equipment . . . 5,868 263
Other . . . . . . . . . . . . . . . . . . . . . . . (12) (447)
--------- ---------
Net cash used in investing activities. . . (119,754) (22,895)
--------- ---------
FINANCING ACTIVITIES
Proceeds from issuance of common stock. . . . . . . 1,333 444
Proceeds from issuance of convertible
subordinated debentures. . . . . . . . . . . . . 77,585 --
Proceeds from debt borrowings . . . . . . . . . . . 65,455 23,133
Reduction of debt . . . . . . . . . . . . . . . . . (27,932) (4,322)
Other . . . . . . . . . . . . . . . . . . . . . . . (113) 80
--------- ---------
Net cash provided by financing activities. 116,328 19,335
--------- ---------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . (567) 5,299
CASH AND CASH EQUIVALENTS, beginning of period . . . . 9,295 5,970
--------- ---------
CASH AND CASH EQUIVALENTS, end of period . . . . . . . $ 8,728 $ 11,269
========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
Page 6
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, 1995. Certain
reclassifications have been made to prior year amounts to conform with the
current year presentation.
The unaudited consolidated financial information included herein reflects
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.
In June 1996, a former employee filed a complaint in federal district
court for the Eastern District of Louisiana against Pride Offshore, Inc., the
subsidiary through which the Company conducts domestic offshore operations. The
complaint purports to be filed on behalf of the individual plaintiff and a class
of similarly situated present and former employees of Pride Offshore, Inc. and
alleges that Pride Offshore, Inc. violated the Fair Labor Standards Act by
failing to pay for time spent in attending safety meetings, evacuation drills,
tour and other meetings and self-study programs. Because the Company has only
recently received the complaint, its investigation is at a preliminary stage and
the Company is unable to determine the amount of liability, if any, it may have
in respect of this matter. The Company does not believe the ultimate outcome of
this matter will have a material adverse effect on the Company s financial
condition.
The Company is self-insured with respect to physical damage or loss to its
domestic vehicles, land rigs (except for thirteen of its largest domestic land
rigs), and other equipment. 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. Nineteen of the Company's 23
offshore platform rigs and all of its 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
$100,000 for general liability claims. The Company further limits its 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 generally $40,000 to $100,000 per occurrence.
As of June 30, 1996 and December 31, 1995, the Company had accrued
approximately $8,512,000 and $7,249,000, respectively, for estimated claims
liabilities, of which $5,713,000 and $3,940,000, respectively, was included in
current liabilities and $2,799,000 and $3,309,000, respectively, was included in
other long-term liabilities in the accompanying unaudited consolidated balance
sheet. As of June 30, 1996, the Company had letters of credit outstanding
totaling $8,606,000. These letters of credit principally guarantee the funding
of the Company's share of insured claims.
3. ACQUISITIONS
In April 1996, the Company acquired all of the outstanding capital stock
of Quitral-Co S.A.I.C. ("Quitral-Co") for an aggregate purchase price of
$140,000,000, consisting of $110,000,000 in cash and a $30,000,000 installment
note payable to the selling shareholders.
The assets acquired and liabilities assumed in the Quitral-Co acquisition,
based on the Company s preliminary purchase price allocation, were as follows:
ASSETS (LIABILITIES)
-------------------
(in thousands)
Cash and cash equivalents . . . . . . . . . $ 5,564
Short-term investments. . . . . . . . . . . 2,851
Trade receivables . . . . . . . . . . . . . 35,189
Parts and supplies. . . . . . . . . . . . . 15,618
Deferred income taxes . . . . . . . . . . . 1,300
Other current assets. . . . . . . . . . . . 3,814
Property and equipment. . . . . . . . . . . 161,420
Other assets. . . . . . . . . . . . . . . . 2
Accounts payable. . . . . . . . . . . . . . (21,710)
Accrued expenses. . . . . . . . . . . . . . (23,462)
Long-term debt. . . . . . . . . . . . . . . (13,936)
Deferred income taxes . . . . . . . . . . . (26,650)
---------
$ 140,000
=========
Unaudited pro forma results of operations assuming the acquisition of
Quitral-Co had occurred on January 1, 1995, are as follows:
SIX MONTHS ENDED
JUNE 30,
--------------------
1996 1995
--------- ---------
(in thousands, except
per share amounts)
Revenues. . . . . . . . . . . . . . . . . . . . . . $ 231,434 $ 228,650
Net Earnings. . . . . . . . . . . . . . . . . . . . $ 10,288 $ 7,804
Earnings per share -
Primary. . . . . . . . . . . . . . . . . . . . . $ .39 $ .31
Fully diluted. . . . . . . . . . . . . . . . . . $ .36 $ .30
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.
In February 1996, the Company acquired substantially all the assets of a
competitor in Freer, Texas for aggregate consideration of approximately
$1,879,000, consisting of $1,850,000 cash and 4,200 restricted shares of common
stock. The assets acquired included seven workover rigs, hauling and anchor
trucks and other support assets.
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.
4. DEBT
LONG-TERM DEBT
Long-term debt at June 30, 1996 and December 31, 1995 consists of the
following:
JUNE 30, DECEMBER 31,
1996 1995
--------- ---------
(in thousands)
Collateralized term loans. . . . . . . . . . . . $ 44,042 $ 5,696
Limited-recourse collateralized term loans . . . 40,668 42,320
Note payable to sellers. . . . . . . . . . . . . 29,000 --
Eximbank notes payable . . . . . . . . . . . . . 10,083 --
Revolving line of credit . . . . . . . . . . . . 8,109 762
Secured term loans . . . . . . . . . . . . . . . 7,120 8,200
Secured revolver . . . . . . . . . . . . . . . . 7,000 8,850
Notes payable. . . . . . . . . . . . . . . . . . 7,049 529
Acquisition note payable . . . . . . . . . . . . 4,473 5,070
--------- ---------
157,544 71,427
Less: current portion. . . . . . . . . . . . . . 42,389 10,291
--------- ---------
$ 115,155 $ 61,136
========= =========
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 term loans are
collateralized by the barge rigs and related charter contracts. The loans are
being repaid from the proceeds of the related charter contracts in equal monthly
installments of principal and interest through July 2004. In addition, a
portion of contract proceeds is being held in trust to assure that timely
payment of future debt service obligations is made. At June 30, 1996,
$2,435,000 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 as security for the lenders, and are not presently available for
use by the Company.
In April 1996, the Company completed two separate financing arrangements
with lending institutions pursuant to which it borrowed an aggregate amount of
$40,000,000, net of repayment of $5,000,000 of borrowings to one of the lenders.
The collateralized term loans bear interest initially at a floating rate of
prime plus 1/2% and are repayable in monthly installments of principal and
interest over a period of five to six years. The Company may elect to convert
the interest payable to a fixed rate basis at any time during the term of the
loans. The loans are collateralized by substantially all of the Company s
domestic land-based rig fleet and ancillary equipment. Proceeds from the loans
were used to fund a portion of the cash consideration for the acquisition of
Quitral-Co, discussed above.
In connection with the acquisition of Quitral-Co in April 1996, the
Company entered into a note payable to the sellers for $30,000,000. The note
bears interest at LIBOR plus 2%, payable quarterly, and principal is expected to
be repaid in thirty monthly installments.
Prior to being acquired by the Company, Quitral-Co had entered into two
loan agreements with a lending institution to finance the purchase and import of
goods manufactured in the United States. Loans made pursuant to the loan
agreements bear interest at rates ranging from LIBOR plus 1.40% to LIBOR plus
1.80% per annum, and are repayable in semi-annual installments through October
2000. Borrowings pursuant to these two loan agreements have been guaranteed
against certain political risks in Argentina and Venezuela by the Export-Import
Bank of the United States ("Eximbank").
Notes payable at June 30, 1996 includes financed insurance premiums and
other short-term borrowings assumed in connection with the acquisition of
Quitral-Co.
CONVERTIBLE SUBORDINATED DEBENTURES
In January 1996, the Company completed the public sale of $80,500,000
principal amount of 6 1/4% convertible subordinated debentures. The debentures,
which are due February 15, 2006, are convertible into common stock of the
Company at a price of $12.25 per share. The debentures are redeemable at the
option of the Company, in whole or in part, at any time on or after March 1,
1999, at an initial redemption price of 103.125% of the principal amount and
declining to 100% of the principal amount by February 15, 2002. Interest is
payable semi-annually on February 15 and August 15 of each year, commencing
August 15, 1996.
5. INCOME TAXES
During the first six months of 1996, the Company has recognized the
current tax benefits from the utilization of approximately $2,854,000 of foreign
net operating loss carryforwards, including $2,216,000 during the second quarter
of 1996. The Company had previously provided a valuation allowance for the tax
benefits of such foreign net operating loss carryforwards.
6. NET EARNINGS PER SHARE
Primary 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 and warrants, 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 has been computed based on the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period, as if the convertible subordinated debentures
were converted into common stock on the date of sale, after giving retroactive
effect to the elimination of interest expense, net of income tax effect,
applicable to the convertible subordinated debentures.
The following table presents information necessary to calculate fully
diluted net earnings per share:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
(in thousands, except per share amounts)
Net earnings . . . . . . . . . . . . $ 4,795 $ 3,582 $ 7,575 $ 6,594
Interest on convertible
subordinated debentures . . . . . 1,331 -- 2,293 --
Income tax effect. . . . . . . . . . (479) -- (825) --
-------- -------- -------- --------
Net earnings applicable
to common stock. . . . . . . . $ 5,647 $ 3,582 $ 9,043 $ 6,594
======== ======== ======== ========
Weighted average number of
common shares outstanding . . . . 25,038 24,518 24,942 24,366
Additional shares assuming
conversion of:
Convertible subordinated
debentures . . . . . . . . . 6,571 -- 5,636 --
Stock options and warrants 1,443 864 1,478 883
-------- -------- -------- --------
Weighted average common shares
and equivalents outstanding. . 33,052 25,382 32,056 25,249
======== ======== ======== ========
Fully diluted net earnings
per share . . . . . . . . . . . $ .17 $ .14 $ .28 $ .26
======== ======== ======== ========
7. SEGMENT INFORMATION
The following table sets forth certain consolidated information with
respect to the Company and its subsidiaries by operating segment:
DOMESTIC DOMESTIC
LAND OFFSHORE INTERNATIONAL TOTAL
--------- --------- --------- ---------
(in thousands)
THREE MONTHS ENDED JUNE 30, 1996
Revenues. . . . . . . . . . . . . . $ 30,084 $ 14,698 $ 57,207 $ 101,989
Earnings from operations. . . . . . 824 1,906 6,631 9,361
Identifiable assets . . . . . . . . 85,785 61,926 355,582 503,293
Capital expenditures,
including acquisitions . . . . . 1,019 4,742 166,162 171,923
Depreciation and amortization . . . 1,425 899 4,721 7,045
THREE MONTHS ENDED JUNE 30, 1995
Revenues. . . . . . . . . . . . . . $ 30,122 $ 12,769 $ 25,965 $ 68,856
Earnings from operations. . . . . . 1,432 1,761 3,888 7,081
Identifiable assets . . . . . . . . 80,001 54,279 115,661 249,941
Capital expenditures,
including acquisitions . . . . . 760 4,064 6,236 11,060
Depreciation and amortization . . . 1,458 765 1,908 4,131
SIX MONTHS ENDED JUNE 30, 1996
Revenues. . . . . . . . . . . . . . $ 57,945 $ 27,074 $ 83,205 $ 168,224
Earnings from operations. . . . . . 1,921 3,127 9,671 14,719
Identifiable assets . . . . . . . . 85,785 61,926 355,582 503,293
Capital expenditures,
including acquisitions . . . . . 3,836 11,853 170,966 186,655
Depreciation and amortization . . . 2,818 1,773 7,228 11,819
SIX MONTHS ENDED JUNE 30, 1995
Revenues. . . . . . . . . . . . . . $ 56,875 $ 25,827 $ 48,666 $ 131,368
Earnings from operations. . . . . . 2,595 3,634 6,573 12,802
Identifiable assets . . . . . . . . 80,001 54,279 115,661 249,941
Capital expenditures,
including acquisitions . . . . . 11,715 8,894 12,759 33,368
Depreciation and amortization . . . 2,733 1,410 3,566 7,709
8. SUBSEQUENT EVENTS
In July 1996, the Company completed the public sale of 3,450,000 shares of
common stock, which resulted in net proceeds to the Company of approximately
$45,641,000. Approximately $20,200,000 of such net proceeds has been used to
repay outstanding indebtedness, approximately $12,000,000 will be used to
finance the construction of two platform rigs for the Company s offshore fleet
and approximately $7,000,000 will be used to fund various capital projects for
Quitral-Co, including rig upgrades and expansion of its rig transportation
fleet. The balance of the net proceeds, $6,441,000, will be available for
general corporate purposes.
<PAGE>
<PAGE>
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 June 30, 1996, and the related consolidated
statements of operations for the three-month and six-month periods ended June
30, 1996 and 1995, and the related consolidated statement of cash flows for the
six-month periods ended June 30, 1996 and 1995. 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, 1995, 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 26, 1996, 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, 1995 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
August 14, 1996
<PAGE>
<PAGE>
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 June 30, 1996 and for the three and six-month periods
ended June 30, 1996 and 1995 included elsewhere herein, and with the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
Increases and decreases in domestic well servicing and drilling activity
historically have had a significant correlation with changes in oil and natural
gas prices. International well servicing and drilling activity is also affected
by fluctuations in oil and natural gas prices, but historically to a lesser
extent than domestic activity. International rig services contracts are
typically for terms of one year or more, while domestic contracts are typically
entered into for one or multiple wells. Accordingly, international rig services
activities generally are not as sensitive to short-term changes in oil and gas
prices as domestic operations.
Since 1993, the Company has entered into a number of transactions that
have significantly expanded the Company's operations, including the following:
o In a series of transactions from mid-1993 through May 1996, the Company
acquired established businesses in Argentina, Venezuela and Colombia and
deployed 35 rigs from its U.S. land-based fleet to Argentina, Venezuela
and Russia.
o In June 1994, the Company acquired the largest fleet of platform workover
rigs, consisting of 22 units, in the Gulf of Mexico. Two additional
platform rigs were constructed and added to the fleet, one in September
1995 and the other in April 1996, replacing a rig then retired from the
fleet.
o In January 1995, the Company commenced operation of two drilling/workover
barge rigs on Lake Maracaibo, Venezuela. The barge rigs were constructed
during 1994 pursuant to ten-year operating contracts entered into with
Lagoven, S.A. ("Lagoven"), a subsidiary of the Venezuelan national oil
company.
o In March 1995, the Company acquired X-Pert Enterprises, Inc. ("X-Pert"),
which operates 35 well servicing rigs in New Mexico.
o In April 1996, the Company acquired Quitral-Co S.A.I.C. ("Quitral-Co")
from Perez Companc S.A., Astra C.A.P.S.A. and other shareholders.
Quitral-Co operates 23 drilling and 57 workover rigs in Argentina and 7
drilling and 23 workover rigs in Venezuela. For its fiscal year ended
June 30, 1995 and the nine month period ended March 31, 1996, Quitral-Co's
consolidated revenues were approximately $175 million and $150 million,
respectively. The acquisition has been accounted for as a purchase,
effective April 30, 1996.
RESULTS OF OPERATIONS
The following tables set forth selected consolidated financial information
of the Company by operating segment for the periods indicated:
THREE MONTHS ENDED JUNE 30,
1996 1995
--------------- ---------------
(in thousands, except percentages)
Revenues:
Domestic land . . . . . . . . . . . . $ 30,084 29.5% $ 30,122 43.7%
Domestic offshore . . . . . . . . . . 14,698 14.4 12,769 18.6
International . . . . . . . . . . . . 57,207 56.1 25,965 37.7
--------- ------ --------- ------
Total revenues . . . . . . . . . . $ 101,989 100.0% $ 68,856 100.0%
========= ====== ========= ======
Earnings from operations:
Domestic land . . . . . . . . . . . . $ 824 8.8% $ 1,432 20.2%
Domestic offshore . . . . . . . . . . 1,906 20.4 1,761 24.9
International . . . . . . . . . . . . 6,631 70.8 3,888 54.9
--------- ------ --------- ------
Total earnings from operations . . $ 9,361 100.0% $ 7,081 100.0%
========= ====== ========= ======
SIX MONTHS ENDED JUNE 30,
1996 1995
--------------- ---------------
(in thousands, except percentages)
Revenues:
Domestic land . . . . . . . . . . . . $ 57,945 34.4% $ 56,875 43.3%
Domestic offshore . . . . . . . . . . 27,074 16.1 25,827 19.7
International . . . . . . . . . . . . 83,205 49.5 48.666 37.0
--------- ------ --------- ------
Total revenues . . . . . . . . . . $ 168,224 100.0% $ 131,368 100.0%
========= ====== ========= ======
Earnings from operations:
Domestic land . . . . . . . . . . . . $ 1,921 13.1% $ 2,595 20.3%
Domestic offshore . . . . . . . . . . 3,127 21.2 3,634 28.4
International . . . . . . . . . . . . 9,671 65.7 6,573 51.3
--------- ------ --------- ------
Total earnings from operations . . $ 14,719 100.0% $ 12,802 100.0%
========= ====== ========= ======
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995.
REVENUES. Revenues for the three months ended June 30, 1996 increased
$33,133,000, or 48%, as compared to the corresponding period in 1995. Of this
increase, $31,242,000 was a result of expansion of the Company's international
operations, including $30,463,000 due to the acquisition of Quitral-Co in April
1996. Revenues attributable to domestic offshore operations increased
$1,929,000 due primarily to higher utilization of the Company's offshore
platform rigs. Revenues from domestic land-based operations were essentially
unchanged.
OPERATING COSTS. Operating costs for the three months ended June 30, 1996
increased $23,537,000, or 47%, as compared to the corresponding period in 1995.
Most of this increase was a result of expansion of the Company's international
operations, including $22,292,000 due to the acquisition of Quitral-Co, as
discussed above. Operating costs attributable to domestic offshore operations
increased $1,728,000 due primarily to improved utilization, as discussed above.
Operating costs for domestic land operations increased $283,000. During the
latter portion of the second quarter of 1996, the Company experienced an
increase in demand for domestic land workover rigs which resulted in an increase
in rig utilization of approximately 10%. The Company incurred start-up costs
associated with meeting this demand which negatively affected the performance of
the domestic land-based operations for the period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
three months ended June 30, 1996 increased $2,914,000, or 71%, as compared to
the corresponding period in 1995, primarily as a result of the Quitral-Co
acquisition and additional expansion of the Company's international and domestic
offshore assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the three months ended June 30, 1996 increased $4,402,000, or 61%,
as compared to the corresponding period in 1995, primarily due to inclusion of
$2,848,000 of such costs for Quitral-Co. As a percentage of revenues, total
selling, general and administrative costs increased to 11.4% for the second
quarter of 1996 from 10.6% for the second quarter of 1995. During the period,
the Company incurred certain non-recurring expenses in connection with
consolidation of acquired operations with its existing operations in Argentina
and Venezuela.
EARNINGS FROM OPERATIONS. Earnings from operations for the three months
ended June 30, 1996 increased by $2,280,000, or 32%, as compared to the
corresponding period in 1995. Of this increase, $3,123,000 was attributable to
the Quitral-Co acquisition and $145,000 to improved utilization of the Company's
offshore platform rigs. These increases were partially offset by a decrease in
earnings from the Company's domestic land-based operations of $608,000 due to
start-up costs incurred during the latter part of the period, as discussed
above.
OTHER INCOME (EXPENSE). Other income (expense) for the second quarter of
1996 included gains from asset sales, foreign exchange transactions and other
sources. Interest income increased to $623,000 for the three months ended June
30, 1996 from $267,000 for the corresponding 1995 period due to an increase in
cash available for investment. Interest expense for the three months ended June
30, 1996 increased by $2,464,000 over the corresponding 1995 period, as a result
of interest accrued on the convertible subordinated debentures and borrowings
related to the Quitral-Co acquisition and other additions to property and
equipment.
INCOME TAX PROVISION. The Company's consolidated effective income tax
rate for the three months ended June 30, 1996 was approximately 24%, as compared
to approximately 37% for the corresponding period in 1995. The decrease is
primarily attributable to the recognition in the second quarter of 1996 of
current tax benefits from the utilization of approximately $2,216,000 of foreign
net operating loss carryforwards. The Company had previously provided a
valuation allowance for the tax benefits of such foreign net operating loss
carryforwards.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995.
REVENUES. Revenues for the six months ended June 30, 1996 increased
$36,856,000, or 28% as compared to the corresponding period in 1995. Of this
increase, $34,539,000 was a result of expansion of the Company s international
operations, primarily the acquisition of Quitral-Co. Revenues from domestic
land operations increased $1,070,000, primarily as a result of the inclusion of
operating results of X-Pert (commencing in March 1995) for six months in the
1996 period as compared to only four months in the 1995 period. Revenues
attributable to domestic offshore operations increased $1,247,000, due primarily
to higher utilization of the Company s offshore platform rigs.
OPERATING COSTS. Operating costs for the six months ended June 30, 1996
increased $26,312,000, or 28%, as compared to the corresponding period in 1995.
Of this increase, $23,661,000 was a result of expansion of the Company s
international operations and $1,307,000 was attributable to domestic land
operations, principally due to the inclusion of the operating results of X-Pert
for the full period, partially offset by start-up costs incurred during the
latter part of the second quarter of 1996. Operating costs related to domestic
offshore operations increased $1,344,000, due to higher utilization, as
discussed above.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the six
months ended June 30, 1996 increased $4,110,000, or 53%, as compared to the
corresponding period of 1995, primarily as a result of the Quitral-Co
acquisition and additional expansion of the Company s international and domestic
offshore assets.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses for the six months ended June 30, 1996 increased $4,517,000, or 30%, as
compared to the corresponding period in 1995, primarily due to the inclusion of
$2,848,000 of such costs for Quitral-Co. As a percentage of revenues, total
selling, general and administrative costs were 11.8% for the first six months of
1996 as compared to 11.7% for the first six months of 1995. During the period,
the Company incurred certain non-recurring expenses in connection with
consolidation of acquired operations with its existing operations in Argentina
and Venezuela.
EARNINGS FROM OPERATIONS. Earnings from operations for the six months
ended June 30, 1996 increased by $1,917,000, or 15%, as compared to the
corresponding period in 1995. Of this increase, $3,123,000 was attributable to
the Quitral-Co acquisition. The increase was partially offset by a decrease in
income from domestic offshore operations of $507,000 due to moderately lower
utilization for the Company s offshore platform rigs during the first quarter of
1996. Earnings from domestic land-based operations decreased by $674,000 due to
start-up costs incurred during the latter part of the second quarter of 1996.
OTHER INCOME (EXPENSE). Other income (expense) for the six months ended
June 30, 1996 included gains from asset sales, foreign exchange transactions and
other sources. Interest income increased to $1,397,000 for the six months ended
June 30, 1996 from $392,000 for the corresponding 1995 period due to an increase
in cash available for investment. Interest expense for the six months ended
June 30, 1996 increased by $3,771,000 over the corresponding 1995 period, as a
result of interest accrued on the convertible subordinated debentures and
borrowings related to the Quitral-Co acquisition and other additions to property
and equipment.
INCOME TAX PROVISION. The Company s consolidated effective income tax
rate for the six months ended June 30, 1996 was approximately 25%, as compared
to approximately 36% for the corresponding period in 1995. The decrease is
primarily attributable to the recognition in the first six months of 1996 of
current tax benefits from the utilization of approximately $2,854,000 of foreign
net operating loss carryforwards. The Company had previously provided a
valuation allowance for the tax benefits of such foreign net operating loss
carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The Company had net working capital of $37,693,000 and $31,302,000 at June
30, 1996 and December 31, 1995, respectively. The Company's current ratio was
1.4 to 1.0 at June 30, 1996 and 1.7 to 1.0 at December 31, 1995. In July 1996,
the Company completed the public sale of 3,450,000 shares of common stock, which
resulted in net proceeds to the Company of approximately $45,641,000. On a pro
forma basis, as adjusted to give effect to the public sale of common stock and
receipt of the net proceeds therefrom, the Company had net working capital of
$83,334,000 and a current ratio of 1.8 to 1.0 at June 30, 1996. Approximately
$20,200,000 of such net proceeds has been used to repay outstanding
indebtedness, approximately $12,000,000 will be used to finance the construction
of two platform rigs for the Company s offshore fleet and approximately
$7,000,000 will be used to fund various capital projects for Quitral-Co,
including rig upgrades and expansion of its rig transportation fleet. The
balance of the net proceeds will be available for general corporate purposes.
Management believes that the Company's available funds, including cash generated
from operations and existing bank credit lines, will be sufficient to fund its
normal ongoing capital expenditure, working capital and debt service
requirements.
The Company is active in reviewing possible expansion and acquisition
opportunities relating to all of its business segments. While the Company has
no definitive agreements 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. From time
to time, the Company has one or more bids outstanding for contracts that could
require significant capital expenditures and mobilization costs. The Company
expects to fund acquisitions and project opportunities primarily through a
combination of working capital, cash flow from operations and full or limited
recourse debt or equity financing.
In January 1996, the Company completed the public sale of $80,500,000
principal amount of convertible subordinated debentures, which resulted in net
proceeds to the Company of approximately $77,585,000. Approximately $10,000,000
of such net proceeds were used to repay outstanding indebtedness. The remainder
of such net proceeds were used to fund a portion of the purchase price for
Quitral-Co and various other capital projects. The Company purchased Quitral-Co
for aggregate consideration of $140,000,000, consisting of $110,000,000 in cash
and a note payable to the sellers for $30,000,000. The note bears interest at
LIBOR plus 2%, payable quarterly, and is expected to be repaid in thirty monthly
installments. Of the cash portion of the purchase price, $70,000,000 was funded
from the Company's working capital and $40,000,000 from the net proceeds from
two new long-term financing arrangements with three lending institutions.
Borrowings under these arrangements, which are collateralized by substantially
all of the Company s domestic land rigs and ancillary equipment, bear interest
initially at the prime rate plus 1/2% and are repayable in monthly installments
of principal and interest over a five-to-six-year period. The Company may elect
to convert the borrowings to a fixed rate of interest at any time during the
term.
As of June 30, 1996, the Company had domestic bank commitments providing
for guidance lines of credit of $18,000,000, against which letters of credit of
$8,606,000 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 June 30, 1996, the Company had
accrued approximately $8,512,000 of claims liabilities, of which $5,713,000 was
included in current liabilities and $2,799,000 was included in other long-term
liabilities in the 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 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 loans are collateralized by
the barge rigs and related charter contracts. At June 30, 1996, the outstanding
balance of these loans was $40,668,000. The loans are being repaid from the
proceeds of the related charter contracts in equal monthly installments of
principal and interest through July 2004. In addition, a portion of the
contract proceeds is being held in trust to assure the timely payment of future
debt service obligations. At June 30, 1996, $2,435,000 of such contract
proceeds are being held in trust as security for the lenders, and are not
presently available for use by the Company.
In connection with the operation, upgrading and expansion of its offshore
platform rig fleet, the Company has established credit facilities with a lending
institution in the aggregate amount of $30,000,000. As of June 30, 1996,
$7,120,000 of secured term loans, $7,000,000 of secured revolving loans and
$8,109,000 of working capital line of credit borrowings were outstanding
pursuant to this facility. All of such borrowings except $3,240,000 of the
secured term loans were repaid subsequent to June 30, 1996 out of the net
proceeds from the Company s public sale of common stock in July 1996.
During the six months ended June 30, 1996, the Company spent approximately
$11,900,000 on additions to its offshore assets, including: (I) construction of
a new state-of-the-art diesel electric platform rig, (ii) major rig
refurbishments and (iii) auxiliary equipment such as top-drive drilling systems
and larger capacity pumps and generators, and improved living quarters. The
Company is currently constructing two additional new platform rigs for an
estimated aggregate cost of $11,500,000. Capital expenditures for offshore
assets for the six months ended June 30, 1995 were approximately $8,900,000.
In September 1995, the Company entered into an agreement with a financial
institution for the sale and leaseback of up to $10,000,000 of equipment to be
used in the Company's business. During 1995, the Company received proceeds of
$5,500,000 pursuant to this facility relating to the construction of a new
platform rig. The Company has annual purchase and lease renewal options at
projected future fair market values under the agreement. The lease has been
classified as an operating lease for financial statement purposes. Rentals on
the initial transaction are $1,167,000 annually. The net book value of the
equipment has been removed from the balance sheet and the excess of $483,000
realized on the transaction has been deferred and is being amortized as a
reduction of the lease expense over the maximum lease term of five years. In
April 1996, the amount of the facility was increased to $10,800,000 and
$5,300,000 of proceeds was received by the Company in connection with the sale
and leaseback of a second newly-constructed offshore platform rig. Rentals on
the second transaction are $1,083,000 annually.
International rig refurbishment and deployment costs for the six months
ended June 30, 1996 and 1995 were approximately $4,700,000 and $8,000,000,
respectively. Capital expenditures related to the completion of the two
drilling/workover barge rigs in the first six months of 1995 were approximately
$3,800,000. Other international capital expenditures for the six months ended
June 30, 1996 and 1995 were approximately $5,900,000 and $1,000,000,
respectively. Capital expenditures related to domestic land-based operations
for the six months ended June 30, 1996 and 1995 were approximately $3,800,000
and $11,700,000, respectively, including acquisition expenditures of
approximately $1,800,000 and $10,000,000, respectively.
CURRENCY FLUCTUATIONS
Deterioration in economic conditions in Venezuela resulted in significant
devaluation of the country's currency during the first half of 1994, which
resulted in currency translation losses for the Company. These losses resulted
principally from the translation of the net Venezuelan monetary assets
(primarily, 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 of 170
Venezuelan bolivars per U.S. dollar. This official rate was maintained for the
remainder of 1994 and during the first three quarters of 1995. Accordingly, no
currency translation losses resulted in those periods. In December 1995, the
Venezuelan government devalued its currency by revising the official exchange
rate to 290 Venezuelan bolivars per U.S. dollar. The December 1995 devaluation
did not result in the recognition of any material currency translation gain or
loss by the Company in its consolidated financial statements.
In April 1996, the Venezuelan government removed exchange control
restrictions and effectively allowed the bolivar to "float" relative to the
U.S. dollar. As a result, the exchange rate for Venezuelan bolivars has
declined to approximately 450-500 bolivars per U.S. dollar. The April 1996
devaluation did not have any material impact on the Company s consolidated
results of operations. To a large extent, the Company avoided currency
translation losses from these recent devaluations of the bolivar by limiting the
bolivar component of its Venezuelan contracts. However, if the market rate of
exchange for Venezuelan bolivars continues to decline relative to the U.S.
dollar, the Company could be susceptible to future 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.
FORWARD-LOOKING INFORMATION
The statements included herein regarding future financial performance and
results and the other statements that are not historical facts are forward-
looking statements. The words "expect," "project," "estimate," "predict" and
similar expressions are also intended to identify forward-looking statements.
Such statements involve risks, uncertainties and assumptions, including but not
limited to, industry conditions, prices of crude oil and natural gas, foreign
exchange and currency fluctuations and other factors discussed herein and in the
Company's other filings with the Securities and Exchange Commission. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary materially from those
indicated.
ACCOUNTING MATTERS
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 adoption of SFAS No.121 did not have any material effect on
the Company's financial position or results of operations.
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). SFAS No. 123, which is effective for fiscal years beginning after
December 15, 1995, encourages but does not require companies to recognize
compensation expense for grants of stock, stock options and other equity
instruments to employees based on new fair value accounting rules. The Company
has decided not to adopt this new fair value based method of accounting for its
stock-based incentive plans.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held in Houston,
Texas on May 16, 1996, for the purpose of voting on the proposals described
below. Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitation in opposition to
management s solicitation.
Shareholders approved the Company s Employee Stock Purchase Plan by the
following vote:
Shares voted "For". . . . . . . . . . . 19,235,754
Shares voted "Against". . . . . . . . . 429,170
Shares "Abstaining" . . . . . . . . . . 77,638
Shares not voted. . . . . . . . . . . . 5,091,094
Shareholders ratified the selection of Coopers & Lybrand L.L.P. as the
Company s independent accountants for 1996 by the following vote:
Shares voted "For". . . . . . . . . . . 19,898,170
Shares voted "Against". . . . . . . . . 16,974
Shares "Abstaining" . . . . . . . . . . 30,793
Shares not voted. . . . . . . . . . . . 4,887,719
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 Current Report on Form 8-K dated April 30, 1996, the Company reported
that the acquisition of Quitral-Co S.A.I.C. had been completed.
On June 4, 1996, the Company filed an amendment on Form 8-K/A to its
Current Report dated April 30, 1996 relating to the acquisition of Quitral-Co.
Included in the Form 8-K/A were the required financial statements of Quitral-Co
and pro forma financial statements of the Company.
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 and Chief
Financial Officer
By: EARL W. MCNIEL
-----------------------------------
(Earl W. McNiel)
Chief Accounting Officer
and Assistant Secretary
Date: August 14, 1996
<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 August 14, 1996 on our review of
interim consolidated financial information of Pride Petroleum Services, Inc. for
the periods ended June 30, 1996 and 1995 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
August 14, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
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