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 September 30, 1996
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
________________________
Commission File Number: 0-22032
________________________
AMERICAN OILFIELD DIVERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Louisiana 72-0918249
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
130 East Kaliste Saloom Road 70508
Lafayette, Louisiana (Zip Code)
(Address of Principal Executive Offices)
318/234-4590
(Registrants telephone number,
including area code)
________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13(b) or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or 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 [ ]
At November 14, 1996 there were 6,813,822 shares of common stock, no par
value, outstanding.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995...................... 1
Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1996 and
September 30, 1995........................................... 2
Consolidated Statements of Changes in Stockholders' Equity -
Nine Months Ended September 30, 1996 and September 30, 1995... 3
Consolidated Statements of Cash Flows -
Three and Nine Months Ended September 30, 1996 and
September 30, 1995........................................... 4
Notes to Consolidated Financial Statements...................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 8
Part II. Other Information
Item 1. Legal Proceedings..................................... 15
Item 6. Exhibits and Reports on Form 8-K...................... 15
Signatures..................................................... 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
American Oilfield Divers, Inc.
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
__________________ _________________
(unaudited) (unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,648 $ 788
Accounts receivable, net of allowance for
doubtful accounts of $500 and $380 21,812 13,014
Unbilled revenue 7,967 13,683
Other receivables 1,574 2,025
Current deferred tax asset 200 1,700
Inventories 2,817 2,261
Prepaid expenses 2,547 1,380
_______________ ______________
Total current assets 38,565 34,851
Property, plant and equipment, net of
accumulated depreciation of $21,430 and $18,053 31,731 25,550
Deferred tax asset --- 57
Other assets 2,703 3,463
_______________ ______________
$ 72,999 $ 63,921
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,128 $ 3,506
Income taxes payable 585 ---
Other liabilities 7,088 6,197
Borrowings under line of credit agreement 4,033 7,875
Current portion of long-term debt 1,500 1,375
________________ ______________
Total current liabilities 18,334 18,953
Deferred tax liability 1,200 ---
Long-term debt, less current portion 8,500 5,413
________________ ______________
Total liabilities 28,034 24,366
Stockholders' equity:
Common stock, no par value 1,368 1,360
Other stockholders' equity 43,597 38,195
________________ ______________
Total stockholders' equity 44,965 39,555
________________ ______________
$ 72,999 $ 63,921
================ ==============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
American Oilfield Divers, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
___________________ ____________________
(unaudited) 1996 1995 1996 1995
_________ ________ __________ _________
Diving and related revenues $ 33,409 $ 32,055 $ 79,466 $ 63,689
_________ _________ _________ _________
Costs and expenses:
Diving and related expenses 21,384 22,220 51,657 45,486
Selling, general and administrative
expenses 5,258 5,173 14,759 14,328
Depreciation and amortization 1,471 1,352 4,737 3,796
_________ _________ __________ __________
Total costs and expenses 28,113 28,745 71,153 63,610
_________ _________ __________ __________
Operating income 5,296 3,310 8,313 79
Other expense, net (295) (381) (153) (985)
_________ _________ __________ __________
Income (loss) before income taxes 5,001 2,929 8,160 (906)
Income tax provision (benefit) 2,150 1,300 3,470 (280)
_________ _________ __________ __________
Net income (loss) $ 2,851 1,629 4,690 (626)
========= ========= ========== ==========
Net income (loss) per share $ .42 $ .24 $ .69 $ (.09)
========= ========= ========== ==========
Weighted average common shares
outstanding 6,806 6,709 6,769 6,709
========= ========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
American Oilfield Divers, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(in thousands, except share data)
<TABLE>
<CAPTION>
Foreign (Accumulated
Additional Currency Deficit)
Common Stock Paid-in Translation Retained
(unaudited) Shares Amount Capital Adjustment Earnings Total
_______ ________ __________ ____________ ___________ _________
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 6,709,497 $ 1,360 $ 40,837 $ (128) $ (2,144) $ 39,925
Net effects of translation of
foreign currency 127 127
Net loss (626) (626)
__________ ________ _________ ___________ ___________ __________
Balance at
September 30, 1995 6,709,497 $ 1,360 $ 40,837 $ (1) $ (2,770) $ 39,426
========== ========= ========= ============ =========== ==========
Balance at
December 31, 1995 6,709,497 $ 1,360 40,837 (132) (2,510) 39,555
Adjustment to valuation of
common stock issued in
connection with an acquisition (52) (52)
Issuance of common stock 101,685 8 763 771
Net effects of translation of
foreign currency 1 1
Net income 4,690 4,690
___________ __________ __________ ___________ __________ __________
Balance at
September 30, 1996 6,811,182 $ 1,368 41,548 (131) 2,180 44,965
=========== ========== ========== =========== ========== ==========
</TABLE>
American Oilfield Divers, Inc.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ __________________
1996 1995 1996 1995
(unaudited) _________ ________ _________ ________
<S> <C> <C> <C> <C>
Net cash flows from operating
activities:
Net income (loss) $ 2,851 $ 1,629 $ 4,690 $ (626)
Non-cash items included in net
income (loss):
Depreciation and amortization 1,471 1,352 4,737 3,796
Net (gain) loss on disposition
of assets 41 --- (536) 119
Other (1,892) (928) 1,508 (2,596)
__________ __________ _________ _________
Net cash provided by operating
activities 2,471 2,053 10,399 693
Cash flows from investing activities:
Capital expenditures (5,536) (1,584) (15,757) (7,559)
Proceeds from sale of assets 12 10 5,681 1,571
Proceeds from insurance claim --- --- 535 1,565
Receipt of payments on notes
receivable --- --- --- 467
Proceeds from sale of notes
receivable --- --- --- 2,762
Other 133 (188) 462 (238)
__________ __________ __________ _________
Net cash used by investing activities (5,391) (1,762) (9,079) (1,432)
Cash flows from financing activities:
Issuance of common stock under
exercise of stock options 34 --- 170 ---
Proceeds from long-term borrowing --- --- 10,500 2,000
Repayments of long term-debt (375) (500) (7,288) (2,242)
Net proceeds (payments) under
line-of-credit agreement 3,683 640 (3,842) 1,270
__________ __________ __________ _________
Net cash provided by (used by)
financing activities 3,342 140 (460) 1,028
__________ __________ __________ _________
Net increase in cash 422 431 860 289
Cash and cash equivalents at
beginning of period 1,226 378 788 520
__________ __________ __________ _________
Cash and cash equivalents at
end of period $ 1,648 809 1,648 809
========== ========== ========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
American Oilfield Divers, Inc.
Notes to Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Principles
___________________________________________________________
The consolidated financial statements include the accounts of American
Oilfield Divers, Inc. and its wholly-owned and majority-owned subsidiaries
(the "Company"). The Company provides undersea construction, installation,
and repair and maintenance services to the offshore oil and gas industry,
primarily in the United States Gulf of Mexico, the U.S. West Coast and select
international areas, and to inland industrial and governmental customers. In
addition, the Company (i) manufactures and markets subsea pipeline connectors
and a patented marginal well production system to the domestic and
international oilfield industry; (ii) operates the "American Intrepid" a jack-
up derrick barge with a 220 ton Manitowoc crane, in the U.S. Gulf of Mexico;
and (iii) provides environmental remediation and oil spill response services
to the oil and gas industry and certain other commercial and governmental
customers. Effective March 1, 1996, the Company sold its pipelay/bury barge,
the "American Enterprise," for proceeds of $5,400,000. The gain on the sale
is included in other income in the consolidated statement of income for the
nine month period ended September 30, 1996. All material intercompany
transactions and balances have been eliminated in consolidation.
On June 26, 1996, the Company's Board of Directors resolved to change the
Company's fiscal year-end from October 31 to December 31 to enable the Company
to report its quarterly and annual results of operations on a comparable basis
with other companies in the oil and gas industry. As a result of the change in
fiscal year end, this quarterly report on Form 10-Q includes results of
operations as of and for the three and nine months ended September 30, 1996
and 1995. These unaudited financial statements at September 30, 1996 and for
the three and nine months ended September 30, 1996 and 1995 and the notes
thereto have been prepared in accordance with generally accepted accounting
principles for interim financial information and Rule 10-01 for Regulation S-
X. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair statement have been
included.
A description of the organization and operations of the Company, the
significant accounting policies followed, and the financial condition and
results of operations as of October 31, 1995, are contained in the audited
consolidated financial statements included in the Company's annual report on
Form 10-K, for the fiscal year ended October 31, 1995. These unaudited third
quarter financial statements should be read in conjunction with the audited
1995 financial statements and the transition report on Form 10-Q as of and for
the two months ended December 31, 1995 and 1994.
During the nine months ended September 30, 1996, the Company purchased certain
diving equipment and four dive support vessels in several separate
transactions for cash and shares of the Company's common stock.
Operating results for interim periods are not necessarily indicative of the
results that can be expected for full fiscal years. The offshore oilfield
services industry in the Gulf of Mexico is highly seasonal as a result of
weather conditions and the timing of capital expenditures by the oil and gas
industry. Utilization of the company's dive crews and diving support vessels
("DSV") and therefore the related scope and extent of the company's offshore
diving operations are limited by winter weather conditions generally
prevailing in the Gulf of Mexico and in certain of the Company's inland
markets from December to April. Although adverse weather conditions occurring
from time to time from May through November may also adversely affect vessel
utilization and diving operations, historically, a disproportionate amount of
the Company's diving services have been performed during the period from May
through November. The Company expects a higher concentration of its total
revenues and net income to be earned during the third (July through September)
and fourth (October through December) quarters of its fiscal year compared to
the first (January through March) and third (April through September)
quarters.
As a result of the change in fiscal year-end, the Company is required to
implement 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 121) for the fiscal year ended December 31, 1996. This
pronouncement requires a review for impairment whenever circumstances indicate
that the carrying amount of long-lived assets, certain identifiable
intangibles and goodwill may not be recoverable through future cash flows. In
accordance with SFAS 121, the Company recognized a pre-tax charge of $500,000
($290,000 after tax, or $.04 per share), effective January 1, 1996. The
charge is included in depreciation and amortization in the consolidated
statement of income for the nine months ended September 30, 1996.
Note 2 - Inventories
_____________________
The major classes of inventories consist of the following (in thousands):
September 30, December 31,
1996 1995
______ ______
(Unaudited) (Unaudited)
Fuel $ 49 $ 101
Supplies 759 1,026
Work-in-process 453 444
Finished goods 1,556 690
_____________ _____________
$ 2,817 $ 2,261
============= =============
Note 3 - Earnings (Loss) per Share
___________________________________
Primary earnings (loss) per share is calculated by dividing net income (loss)
by the weighted average number of common shares outstanding during each
period.
Note 4 - Commitments and Contingencies
______________________________________
In the normal course of business the Company becomes involved as a defendant
or plaintiff in various lawsuits. While the outcome of these lawsuits cannot
be predicted with certainty, based upon the evaluation by the Company's legal
counsel of the merits of pending or threatened litigation, the Company does
not expect that the outcome of such litigation will have a material effect on
the accompanying financial statements.
Although the Company's operations involve a higher degree of risk than found
in some other service industries, management is of the opinion that it
maintains insurance at levels generally at or above industry standards to
insure itself against the normal risks of operations.
An overseas operator has instituted litigation in Edinburgh, Scotland seeking
damages of approximately U.S. $3 million, plus interest and costs, against
subsidiaries of the Company, on the basis of allegations that a product supplied
by the subsidiaries exhibited design faults upon installation in a North Sea
pipeline. The product was hydrostatically tested onshore and did not leak and
otherwise met the customer's requirements. The product was removed by the
overseas company against the recommendations of the subsidiaries, and replaced
before the pipeline was placed in service and the product did not leak or
otherwise malfunction. No environmental damage is alleged. The Company
contends the product was fully suitable for service, intends to defend the
claim vigorously and does not believe that ultimate resolution of the claim will
have a material adverse impact on the Company's financial statements.
Note 5 - Subsequent Event
__________________________
On September 25, 1996, AOD Acquisition Corp., a subsidiary of the Company,
published a tender offer to acquire for cash all of the outstanding common
shares of Hard Suits Inc., a Vancouver, Canada company that manufactures and
markets the NEWTSUIT(TM), a one-atmosphere diving suit, and other subsea
robotic products and provides underwater services using the NEWTSUIT(TM) and
other diving systems. As of November 14, 1996, approximately 9.6 million, or
97% of shares outstanding, have been deposited under the terms of the tender
offer, as varied and extended, and have been or will be taken up by the
Company for a price of approximately $1.23 per share (CDN $1.65 per share)
or total consideration of approximately $11.8 million. The purchase of these
shares was funded by draws against the Company's revolving line of credit.
Although Hard Suits Inc. continues as a publicly traded company, the Company
intends to acquire the remaining common shares outstanding and to seek the
delisting of all shares from both the Toronto Stock Exchange and the Vancouver
Stock Exchange and privatize Hard Suits Inc. The acquisition of Hard Suits
Inc. will be accounted for under the purchase methold of accounting.
Item 2.Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following tables set forth, for the periods indicated, additional
information on the operating results of the Company in its geographic and
product markets:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1996
______________________________________
(Unaudited) Inland
and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
______________ ____________ ____________ ____________ ________
<S> <C> <C> <C> <C> <C>
Diving and related revenues $ 18,478 $ 770 $11,351 $2,810 $33,409
Diving and related expenses $ 11,414 $1,264 $ 7,247 $1,459 $21,384
Gross profit (loss) $ 7,064 $ (494) $ 4,104 $1,351 $12,025
Gross profit (loss)
percentage 38.2% (64.2)% 36.2% 48.1% 36.0%
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1995
_______________________________________
(Unaudited) Inland
and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
______________ ____________ ____________ ____________ ________
<S> <C> <C> <C> <C> <C>
Diving and related revenues $17,350 $7,714 $4,309 $2,682 $32,055
Diving and related expenses $12,750 $5,114 $2,767 $1,589 $22,220
Gross profit $ 4,600 $2,600 $1,542 $1,093 $ 9,835
Gross profit percentage 26.5% 33.7% 35.8% 40.8% 30.7%
<F1> Includes diving and related services, pipelay/bury and derrick barge
services provided by American Marine Construction, Inc. and environmental
remediation and oil spill response services provided by American Pollution
Control, Inc., all of which were performed in the Gulf of Mexico. The
pipelay/bury barge was sold effective March 1, 1996.
<F2> Includes all diving and related services performed outside of the United
States and its coastal waters except for Latin America, which is included
in Inland and West Coast Services.
<F3> Includes diving and related services off the U.S. West Coast provided by
American Pacific Marine, Inc. and diving and related services provided by
American Inland Divers, Inc.
<F4> Includes manufacturing and marketing of Big Inch pipeline connectors and
Tarpon marginal well production systems.
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1996
____________________________________
(Unaudited) Inland
and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
______________ ____________ ____________ ____________ ________
<S> <C> <C> <C> <C> <C>
Diving and related revenues $40,735 $6,202 $26,127 $6,402 $79,466
Diving and related expenses $26,874 $4,286 $17,118 $3,379 $51,657
Gross profit $13,861 $1,916 $ 9,009 $3,023 $27,809
Gross profit percentage 34.0% 30.9% 34.5% 47.2% 35.0%
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1995
_______________________________________
(Unaudited) Inland
and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
______________ ____________ ____________ ____________ ________
<S> <C> <C> <C> <C> <C>
Diving and related revenues $35,369 $14,071 $8,402 $5,847 $63,689
Diving and related expenses $27,130 $ 8,862 $6,194 $3,300 $45,486
Gross profit $ 8,239 $ 5,209 $2,208 $2,547 $18,203
Gross profit percentage 23.3% 37.0% 26.3% 43.6% 28.6%
<F1> Includes diving and related services, pipelay/bury and derrick
barge services provided by American Marine Construction, Inc. and
environmental remediation and oil spill response services
provided by American Pollution Control, Inc., all of which were
performed in the Gulf of Mexico. The pipelay/bury barge was sold
effective March 1, 1996.
<F2> Includes all diving and related services performed outside of the
United States and its coastal waters except for Latin America,
which is included in Inland and West Coast Services.
<F3> Includes diving and related services off the U.S. West Coast
provided by American Pacific Marine, Inc. and diving and related
services provided by American Inland Divers, Inc.
<F4> Includes manufacturing and marketing of Big Inch pipeline
connectors and Tarpon marginal well production systems.
</TABLE>
The following discussion of the Company's financial
condition, results of operations, and liquidity and capital
resources should be read in conjunction with the Company's
consolidated financial statements and the notes thereto
included elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations
As a result of the change in the Company's fiscal year end
from October 31 to December 31, which was approved by the
Company's Board of Directors on June 26, 1996, this quarterly
report on Form 10-Q includes results of operations as of and
for the three and nine months ended September 30, 1996 and
1995.
The Company experienced strong results of operations in the
third quarter ended September 30, 1996, a period traditionally
associated with high diving activity in domestic markets, particularly
in the Gulf of Mexico. For the three months ended September 30,
1996, the Company recorded net income of $2.9 million on revenue
of $33.4 million, compared to net income of $1.6 million on
revenue of $32.1 million for the same period in 1995.
Although the revenue levels were comparable in the third
quarter of both 1996 and 1995, the composition of the revenues
changed from 1995 to 1996. As compared to the third quarter of
1995, the third quarter of 1996 reflected (i) increased
activity in the Inland and West Coast Services group primarily
as a result of the continued work on the Chevron platform
abandonment project off the coast of California; (ii) increased
diving and vessel activity and increased day rates in the Gulf
of Mexico attributable to improved fundamentals in the oil and
gas industry; (iii) increased demand for the Company's subsea
pipeline connector products and (iv) decreased diving and
vessel activity off the coast of West Africa. Although
revenues were stable from period to period, the Company
realized a significant improvement in its net income as a
result of improved rates, increased utilization and the
Company's continued focus on cost control.
The first nine months of 1996 reflect a revenue
increase of 25% to $79.5 million, as compared to $63.7 million
for the comparable period in the prior year. Several factors
combined to produce a significant increase in revenues for the
Company during the nine-month period ended September 30, 1996.
First, the Inland and West Coast Services group experienced
record activity levels with revenues increasing from $8.4
million in the first nine months of 1995 to $26.1
million in the current nine-month period. This is primarily
due to the activity level associated with the Chevron platform
abandonment project off the coast of California discussed above
and the Inland Group's increased market penetration. Second,
Gulf of Mexico activity was significantly higher as a result of
increased dive crew and vessel activity in the Gulf of Mexico
and the operations of the American Intrepid. As a result of
these positive revenue factors, increased gross profit margin
and the lack of third quarter operating losses associated with
the American Enterprise which was sold on March 1, 1996, the
Company recorded net income of $4.7 million for the nine months
ended September 30, 1996 compared to net loss of $626,000 for
the nine months ended September 30, 1995.
The Company's results of operations will generally vary
from reporting period to reporting period depending in large
part on the location and type of work being performed, the mix
of the marine services being performed, the season of the year
and the job conditions encountered. Also, weather conditions
in the Gulf of Mexico and in certain of the Company's inland
markets, particularly the winter weather conditions that are
generally present from December through April, substantially
reduce the work that could otherwise be performed by the
Company's dive crews and limit the utilization of the Company's
support vessels in the Gulf of Mexico. The Company expects
winter weather patterns and other adverse weather conditions to
continue to have an adverse effect on the Company's diving
operations, both in the Gulf of Mexico and elsewhere.
On March 1, 1996, the Company sold the American Enterprise
for proceeds of $5,400,000 resulting in a non-recurring gain in
the first quarter of 1996.
During the second quarter of 1996, the Company acquired four
dive support vessels and certain diving equipment to be used in
its Gulf of Mexico diving operations.
On September 25, 1996, AOD Acquisition Corp., a subsidiary
of the Company, published a tender offer to acquire for cash
all of the outstanding common shares of Hard Suits Inc. a
Vancouver, Canada company. As of November 14, 1996,
approximately 9.6 million, or 97% of shares outstanding, have
been deposited under the terms of the tender offer, as varied
and extended, and have been or will be taken up by the Company
for a price of approximately $1.23 per share (CDN $1.65 per
share) or total consideration of approximately $11.8 million.
Hard Suits manufactures and markets a one-atmosphere diving
suit known as the "NEWTSUIT(TM)" and provides underwater
services using the NEWTSUIT(TM) and other diving systems. Hard
Suits has a facility in North Vancouver, British Columbia,
Canada where it manufactures and develops its products and
services. The Company anticipates that it will continue
operations at these facilities and will make use of the
NEWTSUIT(TM) and other diving systems in connection with its
own operations.
Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995
Total revenues. Compared to the third quarter of 1995,
the Company's consolidated revenues increased $1.4 million or
4%, from $32.1 million in the third quarter of 1995 to $33.4
million in the current quarter. Of the $1.4 million increase,
(i) approximately $7.0 million was attributable to increased
diving activity in the Inland and West Coast Services markets,
$6.9 million of which resulted from the Chevron platform
abandonment project off the coast of California; and (ii)
approximately $3.8 million was attributable to increased diving
and vessel activity in the Gulf of Mexico. These revenue
increases were offset by certain revenue decreases including
(i) approximately $2.6 million attributable to the American
Enterprise, the Company's pipelay/bury barge that was sold on
March 1, 1996, and (ii) approximately $6.9 million attributable
to the operations of the International Services group,
primarily as a result of decreased activity off the coast of
West Africa.
Selling, general and administrative expenses. Selling,
general and administrative expenses increased 2%, or $85,000 to
$5.3 million during the third quarter of 1996 compared to $5.2
million for the third quarter of 1995. The slight increase was
primarily attributable to increases in the selling, general and
administrative expenses of the Inland Services and Subsea
Products groups in the amount of $326,000 as a result of the
increase in activity for these groups in 1996 compared to the
same period in 1995. This increase was offset by an overall
decrease in selling, general and administrative expenses of
$241,000 for the Company's other groups as a result of ongoing
focused cost-cutting efforts and a decrease due to the March,1996
sale of the American Enterprise, the Company's pipelay/bury
barge. Although there was an increase in the level of selling,
general and administrative expenses during the third quarter
of 1996, selling, general and administrative expenses, as a
percentage of revenues, decreased to 15.7% compared to 16.1%
for the third quarter in 1995.
Depreciation and amortization. Depreciation and
amortization increased $119,000, or 9%, to $1.5 million in the
third quarter of 1996 compared to $1.4 million in the third
quarter of 1995. The increase was attributable to additions
and improvements to the Company's operational and administrative
assets primarily in the Gulf Services group, offset by a
reduction in depreciation expense of the American Enterprise which
was sold in March 1996.
Operating income (loss). During the three months ended
September 30, 1996, operating income was $5.3 million compared
to operating income of $3.3 million for the comparable period
in 1995. The positive change in operating income was due
primarily to an overall increase in the Company's gross
profit margin from $9.8 million, or 30.7%, in the third quarter
of 1995 to $12.0 million, or 36.0%, in the third quarter of 1996.
Other income/expense. During the current quarter, other
expense (net) of $295,000 was comprised of interest expense of
$289,000 and a net loss on disposal of assets of $47,000,
offset by other income of $41,000. This compares to other
expense (net) of $381,000 in the comparable quarter of
1995, which was comprised of interest expense of $402,000,
offset by other income of $21,000. Interest expense decreased
from 1995 to 1996 primarily as a result of the Company's
reduced debt levels in the third quarter of 1996 compared to
the comparable period of 1995.
Net income (loss). As a result of the conditions discussed
above, the Company recorded net income of $2.9 million, or $.42
per share, in the three months ended September 30, 1996
compared to net income of $1.6 million, or $.24 per share, in
the comparable period of the prior year.
Nine Months Ended September 30, 1996 Compared to Nine
Months Ended September 30, 1995
Total revenues. The Company's consolidated revenues
increased 25%, from $63.7 million for the nine months ended
September 30, 1995 to $79.5 million in the current period. Of
the $15.8 million increase, (i) approximately $17.7 million was
attributable to increased activity in the Inland and West Coast
diving markets, $14.4 million of which resulted from the
Chevron platform abandonment project off the coast of
California; (ii) approximately $6.7 million was attributable to
increased diving and vessel activity in the Gulf of Mexico;
(iii) approximately $2.4 million was attributable to the
operations of the American Intrepid, the Company's jack-up
derrick barge which was not operational for the entire nine
months ended September 30, 1996 and (iv) approximately $1.8
million was attributable to increased sales of the Company's
subsea pipeline connector products. These revenue increases
were offset by certain revenue decreases including (i)
approximately $3.8 million attributable to the American
Enterprise, the Company's pipelay/bury barge that was sold on
March 1, 1996, and (ii) approximately $7.9 million attributable
to the operations of the International Services group,
primarily as a result of decreased activity in Nigeria and
(iii) approximately $1.3 million attributable to decreased
demand for the Company's Tarpon Systems.
Selling, general and administrative expenses. Selling,
general and administrative expenses increased 3%, or $431,000,
to $14.7 million during the nine months ended September 30,
1996 compared to $14.3 million for the nine months ended
September 30, 1995. The increase was attributable to (i) a
$293,000 increase in the selling, general and administrative
expenses of the International Services group as a result of
supporting the activities of the operations and sales office in
Dubai, UAE which did not have full operations for the entire
first nine months of fiscal 1995; (ii) an additional $125,000
of the increase was attributable to severance paid in
connection with personnel layoffs during the three months ended
March 31, 1996 and (iii) an increase in the Company's Subsea
Products group of $46,000 attributable to increased activity
for the Big Inch connectors and flanges. These increases were
offset by an overall decrease in selling, general and
administrative expenses of $33,000 for the Company's other
groups as a result of ongoing focused cost-cutting efforts,
including a decrease of $382,000 due to the sale of the
American Enterprise, the Company's pipelay/bury barge that was
sold on March 1, 1996. Although there was an overall increase
in the level of selling, general and administrative expenses
during the nine months ended September 30, 1996, selling,
general and administrative expenses as a percentage of revenues
decreased from 22.5% for the nine months ended September 30,
1995 to 18.6% in the comparable period of 1996.
Depreciation and amortization. Compared to the nine
months ended September 30, 1995, depreciation and amortization
increased $941,000, or 25%, to $4.7 million for the nine months
ended September 30, 1996. A portion of the $941,000 increase
includes a pretax charge of $500,000, $290,000 after tax,
attributable to the implementation of 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 121) effective January 1, 1996. The charge is included
in depreciation and amortization in the consolidated statement
of income for the nine months ended September 30, 1996. The
remaining increase of $441,000 was attributable to additions
and improvements to the Company's operational and
administrative assets primarily in the Gulf Services and
International Services groups, offset by a reduction in
depreciation expense of the American Enterprise which was sold
in March 1996.
Operating income. During the nine months ended September
30, 1996, operating income was $8.3 million compared to
operating income of $79,000 for the comparable period in
1995. The significant change in operating income was due
primarily to an overall increase in the Company's gross profit
margin from $18.2 million, or 28.6%, in the first nine months
of 1995 to $27.8 million, or 35.0%, in the first nine months of
1996. This improved gross profit margin for the nine
months ended September 30, 1996 was offset slightly by
increases in both selling, general and administrative expenses
and depreciation and amortization.
Other income/expense. During the first nine months of
1996, other expense (net) of $153,000 was comprised of
interest expense of $817,000, which was offset by a net gain on
disposal of assets of $530,000 and other income of $134,000.
The net gain on the disposal of assets includes the non-
recurring gain on the sale of the American Enterprise offset by
losses on the disposal of other fixed assets. This compares to
other expense (net) of $985,000 in the comparable period of
1995, which was comprised of interest expense of
$1,075,000, and a loss on the disposal of assets of $125,000,
offset by other income of $215,000.
Net income (loss). As a result of the conditions discussed
above, the Company recorded net income of $4.7 million, or $.69
per share, in the nine months ended September 30, 1996 compared
to a net loss of $626,000, or ($.09) per share, in the
comparable period of the prior year.
Liquidity and Capital Resources
The Company's primary liquidity needs are, generally, to
fund working capital requirements and to make capital
expenditures for acquisitions of, and improvements to, its
facilities and to its DSVs and diving and related equipment.
The Company also incurs expenses for mobilization and project
execution on an ongoing basis throughout the course of its
contracts, while collections from customers typically do not
occur until approximately ninety days after invoicing. The
Company has traditionally supported these working capital
requirements by using a combination of internally generated
funds and short-term and long-term debt, as was the case in the
third quarter of 1996.
The Company has a bank line of credit in the principal
amount of $15 million against which $4 million was drawn at
September 30, 1996. Also at September 30, 1996, the Company
has an outstanding balance under a long-term note payable with
a bank in the amount of $10.0 million at a fixed interest rate
of 7.9%. Subsequent to September 30, 1996, the Company's
line of credit was increased to $20 million to facilitate the
funding of its purchase of the outstanding common shares of
Hard Suits Inc. until such time as long-term financing is
arranged. On November 14, 1996, the balance outstanding under
the line of credit was $15.6 million.
The Company believes that cash flows from operations and
borrowings available under its bank credit facility, including
term debt to be provided in connection with the purchase of
Hard Suits Inc., will provide sufficient funds for the next twelve
to eighteen months to meet its working capital and capital
expenditure requirements and to fund any further expansion into
new geographic markets or development of new product lines.
Net cash provided by operations was $10.4 million for the
nine months ended September 30, 1996 compared to $693,000 in
the comparable prior year period. Cash flows from operating
activities are primarily cash received from customers and cash
paid to employees and suppliers. During the nine months ended
September 30, 1996, cash received from customers was $75.8
million and cash paid to employees and suppliers was $65.1
million. During the nine months ended September 30, 1995, cash
received from customers was $57.3 million and cash paid to
employees and suppliers was $55.5 million. The factors
affecting amounts and timing of cash flows from operating
activities are the same as those affecting results of
operations discussed above.
In the most recent nine-month period, net cash used by
investing activities was approximately $9.1 million which
consisted of $15.8 million expended for the acquisition of and
improvements to operating assets to be used in the Company's
operations. This amount was funded primarily by proceeds of
$5.7 million received from the sale of certain operating assets
including the American Enterprise and the receipt of $535,000
of proceeds from an insurance claim. In the prior nine-month
period, net cash used by investing activities was approximately
$1.4 million which consisted of $7.6 million expended for the
acquisition of and improvements to operating assets to be used
in the Company's operations. This amount was funded primarily
by proceeds of $1.6 million received from the sale of operating
assets including the operating assets of its subsidiary,
American Corrosion Services, Inc. ("ACS"), the receipt of $1.6
million related to the insurance claim on the sinking of the
M/V American Heritage, the receipt of $467,000 of payments on
notes receivable acquired in connection with the sale of ACS'
assets and the receipt of proceeds of $2.8 million from the
sale of those notes receivable to a financial institution.
Cash flows used by financing activities of $460,000 in the
nine months ended September 30, 1996 were primarily
attributable to payments of short-term and long-term debt
totalling $11.1 million funded by proceeds from long-term
borrowings of $10.5 million and proceeds from the issuance of
common stock upon exercise of stock options totalling $170,000.
In the comparable period of fiscal 1995, cash provided by
financing activities of approximately $1,028,000 was primarily
attributable to payments of long-term debt of $2.2 million,
offset by net proceeds from short-term and long-term borrowings
totalling $3.3 million.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is involved in various routine legal proceedings
primarily involving claims for personal injury under the General
Maritime Laws of the United States and Jones Act as a result of
alleged negligence. The Company believes that the outcome of all
such proceedings, even if determined adversely, would not have a
material adverse effect on its consolidated financial statements.
An overseas operator has instituted litigation in Edinburgh,
Scotland seeking damages of apprxoimately U.S. $3 million, plus
interest and costs, against subsidiaries of the Company, on the
basis of allegations that a product supplied by the subsidiaries
exhibited design faults upon installation in a North Sea pipeline.
The product was hydrostatically tested onshore and did not leak
and otherwise met the customer's requirements. The product was
removed by the overseas company against the recommendations of
the subsidiaries and replaced before the pipeline was placed
in service and the product did not leak or otherwise malfunction.
No environmental damage is alleged. The company contends the
product was fully suitable for service, intends to defend the
claim vigorously and does not believe that ultimate resolution
of the claim will have a material adverse impact on the Company's
financial statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) 27. Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K, dated
August 20, 1996, with respect to its earnings release
for the three months ended June 30, 1996.
The Company filed a Current Report on Form 8-K, dated
September 4, 1996, with respect to the announcement
that the Inland Services Group was awarded a turnkey
project to the Navigation District of Brownsville.
The Company filed a Current Report on Form 8-K, dated
September 25, 1996, with respect to the announcement
of an offer by a Company subsidiary to purchase stock
of Hard Suits Inc. at a specified price.
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.
AMERICAN OILFIELD DIVERS, INC.
Date: November 14, 1996 /s/ Cathy M. Green
________________________________
Cathy M. Green
Vice President - Finance, Chief
Financial Officer (Principal
Financial and Accounting Officer)
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD ENDING SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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