UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q/A
(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
( ) 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
preceeding 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 August 14, 1996 there were 6,805,182 shares of common
stock, no par value, outstanding.
<PAGE>
Introductory Statement
This Form 10-Q/A is being filed to correct a typographical error
appearing in the Form 10-Q for the quarterly period ended June 30, 1996
(the "Form 10-Q") filed by Registrant on August 14, 1996. The error in
question appeared in the Consolidated Statement of Cash Flows under Cash
Flows for Financing Activities in the line item identified as "Net
Payments under Line-of-Credit Agreement." That item for the six months
ended June 30, 1996 was erroneously showns as $7,525; it should have been
a negative $(7,525), as shown in this Form 10-Q/A. A corresponding change
was made to the name of the line item so that it now reads "Net proceeds
(payments) under the Line of Credit Agreement." A small number of other
errors, all of which are non-substative and typographical, are also made
in this Form 10-Q/A.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
American Oilfield Divers, Inc.
Consolidated Balance Sheets
(in thousands)
June 30, December 31,
1996 1995
____________ _____________
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,226 $ 788
Accounts receivable, net of
allowance for doubtful accounts
of $460 and $380 18,777 13,014
Unbilled revenue 7,618 13,683
Other receivables 1,451 2,025
Current deferred tax asset 647 1,700
Inventories 2,613 2,261
Prepaid expenses 1,727 1,380
_____________ _____________
Total current assets 34,059 34,851
Property, plant and equipment, net
of accumulated depreciation of $20,057 and
$18,053 27,649 25,550
Deferred tax asset --- 57
Other assets 2,913 3,463
_____________ _____________
$64,621 $63,921
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,852 $ 3,506
Other liabilities 7,966 6,197
Borrowings under line of credit agreement 350 7,875
Current portion of long-term debt 1,375 1,375
_____________ _____________
Total current liabilities 13,543 18,953
Long-term debt, less current portion 9,000 5,413
_____________ _____________
Total liabilities 22,543 24,366
Stockholders' equity:
Common stock, no par value 1,368 1,360
Other stockholders' equity 40,710 38,195
_____________ _____________
Total stockholders' equity 42,078 39,555
_____________ _____________
$64,621 $63,921
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
American Oilfield Divers, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
___________________ __________________
(unaudited)
1996 1995 1996 1995
_______ _______ ________ _______
Diving and related revenues $26,829 $19,713 $46,057 $31,634
_______ ________ ________ ________
Costs and expenses:
Diving and related expenses 17,652 14,084 30,273 23,266
Selling, general and
administrative expenses 4,781 4,675 9,501 9,155
Depreciation and amortization 1,404 1,265 3,266 2,444
_______ ________ ________ ________
Total costs and expenses 23,837 20,024 43,040 34,865
_______ ________ ________ ________
Operating income (loss) 2,992 (311) 3,017 (3,231)
Other income (expense), net (7) (457) 142 (604)
_______ ________ ________ ________
Income (loss) before income taxes
and minority interest 2,985 (768) 3,159 (3,835)
Income tax provision (benefit) 1,250 (330) 1,320 (1,580)
_______ ________ ________ ________
Income (loss) before minority
interest 1,735 (438) 1,839 (2,255)
Minority interest in (earnings)
loss of subsidiary -- (47) -- --
_______ ________ ________ ________
Net income (loss) $1,735 $(485) $1,839 $(2,255)
======= ======== ======== ========
Net income (loss) per share $ .26 $(.07) $ .27 $ (.34)
======= ======== ======== ========
Weighted average common share
outstanding 6,788 6,709 6,750 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
Common Stock Additional Currency Deficit)
______________ Paid-in Translation Retained
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 10 10
Net loss (2,255) (2,255)
__________ ______ _________ _________ _________ _________
Balance at June 30, 1995 6,709,497 $1,360 $40,837 $(118) $(4,399) $37,680
========== ====== ========== ========== ========== =========
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 95,685 8 729 737
Net effects of translation of
foreign currency (1) (1)
Net income 1,839 1,839
___________ ________ _________ __________ _________ _______
Balance at June 30, 1996 6,805,182 $1,368 $41,514 $(133) $(671) $42,078
The accompanying notes are an integral part of these
consolidated financial statements.
</TABLE>
American Oilfield Divers, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
_________________ ________________
1996 1995 1996 1995
______ _______ _______ _______
(unaudited)
Net cash flows from operating
activities:
Net income (loss) $ 1,735 $(485) $ 1,839 $(2,255)
Non-cash items included in
net income (loss):
Depreciation and amortization 1,404 1,265 3,266 2,444
Minority interest in earnings
of subsidiary -- 47 -- --
Net (gain) loss on disposition (179) 139 (577) 120
of assets
Other (383) (6,122) 3,400 (1,669)
_________ _________ ________ ________
Net cash provided by
operating activities 2,577 (5,156) 7,928 (1,360)
Cash flows from investing
activities:
Capital expenditures (7,935) (1,833) (10,221) (5,965)
Proceeds from sale of assets 207 10 5,669 1,551
Proceeds from insurance claim -- 1,565 535 1,565
Receipt of payments on notes
receivable -- 249 -- 467
Proceeds from sale of notes
receivable -- 2,762 -- 2,762
Other (660) (466) 329 (50)
_________ _________ ________ ________
Net cash used by investing
activities (8,388) 2,287 (3,688) 330
Cash flows from financing
activities:
Issuance of common stock -- -- 136 --
Proceeds from long-term
borrowing 10,500 2,000 10,500 2,000
Repayments of long term-debt (6,413) (475) (6,913) (1,742)
Net proceeds (payments) under
line-of-credit agreement 350 1,445 (7,525) 630
_________ _________ ________ ________
Net cash provided by (used
by) financing activities 4,437 2,970 (3,802) 888
_________ _________ ________ ________
Net increase (decrease) in cash (1,374) 101 438 (142)
Cash and cash equivalents at
beginning of period 2,600 277 788 520
_________ _________ ________ ________
Cash and cash equivalents at
end of period $ 1,226 $ 378 $ 1,226 $ 378
========= ========= ======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
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,
as 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 six month period ended June 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 six
months ended June 30, 1996 and 1995. These unaudited
financial statements at June 30, 1996 and for the three and
six months ended June 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 second 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 six months ended June 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 dispropotionate 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 second (April through June)
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 six months
ended June 30, 1996.
Management has not made a final determination as to the election
of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," and therefore no impact of its
implementation is reflected in these financial statements.
Note 2 - Discontinued Operation
During the six month period ended June 30, 1995, the Company
completed the sale of certain operating assets of its
subsidiary, American Corrosion Services, Inc. ("ACS"), a
manufacturer and marketer of corrosion protection devices, to
a wholly-owned subsidiary of Corrpro Companies, Inc.
("Corrpro"). The purchase price of $1,500,000 of cash and
$3,386,890 of promissory notes was delivered to the Company on
January 6, 1995 and is reflected in the consolidated statement
of cash flows for the six months ended June 30, 1995.
On April 28, 1995, the Company sold the promissory notes,
which were obtained in connection with the sale of ACS'
assets, with recourse to a financial institution for total
proceeds of $2,761,510. The difference between the proceeds
received and the $2,920,294 principal balance of the notes is
reported as other expense in the consolidated statement of
income for the three and six months ended June 30, 1995.
Note 3 - Inventories
The major classes of inventories consist of the following (in
thousands):
June 30, December 31,
1996 1995
________ ____________
(Unaudited) (Unaudited)
Fuel $ 87 $ 101
Supplies 850 1,026
Work-in- 1,676 444
process
Finished goods --- 690
_______ ________
$2,613 $2,261
======= ========
Note 4 - 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 5 - 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.
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 June 30, 1996
__________________________________________________________________________
International Inland and West Subsea
(Unaudited) Gulf Services<F1> Services<F2> Coast Services<F3> Products<F4> Total
________________ ______________ _________________ _____________ ________
<S> <C> <C> <C> <C> <C>
Diving and related revenues $ 11,453 $ 3,132 $ 9,811 $ 2,433 $ 26,829
Diving and related expenses $ 7,772 $ 2,000 $ 6,526 $ 1,354 $ 17,652
Gross profit $ 3,681 $ 1,132 $ 3,285 $ 1,079 $ 9,177
Gross profit percentage 32.1% 36.1% 33.5% 44.3% 34.2%
Three Months Ended June 30, 1995
__________________________________________________________________________
International Inland and West Subsea
(Unaudited) Gulf Services<F1> Services<F2> Coast Services<F3> Products<F4> Total
________________ ______________ _________________ _____________ ________
Diving and related revenues $ 9,946 $ 4,424 $ 2,931 $ 2,412 $ 19,713
Diving and related expenses $ 7,953 $ 2,695 $ 2,293 $ 1,143 $ 14,084
Gross profit $ 1,993 $ 1,729 $ 638 $ 1,269 $ 5,629
Gross profit percentage 20.0% 39.1% 21.8% 52.6% 28.6%
<FN>
<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>
Six Months Ended June 30, 1996
__________________________________________________________________________
International Inland and West Subsea
(Unaudited) Gulf Services<F1> Services<F2> Coast Services<F3> Products<F4> Total
________________ ______________ _________________ _____________ ________
<S> <C> <C> <C> <C> <C>
Diving and related revenues $22,257 $5,432 $14,776 $ 3,592 $46,057
Diving and related expenses $15,460 $3,022 $ 9,871 $ 1,920 $30,273
Gross profit $ 6,797 $2,410 $ 4,905 $ 1,672 $15,784
Gross profit percentage 30.5% 44.4% 33.2% 46.5% 34.3%
Six Months Ended June 30, 1995
__________________________________________________________________________
International Inland and West Subsea
(Unaudited) Gulf Services<F1> Services<F2> Coast Services<F3> Products<F4> Total
________________ ______________ _________________ _____________ ________
Diving and related revenues $18,019 $6,357 $ 4,093 $ 3,165 $31,634
Diving and related expenses $14,380 $3,748 $ 3,427 $ 1,711 $23,266
Gross profit $ 3,639 $2,609 $ 666 $ 1,454 $ 8,368
Gross profit percentage 20.2% 41.0% 16.3% 45.9% 26.5%
<FN>
<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 six months ended June 30, 1996 and 1995.
In the second quarter ended June 30, 1996, the Company
experienced strong results of operations in spite of the fact
that this period is not traditionally associated with uniformly
high activity, particularly in the Gulf of Mexico. For the three
months ended June 30, 1996, the Company recorded net income of
$1.7 million on revenue of $26.8 million, compared to a net loss
of $485,000 on revenue of $19.7 million for the same period in
fiscal 1995. The positive second quarter results were
accomplished as a result of (i) increased activity in the
Inland and West Coast Services group primarily as a result
of the Chevron platform abandonment project off the coast of
Califonia; (ii) increased diving and vessel activity in the
Gulf of Mexico attributable to a large number of projects
involving pipeline maintenance and repair and increased demand
for the Company's subsea pipeline connector products; (iii) the
addition of the jack-up derrick barge, the "American Intrepid",
which began operations in June 1995 and (iv) the Company's
continued focus on cost control.
The first six months of fiscal 1996 were just as positive
for the Company as revenues increased to $46.1 million, a 46%
increase, as compared to $31.6 million for the comparable
period in the prior year. Several factors combined to produce
a significant increase in revenues for the Company during the
six month period ended June 30, 1996. First, the Inland and
West Coast Services group experienced record activity levels
with revenues increasing from $4.1 million in the first six
months of fiscal 1995 to $15.0 million in the current six
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 margins and the lack of second
quarter operating losses associated with the American Enterprise
which was sold on March 1, 1996, the Company recorded net
income of $1.8 million for the six months ended June 30, 1996
compared to net loss of $2.2 million for the six months ended
June 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 $5,400,000 resulting in a non-recurring gain in the first
quarter of fiscal 1996.
During the second quarter of fiscal 1996, the Company
acquired four dive support vessels and certain diving
equipment to be used in its Gulf of Mexico diving operations.
Three Months Ended June 30, 1996 Compared to Three Months
Ended June 30, 1995
Total revenues. Compared to the second quarter of 1995,
the Company's consolidated revenues increased $7.1 million or
36%, from $19.7 million in the second quarter of 1995 to $26.8
million in the current quarter. Of the $7.1 million increase,
(i) approximately $6.9 million was attributable to increased
diving activity in the Inland and West Coast Services markets,
$6.6 million of which resulted from the Chevron platform
abandonment project off the coast of California; (ii)
approximately $1.3 million was attributable to the operations
of the American Intrepid, the Company's jack-up derrick barge
which was not operational for the entire fiscal 1995 second
quarter; and (iii) approximately $1.8 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 $1.7 million attributable to the
American Enterprise, the Company's pipelay/bury barge that was
sold on March 1, 1996, and (ii) approximately $1.3 million
attributable to the operations of the International Services
group.
Selling, general and administrative expenses. Selling,
general and administrative expenses increased 2%, or $106,000
to $4.8 million during the second quarter of 1996 compared to
$4.7 million for the second quarter of 1995. The increase was
primarily attributable to a $214,000 increase in the selling,
general and administrative expenses of the International
Service 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 second quarter of fiscal 1995.
This increase was offset by an overall decrease in selling,
general and administrative expenses of the Company's other
groups as a result of ongoing focused cost-cutting efforts.
Although there was an overall increase in the level of
selling, general and administrative expenses during the second
quarter of fiscal 1996, selling, general and administrative
expenses, as a percentage of revenues, decreased to 18%
compared to 24% for the second quarter in fiscal 1995.
Depreciation and amortization. Depreciation and
amortization increased $139,000, or 11%, to $1,404,000 in the
second quarter of fiscal 1996 compared to $1,265,000 in the
second quarter of fiscal 1995. The increase 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 (loss). During the three months ended
June 30, 1996, operating income was $3.0 million compared to
an operating loss of $311,000 for the comparable period in
fiscal 1995. The positive change in operating income was due
primarily to an overall increase in the Company's gross profit
margin from $5.6 million, or 28.6%, in the second quarter of
fiscal 1995 to $9.2 million, or 34.2%, in the second quarter
of fiscal 1996.
Other income/expense. During the current quarter, other
expense (net) of $7,000 was comprised of interest expense of
$245,000, offset by a net gain on disposal of assets of
$179,000 and other income of $60,000. This compares to other
expense (net) of $457,000 in the comparable quarter of fiscal
1995, which was comprised of interest expense of $406,000 and
a net loss on the disposal of assets of $139,000, offset by
other income of $88,000. Interest expense decreased from
fiscal 1995 to fiscal 1996 primarily as a result of the
Company's reduced debt levels in the second quarter of fiscal
1996 compared to the comparable period of fiscal 1995.
Net income (loss). As a result of the conditions discussed
above, the Company recorded net income of $1.7 million, or
$.26 per share, in the three months ended June 30, 1996
compared to net loss of $485,000, or ($.07) per share, in the
comparable period of the prior fiscal year.
Six Months Ended June 30, 1996 Compared to Six Months Ended
June 30, 1995
Total revenues. The Company's consolidated revenues
increased 46%, from $31.6 million for the six months ended
June 30, 1995 to $46.1 million in the current period. Of the
$14.5 million increase, (i) approximately $10.7 million was
attributable to increased activity in the Inland and West
Coast diving markets, $6.6 million off which resulted from the
Chevron platform abandonment project; (ii) approximately $2.3
million was attributable to the operations of the American
Intrepid, the Company's jack-up derrick barge which was not
operational for the entire six months ended June 30, 1996; and
(iii) approximately $2.9 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 $1.3 million attributable to the
American Enterprise, the Company's pipelay/bury barge that was
sold on March 1, 1996, and (ii) approximately $925,000
attributable to the operations of the International Services
group.
Selling, general and administrative expenses. Selling,
general and administrative expenses increased 4%, or $346,000,
to $9.5 million during the six months ended June 30, 1996
compared to $9.2 million for the six months ended June 30,
1995. The increase was attributable to a $459,000 increase in
the selling, general and administrative expenses of the
International Service 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 six
months of fiscal 1995. 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. These increases were offset by an overall decrease in
selling, general and administrative expenses of the Company's
other groups as a result of ongoing focused cost-cutting
efforts. Although there was an overall increase in the level
of selling, general and administrative expenses during the six
months ended June 30, 1996, selling, general and
administrative expenses as a percentage of revenues decreased
from 29% for the six months ended June 30, 1995 to 21% in the
comparable period of 1996.
Depreciation and amortization. Compared to the six
months ended June 30, 1995, depreciation and amortization
increased $822,000, or 34%, to $3.3 million for the six months
ended June 30, 1996. Of the $822,000 increase, the Company
recognized 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 six months ended June 30, 1996. The remaining
increase of $322,000 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 (loss). During the six months ended June
30, 1996, operating income was $3.0 million compared to
operating loss of $3.2 million for the comparable period in
fiscal 1995. The significant change in operating income
was due primarily to an overall increase in the Company's
gross profit margin from $8.4 million, or 26.5%, in the first
six months of 1995 to $15.8 million, or 34.3%, in the first
six months of fiscal 1996.
Other income/expense. During the first six months of
fiscal 1996, other income (net) of $142,000 was comprised of
interest expense of $528,000, which was offset by a net gain
on disposal of assets of $578,000 and other income of $92,000.
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 $604,000 in the comparable
period of fiscal 1995, which was comprised of interest expense
of $674,000, offset by other income of $195,000 and a loss on
the disposal of assets of $126,000.
Net income (loss). As a result of the conditions discussed
above, the Company recorded net income of $1.8 million, or
$.27 per share, in the six months ended June 30, 1996 compared
to a net loss of $2.3 million, or ($.34) per share, in the
comparable period of the prior fiscal 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 second quarter of 1996.
The Company has a bank line of credit in the principal
amount of $15 million against which $350,000 was drawn at June
30, 1996. Also at June 30, 1996, the Company has a long-term
note payable with a bank in the amount of $10.5 million at a
fixed interest rate of 7.9%.
The Company believes that cash flows from operations and
borrowings available under its bank credit facility 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 $7.9 million for the
six months ended June 30, 1996 compared to $1.4 million used
by operations 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 six months ended June 30, 1996, cash received from customers
was $46.2 million and cash paid to employees and suppliers was
$38.2 million. During the six months ended June 30, 1995, cash
received from customers was $33.6 million and cash paid to
employees and suppliers was $34.0 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 six month period, net cash used by investing
activities was approximately $3.7 million which consisted of $10.2
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 six month period, net cash provided
by investing activities was approximately $330,000 which consisted
of $6.0 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
$1,500,000 received from the sale of 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 $3.8 million
in the six months ended June 30, 1996 were primarily
attributable to payments of short-term and long-term debt
totalling $14.4 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
$136,000. In the comparable period of fiscal 1995, cash
provided by financing activities of approximately $888,000 was
primarily attributable to payments of short-term and long-term
debt totalling $1.1 million, offset by proceeds from long-
term borrowings of $2.0 million.
Cautionary Statement Concerning Forward-Looking Information
Statements made in this report and in oral statements made
from time to time by management of the Company that are not
statements of historical fact, are forward-looking statements
and are subject to factors that could cause actual results to
differ materially from the results predicted in those
statements. Such factors include, among others, the
following:
Cyclical Demand; Dependence on Oil and Gas Industry. The
demand for the Company's diving services is cyclical. It
depends on the condition of the oil and gas industry and on
the expenditures of oil and gas companies for activities
related to production and exploration. These expenditure are
influenced by, among other things, oil and gas prices,
expectations about future prices, the cost of exploring for,
producing and delivering oil and gas, the sale and exploration
dates of offshore leases in the United States and overseas,
the discovery rate of new oil and gas reserves and offshore
areas, local and international political, regulatory and
economic conditions and the ability of oil and gas companies
to generate capital.
Competition. The Company's business is highly competitive.
Although some consolidation has occurred in the Gulf of Mexico
diving services industry in recent years, the remaining
companies aggressively compete for available diving projects.
While the Company believes that customers continue to consider
the availability and capabilities of equipment and the
reputation and experience of the diving service supplier,
price has become increasingly the primary determinant of
customer selection.
While the Company competes primarily with a limited number
of substantial competitors in the Gulf of Mexico (primarily
Oceaneering International, Inc. and Cal-Dive International,
Inc.), it also competes with in-house diving divisions of
offshore construction companies (primarily Global Industries,
Ltd., Subsea International, Inc. and J. Ray McDermott S.A.; J.
Ray McDermott, S.A. has recently announced the proposed sale
of its diving assets to Cal-Dive International, Inc.).
Contract Bidding Risks. Approximately 30% of the Company's
total revenues in fiscal 1995 were derived from contracts
performed on a fixed-price basis (turnkey contracts) and this
percentage is expected to increase in the future. Fixed-price
contracts are inherently risky because of the possibility of
underbidding and the Company's assumption of substantially all
of the project's operational risks. The revenue, cost and
gross profit realized on such contracts often vary from the
estimated amounts for various reasons including, among
others, changes in weather and other job conditions and
variation in labor and equipment productivity (such as
equipment failure) from original estimates. These variations
and the risks inherent in the diving and the inland marine
construction industry can result in reduced profitability or
losses on fixed-price contracts. Moreover, when demand for
the Company's diving services decreases, the percentage of
fixed-price contracts may increase. Accordingly, the normal
negative effects on the Company's operations resulting from
decreased demand can be exacerbated by an increased percentage
of fixed-price contracts.
Effect of Adverse Weather Conditions. The Company's diving
services, both offshore and inland, are often curtailed when
adverse weather conditions are present or anticipated. During
such periods of curtailed activity, the Company continues to
incur operating expenses, but revenues from operations are
delayed or reduced. Weather conditions during the winter
months are generally adverse and substantially curtail the
Company's diving activities in the Gulf of Mexico and, to a
lesser but nevertheless substantial extent, in the inland
waters of the United States. Winter conditions typically
begin in December and continue until April, although in some
years, can begin as early as late September and continue
through early May. Although adverse weather is more typical
during the winter months, operations can be curtailed by
weather conditions at any time, as has happened, for example,
during extended periods when hurricanes and tropical
depressions are present or expected in the Gulf of Mexico.
International Operations. The international diving
activities of the Company, which started in West Africa in
1992, have continued to expand and play an increasingly
important role in Company operations. The Company's
international operations are subject to additional risks,
including the Company's relative inexperience in new
international markets, financial and political instability,
civil unrest, asset seizures or nationalization, currency
restrictions, fluctuations and revaluations, import-export
restrictions, and tax and other regulatory requirements.
Operating Risks. The Company's operations involve a high
degree of operational risk, particularly of personal injuries,
fines and costs imposed by government agencies, product
liability and warranty claims, and third-party consequential
damage claims. The Company's diving and vessel operations
involve numerous hazards to divers, vessel crew members and
equipment, and result in a greater incidence of employee
injury and death and equipment loss and damage than occurs in
many other service industries. Virtually all employees
engaged in the Company's offshore diving operations are
covered by provisions of the Jones Act, the Death on the High
Seas Act and general maritime law, which operate to exempt
these employees from limits of liability established under
worker's compensation laws and, instead, permit them or their
representatives to maintain actions against the Company for
damages or job related injuries, with no limitations on the
Company's potential liability. The Company's ownership and
operation of vessels give rise to large and varied liability
risks, such as risks of collisions with other vessels or
structures, sinkings, fires and other marine casualties, which
can result in significant claims for damages against both
Company and third parties for, among other things, personal
injury, death, property damage, pollution and loss of
business. The Company's manufacturing operations with respect
to Big Inch Marine Systems (subsea pipeline connector
products) and Tarpon Systems, Inc. (a cable-guyed, single
caisson marginal well production system), involve significant
risks, particularly product liability and warranty claims and
installation risks. Company-manufactured products installed
in the past, as well as those to be installed in the future,
could give rise to such claims.
Limitation of Insurance Coverage. While the Company
maintains insurance that it believes is in accordance with
general industry standards against the normal risks of its
operations, such insurance is subject to various exclusions
and there can be no assurance that the Company's insurance
policies will be sufficient or effective under all
circumstances or against all liabilities to which the Company
may be subject. Liabilities to customers and third parties
for claimed defects in products or damages caused by defective
products manufactured by the Company may be significant and
are not generally insured to the extent that they are in the
nature of warranty claims or other claims based on breach of
contract. A successful claim for which the Company is not
insured could have a material adverse effect on the Company
and its financial condition. Moreover, no assurance can be
given that the Company will be able to maintain adequate
insurance in the future at rates that it considers reasonable
or that all types of coverage will be available.
Regulatory and Environmental Matters. The Company's diving
service vessels and operations are subject to various types of
governmental regulation, which are becoming increasingly
complex and stringent. In addition, the Company depends on
the demand for its services from the oil and gas industry and,
therefore, the Company's operations are affected by laws and
regulations, as well as changing taxes and policies, relating
to the oil and gas industry generally. Significant fines and
penalties may be imposed for non-compliance, and certain
environmental laws impose joint and several "strict liability"
for remediation of spills and releases of oil and hazardous
substances rendering a person liable for environmental damage,
without regard to negligence or fault on the part of such
person.
The Company assumes no obligation to update the forward-
looking statements made in this report or in the oral
statements made from time to time by its management.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
AMERICAN OILFIELD DIVERS, INC.
Date: October 30, 1996 /s/ Cathy M. Green
_________________________________
Cathy M. Green
Vice President - Finance,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
