Form 10-K
Securities and Exchange Commission
Washington, D.C. 20549
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1996
OR
Transition Report Pursuant to Section 13 or 15(d)
of The Securities Exchange Act of 1934
For the transition period from _______to_______
Commission File Number 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
incorporation or organization) Identification No.)
130 E. Kaliste Saloom Road
Lafayette, Louisiana 70508
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (318) 234-4590
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common
Stock, no par value
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
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___.
Aggregate market value of the voting stock held by non-affiliates
(affiliates being, for these purposes only, directors, executive
officers and the holders of more than 5% of the registrant's Common
Stock) of the registrant at February 28, 1997, based upon the closing
sale price of the Common Stock on the NASDAQ National Market: $97,942,246
Number of shares of Common Stock outstanding at February 28, 1997:
10,463,248
Documents Incorporated by Reference
Portions of the proxy statement dated April 7, 1997,
distributed in connection with the Annual Meeting of Shareholders to be
held on May 16, 1997, is incorporated into Part III of this Report.
<PAGE>
ITEM 1. BUSINESS
General
American Oilfield Divers, Inc. (together with its subsidiaries, the
"Company" or "AOD") provides subsea services and products to the
offshore oil and gas industry in the Gulf of Mexico, the West Coast and
select international markets. In addition, the Company provides inland
underwater services and products to domestic industrial and governmental
customers. The Company's services are provided through approximately
240 dive crews and are supported by a Company-owned fleet of 20 diving
support vessels (DSVs), 14 of which operate in the Gulf of Mexico.
Based upon the number of divers employed, the size of its DSV fleet and
the number of customers served, the Company believes that it is the
leading provider of diving services in the Gulf of Mexico.
Since its establishment in 1981, the Company has considerably
expanded the scope of its products and services through internal
development and selective acquisitions. In the last three years, the
Company's revenue has doubled as a result of improved demand in its core
Gulf of Mexico market and through internal growth and acquisitions that
have expanded the Company's service and product offerings. For the year
ended December 31, 1996, the Company's revenue increased 19% to
$105.8 million and EBITDA (earnings before interest, taxes, depreciation
and amortization) more than doubled to $16.2 million as compared to the
fiscal year ended October 31, 1995.
In November 1996, the Company acquired 97% of the outstanding common
stock of Hard Suits Inc. (HSI) for $11.8 million through an unsolicited
tender offer. HSI manufactures, markets and operates a one-atmosphere
diving suit known as the "NEWTSUIT(TM)". HSI's NEWTSUIT(TM) technology
allows for manned diving in deep water without saturation or
decompression, which are required by current practices for manned deep
water diving. NEWTSUIT(TM) technology significantly reduces operating
costs associated with deep water projects due to the reduction in
personnel and time needed to complete such projects. The current
NEWTSUIT(TM) is capable of operations in water depths up to 1,200 feet.
HSI has developed the technology to manufacture a suit capable of
operation at depths up to 2,000 feet and is working with the United
States Navy to produce a prototype. The Company intends to manufacture
the NEWTSUIT(TM) primarily for its own use and for sale to the United
States Navy and other navies. HSI also manufactures and markets the
Remora(TM), a subsea rescue vehicle for submarines. The Company intends to
acquire the remainder of the outstanding common stock of HSI in 1997.
In February 1997, the Company completed a secondary stock offering of
3,553,315 shares of common stock which provided the Company with net
proceeds of approximately $40 million. The Company used approximately
$16 million to repay borrowings outstanding at December 31, 1996
including $12,450,000 to acquire HSI. The Company intends to use the
remaining proceeds for general corporate purposes, including working
capital requirements and to fund any future capital expenditures and
strategic asset acquisitions.
Key elements of the Company's growth strategy are to continue to:
* Focus on Gulf of Mexico Market. The Company's Gulf of Mexico
operations will continue to be its core business. Since 1993, the
Company has significantly increased the number and capabilities of
its DSVs in the Gulf of Mexico. The Company believes it is well-
positioned to take advantage of opportunities in the Gulf of Mexico
market.
* Diversify Revenue Base. Over the past three years, the Company has
expanded its operations to inland markets, the U.S. West Coast
market, and select international markets, including West Africa,
Latin America, and the Middle East. Revenues from these sources have
increased substantially over the past three years, from $12.3
million, or 23% of total revenue, in the fiscal year ended October
31, 1994 to $41.9 million, or 40% of total revenue, for the year
ended December 31, 1996.
* Provide Single-Source Solutions for Customers. Through expansion of
its fleet of DSVs and the broadening of its services and products,
the Company can offer total project management services. Management
believes this integrated approach simplifies a customer's procurement
process and reduces the Company's dependence on third-party
contractors.
* Expand Services and Products. By adding the Big Inch, Tarpon Systems
and NEWTSUIT(TM) products, the Company has significantly broadened its
capabilities and complemented its core subsea services business. The
Company intends to continue to expand its services and products
internally and through strategic acquisitions.
Subsea and Other Services
The Company provides subsea services to support all phases of
offshore oil and gas activities, including drilling, production,
abandonment, and salvage. These services include construction,
installation, maintenance, repair, inspection and support of drilling
operations; development of offshore pipelines and production platforms;
and ongoing production activities. Subsea services are provided to a
diverse group of customers, including major and independent oil and gas
exploration and production companies, offshore engineering and
construction companies, and major pipeline transmission companies. The
Company's offshore operations are currently performed through manned
surface and saturation diving activities at depths up to 1,000 feet.
With the acquisition of HSI, the Company intends to use the NEWTSUIT(TM)
as a cost-effective alternative for operations at depths up to 1,200
feet.
On December 31, 1996, the Company employed approximately 400 divers,
tenders, and diving supervisors, supported by the Company's fleet of 20
DSVs, ranging in length from 65 to 210 feet, and a 150-foot jack-up
derrick barge with a 220-ton Manitowoc crane. The Company owns and
operates seven ROVs. Five of these are observation ROVs, which support
the Company's diving activities, and two are work-class ROVs outfitted
with manipulators to perform tasks in depths up to 3,000 feet. The
Company owns seven NEWTSUITsTM, six of which are deployed for operations
in Australia, the North Sea, and the Gulf of Mexico. The Company's
offshore diving operations are coordinated through regional staging
facilities in the Port of Iberia and Harvey, Louisiana; Houston, Texas;
Oxnard, California; Dubai, United Arab Emirates; and Port Harcourt,
Nigeria.
The Company provides a variety of specialized inland diving services
to industrial and governmental customers. These services include the
maintenance, repair, and inspection of bridges, docks, piers, pipelines,
and other inland underwater structures, the inspection and maintenance
of hydroelectric and nuclear power plants and small to medium-sized
general construction projects requiring underwater capabilities. Inland
operations are coordinated through regional staging facilities in
Houston, Texas; Kansas City, Kansas; and Columbus, Ohio. The Company
also provides inland diving services from its Oxnard, California
operations base.
The Company also provides environmental remediation and emergency oil
spill response services to customers operating in both inland and
offshore markets. The Company's services include oil and chemical spill
containment and removal, remediation of naturally occurring radioactive
material, pit closure, bioremediation, asbestos abatement services, and
confined space entry activities.
Most of the Company's operations are subject to weather-related
seasonality as well as cyclical demand based on the capital expenditures
of oil and gas companies for offshore production and exploration
activities.
Traditional Diving Techniques. The Company conducts its diving
operations using the three traditional diving techniques: air diving,
mixed gas diving and saturation diving, all of which use a
surface-supplied breathing media. With the addition of the NEWTSUIT(TM)
technology, the Company has an alternative method of diving at depths up
to 1,200 feet.
The choice among the three traditional techniques is determined by
diver decompression requirements, which are in turn determined by the
depth at which the diver works and the time to be spent at a given
depth. Decompression is the process by which the diver's depth (or the
ambient pressure) is decreased over a period of time long enough to
prevent the gases absorbed by the diver's body tissues from expanding
into vapor and causing the "bends," a medical condition that can result
in injury or death. As dive depth and dive time increase, the diver's
body tissues absorb increasing amounts of ambient gases and require a
corresponding increase in decompression time. After a given time at a
given depth, the diver's body tissues reach the "saturation point" at
which no additional gases are absorbed. As a result, additional time
spent at that depth will not require additional decompression time when
the diver ascends. As a general rule, after the saturation point is
reached, approximately one day of decompression time is required for
ascent from each approximately 100 feet of water depth.
The air diving technique is employed in relatively shallow water
projects (up to approximately 160 feet) of short duration and does not
require divers to reach the saturation point. In air diving, which the
Company uses to provide many of its diving services, divers are linked
to the surface by a diving umbilical containing compressed air lines and
communications equipment. The diver enters the water directly, without
the use of a diving bell, descends to the work site, accomplishes
project-related activities, and begins to decompress in the water as he
ascends to the surface. Decompression is conducted through timed stops
at intervals of ten feet and in a decompression chamber upon return to
the surface. The length of time a diver is required to remain at each
interval depends upon dive length and depth. At depths in excess of
approximately 220 feet the diver is required to enter a diving bell
before surfacing.
Mixed gas diving is used for projects of relatively short duration in
water depths between 160 and 300 feet. For this type of diving, divers
breathe a mixture of helium and oxygen, which reduces nitrogen narcosis,
the harmful effect of nitrogen when breathed at relatively high
pressures for extended periods. This type of diving also requires
decompression as the diver ascends in the water and the use of a surface
decompression chamber. The decompression times required for mixed gas
diving generally exceed those required for air diving.
For subsea projects in depths of 300 to 1,000 feet and for projects
of relatively long duration at depths below approximately 180 feet, the
Company typically conducts its operations by using saturation diving
techniques from a special pressurized chamber on the surface in which
the divers live at a pressure equivalent to the depth of the work site.
Saturation diving is generally considered the safest and most efficient
form of the three traditional diving techniques. The chamber in which
the divers live is filled with a mixture of helium and oxygen that
saturates the divers' body tissues. Divers are transported from the
surface to the work site by a pressurized diving bell. After working
underwater for six to eight hours, divers are transported back to the
DSV by the diving bell, and return to the pressurized living chamber to
be replaced by a new group of divers who are lowered to the job site to
continue the underwater work. The Company currently operates five
saturation diving systems, each of which can accommodate four to six
divers at a time. This allows the Company to conduct diving operations
24 hours a day. During such a project, the pressurized chamber
functions as living quarters with food, showers, sleeping accommodations
and sanitary facilities. Saturation diving systems and their associated
life-support equipment are generally built into DSVs, but can also be
located on drilling rigs, production platforms, barges or other vessels
or structures. The primary advantage of saturation diving is that the
divers can remain under pressure and make repeated dives for extended
periods (generally up to a maximum of 30 days) before beginning
decompression. This method reduces the risks and delays associated with
frequent decompression and enhances overall productivity.
The headquarters and principal staging facilities of the Company's
Gulf of Mexico diving operations are at the Port of Iberia, Louisiana.
A regional staging facility is located in Harvey, Louisiana. Both the
Port of Iberia and Harvey offices are full-service, decentralized
operations centers, strategically located for the rapid deployment of
personnel and equipment.
One-Atmosphere Diving. One-atmosphere diving, in which the diver is
maintained at normal surface atmospheric pressure, is an alternative to
saturation diving for jobs in depths up to 1,200 feet. In this method
of diving, the diver wears a proprietary diving suit developed by HSI
known as the "NEWTSUIT(TM)." The diver wearing a NEWTSUIT(TM) enters the
water and returns to the surface with the assistance of a NEWTSUIT(TM)
launch and recovery diving system but without the need of a pressurized
diving bell. Atmospheric pressure is maintained at all times in the
NEWTSUIT(TM), thereby eliminating the diver's need for any decompression.
This permits the diver to make repeated dives at atmospheric pressure
without the delays and costs associated with frequent decompression or
saturation diving.
The Company does not expect to use the NEWTSUIT(TM) as a replacement
for traditional diving techniques, but believes that the suit will serve
as an additional diving technique in appropriate circumstances,
particularly those in which substantial decompression time is required.
When using the NEWTSUIT(TM) the diver performs tasks not by the direct use
of his own hands but by means of manipulators outfitted with specialized
tools. Consequently, the time spent by the diver in actually performing
certain tasks in a NEWTSUIT(TM) may be substantially longer than the time
required for the same tasks using other diving techniques. The Company
believes, however, that in certain applications the overall time and
costs required to complete a project may be decreased because of the
elimination of decompression time. The Company believes that refinement
of the tools used with the NEWTSUIT(TM) will increase the efficiency of
one-atmosphere diving and broaden its application.
Diving Support Services. In connection with its diving operations,
the Company provides support services that minimize dependence on
third-party subcontractors and maximize safety and use of the Company's
vessels, equipment, personnel and organizational structure. The Company
operates a small fleet of leased crew cabs and vans that transport its
dive crews and small equipment items from its facilities to the
Company's DSVs. This capability minimizes the Company's reliance on
third-party truck fleets, permits project scheduling efficiency,
enhances reliability and quality control, and significantly reduces its
costs. For medium to large equipment hauls, the Company generally uses
third-party truck fleets, which for these purposes are capable of
providing reliable, quality service at greatly reduced costs. As part
of the Company's DSV operations, the Company also provides full-service
catering services to the vessel and dive crews, which minimize
dependence on third-party caterers and permit the Company to further
control costs. The Company's diving support services distinguish the
Company from its competitors and are consistent with the Company's
business strategy.
International Services. In July 1992, the Company established
administrative offices in Lagos, Nigeria and an operations office and
shop in Port Harcourt, Nigeria to provide diving services to oil and gas
companies operating in Nigeria and other West African locations. The
Company has expanded its activities in West and South Africa and to seek
further international expansion of its diving services in Latin America,
the Middle East, and Southeast Asia. In March, 1995, the Company
acquired certain diving and related assets located in Dubai, United Arab
Emirates, and established an operational and sales office in Dubai to
provide diving services to oil and gas companies operating in the Middle
East. The Company is reviewing its presence in the Middle East and, if
no significant opportunities materialize in the first six months of
1997, the Company may elect to reduce its resource commitment to this
area. The Company currently maintains two DSVs in Port Harcourt.
Inland and West Coast Services. The Company's inland United States
diving operations have historically provided a variety of specialized
domestic diving services, including pipeline repair, pipeline lowering
and anchoring, underwater drilling, underwater welding, burning and
sawing, bridge inspection, dock and pier inspection and repair, and
installation and repair of water intake and outflow structures. The
Company also performs underwater construction, maintenance, repair and
inspection of hydroelectric and nuclear plants. The Company's inland
operations are conducted in lakes and rivers and along coast lines. The
operations bases of the Company's inland operations are located in
Houston, Texas; Kansas City, Kansas; and Columbus, Ohio. The operations
base of the Company's West Coast Services are located in Oxnard,
California. Recently, the Company has changed the focus of its inland
operations to larger marine construction projects, in which the Company
functions as prime contractor. To reduce the effect of seasonality,
during winter months the Company expects to focus primarily on projects
in warm-weather states that are less likely to be adversely affected by
winter weather.
Environmental Remediation and Oil Spill Response Operations. The
Company is an environmental contractor serving customers operating in
both inland and offshore markets and specializes in emergency oil spill
response and hazardous waste remediation activities. The Company's
areas of expertise include bioremediation, oil and chemical spill
containment and removal, remediation of naturally occurring radioactive
material (NORM), pit closure, asbestos abatement services, and confined
space entry activities.
Subsea Products
One-Atmosphere Diving Suits. The NEWTSUIT(TM) is an articulated metal
suit with patented joints that allow the diver a relatively wide range
of motion and to work at surface atmospheric pressure (one atmosphere).
The NEWTSUIT(TM) and other products and related services are manufactured
and developed by HSI in North Vancouver, British Columbia, Canada. The
current NEWTSUIT(TM) is capable of operations to water depths up to 1,200
feet. The Company intends to manufacture the NEWTSUIT(TM) primarily for
its own use and for sale to the United States Navy and to the navies of
other countries. HSI has developed a suit capable of operation at
depths up to 2,000 feet and is working with the United States Navy to
produce a prototype. The Company is also considering the feasibility of
a one-atmosphere diving suit for deployment in shallower waters using
HSI technology.
Submarine Rescue System. HSI also manufactures a submarine rescue
vehicle known as the "Remora(TM)," a submersible decompression chamber
that has an articulated skirt to permit docking with a disabled
submarine at angles of up to 60 degrees. The Remora(TM) is capable of
recovering, and subsequently transferring under pressure, up to nine
persons at a time from a disabled submarine. One fully operational
Remora(TM) has been sold for the benefit of the Royal Australian Navy,
and the Company is currently marketing the Remora(TM) to the navies of
other nations.
Pipeline Connector Products. The Company manufactures and markets a
patented line of subsea pipeline connectors used in the construction and
repair of underwater pipelines. The Big Inch product line manufactured
by the Company includes Flexiforge(TM) end connectors, Ball Flange(TM)
connectors and Load Limiting(TM) connectors used in pipeline and flowline
tie-ins, emergency repairs to pipelines, flow lines and risers and to
retrofit mainline lateral tie-ins. The Company offers a standard
product line and also offers modifications of its connectors for
specialized applications. In the last two years, the Company has
diversified into land-based pipeline components with a product line of
electrical isolation joints known as Big Inch Insulating FlangesTM,
which are used to isolate segments of pipelines from corrosion. The
Company has also developed the InnerLOCK(TM) Cutter system, a mechanical
cutter that removes stubs (abandoned in-place drillpipe) without the use
of explosives, by cutting them from inside the pipe and the BIMS-Tap(TM)
Tee, a mechanical subsea "hot tap" device that permits the joining of
two subsea pipelines without requiring the pipelines to be brought to
the surface and without interrupting the flow in the pipelines. The
Company believes that the Big Inch products permit pipeline
construction, repair and removal to be performed faster and more
efficiently than conventional systems.
Components of Big Inch connectors are forged and machined to Big Inch
specifications by various unaffiliated contractors in the United States
and the United Kingdom. At its Houston plant, the Company assembles
these components, and the assembled products are shipped to customers or
used by the Company in its own diving operations. Assembly, quality
control and warehousing of Big Inch products are conducted at offices in
Houston, Texas and Aberdeen, Scotland. Although Big Inch sales are made
primarily to users in the Gulf of Mexico and the North Sea, Big Inch
products are marketed and sold worldwide through both its Aberdeen and
Houston offices. Big Inch products are marketed in conjunction with the
Company's subsea services and are also sold to third-party installers.
Marginal Well Production Systems. The Company manufactures and
installs the Tarpon System, a patented production system primarily used
in offshore marginal field development. A Tarpon System consists of
underwater anchor piles and a cable guying assembly that supports a
site-specific well protector caisson, boat landing, platform and related
production equipment. Tarpon Systems are best suited for marginal well
production in water depths from 80 to 300 feet and for the production of
larger fields using a satellite system of multiple Tarpon System
structures tied into a central production facility. The Company
believes that Tarpon Systems are a cost-effective alternative to
traditional, fixed multi-leg platforms or other minimal systems because
of their relatively low construction costs and ability for rapid
installation, allowing oil and gas producers to recognize early cash
flows from production. The Company has at least seven competitors in
this market, comprised primarily of engineering firms. The Company is
actively seeking opportunities for the Tarpon System both in the United
States and select international areas including West Africa, the Middle
East, India and Southeast Asia.
Concrete Storage Barges. The Company manufactures concrete storage
barges that may be used as an alternative to steel tankers for
offloading and storage of up to 350,000 barrels of oil either on the
surface or in water depths up to approximately 350 feet. Concrete
floating or subsea barges can be used with a Tarpon System for storage
of oil produced from marginal fields that do not have existing pipeline
infrastructure. The Company also intends to offer the concrete storage
barges to others on a stand-alone basis.
Marketing
The Company's marketing efforts with respect to its diving services
are primarily concentrated in the Gulf Coast and West Coast of the
United States, in West Africa and in the Middle East. The Company
maintains a focused marketing effort through a direct sales force
consisting of approximately 20 full-time sales personnel operating from
Lafayette, Houma, and Harvey, Louisiana; Houston, Texas; Oxnard,
California; Kansas City, Kansas; and Columbus, Ohio. The Company also
has sales offices located in Lagos, Nigeria and Dubai, United Arab
Emirates. The Company's senior management participates in the Company's
marketing efforts. The Company's diving services are often marketed in
conjunction with Big Inch and Tarpon System products and the Company's
other service and product lines.
Safety and Quality Assurance
The Company maintains a stringent safety and quality assurance
program that encompasses all areas of its operations and relies
substantially on employee experience and involvement. An offshore
safety officer is assigned to every diving project regardless of size.
In connection with its safety program, the Company maintains a rigorous
in-house diver training program. The Company's training program
requires each new diver (who must be a graduate of a certified diving
school) to spend at least 6 to 10 days of intensive onshore skill based
training prior to offshore deployment. In addition, each new diver must
spend at least two years as a diving tender, maintaining equipment and
providing other top-side support to more experienced divers and, in the
process, learning how to complete diving assignments safely and
efficiently, and approximately two years as a junior diver on a large
crew, gaining more experience from the Company's senior divers. The
Company stresses diver safety and training throughout the diver's tenure
with the Company. The Company believes that its safety program and
commitment to quality have given it a competitive advantage in
attracting and retaining customers and divers. The accomplishments of
the Company's safety program were recognized by the National Oceans
Industries Association ("NOIA"), which awarded its Safety in Seas Award
jointly to the Company and the Gulf of Mexico business unit of Chevron
USA, Inc. in 1996. In 1997, NOIA awarded its Safety in Seas Award to
the Company for its SMARTSM program. The program emphasizes Self-
Esteem, Management, Accountability, Responsibility and Training. The
Company is the only award winner that has won the Safety in Seas Award
in two consecutive years.
Customers and Competition
The Company's offshore customers include a broad base of major and
independent oil and gas companies, offshore engineering and construction
companies and major pipeline transmission firms. The Company provided
diving and related services to approximately 700 customers in the year
ended December 31, 1996. The Company's ten largest customers accounted
for 44% of the Company's total revenue in the year ended December 31,
1996 and for 46% and 39% of the Company's total revenues during the
fiscal years ended October 31, 1995 and 1994, respectively. For the
year ended December 31, 1996 and the year ended October 31, 1994,
Chevron U.S.A. accounted for 24% and 10%, respectively, of the Company's
total revenues. For the year ended October 31, 1995, United Meridian
Corporation accounted for 14% of the Company's total revenues. In 1995
the Company entered into an alliance agreement with Chevron U.S.A.'s
Gulf of Mexico business unit under which the Company is a preferred
provider of diving services and has received a significant portion of
the Chevron unit's undersea work at prevailing rates.
The level of activity that the Company may perform for a single
offshore customer depends on, among other things, the amount of the
customer's capital expenditure budget devoted to diving projects in any
single year. This amount may vary substantially from year to year. As
a result, customers that account for a significant portion of revenues
in one fiscal year may represent an immaterial portion of revenues in
other years.
The available market for diving services is essentially divided
between the call-out (or day rate) market and the turnkey (fixed price)
market. Contracts are obtained either through direct negotiation with
the customer or pursuant to bidding procedures established by the
offshore customer. The Company typically enters into "master service
agreements" or similar arrangements with most of its offshore customers,
that expedite providing call-out diving services for those customers and
enhance the Company's customer relationships. These contracts establish
daily rates and terms (such as insurance requirements) for services that
the customer may need in the future or on an emergency basis. Master
service agreements may be long-term, may be reviewed and renewed each
year, or may be of whatever duration the parties stipulate.
In past years the Company derived approximately 80% to 90% of its
revenues from the call-out market and approximately 10% to 20% of its
revenues from the turnkey market. More recently, however, the
percentage of turnkey revenues derived by the Company has increased to
approximately 20% to 30%. The Company expects this trend to continue as
its customers attempt to use fixed price contracts as a method of
reducing their costs and risks and to predetermine their costs for
budgetary purposes. The Company attempts to minimize the financial
risks associated with fixed-price contracts by stipulating certain
conditions to its performance that, if not met by the customer, result
in increased charges. The Company may not, however, be able to
anticipate all such risks and, especially in a very competitive market,
the Company may not be able to obtain such protective terms.
The Company's inland customers include utility companies, railroad
companies, state and federal governmental agencies (such as the
U.S. Army Corps of Engineers and the U.S. Bureau of Reclamation) and
political subdivisions such as city and county governments. Inland
diving and related services contracts are generally obtained pursuant to
formal bidding procedures established by the inland customer.
Competition in the inland market is based largely on price, although
type of equipment available, location of or ability to deploy such
equipment and quality of service are other factors considered by the
customer.
Because diving services contracts in the call-out market are
generally bid upon and entered into one to two weeks prior to the
planned commencement of the projects, the Company in the past has had no
significant call-out diving services backlog. However, as a result of
recent increases in turnkey projects and the increased activities of
Inland and West Coast Services (in which turnkey projects are more
common), at February 28, 1997 the Company's backlog of projects to be
performed in 1997 was approximately $22.6 million.
The offshore diving industry is highly competitive and is influenced
by events largely beyond the control of the Company. At various times
since 1986, many oil and gas companies significantly decreased their
expenditures for development projects in the Gulf of Mexico in response
to substantial declines in oil and gas prices. Also during that period,
a number of smaller diving firms have been acquired or have ceased
operations entirely. In addition, some of the Company's major
competitors have reorganized and redirected their efforts to different
or more specialized markets. While more than 50 independent diving
companies operated in the Gulf of Mexico in 1980, fewer than ten
currently operate on an on-going basis in the Gulf of Mexico. In
addition, three offshore construction companies operating in the Gulf of
Mexico own diving subsidiaries or divisions that provide substantially
all of the diving services required by their respective parent
companies. The Company has three principal competitors in its Gulf of
Mexico market, Oceaneering International, Inc., Global Industries, Ltd.
and Cal Dive International, Inc. The remaining smaller diving companies
in the Gulf of Mexico also compete with the Company for diving projects
that require less sophisticated equipment or diving techniques.
Although the Company occasionally provides diving services to offshore
construction companies with in-house diving operations, the Company does
not expect to derive substantial revenues from such services. Moreover,
such in-house diving operations also provide diving services to
unaffiliated third parties and compete with the Company and other diving
companies in the Gulf of Mexico on a limited basis.
The Company has two major competitors with well developed
international sales capabilities (Hydro Tech, Inc. and Oceaneering
International, Inc.) that manufacture product lines of connectors used
in the repair and construction of underwater pipelines. Both of these
manufacture connectors using elastimer seal technology as opposed to the
patented Big Inch metal-to-metal seal technology. Several smaller
companies also compete in the connector market, one of which offers
metal-to-metal seal technology. Despite the generally higher price of
Big Inch products, management believes that the Company competes
effectively on the basis of the installation, responsiveness and quality
advantages associated with its metal-to-metal seal technology.
Competition for underwater services historically has been based upon
the type of underwater equipment available, location of or ability to
deploy such equipment, quality of service and price. In recent years,
price has been the most important factor in obtaining contracts,
although the abilities to develop improved equipment and techniques and
to attract and retain skilled personnel are also important competitive
factors. The Company believes, however, that the awarding of contracts
on the basis of pre-existing relationships between the customer and
supplier, combined with the reliability and quality of the supplier's
services, is a trend that has benefited the Company. An example of this
is the Company's relationship with Chevron U.S.A.'s Gulf of Mexico
business unit, which has resulted in the Company's obtaining one of only
two such alliances currently existing between a diving contractor and a
major oil company in the Gulf of Mexico market. The Company competes in
all of its service and product lines with both large and small
companies, and certain of these companies are larger and have greater
financial and other resources than the Company. Should the Company's
competitors develop and market products or services that are
technologically superior to any products manufactured or services
rendered by the Company, the Company's ability to market its products
and services would be significantly impaired.
Patents
The Company owns certain technology (including patents) with respect
to its Big Inch pipeline connector products line, the pressurized rotary
joints used in the NEWTSUIT(TM), certain underwater Ultrascan(TM)
radiography systems, its Sonar ScourVision(TM) system, and the Tarpon
System. The Company believes that its customer relationships and
reputation, together with its technical expertise, responsiveness to
customers and full-service capabilities, are of greater competitive
significance to the Company than its technology. While the Company's
business is not dependent on any one of its patents, the loss of patent
protection for the Company's entire Big Inch product line could have a
material adverse effect on the Company's competitive position. The
Company's Big Inch patents generally are scheduled to expire from 1999
to 2003. Although the patent for one of the Big Inch products has
expired, due to the high start-up costs of this product, management does
not believe that the loss of the exclusive use of this patent will have
a material adverse effect on the Company's competitive position. The
patents covering the NEWTSUI(TM) joints will expire in the years 2004
through 2009 and have an average remaining term of approximately
nine years.
Government Regulation
Many aspects of the Company's operations are subject to governmental
regulation, including regulation by the U.S. Coast Guard and the
Occupational Safety and Health Administration, as well as by private
industry organizations such as the American Bureau of Shipping and the
Association of Diving Contractors. The Coast Guard sets certain safety
standards and is authorized to investigate vessel accidents and
recommend improved safety standards relating to vessels and offshore
diving. The Occupational Safety and Health Administration performs
similar functions with respect to the Company's onshore facilities and
operations. 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 the limits of liability established under worker's
compensation laws and instead permit them or their representative to
maintain an action against the Company for damages for a job related
injury, with no limitations on the Company's potential liability.
Certain of the Company's employees may also be covered by the
Longshoremen and Harbor Worker's Act, which permits such employees to
seek compensation for a job related injury under that act. As a result
of the Company's expansion into Nigeria, the Middle East and other
foreign jurisdictions, the Company is also subject to regulation by
other governments.
The Company is required by various governmental and
quasi-governmental agencies to obtain certain permits, licenses and
certificates with respect to its operations. The kinds of permits,
licenses and certificates required in the Company's operations depend
upon a number of factors. The Company believes that it has obtained or
can obtain all permits, licenses and certificates that are necessary to
the conduct of its business.
In addition, the Company depends on the demand for its services from
the oil and gas industry and, therefore, the Company's business is
affected by laws and regulations, as well as changing taxes and
governmental policies, relating to the oil and gas industry generally.
In particular, the exploration and development of oil and gas properties
located on the Outer Continental Shelf of the United States is regulated
primarily by the Minerals Management Service.
The operations of the Company are also affected by numerous federal,
state and local laws and regulations relating to protection of the
environment including the Outer Continental Shelf Lands Act, the Federal
Water Pollution Control Act of 1972 and the Oil Pollution Act of 1990.
In addition, the Company's environmental services operations are subject
to regulation by various local, state and federal agencies including the
Louisiana Department of Environmental Quality and U.S. Environmental
Protection Agency, among others. The Company is not aware of any
non-compliance with applicable environmental laws and regulations that
would likely have a material adverse effect on the Company's business or
financial condition. The requirements of these laws and regulations are
becoming increasingly complex, stringent and expensive to comply with,
and some environmental laws provide for liability for damages to natural
resources (including damage to fish and wildlife) or threats to public
health and safety. Certain environmental laws provide for "strict
liability" for remediation of spills and releases of hazardous
substances into the environment even after such substances have been
transferred to a disposal contractor. Sanctions for non-compliance may
include revocation of permits, corrective action orders, administrative
or civil penalties, and criminal prosecution. Such laws and regulations
may expose the Company to liability for (i) its actions that may cause
environmental damage such as vessel collisions with rigs, tankers or
pipelines, (ii) environmental harm caused by defective
Company-manufactured products, improper installation of products
manufactured by others or the improper handling of hazardous materials,
(iii) the conduct of or conditions caused by others, or (iv) acts of the
Company that are in compliance with all applicable laws at the time such
acts were performed. It is possible that changes in the environmental
laws and enforcement policies thereunder, or claims for damages to
persons, property, natural resources or the environment could result in
substantial costs and liabilities to the Company. The Company's
insurance policies provide liability coverage for sudden and accidental
occurrences of pollution, clean-up and containment of the foregoing in
amounts that the Company believes are comparable to policy limits
carried in the offshore diving industry.
The Company's vessel operations in the Gulf of Mexico are considered
to be engaged in "coastwise trade" under federal maritime law and are,
therefore, subject to special regulation by federal government agencies.
Under these laws and regulations, only vessels owned by United States
citizens that are built in and documented under the laws of the United
States may engage in "coastwise trade." Certain provisions of the
Company's Articles of Incorporation are intended to aid in compliance
with the foregoing requirements regarding ownership by persons other
than United States citizens.
Insurance
The Company's operations are subject to the inherent risks of
offshore and inland marine activity including accidents resulting in
personal injury, the loss of life or property, environmental mishaps,
mechanical failures and collisions. The Company's diving and vessel
operations involve numerous hazards to divers, vessel crew members and
equipment, and can result in greater incidence of employee injury and
death and equipment loss and damage than occurs in many other service
industries. The Company's ownership and operation of vessels gives rise
to large and varied liability risks, severe risks of collisions with
other vessels or structures, sinkings, fires and other marine
casualties, which can result in significant claims for damages against
both the Company and third parties for, among other things, personal
injury, death, property damage, pollution and loss of business. The
Company's manufacturing operations involve significant risks,
particularly product liability and warranty claims.
Company-manufactured products installed in the past, as well as those
installed in the future, could give rise to such claims.
The Company maintains insurance that it believes is in accordance
with general and industry standards against normal risks of its
operations. The Company also carries workers' compensation, maritime
employer's liability, general liability, product liability and other
insurance customary in its business. All insurance is carried at levels
of coverage and deductibles that the Company considers financially
prudent, although there can be no guarantee that the amount of insurance
carried by the Company is sufficient to protect it fully in all events.
Liabilities to customers and third parties for damages caused by claimed
defects in products manufactured by the Company may be significant and
are not insured to the extent that they are in the nature of warranty
claims or consequential damages. A successful liability claim for which
the Company is underinsured or uninsured could have a material adverse
effect on the Company. 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.
Employees
The size of the Company's work force, other than its clerical and
administrative personnel, is variable and depends upon the Company's
workload at any particular time. Diving personnel are paid only for
actual days worked, but are available on a year-round basis and are
entitled to participate in all of the Company's employee benefit
programs. At December 31, 1996, the Company employed 182 divers, 141
tenders, 43 diving supervisors, 327 vessel crewmen, barge crewmen and
operations support personnel, and 207 clerical and administrative
personnel. Of these persons, 760 are hourly employees (divers are paid
on an hourly basis) and 140 are salaried employees. The Company
believes that its relationship with its employees is satisfactory.
UNCERTAINTY OF FORWARD-LOOKING INFORMATION; RISK FACTORS
Certain of the statements set forth in Items 1, 3 and 7 and elsewhere
in this report (such as, for example, statements as to planned capital
expenditures and market opportunities; anticipated personnel and vessel
rates and utilization; extent of future rate of pipeline installation
and repair; anticipated demand for Company products; anticipated deep
water development activities; international expansion opportunities; and
anticipated Company diversification) are not statements of historical
fact, are forward-looking and are based upon the Company's current belief
as to the outcome and timing of such future events. A variety of risks
and uncertainties including many beyond the control of the Company can
affect the outcome and timing of such events and can affect the financial
performance of the Company generally. These factors include, but are not
limited to, the matters described below. Should one or more of these risks
or uncertainties occur, or should underlying assumptions prove incorrect,
the Company's financial performance could be affected and actual results
and plans could differ materially from those expressed in the forward-looking
statements. Investors and prospective investors should consider the
following information, as well as the other information contained in
this report, in making any investment decision with respect to Company
securities.
Cyclical Demand; Dependence on Energy Industry
The demand for the Company's offshore diving services has
traditionally been cyclical, depending on the condition of the oil and
gas industry, and specifically on the capital expenditures of oil and
gas companies for exploration and production activities. These capital
expenditures are influenced by both short-term and long-term trends in
oil and gas prices, expectations about future prices, the cost of
exploring for, producing and delivering oil and gas, the sale and
expiration dates of offshore leases in the United States and other
nations, the discovery rate of new oil and gas reserves in offshore
areas, local and international political, regulatory and economic
conditions and the ability of oil and gas companies to generate capital.
The Company believes there has been a general increase in the level of
exploration and production activities in the Gulf of Mexico in recent
years resulting from increases in oil and gas prices, but the extent and
duration of this condition is beyond the control of the Company and will
depend primarily upon worldwide oil and gas prices and the capital
expenditures of oil and gas companies for offshore development. A
significant or prolonged reduction in natural gas or oil prices in the
future would likely depress offshore drilling and development activity,
reduce the demand for the Company's services and could have a material
adverse effect on the Company's financial condition and results of
operations.
Operating Risks and Limitation of Insurance Coverage
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 the 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 the Company and
third parties for, among other things, personal injury, death, property
damage, pollution and loss of business. The Company's manufacturing
operations 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. The Company maintains insurance that it
believes is in accordance with general industry standards against the
normal risks of its operations. Such insurance, however, 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 insured to the extent that they
are in the nature of warranty claims or other claims based on breach of
contract, nor has the Company established substantial reserves for such
claims. A successful claim for which the Company is not fully insured
could have a material adverse effect upon 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.
See "Business--Insurance."
Availability of Divers
Divers require up to two years of diving school followed by two or
more years of apprenticeship and on-the-job training before they are
considered qualified to work as divers for the Company. With only six
diving schools producing diving graduates qualified to be employed by
the Company (a decrease from 12 in 1980), fewer divers are available for
employment. As a result, there can be no assurance that the Company
will have a supply of qualified divers sufficient to conduct and expand
the Company's diving operations. Although none of the terms and
conditions of employment of the Company's divers are determined by
collective bargaining with a union, there can be no assurance that the
Company's divers may not be subject to union organization attempts and
collective bargaining in the future. The Company believes that its
ability to employ divers and other employees not subject to a collective
bargaining agreement is important to its ability to compete successfully
for diving work.
Contract Bidding Risks
A significant percentage of the Company's total revenues is derived
from increasingly large contracts performed on a fixed-price basis.
This percentage and the relative size of such contracts are expected to
increase in the future. Fixed-priced 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, variations in labor and equipment
productivity (such as equipment failure) from original estimates,
project modifications creating unreimbursable costs overruns and
supplier or subcontractor failure to perform. These factors and the
risks inherent in the diving and the inland marine construction industry
can result in reduced profitability or losses on fixed-price contracts.
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.
Moreover, the failure to obtain large projects, delays in the awarding
of large projects, the postponement of previously awarded projects or
delays in completion of large projects may negatively impact the
Company's results of operations and financial condition. See "Business-
- -Customers and Competition."
Effect of Adverse Weather Conditions; Seasonality
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.
Availability of DSVs
There has been no significant construction of vessels within the
worldwide marine support services industry since the early 1980s. As a
result, there is a shortage of both new and used DSVs and vessels
convertible into DSVs. Thus, the Company's ability to replace vessels
or increase the size of its DSV fleet through the purchase of new, used
or converted vessels may be significantly adversely affected by this
shortage and any acquisition may be cost prohibitive.
International Operations
The Company's international diving activities, which started in West
Africa in 1992, have continued to expand and play an increasingly
important role in Company operations. These 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. There can be no assurance
that the Company will not experience material adverse developments with
respect to its operations outside the United States; such developments,
if they were to occur, could have a material adverse effect on the
Company's results of operations and financial condition. See "Business-
- -Subsea and Other Services--International Services."
Dependence on Key Personnel
The Company's success depends on the continued active participation
of the Company's key officers and operating personnel. The loss of the
services of any one of these persons could have a material adverse
effect upon the Company. The Company does not hold key-man life
insurance policies covering any Company officer, nor does the Company
have employment agreements or non-competition agreements with any of its
key officers or employees other than Rodney W. Stanley, the Company's
President and Chief Executive Officer. See "Executive Officers of the
Registrant."
Regulatory and Environmental Matters
The Company's DSVs and operations are subject to various types of
governmental regulation, including many federal, state and local
environmental protection laws and regulations, 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. Such laws and regulations may expose the Company to liability
for the conduct of or conditions caused by others, or for acts of the
Company which are in compliance with all applicable laws at the time
such acts were performed. The Company does not believe that compliance
with current environmental laws or regulations is likely to have a
material adverse effect on the Company's business or financial condition
or results of operations. See "Business--Government Regulation."
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 quality of the supplier's services
and equipment, price has become an increasingly more important factor in
the selection process. In all of its operations, the Company competes
with both large and small companies, and certain of these competitors
are larger and have greater financial and other resources than the
Company. It is possible that competitors, particularly large,
international companies, could relocate vessels, other equipment and
personnel to the Gulf of Mexico and other areas in which the Company
operates with the result that competition could increase and adversely
affect the Company's revenues and operating margins. Should the
Company's competitors develop and market services or products that are
technologically superior to those of the Company, the Company's ability
to market its services and products would be significantly impaired. In
addition, it is possible for an experienced individual in the industry
who has at least minimal contacts with customers and divers to begin a
business that could compete successfully with the Company, particularly
with respect to smaller, independent customers. See "Business--Subsea
Products--Pipeline Connector Products" and "Business--Customers and
Competition."
Anti-Takeover Provisions
Certain provisions of the Company's Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") and By-laws, including,
among others, provisions allowing the Company's Board of Directors to
issue preferred stock, and certain provisions of the Louisiana Business
Corporation Law under which the Company is incorporated, may tend to
deter potential unsolicited offers or other efforts to obtain control of
the Company that are not approved by the Board of Directors. Such
provisions may therefore deprive the stockholders of opportunities to
sell shares of the Common Stock at prices higher than prevailing market
prices.
Absence of Dividends
The Company has never paid cash dividends on its Common Stock and
intends for the near future to retain any earnings otherwise available
for dividends for the future operation and growth of the Company's
business. In addition, the Company's loan agreement restricts the
payment of cash dividends on its capital stock. See "Market for the
Registrant's Common Equity and Related Shareholder Matters."
Limitation on Foreign Ownership
The Company's Articles of Incorporation contain limitations on the
percentage of outstanding Common Stock and other classes of securities
that can be owned by persons who are not United States citizens within
the meaning of certain statutes relating to the ownership of United
States flag vessels. Consistent with statutory requirements, the
Articles of Incorporation prohibit the ownership of more than 23% of the
outstanding Common Stock by persons other than United States citizens.
The restrictions imposed by the Company's Articles of Incorporation may
at times preclude United States citizens from transferring their Common
Stock to persons other than United States citizens. This may restrict
the available market for resale of shares of Common Stock and for the
issuance of shares of Common Stock by the Company.
ITEM 2. PROPERTIES
Vessels. The Company's offshore diving activities are performed from
the Company's 20 DSVs, as well as from structures and vessels owned by
others. The DSVs are offshore utility and supply vessels that have been
converted and equipped to support diving operations for offshore
construction, inspection, maintenance, and repair work. All of the
Company's vessels are United States-flagged vessels except for the
"American Eagle" (Honduran-flagged), the "American Constitution" and the
"American Pioneer" (Panamanian-flagged). Eleven of the Company's DSVs
are mortgaged as collateral for the Company's bank borrowings. The
following table describes the Company's DSVs, all of which are owned by
wholly owned subsidiaries of the Company:
<TABLE>
<CAPTION>
Vessel
Length Year
Vessel Vessel Type Home Port (feet) Acquired
_______ ___________ _________ ________ __________
<S> <C> <C> <C> <C>
American Constitution Four-point anchor Port of Iberia, La 210 1996
system/saturation
diving/moonpool
American Pioneer Dynamically Port of Iberia, La 200 1996
positioned/ ROV and
NEWTSUIT(TM) support
American Recovery Tug/diving support Oxnard, Ca. 150 1996
American Pride Four-point anchor Port Harcourt, Nigeria 185 1990
system
American Victory Four-point anchor Port of Iberia, La. 166 1993
system
American Star Four-point anchor Port of Iberia, La. 165 1989
system/ saturation
diving
American Patriot Four-point anchor Oxnard, Ca. 165 1994
system/40-ton crane
American Triumph Four-point anchor Port of Iberia, La. 165 1996
system
American Independence Four-point anchor Port of Iberia, La. 165 1996
system
American Eagle Four-point anchor Port Harcourt, Nigeria 150 1986
system
American Spirit Four-point anchor Port of Iberia, La. 130 1994
system
American Liberty Four-point anchor Fourchon, La. 125 1990
system
American Diver Diving support Port of Iberia, La. 110 1983
Pipeline Surveyor Diving support Fourchon, La. 110 1985
American Scout Diving support Port of Iberia, La. 110 1996
Pipeline Inspector Diving support Port of Iberia, La. 105 1985
Pipeline Diver Diving support Port of Iberia, La. 105 1985
Pipeline Observer Diving support Fourchon, La. 95 1990
American Progress Crewboat/survey Oxnard, Ca. 65 1994
support
American Endeavor Utility tug/ROV Oxnard, Ca. 65 1994
support
</TABLE>
In addition to the DSVs listed above, the Company operates a 150-foot
jack-up derrick barge, the "American Intrepid," which it time-chartered
in 1995. The Company owns a 220-ton Manitowoc crane that is installed
on the American Intrepid.
The Company manages its vessel fleet so as to maintain a competitive
presence in each of its targeted market areas and to pursue project
opportunities as they arise in each area. The Company frequently
evaluates the need to reposition vessels and from time to time does so.
For example, in August 1995 the Company repositioned the American Pride
from its Dubai, United Arab Emirates operations base to its Port
Harcourt, Nigeria base to pursue chartering opportunities in West Africa
in fiscal 1996 and in November 1996 the Company repositioned the
American Eagle from its Port of Iberia, Louisiana base to its Port
Harcourt, Nigeria base. The average age of the Company's vessels is
approximately 27 years.
The Company's vessel fleet is maintained, as required by law and by
its insurers, in accordance with governmental regulations and
classification standards of either or both the American Bureau of
Shipping and the U.S. Coast Guard or, with respect to its
foreign-flagged vessels, the regulations of the respective foreign
governments. The Company's United States-flagged vessels are subject to
annual inspections and to drydocking in which compliance with applicable
regulations and standards is monitored, after which any necessary
modifications or repairs are made. In addition to complying with these
regulations and standards, the Company performs supplemental repairs and
maintenance on its vessels as part of a regular preventive maintenance
schedule and on an as-needed basis.
The vessels are also equipped with various winches, cranes and other
support equipment. Several of the Company's DSVs are equipped with a
four-point anchor system that maintains the ship in proper position.
The dynamic positioning system of the "American Pioneer" can, through
thrusters coordinated by the vessel's onboard computer system, maintain
the vessel on station for an extended period of time without the use of
anchors.
ROVs. The Company's ROVs are submersible, unmanned, remotely
controlled vehicles that are powered and operated from a surface
platform (a DSV, barge or other platform) by a crew of trained pilots
through an umbilical containing electric power and communications
cables. The Company's ROVs are generally used to complement, support
and increase inspection work and photography tasks. At December 31,
1996, the Company owned and operated five observation ROVs, which are
equipped with subsea lights, sonar, video cameras and other equipment
that transmit subsea video and other information to their surface
operators to support the work of the Company's divers. Also at December
31, 1996, the Company operated two work ROVs, which are equipped with
lights and video equipment as well as manipulators, which permit them to
perform tasks in water depths up to 3,000 feet.
Facilities. The Company typically leases office facilities to house
its administrative staff (other than the Lafayette corporate
headquarters building and the Port of Iberia operations base, which it
owns), shops equipped for fabrication, testing, repair and maintenance
activities, warehouses and yard areas for storage and mobilization of
equipment enroute to work sites, and dock facilities for the Company's
DSVs. The Company has facilities in California, Kansas, Louisiana,
Ohio, Texas, Canada, Nigeria, and the United Arab Emirates. The Company
also owns a facility in Houma, Louisiana that is currently held for sale
and not used as an operations base. The following table describes the
Company's primary facilities:
<TABLE>
<CAPTION>
Approximate
Location Square Feet Primary Use(s)
________ ___________ _______________
<S> <C> <C>
Lafayette, Louisiana 24,000 Corporate headquarters
Lafayette, Louisiana 6,000 Tarpon Systems/jack-up barge operations
Port of Iberia, Louisiana 29,000(1) Gulf of Mexico diving and vessel operations
Harvey, Louisiana 31,000(2) Gulf of Mexico diving operations
Houston, Texas 27,240(3) Big Inch/Inland headquarters
Oxnard, California 23,000(4) West Coast diving operations
Kansas City, Kansas 9,000(5) Inland diving operations
Columbus, Ohio 8,600(6) Inland diving operations
Dubai, UAE 11,500(7) International diving operations
Port Harcourt, Nigeria 13,500(8) International diving operations
Vancouver, Canada 4,970(9) HSI headquarters/shop space
__________________________
(1) Includes approximately 6,000 square feet of office space,
23,000 square feet of shop/warehouse space, 23 acres of yard
space and 1,800 feet of waterfront access.
(2) Includes approximately 4,000 square feet of office space and
27,000 square feet of shop/warehouse space.
(3) Includes approximately 8,500 square feet of office space,
18,740 square feet of shop/warehouse space and 83,160 square
feet of yard space and parking.
(4) Includes approximately 10,000 square feet of office space and
13,000 square feet of shop/warehouse space.
(5) Includes approximately 2,700 square feet of office space,
6,300 square feet of shop/warehouse space and approximately one
acre of yard space.
(6) Includes approximately 3,000 square feet of office space,
5,600 square feet of shop/warehouse space and two acres of yard
space.
(7) Includes approximately 3,000 square feet of office space and
8,500 square feet of shop/warehouse space.
(8) Includes approximately 3,500 square feet of office space,
10,000 square feet of shop/warehouse space and 16,000 square
feet of yard space.
(9) Includes approximately 2,970 square feet of office space and
2,000 square feet of shop/warehouse space.
</TABLE>
Equipment. The Company owns an extensive inventory of diving
equipment, including six saturation diving systems (five of which are
operational), seven NEWTSUITsTM (one of which is used for training and
demonstration only), compressors, decompression chambers, high pressure
water blasters, jet pumps, hydraulic power tools, welding machines,
tuggers, underwater video systems, UltrascanTM recordable
non-destructive testing systems, and TH-1000 x-ray systems. The Company
performs routine maintenance on all of its equipment and generates
timely status reports to track use and availability of the Company's
equipment.
ITEM 3. LEGAL PROCEEDINGS
A large oil and gas company has instituted litigation against
subsidiaries of the Company in Edinburgh, Scotland seeking damages of
approximately U.S. $3.0 million, plus interest and costs, on the basis
of allegations that a product supplied by the subsidiaries exhibited
design faults upon installation in a North Sea pipeline. Prior to
installation the product was hydrostatically tested onshore and during
the test it did not leak or otherwise malfunction. After installation
but before oil or gas flowed through the pipeline under pressure the
product was removed and replaced by the customer against the
recommendations of the Company's subsidiaries. The product did not leak
and no environmental damage is alleged. The Company believes that the
product was fully suitable for service and intends to defend the claim
vigorously, although no assurance can be given as to the ultimate
outcome of the litigation.
The Company and certain of its subsidiaries are also parties to
various routine legal proceedings primarily involving claims for
personal injury under the General Maritime Laws of the United States and
the Jones Act as a result of alleged negligence or alleged
"unseaworthiness" of the Company's vessels. While the outcome of these
lawsuits cannot be predicted with certainty, the Company believes that
its insurance coverage with respect to such claims is adequate and that
the outcome of all such proceedings, even if determined adversely, would
not have a material adverse effect on its business or financial
condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS
No matter was submitted to a vote of the security holders, through
the solicitation of proxies or otherwise, during the fourth quarter of
the year ended December 31, 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of the date of
this Prospectus with respect to the directors and executive officers of
the Company.
Name Age Position
______ _____ __________
George C. Yax 55 Director and Chairman of the Board
Rodney W. Stanley 52 Director, President and Chief Executive Officer
Prentiss A. Freeman 48 Director, Executive Vice President and Chief
Operating Officer
Cathy M. Green 31 Vice President-Finance and Chief Financial
Officer
Quinn J. Hebert 33 Corporate Counsel and Secretary
Robert B. Suggs 49 Vice President/General Manager-Offshore Division
The following biographies describe the business experience of the
directors and executive officers of the Company:
George C. Yax co-founded the Company in 1981 and has served as
Chairman of the Board since its inception. Mr. Yax served as President
and Chief Executive Officer from the Company's inception until
December 1996. Mr. Yax has over 28 years of experience in the subsea
services industry. Mr. Yax is a director of the National Oceans
Industries Association and has also served in various officer capacities
for the Association of Diving Contractors. Mr. Yax holds a BBA degree
and an MBA degree from Sam Houston University.
Rodney W. Stanley joined the Company on August 1, 1996 as a Director
and Senior Vice President-International Operations and became President
and Chief Executive Officer of the Company in December 1996.
Mr. Stanley has over 33 years of experience in the subsea services
industries. From 1995 to May 1996, he served as President and Chief
Executive Officer of Hard Suits Inc., which was acquired by the Company
in 1996. From 1986 to 1995, Mr. Stanley was President and Chief
Executive Officer of Sonsub, Inc., a leading provider of specialist
subsea engineering and heavy work class ROV services, which he founded
in 1986. From 1969 to 1984, he held various management positions at
Divcon, Inc. and its successor, Oceaneering International, Inc.
Prentiss A. Freeman joined the Company in 1986 as Vice President and
General Manager of the Company's New Orleans office. He became
Executive Vice President and General Manager of the Company in 1987 and
has served as the Company's Executive Vice President and Chief Operating
Officer since 1988. From 1983 to 1986, he served as President and Chief
Operating Officer of Sonat Subsea Services (Americas), Inc., which was
acquired by the Company in 1986. Mr. Freeman has over 28 years of
experience in the subsea services industry, including six years as a
diver.
Cathy M. Green joined the Company in 1994 as Corporate Controller.
She became Vice President-Finance and Chief Financial Officer in
January 1996. Ms. Green has over eight years of experience in the
accounting profession. From 1988 to 1994, she was employed by Price
Waterhouse LLP, an independent public accounting firm, and served as a
manager at such firm from 1992 to 1994. Ms. Green holds a BS degree
from the University of New Orleans. She is a Certified Public
Accountant.
Quinn J. Hebert joined the Company in 1993 as Corporate Counsel and
Secretary. Mr. Hebert has over eight years of experience in the legal
profession. From 1988 to 1993, he was an associate with the law firm of
Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New
Orleans, Louisiana. Mr. Hebert holds a BA degree from Louisiana State
University and a JD degree from Boston College. He is a member of the
Louisiana Bar Association.
Robert B. Suggs joined the Company in 1985 as the Company's Vice
President-Operations. He became Vice President/General Manager-Offshore
Division in 1990. From 1981 to 1985, Mr. Suggs served as Vice
President-Diving Services for Sea Con, Inc. In 1975, Mr. Suggs
co-founded Sea Dive, Inc., which was sold to Sea Con, Inc. in 1981. He
has over 25 years of experience in the diving industry, including six
years as a diver. He served in the United States Navy aboard a nuclear
submarine from 1966 to 1970.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The Common Stock of the Company commenced trading on the NASDAQ
National Market under the symbol "DIVE" on July 21, 1993. The following
table presents high and low bid quotes for the Company's Common Stock as
reported by the NASDAQ National Market System for each fiscal quarter
and interim period since trading began on July 21, 1993. In 1996, the
Company changed the end of its fiscal year from October 31 to
December 31.
High Low
---- ---
Quarter Ended:
July 31, 1993(1) $ 9.750 $9.000
October 31, 1993 12.500 9.250
Quarter Ended:
January 31, 1994 12.250 8.375
April 30, 1994 10.250 7.250
July 31, 1994 9.750 6.500
October 31, 1994 7.500 6.000
Quarter Ended:
January 31, 1995 7.000 5.375
April 30, 1995 6.750 5.500
July 31, 1995 6.750 5.750
October 31, 1995 6.313 5.375
Transition Period:
November 1, 1995 to December 31, 1995 7.875 5.625
Quarter Ended:
March 31, 1996 8.750 6.750
June 30, 1996 11.000 8.125
September 30, 1996 11.375 8.125
December 31, 1996 14.125 9.750
(1)Prices are for the period July 21 to July 31, 1993.
At February 28, 1997, the Company had approximately 2,000 holders of
its Common Stock, including record holders and individual participants
in security position listings.
The Company has not paid cash dividends on its Common Stock since its
inception. The Board of Directors does not anticipate payment of any
cash dividends in the near future and intends to continue its present
policy of retaining earnings for reinvestment in the operations of the
Company. The amended and restated loan agreement between the Company
and its lending bank restricts the Company's payment of dividends for
any fiscal quarter to 15% of the average of quarterly net income of the
Company for the immediately preceding four fiscal quarters.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial and other data set forth below should be
read in conjunction with the consolidated financial statements of the
Company and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in
this Form 10-K.
Selected Consolidated Financial and Other Data
(In thousands, except per share and operating data)
<TABLE>
<CAPTION>
Fiscal Year Two Months
Ended Ended Fiscal Year Ended October 31,
December 31, December 31, _________________________________
1996 1995 (1) 1995 1994 1993 1992
____________ ____________ _____ _____ _____ _____
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data
Diving and related revenues $105,772 $15,486 $88,660 $52,755 $51,023 $36,875
Diving and related expenses 70,066 10,346 63,180 35,338 30,635 22,084
Selling, general and
administrative expenses 19,486 3,055 19,318 14,222 10,808 8,303
Depreciation and amortization 6,815 889 5,064 3,415 2,153 1,650
Operating income (loss) 9,405 1,196 1,098 (220) 7,427 4,838
Non-recurring charge (2) --- --- --- --- (27,301) ---
Interest expense 1,246 220 1,377 297 341 277
Income (loss) from continuing operations
before income taxes and minority interest 8,971 994 (151) (264) (20,030) 4,834
Income (loss) from continuing operations 5,021 574 (329) (257) (13,199) 3,269
Loss from discontinued operations --- --- --- (1,696) (638) (555)
Net income (loss) 5,021 574 (329) (1,953) (13,837) 2,714
Earnings (loss) per share .74 .09 (.05) (.29) (2.52) 0.54
Weighted average common shares outstanding 6,787 6,709 6,709 6,706 5,484 5,044
Other Data:
EBITDA (3) $16,220 $2,085 $6,162 $3,195 $9,580 $6,488
EBITDA Margin (3) 15% 13% 7% 6% 19% 18%
Cash flow from operations 19,642 (297) 1,375 4,423 3,968 3,344
Balance Sheet Data
Working capital $12,222 $15,898 $14,067 $14,087 $26,362 $ 8,366
Property, plant and equipment, net 43,041 25,550 26,079 24,424 14,659 8,693
Total assets 92,907 63,921 69,408 61,607 47,601 26,068
Current portion of long-term debt 1,702 1,375 2,000 2,488 121 1,144
Long-term debt, less current portion 8,459 5,413 5,121 5,443 --- 2,189
Total stockholders' equity 45,845 39,555 38,989 39,327 41,099 14,168
Operating Data
Average number of dive crews employed (4) 248 230 239 221 163 100
Dive crew days (5) 40,131 5,922 35,869 22,455 25,149 17,158
Number of diving support vessels
(DSVs) at end of period 20 14 14 15 11 10
DSV days (6) 3,565 443 2,831 2,376 2,227 1,636
DSV utilization (7) 51% 52% 47% 49% 59% 45%
(1) In June 1996 the Board of Directors of the Company changed the Company's
fiscal year end from October 31 to December 31.
(2) Non-recurring, non-cash incentive compensation charge incurred at the
time of the Company's initial public offering, at which time forfeiture
restrictions applicable to stock previously awarded to Company employees
were eliminated.
(3) The Company calculates EBITDA (earnings before interest, taxes,
depreciation and amortization) as operating income plus depreciation and
amortization. EBITDA should not be considered as an alternative to net
income as an indication of the Company's operating performance or
as an alternative to cash flow as a better measure of liquidity. EBITDA
margin represents EBITDA divided by the Company's total revenues in that
period.
(4) A dive crew generally consists of (i) a diver and a tender (diver
trainee/assistant) or (ii) one diving supervisor.
(5) A dive crew day is one calendar day during which one Company dive crew
was engaged in an active project, was in transit or was waiting on
inclement weather while under contract.
(6) A DSV day is one calendar day in which one Company DSV is offshore
performing services, in transit or waiting on inclement weather while
under contract.
(7) DSV utilization is DSV days expressed as a percentage of DSV capacity.
DSV capacity is the average number of DSVs available for operation in
a given period multiplied by the number of days in that period.
The Company's maximum DSV utilization is limited by the seasonality of
offshore operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations."
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of the Company's financial condition,
results of operations, historical financial resources and working
capital, and income taxes should be read in conjunction with the
consolidated financial statements of the Company and the notes
thereto included in this Annual Report. For a description of the
Company's accounting policies, see Note 1 to the Company's
consolidated financial statements.
In June 1996, the Board of Directors of the Company changed the
Company's fiscal year end from October 31 to December 31 so as 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 this change in year end, the following
discussion includes the year ended December 31, 1996; the two
fiscal years ended October 31, 1995 and 1994 and the two-month
transition periods ended December 31, 1995 and 1994.
Overview
The Company's operations are affected by a number of factors,
the most significant of which is the activity of the offshore oil
and gas industry in the Gulf of Mexico, especially the timing of
capital expenditures by oil and gas companies. These capital
expenditures are influenced by oil and gas prices, expectations
about future prices, the cost of exploring for, producing and
delivering oil and gas, the sale and expiration dates of offshore
leases in the United States and international markets, the
discovery rate of new oil and gas reserves in offshore areas,
local, state, federal and international political, regulatory and
economic conditions, and the ability of oil and gas companies to
generate capital, all of which are beyond the control of the
Company. Natural gas factors have a greater effect on the
operation of the Company than oil factors because a majority of
the production in the Gulf of Mexico is natural gas.
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. The diving industry is highly
seasonal as a result of the weather conditions that affect the
timing of platform and pipeline construction and other diving
related activities of oil and gas companies in the Gulf of
Mexico, and the inland activities of the Company's customers.
The winter 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
use of the Company's DSVs stationed in the Gulf of Mexico.
Although adverse weather conditions occurring from time to time
from May through November may also adversely affect vessel use
and diving operations, historically a disproportionate amount of
the Company's diving services have been performed during this
period. 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. The
Company expects the winter weather patterns to continue to have
an adverse effect on the Company's Gulf of Mexico and inland
diving operations.
In general, large, complex underwater inland diving projects
are awarded on a fixed price basis. With such projects, contract
revenues are recognized on a percentage of completion basis for
individual contracts based on the ratio of costs incurred to
total estimated costs at completion. Contract price and cost
estimates are reviewed periodically as work progresses and
adjustments proportionate to the percentage of completion are
reflected in contract revenues and gross profit in the reporting
period when such estimates are revised. All known or anticipated
losses on contracts are provided for currently. At December 31,
1996, the Company accounted for 10 contracts (aggregating
$1,689,000, or approximately 28%, of unbilled revenue at December
31, 1996) using the percentage of completion method. If the
Company continues to expand its operations in the inland market
and the number of turnkey projects in the Gulf of Mexico awarded
to the Company increases, the Company believes that a greater
proportion of its inland and Gulf of Mexico diving contracts will
be accounted for using the percentage of completion accounting
method.
Results of Operations
The Company analyzes the results of its operations by
separating them into four geographic and product markets:
(i) Gulf of Mexico diving and related services, derrick barge
services, and environmental remediation and emergency oil spill
response services ("Gulf Services"); (ii) all diving and related
services performed outside the United States and its coastal
waters, except Latin America ("International Services");
(iii) diving and related services off the United States West
Coast, inland within the United States and in the coastal waters
off Latin America ("Inland and West Coast Services"); and (iv)
sales and installations of Big Inch pipeline connectors, Tarpon
Systems marginal well production systems and concrete storage
barges, and Hard Suits Inc. products and services ("Subsea
Products"). The following table sets forth, for the periods
indicated, additional information on the operating results of the
Company in each of those four markets:
<TABLE>
<CAPTION>
Two Months Ended
Year ended December 31, Year ended October 31, December 31,
____________________ _____________________ ______________
1996 1995(1) 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
(Unaudited) (Unaudited)
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Gulf Services
Diving and related revenues $ 53,220 $49,987 $49,522 $35,733 $ 9,929 $9,463
Diving and related expenses 36,037 38,118 37,362 24,887 6,888 6,087
_________ ________ ________ ________ ________ _________
Gross profit 17,183 11,869 12,160 10,846 3,041 3,376
Gross profit percentage 32.3% 23.7% 24.6% 30.4% 30.6% 35.7%
International Services
Diving and related revenues $ 7,837 $16,653 $17,079 $ 3,889 $ 924 $ 1,350
Diving and related expenses 5,490 10,837 11,318 2,545 595 1,077
_________ _________ _________ ________ _________ _________
Gross profit 2,347 5,816 5,761 1,344 329 273
Gross profit percentage 29.9% 34.9% 33.7% 35.0% 35.6% 20.2%
Inland and West Coast Services
Diving and related revenues $ 34,097 $15,180 $14,539 $ 8,439 $ 3,909 $ 3,268
Diving and related expenses 22,025 10,074 10,114 5,619 2,488 2,528
________ _________ _________ _________ _________ _________
Gross profit 12,072 5,106 4,425 2,820 1,421 740
Gross profit percentage 35.4% 33.6% 30.4% 33.4% 36.4% 22.6%
Subsea Products
Diving and related revenues $ 10,618 $ 7,066 $ 7,520 $ 4,694 $ 724 $ 1,178
Diving and related expenses 6,514 4,095 4,386 2,287 375 667
_________ _________ _________ ________ _________ _________
Gross profit 4,104 2,971 3,134 2,407 349 511
Gross profit percentage 38.7% 42.0% 41.7% 51.3% 48.2% 43.4%
Total
Diving and related revenues $105,772 $88,886 $88,660 $52,755 $15,486 $15,259
Diving and related expenses 70,066 63,124 63,180 35,338 10,346 10,359
_________ _________ _________ ________ _________ _________
Gross profit 35,706 25,762 25,480 17,417 5,140 4,900
Gross profit percentage 33.8% 29.0% 28.7% 33.0% 33.2% 32.1%
</TABLE>
(1) Information for the year ended December 31, 1995 is
presented for comparison purposes only.
For additional information concerning the operations of the
Company in geographic areas, see note 12 to the financial
statements of the Company included in this Annual Report.
The following table sets forth for the periods indicated
certain consolidated income statement data expressed as a
percentage of consolidated revenues.
<TABLE>
<CAPTION>
Year Ended Two Months Ended
December 31, Year Ended October 31, December 31,
___________ ________________ ____________
1996 1995(1) 1995 1994 1995 1994
____ ____ ____ ____ ____ ____
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Percentage of consolidated revenues:
Selling, general and administrative exepenses 18.4% 22.0% 21.8% 27.0% 19.7% 18.8%
Depreciation and amortization 6.4 5.8 5.7 6.5 5.7 5.2
Operating income(loss) 8.9 1.2 1.2 (.4) 7.7 8.0
Income (loss) from continuing operations
before income taxes and minority interest 8.5 (.3) (.2) (.5) 6.4 7.2
Net income (loss) 4.7 (.4) (.4) (3.7) 3.7 4.0
(1) Information for the year ended December 31, 1995 is
presented for comparison purposes only.
</TABLE>
In the year ended December 31, 1996, the Company continued to
experience significant growth in its operations and related
revenues. Factors contributing to the increased activity include
the following:
First, the oil and gas industry in the Gulf of Mexico has
continued to strengthen, resulting in an increase in both
the demand and the day rates charged for the Company's
divers and DSVs. The improved industry trends have also
contributed to increased demand for the Company's subsea
pipeline connector products and derrick barge services in
the Gulf of Mexico. The Company anticipates that this trend
will continue as long as supply and demand fundamentals for
oil and gas and demand for infrastructure-related projects
remain strong in the Gulf of Mexico.
Second, the activity level of Inland and West Coast
Services has increased substantially, primarily due to
improved bidding and estimating processes, and the Company's
ability to obtain large turnkey projects. For example, the
Company completed in 1996 the approximately $15 million
Chevron platform abandonment project and also expects to
complete in late 1997 the approximately $8 million Port of
Brownsville project. Although no assurances can be given
that the Company will obtain projects of a size similar to
these projects in the future, the Company believes it has
positioned itself to bid on competitive projects of similar
size and scope going forward.
Although the revenue and activity level of International
Services were significant in fiscal 1995, this was due
primarily to the installation of a Tarpon System off the
Ivory Coast. Revenue and activity levels returned to a more
representative level during 1996.
As a result of strong commodity prices and the related
increased drilling activity in 1996, the Company anticipates
demand for its products and services, particularly in the Gulf of
Mexico, to remain strong in 1997 as a significant portion of oil
and gas field development enters the construction phase. This
strong demand for products and services is expected to result in
increased utilization and rates for the Company's personnel,
equipment and diving support vessels
The Company's profitability improved substantially from 1995 to
1996 due primarily to the non-recurrence of several adverse
factors that gave rise to losses in 1995.
First, the Company experienced cost overruns and losses on
certain nonrecurring turnkey diving projects in the Gulf of
Mexico and Dubai aggregating approximately $1.5 million in
fiscal 1995. The Company identified the causes of these
problems and, in response, has implemented new project
management and bidding procedures.
Second, the pipelay/bury barge "American Enterprise"
recorded an operating loss of approximately $1.5 million in
fiscal 1995 due to low use and lower than expected gross
profit margins, both of which adversely affected the
Company's overall gross profit margins. After evaluating
the American Enterprise's results of operations, the Company
sold the barge on March 1, 1996 for $5.4 million, resulting
in a nonrecurring gain in the first quarter of 1996.
Third, the inland operations recorded an operating loss of
approximately $660,000 in fiscal 1995. This loss was
attributable primarily to low revenue levels in the first
and second quarters of fiscal 1995 coupled with the fixed
costs of developing the inland market and lower than
expected gross profit margins on the larger construction
projects, which involve a relatively high percentage of
third party costs. The Company believes a portion of the
inland diving market is sensitive to similar weather
patterns affecting the Gulf of Mexico diving market.
However, during the latter half of 1995 and continuing into
1996, the inland operations experienced high activity levels
and were profitable. Further, the Company believes the
inland diving market can reduce the Company's overall
dependence on the oil and gas industry, which is subject to
several external factors as previously described.
Acquisitions
In November 1996, the Company acquired 97% of the outstanding
common stock of HSI, a manufacturer and marketer of one-
atmosphere diving suits, through an unsolicited tender offer for
a cash purchase price of $11.8 million.
The purchase was funded through borrowings on the Company's line
of credit, which were repaid subsequent to December 31, 1996 with
the proceeds from the secondary offering of the Company's common
stock. The Company intends to acquire the remaining outstanding
common shares of Hard Suits and to seek delisting of all shares
from both the Toronto and Vancouver Stock Exchanges. The
transaction was accounted for under the purchase method of
accounting. The results of operations of Hard Suits are included
in the consolidated statement of operations for the two months
ended December 31, 1996.
The following table sets forth certain pro forma combined
statement of operations data for the year ended December 31, 1996
and the fiscal year ended October 31, 1995 assuming the
acquisition occurred on January 1, 1996 and November 1, 1994,
respectively.
For the Years Ended
December 31, October 31,
1996 1995
____________ ____________
(Unaudited)
(in thousands)
Diving and related revenues $ 110,005 $ 102,061
Gross profit 36,096 28,426
Selling, general and administrative
expense 22,078 23,340
Depreciation and amortization 9,302 8,433
Operating income (loss) 4,717 (3,347)
Interest expense 2,278 2,533
Net loss (431) (5,630)
Net loss per share (.06) (.84)
These pro forma combined statements of operations reflect both
the historical operating losses of HSI and certain pro forma
expense adjustments related to the purchase of HSI, including
additional interest expense on the borrowings under the Company's
line of credit, and additional depreciation and amortization
related to tangible and intangible assets acquired. However, as
stated above, the Company repaid the debt incurred to purchase
HSI with a portion of the proceeds of its secondary offering of
common stock and therefore does not anticipate incurring ongoing
interest expense related to the HSI acquisition.
Over the course of 1996, the Company acquired six vessels, two
of which are suitable for operations in deeper waters, and
certain diving assets to be used in its Gulf of Mexico diving
operations. The vessels acquired during 1996 include the
"American Constitution," a 210-foot vessel that has since been
undergoing modifications for use as a DSV, including installation
of a moonpool and outfitting with a saturation diving system; the
"American Pioneer," a 200-foot dynamically positioned vessel
dedicated to supporting work-class ROV; and the "American
Recovery," a 150-foot tug/diving support vessel to support its
West Coast operations.
Finally, in November 1996, the Company acquired certain
operating assets of a manufacturer of concrete storage barges for
cash and a note payable totaling approximately $1.7 million; the
note was paid in January 1997. Concrete floating or subsea
barges can be used with a Tarpon System as an alternative to
steel tankers for offloading and storage of oil produced from
marginal fields that do not have an existing pipeline
infrastructure. The Company also intends to offer the concrete
storage barges to others on a stand-alone basis.
Year Ended December 31, 1996 Compared to Year Ended October 31,
1995
Factors affecting the results of operations in the year ended
December 31, 1996 as compared to the year ended December 31, 1995
would be substantially the same as those discussed below in the
comparison between the year ended December 31, 1996 and the year
ended October 31, 1995.
Diving and related revenues. The Company's consolidated
revenues increased 19%, from $88.7 million for the year ended
October 31, 1995 to $105.8 million for the year ended December
31, 1996. The difference between these two amounts is due
primarily to the following increases: (i) approximately
$19.6 million was attributable to increased activity by Inland
and West Coast Services, approximately $14.3 million of which
resulted from the Chevron platform abandonment project off the
coast of California; (ii) approximately $6.4 million was
attributable to increased diving and vessel activity in the Gulf
of Mexico; (iii) approximately $3.6 million was attributable to
the operations of the "American Intrepid," the Company's jack-up
derrick barge, which was operational for only a portion of the
year ended October 31, 1995; (iv) approximately $3.0 million was
attributable to increased sales of the Company's subsea pipeline
connector products and (v) approximately $1.4 million was due to
revenue from the Company's new Tarpon concrete storage barge and
HSI products. The increase in revenue was offset by certain
revenue decreases, including (i) approximately $6.8 million
attributable to the "American Enterprise," the Company's
pipelay/bury barge that was sold on March 1, 1996,
(ii) approximately $9.2 million attributable to International
Services, primarily as a result of non-recurring work associated
with the installation of a Tarpon System off the Ivory Coast in
1995, and (iii) approximately $1.3 million attributable to
decreased demand for the Company's Tarpon Systems marginal well
production systems.
Diving and related expenses. The Company's diving and related
expenses increased 11%, from $63.1 million for the year ended
October 31, 1995 to $70.0 million for the year ended December 31,
1996. The difference between these two amounts is due primarily
to the following increases: (i) approximately $11.9 million was
attributable to increased activity by Inland and West Coast
Services; (ii) approximately $2.0 million was attributable to
increased diving and vessel activity in the Gulf of Mexico;
(iii) approximately $3.7 million was attributable to the
operations of the "American Intrepid," the Company's jack-up
derrick barge, which was operational for only a portion of the
year ended October 31, 1995; (iv) approximately $1.6 million was
attributable to increased sales of the Company's subsea pipeline
connector products and (v) approximately $1.2 million was due to
the Company's new Tarpon concrete storage barge and HSI products.
The increase in expenses was offset by certain expense decreases,
including (i) approximately $7.3 million attributable to the
"American Enterprise," the Company's pipelay/bury barge that was
sold on March 1, 1996, (ii) approximately $5.8 million
attributable to International Services, primarily as a result of
non-recurring work associated with the installation of a Tarpon
System off the Ivory Coast in 1995 and (iii) approximately
$700,000 attributable to decreased demand for the Company's
Tarpon Systems marginal well production systems.
Selling, general and administrative expenses. Selling, general
and administrative expenses increased 1%, from $19.3 million for
the year ended October 31, 1995 to $19.5 million for the year
ended December 31, 1996. The increase was primarily attributable
to (i) a $143,000 increase in the selling, general and
administrative expenses of International Services primarily as a
result of supporting the activities of the operations and sales
office in Dubai, which did not have full operations for the
entire year of fiscal 1995, (ii) $125,000 in severance paid in
connection with personnel layoffs during January 1996 and (iii)
other increases necessary to support the increased operations of
the Company in 1996. These increases were offset by the effect
of cost cutting measures which were put into place in 1995.
Selling, general and administrative expenses as a percentage of
revenues decreased from 22% for the year ended October 31, 1995
to 18% for the year ended December 31, 1996.
Depreciation and amortization. Depreciation and amortization
increased 35%, from $5.1 million for the year ended October 31,
1995 to $6.8 million for the year ended December 31, 1996. The
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
operations for the year ended December 31, 1996. The remaining
increase was attributable to additions and improvements to the
Company's operational and administrative assets. Depreciation
expense for Gulf Services increased approximately $774,000 due
primarily to the addition of new dive support vessels and diving
equipment, and depreciation expense for Subsea Products increased
$451,000 due to the acquisition of HSI. Depreciation expense for
the other operating groups increased by approximately $519,000 as
a result of various improvements and additions to fixed assets.
These increases were offset by a reduction in depreciation
expense of $493,000 attributable to the "American Enterprise,"
which was sold on March 1, 1996.
Operating income. For the year ended December 31, 1996,
operating income was $9.4 million compared to operating income of
$1.1 million for the year ended October 31, 1995. The
significant change in operating income was due primarily to an
overall increase in the Company's gross profit margin for reasons
described above from $25.5 million, or 28.7%, in the year ended
October 31, 1995 to $35.7 million, or 33.8%, in the year ended
December 31, 1996. This increase in operating income for the
year ended December 31, 1996 was offset by increases in both
selling, general and administrative expenses and depreciation and
amortization.
Other income (expense). For the year ended December 31, 1996,
other expense (net) of $434,000 was comprised of interest expense
of $1,246,000, which was offset by a net gain on disposal of
assets of $708,000 and other income of $104,000. 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 $1,249,000 in the comparable period of fiscal 1995,
which was comprised of interest expense of $1,377,000, and a loss
on the disposal of assets of $130,000, offset by other income of
$258,000.
Net income (loss). As a result of the factors discussed above,
the Company recorded net income of $5.0 million, or $.74 per
share, in the year ended December 31, 1996, compared to a net
loss of $329,000, or ($.05) per share, in the year ended October
31, 1995.
Two Months Ended December 31, 1995 Compared to Two Months Ended
December 31, 1994
Diving and related revenues. The Company's consolidated
revenues increased 1%, from $15.3 million in the two months ended
December 31, 1994 to $15.5 million in the two months ended
December 31, 1995. The $227,000 increase in revenues was
comprised of (i) an increase of approximately $640,000
attributable to increased diving activity by Inland and West
Coast Services; (ii) an increase of approximately $1.0 million
attributable to the operations of the "American Intrepid," the
Company's jack-up derrick barge; (iii) a decrease of $393,000
attributable to the operations of the "American Enterprise," the
Company's pipelay/bury barge, which was sold on March 1, 1996;
(iv) a decrease of $426,000 attributable to the diving activity
of International Services; and (v) a decrease of $454,000
attributable to decreased subsea products sales.
Diving and related expenses. The Company's diving and related
expenses decreased 1%, from $10.4 million in the two months ended
December 31, 1994 to $10.3 million in the two months ended
December 31, 1995. The $14,000 decrease in expenses was
comprised of (i) an increase of approximately $40,000
attributable to increased diving activity by Inland and West
Coast Services; (ii) an increase of approximately $1.0 million
attributable to the operations of the "American Intrepid," the
Company's jack-up derrick barge; (iii) a decrease of $278,000
attributable to the operations of the "American Enterprise," the
Company's pipelay/bury barge, which was sold on March 1, 1996;
(iv) a decrease of $481,000 attributable to the diving activity
of International Services; and (v) a decrease of $291,000
attributable to decreased subsea products sales.
Selling, general and administrative expenses. Selling, general
and administrative expenses increased 6%, from $2.9 million for
the two months ended December 31, 1994 to $3.1 million for the
two months ended December 31, 1995. This increase was primarily
due to a $127,000 increase in expenses attributable to supporting
the activities of the operations and sales office in Dubai for
the two months ended December 31, 1995. This office did not have
full operations in the same period of 1994. Although there was
an overall increase in the level of selling, general and
administrative expenses during the two months ended December 31,
1995, these expenses, as a percentage of revenues, increased less
than 1%, from 19% for the two months ended December 31, 1994 to
20% for the two months ended December 31, 1995.
Depreciation and amortization. Depreciation and amortization
increased 11%, from $799,000 in the two months ended December 31,
1994 to $889,000 for the two months ended December 31, 1995. The
increase was attributable to additions and improvements to the
Company's operational and administrative assets primarily in Gulf
Services and International Services.
Operating income. Operating income decreased from $1,228,000
for the two months ended December 31, 1995 to $1,196,000 for the
two months ended December 31, 1994. The slight decrease was due
to the increase in selling, general and administrative expenses
and depreciation and amortization expenses for the two months
ended December 31, 1995 as described above.
Other income (expense). For the two months ended December 31,
1995, other expense (net) of $202,000 was comprised of interest
expense of $220,000, offset by miscellaneous other income items
totaling $18,000. This compares to other expense (net) of
$137,000 in the comparable two-month period ended December 31,
1994, which was comprised of interest expense of $183,000, offset
by miscellaneous other income items of $46,000.
Net income. As a result of the factors discussed above, the
Company recorded net income of $574,000, or $.09 per share, in
the two months ended December 31, 1995, compared to net income of
$611,000, or $.09 per share, in the two months ended December 31,
1994.
Year Ended October 31, 1995 Compared to Year Ended October 31,
1994
Diving and related revenues. The Company's revenues increased
68%, from $52.8 million in fiscal 1994 to $88.7 million in fiscal
1995. Of the $35.9 million increase, (i) $13.2 million was
attributable to increased diving activity of International
Services, primarily in West Africa, (ii) $8.3 million was
attributable to increased diving and vessel activity in the Gulf
of Mexico, (iii) $10.5 million was attributable to the results of
operations of assets acquired and operations established in
fiscal 1994 that were not operational for the entire year of
fiscal 1994, and (iv) $1.9 million was attributable to the
operations of the "American Intrepid," the Company's new jack-up
derrick barge. Of the $10.5 million increase from the Company's
expanded operations, $3.1 million was from pipelay/bury barge
operations, $5.1 million was due to activity of Inland and West
Coast Services, $1.8 million was from Tarpon Systems operations,
and $565,000 was from environmental remediation and oil spill
response operations.
Diving and related expenses. Diving and related expenses in
fiscal 1995 increased 79%, from $35.3 million in fiscal 1994 to
$63.2 million in fiscal 1995. Of the $27.9 million increase,
(i) $8.8 million was attributable to the increased diving
activity of International Services, primarily in West Africa,
(ii) $6.3 million was attributable to the increased diving and
vessel activity in the Gulf of Mexico, (iii) $10.0 million was
attributable to the expanded operations discussed above, and
(iv) $1.3 million was attributable to the derrick barge
operations. Of the $10.0 million increase from the Company's
expanded operations, $4.4 million was from pipelay/bury barge
operations, $3.7 million was from Inland and West Coast Services,
$1.5 million was from Tarpon Systems operations, and $434,000 was
from environmental remediation and oil spill response operations.
Selling, general and administrative expenses. Selling, general
and administrative expenses increased 36%, from $14.2 million in
fiscal 1994 to $19.3 million in fiscal 1995. Approximately
$2.6 million, or 51% of the increase, was attributable to
supporting the assets acquired and operations established during
fiscal 1994. Although there was an overall increase in the level
of selling, general and administrative expenses during the fiscal
year, these expenses as a percentage of total revenues decreased
from 27% in fiscal 1994 to 22% in fiscal 1995.
Depreciation and amortization. Depreciation and amortization
expenses increased 48%, from $3.4 million in fiscal 1994 to
$5.1 million in fiscal 1995. Of the $1.7 million increase,
approximately $1.1 million was attributable to depreciation of
assets acquired and operations established during fiscal 1994.
The remainder of the increase was attributable to additions and
improvements to the Company's operational and administrative
assets.
Operating income (loss). For fiscal 1995, the Company recorded
operating income of approximately $1.1 million compared to an
operating loss of approximately $220,000 in fiscal 1994. The
increase in operating income was primarily due to substantial
increases in the Company's total revenues in 1995; however, this
significant revenue increase was offset by several factors that
adversely affected the Company's combined gross profit
percentage, including losses on certain turnkey projects, the
operating losses on the American Enterprise, and the operating
loss of the inland diving operations, all of which were
previously described.
Other income (expense). For fiscal 1995, other expense (net)
of $1.2 million was comprised of interest expense of
$1.4 million, a loss of $130,000 on the disposal of fixed assets,
and other income of $258,000. This compares to other expense
(net) of $44,000 for fiscal 1994, which was comprised of interest
expense of $297,000, a gain on the disposal of fixed assets of
$21,000, and other income of $232,000. The increase in interest
expense in 1995 was due primarily to increased average borrowings
under the Company's revolving line of credit during the year
compared to fiscal 1994. In addition, fiscal 1995 interest
expense includes a discount of $159,000 on the sale of notes
receivable during the year.
Net loss. As a result of the factors discussed above, the
Company recorded a net loss of $329,000, or $.05 per share, for
fiscal 1995 compared to a net loss of $1,953,000, or $.29 per
share, for fiscal 1994.
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, facilities, DSVs, and
diving and related equipment. The Company also incurs expenses
for mobilization and project execution throughout the course of
its contracts, while collections from customers typically do not
occur until approximately 90 days after completion of the job.
The Company has traditionally supported these working capital
requirements by using a combination of internally generated funds
and short-term and long-term debt.
During February 1997, the Company completed a secondary stock
offering of 3,553,315 shares of common stock which provided the
Company with net proceeds of approximately $40 million, of which
$16 million was used to repay borrowings outstanding under the
line of credit agreement. The Company believes that cash flows
from operations, borrowings available under its bank credit
facility and the remaining proceeds from the stock offering will
provide sufficient funds to meet its working capital and capital
expenditure requirements for 1997.
Cash flow from operations. The Company has generated positive
net cash flow from operations for each of the last three full
fiscal years with $19.6 million in 1996, $1.4 million in 1995 and
$4.4 million in 1994. The primary factors affecting amounts and
timing of cash flows from operating activities are the same as
those affecting results of operations discussed above.
Investing activities. Cash flows from investing activities are
primarily related to capital expenditures and acquisitions of
businesses. For the year ended December 31, 1996, capital
expenditures were $22.0 million which included the acquisition of
six DSVs and certain other diving equipment. In addition, $12.6
million was expended for the acquisition of HSI. These
expenditures were funded by a combination of long-term debt,
borrowings under the line of credit and proceeds of $5.4 million
received from the sale of the "American Enterprise." Management
expects that the Company will continue to make capital
expenditures for improvements to its existing assets and for
acquisitions of assets in support of its growth strategy.
Financing activities. Cash flows from financing activities are
primarily attributable to borrowings and repayments on both the
Company's long-term indebtedness and credit facilities. The
Company has a $15 million revolving line of credit with a bank at
the prime rate (8.25% at December 31, 1996). The line is secured
by and limited to certain qualifying accounts receivable and is
cross-collateralized by certain of the Company's vessels and
equipment. During October 1996, the Company received a
$5.0 million increase in the line of credit to facilitate the
funding of its purchase of the outstanding common shares of HSI
until such time as permanent financing could be arranged. At
December 31, 1996, $12.6 million was outstanding under the line
of credit agreement. On February 7, 1997, the Company used a
portion of the proceeds of its secondary stock offering to repay
all amounts outstanding under the line of credit agreement.
The Company also has a long-term note payable to a bank in the
amount of $9.6 million at December 31, 1996 at a fixed interest
rate of 7.9%. The terms of the note require monthly principal
payments of $125,000, plus interest, with a balloon payment of
$3.1 million due on May 31, 2001. This debt is secured by eleven
DSVs and certain diving equipment.
Income Taxes
The Company conducts operations in various foreign tax
jurisdictions including Canada, the United Kingdom, Nigeria, and
the United Arab Emirates and anticipates that it will expand its
operations into other foreign tax jurisdictions. It is possible
that a number of these foreign tax jurisdictions may have
corporate income tax rates that exceed the current maximum
U.S. corporate income tax rate of 34%. As a result, the
Company's operations in these jurisdictions could result in the
Company experiencing an overall effective tax rate in excess of
the current maximum U.S. tax rate applicable to corporations.
See Note 9 to the consolidated financial statements included in
this Annual Report for the reconciliation of the statutory
federal income tax rate to the Company's effective tax rate.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
In this report, the consolidated financial statements and
supplementary data of the Company appear on pages K-35 through
pages K-53 and are incorporated in this Item 8 by reference. See
Index to Financial Schedules on page K-33.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 will be included in the
Company's definitive proxy statement for its 1997 annual meeting
of shareholders and is incorporated herein by reference. For
information regarding executive officers of the Company, see
"Executive Officers of the Registrant" in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be included in the
Company's definitive proxy statement for its 1997 annual meeting
of shareholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 will be included in the
Company's definitive proxy statement for its 1997 annual meeting of
shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 will be included in the
Company's definitive proxy statement for its 1997 annual meeting of
shareholders and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report.
1. Financial Statements..
(i) Report of Independent Accountants
(ii) Consolidated Balance Sheets
(iii) Consolidated Statements of Operations
(iv) Consolidated Statements of Changes in
Stockholders' Equity
(v) Consolidated Statements of Cash Flows
(vi) Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
All schedules are omitted as the required information is
inapplicable or the information is presented in the
Consolidated Financial Statements or notes thereto.
3. Exhibits: Those exhibits marked with an asterisk ("*") refer
to exhibits (or portions thereof in the case of Exhibit 13.1)
filed herewith and listed in the Exhibit Index which appears
immediately before the first such exhibit; the other exhibits
are incorporated herein by reference, as indicated in the
following list.
Exhibit
No.
____________________________________________________________________________
3.1 Amended and Restated Articles of Incorporation of the Company.(1)
3.2 By-laws of the Company.(1)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Amended and Restated Articles of Incorporation and By-laws defining
the rights of holders of Common Stock.
4.2 Specimen of Common Stock certificate.(1)
10.1 American Oilfield Divers, Inc. 1993 Incentive Compensation Plan.(1)
10.2 American Oilfield Divers, Inc. Non-Employee Director Stock Option
Plan.(1)
10.3 American Oilfield Divers, Inc. Profit Sharing and Retirement Plan.(1)
10.4 American Oilfield Divers, Inc. Employee Stock Option Plan.(2)
10.5 Asset Purchase Agreement by and among American Corrosion Services,
Inc., American Oilfield Divers, Inc., Corrtherm, Inc. and Corrpro
Companies, Inc. dated November 23, 1994, incorporated by reference
to the Company's Current Report on Form 8-K dated November 23, 1994.(3)
10.6 Escrow Agreement dated November 23, 1994 by and among American Oilfield
Divers, Inc., American Corrosion Services, Inc., Corrpro Companies, Inc.,
Corrtherm, Inc. and Phelps Dunbar, L.L.P., incorporated by reference to
the Company's Current Report on Form 8-K dated November 23, 1994.(3)
10.7 Lease dated December 1, 1984 between American Oilfield Divers, Inc.
and Le Triomphe General Partnership,a Louisiana general partnership,
of which George C. Yax, the Chairman of the Board, President, and
Chief Executive Officer, is a general partner owning a 9.1% interest,
relating to the Company's Broussard, Louisiana facility.(1)
10.8 Business Park Lease dated April 23, 1993, between American Oilfield
Divers, Inc. and The Texas Development Company relating to the Houston,
Texas facility.(2)
10.9 Lease dated July 21, 1989 between Mr. Yax and American Oilfield Divers,
Inc. with respect to the Texas hunting facility and Amendment No. 1
thereto dated December 1, 1994.(3)
10.10 Lease dated September 28, 1989 between Mr. Freeman and American
Oilfield Divers, Inc. with respect to the Mississippi hunting facility
and Amendment No. 1 thereto dated December 1, 1994.(3)
10.11 Amended and Restated Loan Agreement dated September 22, 1994, among
American Oilfield Divers, Inc., certain of its subsidiaries and
First National Bank of Commerce.(3)
10.12 Second Amended and Restated Loan Agreement, dated April 3, 1996
among American Oilfield Divers, Inc., certain of its subsidiaries and
First National Bank of Commerce.
10.13 Employment Agreement dated August 1, 1996 between American Oilfield
Divers, Inc. and Rodney W. Stanley.
10.14 Form of Indemnity Agreement by and between American Oilfield Divers,
Inc. and each of Messrs. Yax, Freeman, Weems, Suggs, Green, Hebert,
O'Malley and Lasher.(1)
13.1 * The Company's 1996 Annual Report to Shareholders.
21. * List of Subsidiaries of the Company.
23.1 * Consent of Price Waterhouse.
24. * Powers of Attorney.
27.1 * Financial Data Schedule.
____________________________________________________________________________
(1) Indicates exhibit previously filed with the Securities and Exchange
Commission in the Company's Registration Statement on Form S-1,
(Registration No 33-63920), on June 4, 1993, as amended.
(2) Indicates exhibit previously filed with the Securities and Exchange
Commission in the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1993.
(3) Indicates exhibit previously filed with the Securities and Exchange
Commission in the Company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1994.
(4) Indicates exhibit previously filed with the Securities and Exchange
Commission in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended April 30, 1995.
(b) Reports on Form 8-K
During the last quarter of the year ended December 31, 1996, the
Company filed the following reports on Form 8-K:
Date of Report Item Reported:
October 16, 1996 (Form 8-K) Item 5, "Other Events," announcing the
extension of the offer by AOD Acquisition
Corp., a wholly owned subsidiary of the Company
to purchase all of the outstanding shares of
Hard Suits Inc.
October 31, 1996 (Form 8-K) Item 2, "Acquisition or Disposition of
Assets," regarding the purchase of 9.6 million
or 97% of the outstanding shares of Hard Suits
Inc.; Item 5, "Other Events," regarding the
execution of a lock-up agreement and
Acquisition Agreement with the Chairman and
Chief Executive Officer of Hard Suits Inc. and
Item 7, "Financial Statements and Exhibits,"
exhibits to the tender offer.
October 31, 1996 (Form 8-KA)Item 7, "Financial Statements and
Exhibits," filing the consolidated financial
statements of Hard Suits Inc.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on
March 27, 1997.
American Oilfield Divers, Inc.
By: /s/ Rodney W. Stanley
___________________________
Rodney W. Stanley
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature Title Date
__________ _____ _____
/s/ George C. Yax
________________________
George C. Yax Chairman of the Board March 27, 1997
/s/ Rodney W. Stanley
_________________________
Rodney W. Stanley President and Chief March 27, 1997
Executive Officer
(Principal Executive Officer)
/s/ Prentiss A. Freeman
__________________________
Prentiss A. Freeman Executive Vice President March 27, 1997
Chief Operating Officer
and Director
*
__________________________
William C. O'Malley Director March 27, 1997
*
__________________________
Stephen A. Lasher Director March 27, 1997
/s/ Cathy M. Green
___________________________
Cathy M. Green Vice President - Finance March 27, 1997
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
*By: /s/ Cathy M. Green
________________________
Cathy M. Green
Attorney-in-fact
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Index to Financial Statements Page
_______________________________________________________________________________
Report of Independent Accountants K-35
Consolidated Balance Sheets K-36
Consolidated Statements of Operations K-38
Consolidated Statements of Changes in Stockholders' Equity K-39
Consolidated Statements of Cash Flows K-40
Notes to Consolidated Financial Statements K-42
Selected Quarterly Financial Data K-53
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of American Oilfield Divers, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of American Oilfield Divers, Inc. and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for the year ended December 31, 1996,
the two months ended December 31, 1995 and each of the two years in the
period ended October 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
New Orleans, Louisiana
February 17, 1997
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
__________________________________
CONSOLIDATED BALANCE SHEETS
__________________________________
(in thousands, except share data)
December 31,
1996 1995
____ ____
ASSETS
Current assets:
Cash and cash equivalents $ 1,322 $ 788
Accounts receivable, net of
allowance for doubtful accounts
of $500 and $380 20,095 13,014
Unbilled revenue 5,929 13,683
Other receivables 2,171 2,025
Current deferred tax asset -- 1,700
Inventories 4,651 2,261
Prepaid expenses 1,566 1,380
_________ _________
Total current assets 35,734 34,851
Property, plant and equipment, net 43,041 25,550
Deferred tax asset -- 57
Intangible and other assets 14,132 3,463
__________ _________
$92,907 $ 63,921
========== =========
The accompanying notes are an integal part
of these financial statements.
<PAGE>
December 31,
1996 1995
____ ____
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,609 $ 6,027
Income taxes payable 1,756 --
Other liabilities 9,139 3,676
Short-term borrowings 1,306 7,875
Current portion of long-term debt 1,702 1,375
________ ________
Total current liabilities 23,512 18,953
Deferred tax liability 2,601 --
Borrowings under a line of credit agreement 12,450 --
Long-term debt, less current portion 8,459 5,413
Other 40 --
________ ________
Total liabilities 47,062 24,366
________ ________
Commitments and contingencies (Note 13) -- --
Stockholders' equity:
Preferred stock, no par value;
5,000,000 shares authorized; none issued -- --
Common stock, no par value;
30,000,000 shares authorized; 6,879,867
and 6,709,497 issued and outstanding at
stated value at December 31, 1996 and
1995 1,373 1,360
Additional paid-in capital 42,059 40,837
Foreign currency translation adjustments (98) (132)
Retained earnings (accumulated deficit) 2,511 (2,510)
_________ ________
Total stockholders' equity 45,845 39,555
_________ ________
$92,907 $63,921
========= ========
The accompanying notes are in integral part
of these financial statements.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
_______________________________
CONSOLIDATED STATEMENTS OF OPERATIONS
_____________________________________
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Year Ended Two Months Ended
December 31, October 31, December 31,
______________ _____________ ________________
1996 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C>
Diving and related revenues $105,772 $88,660 $52,755 $15,486 $ 15,259
Costs and expenses:
Diving and related expenses 70,066 63,180 35,338 10,346 10,359
Selling, general and administrative
expenses 19,486 19,318 14,222 3,055 2,873
Depreciation and amortization 6,815 5,064 3,415 889 799
_________ _________ _________ _________ _________
Total costs and expenses 96,367 87,562 52,975 14,290 14,031
_________ _________ _________ _________ _________
Operating income (loss) 9,405 1,098 (220) 1,196 1,228
_________ _________ _________ _________ _________
Other income (expense):
Interest expense (1,246) (1,377) (297) (220) (183)
Gain (loss) on sale or abandonment
of property and equipment and
other assets 708 (130) 21 5 1
Other income, net 104 258 232 13 45
_________ _________ _________ _________ _________
Total other expense (434) (1,249) (44) (202) (137)
_________ _________ _________ _________ _________
Income (loss) from continuing
operations before income taxes
and minority interest 8,971 (151) (264) 994 1,091
Income tax expense attributable
to continuing operations 3,950 62 75 420 480
_________ _________ _________ _________ _________
Income (loss) from continuing operations
before minority interest 5,021 (213) (339) 574 611
Minority interest in (earnings) loss of
subsidiary -- (116) 82 -- --
_________ _________ _________ _________ _________
Income (loss) from continuing operations 5,021 (329) (257) 574 611
_________ _________ _________ _________ _________
Discontinued operations:
Loss from discontinued operations
through October 31, 1994, less
income tax benefit of $539 -- -- (1,054) -- --
Estimated loss on disposal, less
income tax benefit of $331 -- -- (642) -- --
_________ _________ _________ _________ _________
Loss from discontinued operations -- -- (1,696) -- --
_________ _________ _________ _________ _________
Net income (loss) $ 5,021 $ (329) $(1,953) $ 574 $ 611
========= ========= ========= ========= =========
Net income (loss) per share:
Continuing operations $ .74 $ (.05) $ (.04) $ .09 $ .09
Discontinued operations -- -- (.25) -- --
_________ _________ _________ _________ _________
Net income (loss) per share $ .74 $ (.05) $ (.29) $ .09 $ .09
========= ========= ========= ========= ==========
Weighted average common shares
outstanding 6,787 6,709 6,706 6,709 6,709
========= ========= ========= ========= ==========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
________________________________
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
___________________________________________________________
FOR THE YEAR ENDED DECEMBER 31, 1996, THE TWO MONTHS ENDED DECEMBER 31, 1995
AND THE YEARS ENDED OCTOBER 31, 1995 AND 1994
(in thousands, except share data)
<TABLE>
<CAPTION>
Foreign (Accumulated
Common Stock Additional Currency Deficit)
_________________ Paid-in Translation Retained
Shares Amount Capital Adjustments Earnings Total
______ ______ _______ ___________ ________ _____
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1993 6,688,750 1,359 $40,674 $(132) $ (802) $ 41,099
Issuance of common stock 20,747 1 163 -- -- 164
Net effects of translation
of foreign currency -- -- -- 17 -- 17
Net loss -- -- -- -- (1,953) (1,953)
___________ _________ __________ _________ ___________ ___________
Balance at October 31, 1994 6,709,497 1,360 40,837 (115) (2,755) 39,327
Net effects of translation of
foreign currency -- -- -- (9) -- (9)
Net loss -- -- -- -- (329) (329)
___________ _________ __________ _________ ___________ ___________
Balance at October 31, 1995 6,709,497 1,360 40,837 (124) (3,084) 38,989
Net effects of translation of
foreign currency -- -- -- (8) -- (8)
Net income -- -- -- -- 574 574
___________ _________ __________ _________ ___________ ___________
Balance at December 31, 1995 6,709,497 1,360 40,837 (132) (2,510) 39,555
Issuance of common stock 71,685 6 594 -- -- 600
Exercise of stock options 98,685 7 680 __ __ 687
Net effects of translation of
foreign currency -- -- -- 34 -- 34
Other -- -- (52) -- -- (52)
Net income -- -- -- -- 5,021 5,021
___________ _________ __________ _________ ___________ ___________
Balance at December 31, 1996 6,879,867 $1,373 $42,059 $ (98) $ 2,511 $45,845
=========== ========= ========== ========= ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
______________________________
CONSOLIDATED STATEMENTS OF CASH FLOWS
_____________________________________
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Two Months Ended
December 31, October 31, December 31,
______________ _______________ __________________
1996 1995 1994 1995 1994
_____ _____ ____ ____ ____
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $106,620 $80,070 $51,962 $ 19,657 $ 13,125
Cash paid to suppliers and employees (85,548) (77,285) (53,570) (19,137) (13,527)
Interest paid (1,246) (1,217) (273) (220) (182)
Income taxes refunded (paid) (147) (167) 6,112 (21) 12
Other cash received (paid) (37) (26) 192 (576) (356)
___________ ________ ________ _________ _________
Net cash provided by (used by) operating
activities 19,642 1,375 4,423 (297) (928)
___________ ________ ________ _________ _________
Cash flows from investing activities:
Decrease (increase) in other assets 781 (1,551) (1,902) (44) (37)
Capital expenditures (22,128) (7,884) (17,824) (322) (315)
Acquisition of Hard Suits Inc., including
capital assets of $6,000,000 and net of
cash received (Note 2) (12,597) -- -- -- --
Net proceeds from sales of assets 6,131 1,541 17 35 --
Proceeds from insurance claims 535 1,565 -- -- --
Proceeds from sale of notes receivable -- 2,762 -- -- --
Receipt of payments on notes receivable -- 480 -- -- --
Maturity of short-term investment -- -- 498 -- --
___________ ________ ________ _________ _________
Net cash used by investing activities (27,278) (3,087) (19,211) (331) (352)
___________ ________ ________ _________ _________
Cash flows from financing activities:
Repayments of long-term debt (7,708) (2,810) (213) (333) (401)
Proceeds from long-term borrowings 10,500 2,000 8,023 -- --
Net proceeds under line of credit
agreement 4,743 2,470 4,830 575 950
Issuance of common stock under exercise
of options 687 -- -- -- --
Other (52) -- -- -- --
___________ ________ ________ _________ _________
Net cash provided by financing
activities 8,170 1,660 12,640 242 549
___________ ________ ________ _________ _________
Net increase (decrease) in cash 534 (52) (2,148) (386) (731)
Cash and cash equivalents at beginning
of period 788 1,226 3,374 1,174 1,226
___________ ________ ________ _________ _________
Cash and cash equivalents at end of period $1,322 $ 1,174 $ 1,226 $ 788 $ 495
=========== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
_________________________________
CONSOLIDATED STATEMENTS OF CASH FLOWS
_____________________________________
(in thousands)
<TABLE>
<CAPTION>
Year Ended Year Ended Two Months Ended
December 31, October 31, December 31,
____________ _______________ __________________
1996 1995 1994 1995 1994
_______ _______ _______ ________ ________
(unaudited)
<S> <C> <C> <C> <C> <C>
Reconciliation of net income to net cash
provided by operating activities:
Net income (loss) $ 5,021 $ (329) $(1,953) $ 574 $ 611
Adjustments to reconcile net income to
net cash provided by operating activities:
(Gain) loss on sale or abandonment of
property and equipment and other
assets (708) 130 (21) (5) --
Discount on sale of note receivable -- 159 -- -- --
Write-down of assets held for sale -- -- 648 -- --
Minority interest in earnings (loss) of
subsidiary 26 116 (82) -- --
Depreciation and amortization 6,815 5,064 4,022 889 799
Provision for loss on receivables 398 237 92 80 70
Receivables written off (278) (345) (144) -- (20)
(Increase) decrease in deferred tax
asset 1,777 930 (1,407) -- --
Increase (decrease) in deferred tax
liability 301 -- (1,017) -- --
(Increase) decrease in current assets,
net of the effect of businesses
acquired (Note 2):-
Accounts receivable (6,905) (6,465) (4,521) 10,775 (1,876)
Unbilled receivables 7,754 (1,790) (1,764) (6,604) (151)
Tax refund receivable 125 6,149 -- (102)
Other receivables 167 (409) (40) (590) (400)
Current deferred tax asset (950) 1,525 400 492
Inventories (1,845) (549) (803) (70) 120
Prepaid expenses (47) (912) (239) 555 (83)
Increase (decrease) in current
liabilities, net of the effect of
businesses acquired:-
Accounts payable and other
liabilities 5,441 6,363 3,978 (6,301) (388)
Income taxes payable 1,725 -- -- -- --
______ _____ _______ ________ _______
Total adjustments 14,621 1,704 6,376 (871) (1,539)
______ _____ _______ ________ _______
Net cash provided by (used by)
operating activities $19,642 $ 1,375 $ 4,423 $ (297) $ (928)
======= ======= ======= ======= ========
</TABLE>
Supplemental disclosure of noncash activities:-
In two separate transactions, the Company issued common stock valued at
approximately $600,000 and entered into a note payable for $1,138,368 in
connection with its acquisition of certain diving support vessels and
equipment in 1996. Fixed assets and inventory totalling $4,886,890 are
classified as assets held for sale at October 31, 1994. The Company
issued common stock valued at $164,000 in connection with its
acquisition of a business during 1994.
The accompanying notes are an integral part
of these financial statements.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
_______________________________
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________________________________________
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
____________________________________________________
The Company and Principles of Consolidation
___________________________________________
The consolidated financial statements include the accounts of American
Oilfield Divers, Inc. and its wholly-owned and majority-owned
subsidiaries (the Company). 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.
During 1996, the Company acquired 97% of the outstanding common stock of
Hard Suits Inc. (see Note 2).
Effective October 31, 1994, the Company sold certain assets of its
subsidiary, American Corrosion Services, Inc. The purchase price
totalled $4,900,000 and included notes receivable of $3,386,000 which
were sold, with recourse, in April 1995, and have a balance outstanding
of $1,365,789 at December 31, 1996.
In February 1997, the Company completed a secondary stock offering of
3,553,315 shares of common stock which provided the Company with net
proceeds of approximately $40 million. The Company used approximately
$16 million to repay borrowings outstanding under its line of credit at
December 31, 1996 and intends to use the remaining proceeds for general
corporate purposes, including working capital requirements and to fund
any future capital expenditures and strategic asset acquisitions.
Use of Estimates
_________________
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
___________________
Revenue is recognized on projects of short duration at the time services
are rendered at estimated collectible amounts. Revenue is recognized on
fixed price (turnkey) contracts on the percentage of completion method
based on the ratio of costs incurred to total estimated costs at
completion. Contract price and cost estimates are reviewed periodically
as work progresses and adjustments are reflected in the period in which
such estimates are revised. Provisions for estimated losses on fixed
price contracts are made in the period such losses are determined.
Unbilled revenue represents revenue attributable to work completed prior
to the balance sheet date which has not been billed and work in progress
at the balance sheet date which will be billed at the completion of the
related contract. All amounts included in unbilled revenue at December
31, 1996 and 1995 are estimated to be billed and collected within the
current year.
Diving and related expenses include all the direct labor and benefits,
materials unique to or installed in the project, and vessel related
expenses, and are charged as incurred. General and administrative
expenses are charged to expense as incurred.
Inventories
___________
Inventories are valued at the lower of cost or market determined on the
first-in, first-out basis.
Other Assets
_____________
Other assets include goodwill, patents and trademarks, organization
costs, deferred drydock costs and noncompete agreements, which are
amortized on the straight-line method over their estimated useful lives,
ranging from two to fifteen years.
Property, Plant and Equipment
______________________________
Property, plant and equipment are carried at cost. Depreciation of
assets is computed by the straight-line method over the estimated useful
lives of the related assets. Amortization of leasehold improvements is
computed by the straight-line method over the shorter of the useful life
of the asset or the life of the lease. Useful lives range from 5 to 10
years for vessels and surveying equipment; 3 to 10 years for diving and
other equipment; 3 to 5 years for transportation equipment; 3 to 10
years for leasehold improvements; 5 years for furniture and fixtures and
30 years for buildings. As the Company has not had any construction
projects of significant duration, no interest costs have been
capitalized in connection with these projects; however, certain labor
and other direct construction costs have been capitalized as part of the
assets.
Assets retired or otherwise disposed of are removed from the accounts
along with any related depreciation and amortization and the resultant
gain or loss is reflected in income. Maintenance and repairs are
charged to expense as incurred.
As a result of the change in fiscal year-end, the Company was 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, on certain of the Company's diving
assets which are not expected to be fully utilized in operations. The
charge is included in depreciation and amortization for the year ended
December 31, 1996.
Foreign Currency Translation
____________________________
Income statement accounts are translated at average exchange rates
during the year and the balance sheet is converted as of the last day of
the fiscal year at the current rate of exchange. The resulting
translation adjustment is recorded as a separate component of
stockholders' equity.
Income Taxes
_____________
The Company files a consolidated federal income tax return. The Company
provides for taxes on the basis of items included in the determination
of income for financial reporting purposes regardless of the period when
such items are reported for tax purposes. Accordingly, the Company
records deferred tax liabilities and assets for future tax consequences
of events that have been recognized in different periods for financial
and tax purposes.
Earnings (Loss) Per Share
__________________________
Earnings (loss) per common share is calculated by dividing net income
(loss) by the weighted average number of common shares, including
redeemable common shares, outstanding during each year. Outstanding
stock options are common stock equivalents but are excluded from
earnings per common share as the effect would not be materially
dilutive.
Stock Compensation
__________________
The Company has adopted Statement of Financial Accounting Standards No.
123 "Accounting for Stock Based Compensation" (SFAS 123). In accordance
with the provisions of SFAS 123, the Company has elected to apply the
provisions of APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related Interpretations in accounting for its stock
option plans. Compensation expense is the excess, if any, of the quoted
market price of the stock at the grant date or other measurement date
over the amount the employee must pay to acquire the stock.
Cash and Cash Equivalents
_________________________
For purposes of the consolidated statement of cash flows, cash and cash
equivalents include short-term highly liquid investments with original
maturities of three months or less.
Fair Value of Financial Instruments
___________________________________
The carrying amount of financial instruments, which include cash,
accounts receivable, accounts payable and notes payable, approximates
fair values at December 31, 1996.
Reclassifications
_________________
Certain amounts in the 1995 Consolidated Balance Sheet have been
reclassified to conform to the 1996 presentation.
Interim Financial Statements
_____________________________
The accompanying financial statements for the two months ended December
31, 1994 are unaudited. In management's opinion, such interim financial
statements reflect all normal recurring adjustments necessary for a fair
statement of the results of operations for such interim period. These
interim financial statements should be read in conjunction with the
Company's audited financial statements included herein.
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. As a result, a
disproportionate amount of the Company's total revenues and net income
is earned during the third (July through September) and fourth (October
through December) quarters of its fiscal year. Results for interim
periods are not necessarily indicative of the results that may be
expected for the complete fiscal year.
NOTE 2 - ACQUISITION
____________________
From October 31, 1996 to November 15, 1996, a subsidiary of the Company
acquired approximately 97% of the outstanding common stock of Hard Suits
Inc., a publicly traded company on the Toronto and Vancouver Stock
Exchanges, for a cash purchase price of approximately $12.6 million,
including transaction costs. The purchase was funded through borrowings
on the Company's line of credit, which were repaid subsequent to
December 31, 1996 with the proceeds from a secondary offering of the
Company's common stock (see Notes 1 and 7). The Company intends to
acquire the remaining outstanding common shares of Hard Suits and to
seek delisting of all shares from both the Toronto and Vancouver Stock
Exchanges. The transaction was accounted for under the purchase method
of accounting. The results of operations of Hard Suits are included in
the consolidated statement of operations for the two months ended
December 31, 1996.
The purchase price was allocated to the assets of Hard Suits Inc. based
on estimated fair values as follows (in thousands):
Current assets $1,362
Property, plant and equipment 6,000
Patents and other intangible assets 8,900
Goodwill 2,888
Liabilities assumed (4,190)
Deferred tax liability (2,300)
________
$12,660
========
The following unaudited pro forma information presents a summary of the
consolidated results of operations of the Company and Hard Suits as if
the acquisition occurred on January 1, 1996 and November 1, 1994,
respectively. Pro forma adjustments include depreciation and
amortization, interest charges on borrowings on the line of credit and
tax benefit related to additional interest charges.
For the Years Ended
December 31, 1996 October 31, 1995
_________________ _________________
(Unaudited)
(in thousands)
Diving and related revenues $110,005 $ 102,061
Net loss (431) (5,630)
Net loss per share (.06) (.84)
NOTE 3 - INVENTORIES
____________________
Inventories consist of the following (in thousands):
December 31,
______________
1996 1995
---- ----
Fuel $ 152 $ 101
Supplies 659 1,026
Work in process 2,491 444
Finished goods 1,349 690
_______ _______
$4,651 $2,261
======= =======
NOTE 4 - INTANGIBLE AND OTHER ASSETS
____________________________________
Intangible and other assets consist of the following (in thousands):
December 31,
____________
1996 1995
---- ----
Trademarks and patents $9,991 $1,090
Goodwill 3,791 609
Deferred drydock expenses 1,791 1,484
Other 1,371 1,787
_______ _______
16,944 4,970
Less - Accumulated amortization (2,812) (1,507)
_______ _______
$14,132 $3,463
======= =======
NOTE 5 - PROPERTY, PLANT AND EQUIPMENT
______________________________________
Property, plant and equipment consist of the following (in thousands):
December 31,
_____________
1996 1995
---- ----
Diving equipment $24,388 $16,056
Manufacturing and related equipment 3,224 892
Vessels and surveying equipment 24,244 17,454
Furniture and fixtures 4,130 3,463
Leasehold improvements 1,381 1,080
Construction in progress 3,016 665
Building 2,498 2,699
Land 1,347 591
Transportation equipment 704 703
Construction Equipment 537 --
_________ _______
65,469 43,603
Less - Accumulated depreciation
and amortization (22,428) (18,053)
________ ________
$43,041 $25,550
======== ========
Construction in progress at December 31, 1996 primarily consists of
construction of various items of equipment. The total costs to complete
the projects have been estimated by management to approximate $2,000,000
and are estimated to be completed at various times during fiscal 1997.
The net book value of assets pledged as collateral to secure the
Company's debt (see Note 8) was $13,645,587 and $11,492,133 at December
31, 1996 and 1995.
NOTE 6 - OTHER LIABILITIES
___________________________
Other liabilities consist of the following (in thousands):
December 31,
______________
1996 1995
---- ----
Accrued compensation $ 993 $ 313
Workers' compensation liability 817 624
Job related accruals and other 7,329 2,739
________ _______
$9,139 $3,676
======== =======
NOTE 7 - SHORT-TERM BORROWINGS AND BORROWINGS UNDER LINE OF CREDIT
__________________________________________________________________
Short-term borrowings and borrowings under the line of credit agreement
consist of the following (in thousands):
December 31,
______________
1996 1995
Note payable to a company for purchase of ---- ----
certain assets; interest at 6%; unsecured;
due on January 3, 1997 (paid in full on
January 3, 1997) $ 1,138 $ --
Revolving line of credit agreement with
a bank; interest at a prime rate (8.25%
at December 31, 1996) and due in
quarterly installments 12,618 7,875
-------- --------
13,756 7,875
Less: Amount classified as long-term (12,450) --
--------- --------
$ 1,306 $7,875
========= ========
During 1996, the line of credit was increased from $15,000,000 to
$20,000,000 to facilitate the purchase of Hard Suits. The line expires
on March 31, 1997 but the Company expects to renew such line for
$15,000,000. At December 31, 1996, $12,450,000 of the balance
outstanding under the line of credit is classified as long-term as it
relates to the acquisition of Hard Suits Inc. and, at the date of the
borrowing, the Company intended to refinance the debt to arrange for a
long-term payment schedule. Subsequent to December 31, 1996, the
Company repaid all amounts outstanding under the line of credit
agreement using the proceeds of its secondary offering of common stock
(see Note 1). The line is secured by and limited to certain qualifying
accounts receivable, is collateralized by certain of the Company's
vessels and certain other assets and is subject to certain covenants
(see Note 8).
NOTE 8 - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31,
_____________
1996 1995
Note payable to a bank, interest at 7.90%; ---- ----
monthly principal installments of $125
plus interest with a balloon payment of
$3,125 on May 31, 2001; secured by
11 vessels and certain diving equipment $9,625 $ --
Various government assistance notes, non-
interest bearing and unsecured; payable
in various installments through July 1999. 458 --
Various notes payable to a bank, with
interest rates ranging from 8.75% to
9.50%; monthly principal installments
totalling $166 plus interest; maturity
dates August 9, 1999 through April 3,
2000; secured by seven vessels and
certain diving equipment -- 6,788
Other long-term debt 78 --
________ ________
10,161 6,788
Less - Current portion (1,702) (1,375)
________ ________
$8,459 $5,413
======== ========
Aggregate maturities of long-term debt in the fiscal years subsequent to
December 31, 1996 are as follows (in thousands):
1997 $1,702
1998 1,668
1999 1,632
2000 1,534
2001 and thereafter 3,625
_______
$10,161
The Company's long term debt and line of credit agreements require the
Company to maintain certain financial ratios and a specified amount of
equity, include restrictions on capital expenditures and also limit
payment or declaration of dividends to an amount not to exceed 15% of
average net income for the four previous quarters.
NOTE 9 - INCOME TAXES
_____________________
The provision (benefit) for income taxes attributable to continuing
operations is comprised of the following (in thousands):
Year Ended Year Ended Two Months Ended
December 31, October 31, December 31,
___________ ____________ _________________
1996 1995 1994 1995
---- ---- ---- ----
Current tax expense:
Federal $1,120 $ -- $ 305 $ --
State 770 13 140 --
Foreign -- 69 -- --
________ _______ _______ ________
Total current tax expense 1,890 82 445 --
Deferred tax (benefit) provision 2,060 (20) (370) 420
________ ________ ________ _________
Total provision for income
taxes $3,950 $ 62 $ 75 $ 420
________ ________ ________ _________
A summary of the components of the provision (benefit) for deferred
income taxes follows (in thousands):
Year Ended Year Ended Two Months Ended
December 31, October 31, December 31,
____________ ___________ ________________
1996 1995 1994 1995
---- ---- ---- ----
Utilization of tax loss
carryforwards $2,896 -- -- $ 338
Minimum tax credit (703) -- -- --
Foreign tax loss carryforward -- -- (329) --
Excess tax over book depreciation (80) (111) (100) 80
Other, net (53) 91 59 2
________ _______ _______ _______
Total provision (benefit) for
deferred income taxes $2,060 $ (20) $(370) $ 420
======== ======= ======= =======
The difference between the taxes provided for continuing operations at
the United States statutory rate and the Company's actual tax provision
is reconciled below (in thousands):
Year Ended Year Ended Two Months Ended
December 31, October 31, December 31,
_____________ _____________ ________________
1996 1995 1994 1995
---- ---- ---- ----
Taxes provided at United States
statutory rate $3,050 $(51) $(90) $ 338
State tax expense, net of
federal benefit 508 13 76 33
Non-deductible meals and
entertainment 71 118 99 20
Foreign tax expense 200 -- -- --
Other, net 121 (18) (10) 29
_________ ________ ________ ________
Total provision for income taxes $3,950 $ 62 $ 75 $ 420
========= ======== ======== ========
The approximate effect of temporary differences and carryforwards that
give rise to deferred tax balances were as follows (in thousands):
December 31,
_____________
1996 1995
---- ----
Federal net operating loss carryforward $ -- $ 1,679
Deferred drydock expense (437) (317)
Allowance for doubtful accounts 150 102
Accrued insurance 182 182
Other, net 105 54
________ ________
Current deferred tax asset $ -- $ 1,700
======== ========
Depreciable asset basis differences $(6,380) $(2,400)
Federal, state and foreign net operating
loss carryforward 2,600 1,917
Foreign tax credit carryforward 163 163
Minimum tax credit carryforward 1,075 372
Other, net (59) 5
________ ________
Noncurrent deferred tax asset (liability) $(2,601) $ 57
======== ========
At December 31, 1996 the Company had federal, state and foreign net
operating loss carryforwards (NOL's) of approximately $6,200,000, which
can be used to offset future taxable income. Approximately $4,100,000
of the NOL's relate to the Company's Canadian subsidiary, Hard Suits.
Such carryforwards, which may provide future tax benefits, expire in
1998 through 2002. Based on the Company's forecast for future earnings,
management has determined that future taxable income will more likely
than not be sufficient to utilize the NOL's prior to their expiration.
NOTE 10 - STOCKHOLDERS' EQUITY
______________________________
Incentive Compensation Plan
___________________________
Under the 1993 Incentive Compensation Plan, officers and other employees
of the Company may be granted stock options, stock awards, restricted
stock, performance share awards or cash awards. A total of 500,000
shares of common stock have been reserved for issuance under the Plan.
The exercise price of an incentive option may not be less than the fair
market value of the common stock on the date of the grant. A total of
336,500 options had been granted under this plan at fair market value
prices ranging from $5.67 to $9.00 per share over terms ranging from
five to ten years from date of grant. At December 31, 1996, 207,813
options are outstanding of which 162,434 are exercisable. No
compensation expense was recognized in connection with the issuance of
these options.
Pursuant to an employment agreement dated July 16, 1996, an officer of
the Company was granted 375,000 options to purchase common stock at an
exercise price of $8.75 per share which equaled fair market value of
the date of grant. Of the total options granted, 225,000 are subject to
shareholder approval in 1997. If shareholder approval is not obtained,
the Company will be required to provide the officer with the economic
equivalent of those options not approved. The options vest in one-fifth
increments over a five year period, contingent upon meeting certain
performance goals which will be established by the Compensation
Committee. As of December 31, 1996, such goals had not yet been
established. However, assuming the goals were established and met,
management has determined that any related compensation cost would have
been immaterial for the year ended December 31, 1996.
Director Plan
______________
Under the Director Plan, non-employee directors automatically receive
options to purchase 1,500 shares of common stock upon first becoming a
director and annually thereafter on the day following the date of the
Company's annual meeting of stockholders. The option exercise price is
equal to the fair market value of the common stock on the date of grant.
A maximum of 50,000 shares are reserved for issuance under the Plan. As
of December 31, 1996, options to purchase 12,000 shares of common stock
at prices ranging from $6.625 to $9.00 per share have been granted and
are outstanding. The options are immediately exercisable over five
years from date of grant. No compensation expense was recognized in
connection with the issuance of these options.
Employee Stock Option Plan
___________________________
The Employee Plan provides for the one-time grant of non-qualified stock
options to purchase shares of common stock for employees meeting certain
eligibility requirements. A total of 160,000 shares of common stock
were reserved for issuance under the Employee Plan and, in September
1993, options for 149,952 shares were granted to certain employees. The
fair market value of the common stock on the date of grant was $10.00
per share. The options with respect to one-third of the shares became
exercisable on September 21, 1995 at a price of $9.00 per share and have
expired as of December 31, 1996. The options with respect to a second
one-third of the shares become exercisable on March 21, 1997 at a price
of $10.00 per share and must be exercised no later than September 21,
1998 or automatically expire. The options with respect to the final
one-third of the shares become exercisable on March 21, 1998 at a price
of $10.00 per share and must be exercised no later than September 21,
1998 or automatically expire. No compensation expense was recognized
with the issuance of these options.
If compensation expense for stock option grants had been determined
based upon the fair value at the grant date for awards under these plans
consistent with the methodology prescribed by SFAS 123, the impact on
the Company's net income and earnings per share would be immaterial.
Pro forma compensation expense was based on stock options grants during
1996 and may not be indicative of the effects on net income and income
per share in future years. The fair value of the options was estimated
at the date of grant using the Black Scholes option-pricing model with
the following weighted-average assumptions for the year ended December
31, 1996: Dividends yield-0; expected volatility of 37%, risk free
interest rates of approximately 5.6% and expected life of 5 years. The
weighted average fair value of options granted during the year ended
December 31, 1996 was $3.93.
Transactions involving stock options are summarized as follows:
<TABLE>
<CAPTION>
Total Weighed Average
Incentive Directors Employee Stock Options Exercise Price of
Plan Plan Plan Outstanding Options Outstanding
---- ---- ---- ----------- -------------------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1993 156,500 3,000 149,952 309,452 $8.68
Granted 170,000 3,000 -- 173,000 7.52
Forfeited -- -- (10,611) (10,611) 9.67
------- ------ ------- -------
Balance at October 31, 1994 326,500 6,000 139,341 471,841 8.23
Granted 6,000 3,000 -- 9,000 6.54
Forfeited (6,667) -- (18,931) (25,598) 9.10
-------- ----- -------- --------
Balance at October 31, 1995 325,833 9,000 120,410 455,243 8.15
Expired -- -- (35,515) (35,515) 9.67
Forfeited -- -- (3,437) (3,437) 9.67
-------- ------ -------- --------
Balance at December 31, 1995 325,833 9,000 81,458 416,291 8.01
Granted (1) 4,000 3,000 -- 7,000 8.06
Exercised (98,685) -- -- (98,685) 6.95
Forfeited (23,335) -- (13,263) (36,598) 8.29
-------- ------- -------- --------
Balance at December 31, 1996 207,813 12,000 68,195 288,008 $ 8.41
======== ======= ======== ========
(1) Performance based stock options totalling 375,000 for which vesting
criteria has not been established.
</TABLE>
The following table summarizes information concerning currently
outstanding and exercisable stock options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
___________________________ ____________________________
Weighted Weighted Weighted
Range of Number Average Remaining Average Number Average
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
-------------- ----------- ----------------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
$5.00 - $7.50 132,913 6.88 $ 7.27 91,534 $ 7.21
$7.51 - $10.00 155,095 1.84 9.39 82,900 8.94
</TABLE>
NOTE 11 - EMPLOYEE BENEFITS
- ----------------------------
Effective January 1, 1989, the Company established a qualified 401(k)
profit sharing plan (the Plan) for employees. The Plan provides for a
30% match of employee contributions directed toward the purchase of the
Company's common stock and a 10% match for all other contributions up to
15% of gross pay. Such employer contributions vest over a period of 5
years and totalled $116,909 for the year ended December 31, 1996,
$17,038 for the two months ended December 31, 1995 and $89,795 and
$80,241 for the years ended October 31, 1995 and 1994. Under the terms
of the Plan, participants may elect to purchase shares of the Company's
common stock on the open market through a broker.
NOTE 12 - BUSINESS SEGMENT, GEOGRAPHIC AREA AND MAJOR CUSTOMER INFORMATION
- --------------------------------------------------------------------------
The Company classifies its operations under one business segment, diving
and related revenues. A summary operations by geographical area
follows (in thousands):
<TABLE>
<CAPTION>
United States Consolidated
Africa(1) Canada and other Corporate Total
Year Ended October 31, 1994 ------ ------ ------------- ---------- ------------
- ----------------------------
<S> <C> <C> <C> <C> <C>
Diving and related revenues $ 3,889 $ -- $ 48,866 $ -- $ 52,755
Operating income (loss) (241) -- 21 -- (220)
Identifiable assets (2) 3,146 -- 56,304 2,157 61,607
Year Ended October 31, 1995
- ---------------------------
Diving and related revenues $18,974 $ -- $ 69,686 $ -- $ 88,660
Operating income (loss) 2,883 -- (1,785) -- 1,098
Identifiable assets (2) 10,354 -- 56,877 2,177 69,408
Two Months Ended December 31, 1995
- ----------------------------------
Diving and related revenues $ 924 $ -- $ 14,562 $ -- $ 15,486
Operating income (loss) (150) -- 1,346 -- 1,196
Identifiable assets (2) 7,046 -- 55,118 1,757 63,921
Year Ended December 31, 1996
- -----------------------------
Diving and related revenues $ 7,838 $ 532 $ 97,402 $ -- $ 105,772
Operating income (loss) (963) (593) 10,961 -- 9,405
Identifiable assets 8,664 18,367 65,876 -- 92,907
(1)Includes the Company's diving and related services provided off the
coast of West Africa and Dubai, United Arab Emirates.
(2)Identifiable assets are those assets used in the Company's operations
in each area. Corporate assets consist of the Company's deferred tax
asset.
</TABLE>
The Company's ten largest customers accounted for $50,559,682 or 44% of
the Company's total revenues during the year ended December 31, 1996;
$5,591,707 or 65% during the two months ended December 31, 1995;
$40,451,000 or 46% during 1995 and $23,027,000 or 39% during 1994. Of
the ten customers, there was one that accounted for more than 10% of the
Company's revenues during each of the following periods: $27,343,026 or
24% for the year ended December 31, 1996; $2,445,311 or 16% for the two
months ended December 31, 1995, $12,782,000 or 14% during 1995 and
$6,022,000 or 10% during 1994.
NOTE 13 - COMMITMENTS AND CONTINGENCIES
Legal Matters
A large oil and gas company has instituted litigation against
subsidiaries of the Company in Edinburgh, Scotland seeking damages of
approximately U.S. $3,000,000, plus interest and costs, on the basis of
allegations that a product supplied by the subsidiaries exhibited design
faults upon installation in a North Sea pipeline. Prior to installation
the product was hydrostatically tested onshore and during the test it
did not leak or otherwise malfunction. After installation but before
oil or gas flowed through the pipeline under pressure the product was
removed and replaced by the customer against the recommendations of the
Company's subsidiaries. The product did not leak and no environmental
damage is alleged. The Company believes that the product was fully
suitable for service and intends to defend the claim vigorously,
although no assurance can be given as to the ultimate outcome of the
litigation.
The Company and certain of its subsidiaries are also parties to various
routine legal proceedings primarily involving claims for personal injury
under the General Maritime Laws of the United States and the Jones Act
as a result of alleged negligence or alleged "unseaworthiness" of the
Company's vessels. While the outcome of these lawsuits cannot be
predicted with certainty, the Company believes that its insurance
coverage with respect to such claims is adequate and that the outcome of
all such proceedings, even if determined adversely, would not have a
material adverse effect on its business or financial condition or
results of operations.
Insurance
The Company's operations involve a higher degree of operational risk,
product liability and warranty claims than that found in other
industries. Management is of the opinion that it maintains adequate
insurance, in line with industry standards, to insure itself against the
normal risks of operations.
Operating Leases
Leases are primarily for buildings and vehicles used in operations and
are classified as operating leases. The amount of future minimum
rentals for these noncancellable leases with terms in excess of one year
are as follows at December 31, 1996 (in thousands):
1997 $1,099
1998 470
1999 318
2000 238
2001 25
------
$2,150
======
Total rental expense under operating leases was $937,919 for the year
ended December 31, 1996, $153,316 for the two months ended December 31,
1995, and $1,249,196 and $983,214 for the years ended October 31, 1995
and 1994.
Selected Quarterly Financial Data
(in thousands, except per share data)
The following table sets forth selected unaudited quarterly financial
information.
<TABLE>
<CAPTION>
Quarter Ended
________________
January 31, April 30, July 31, October 31,
1994 1994 1994 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Diving and related revenues $ 8,305 $ 8,946 $13,570 $ 21,934
Operating income (loss) from
continuing operations (709) (699) (614) 1,802
Income (loss) from continuing operations (328) (407) (412) 890
Loss from discontinued operations (including
loss on disposal) (274) (170) (266) (986)
Net loss (602) (577) (678) (96)
Earnings (loss) per share:
Continuing operations (.05) (.06) (.06) .13
Discontinued operations (.04) (.03) (.04) (.14)
Net loss (.09) (.09) (.10) (.01)
Weighted average common shares outstanding 6,695 6,709 6,709 6,709
Quarter Ended
________________
January 31, April 30, July 31, October 31,
1995 1995 1995 1995
---- ---- ---- ----
Diving and related revenues $19,638 $12,287 $24,908 $31,827
Operating income (loss) 384 (3,117) 1,632 2,199
Net income (loss) 141 (2,126) 685 971
Earnings (loss) per share .02 (.32) .10 .14
Weighted average common shares outstanding 6,709 6,709 6,709 6,709
</TABLE>
<TABLE>
<CAPTION>
January 31, April 30, June 30, September 30, December 31,
1996 1996 1996(1) 1996 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Diving and related revenues $22,162 $19,179 $26,829 $33,409 $ 26,306
Operating income 1,427 595 2,992 5,296 1,092
Net income 709 471 1,735 2,851 331
Earnings per share .11 .07 .26 .42 .05
Weighted average common
shares outstanding 6,709 6,726 6,788 6,806 6,840
(1)On June 26, 1996, the Company's Board of Directors resolved to change
the Company's year end from October 31 to December 31.
</TABLE>
Exhibit 21.1
SUBSIDIARIES OF
AMERICAN OILFIELD DIVERS, INC.
American Inland Divers, Inc. (a Louisiana corporation)
American Inland Divers, Inc. (a Kansas corporation)
American Inland Marine, Inc. (an Ohio corporation)
American Pacific Marine, Inc. (a Delaware corporation)
American International Diving, Ltd. (a Cayman Islands corporation)
American Marine Construction, Inc. (a Delaware corporation)
American Pollution Control, Inc. (a Delaware corporation)
Big Inch Marine Systems, Inc. (a Delaware corporation)
Big Inch Marine Systems, Ltd. (a U.K. corporation)
Tarpon Systems, Inc. (a Louisiana corporation)
Tarpon Concrete Structural Systems, Inc. (a Louisiana corporation)
American Oilfield Divers (Nigeria), Ltd. (a Nigerian corporation)
S&H Diving, L.L.C. (a Louisiana limited liability company)
AOD Holdings, Inc. (a Delaware corporation)
Hard Suits Inc. (a British Columbia corporation)
International Hard Suits, Ltd. (a British Columbia corporation)
Sea Urchin Submersibles Ltd. (a British Columbia corporation)
CDC Can-Dive, Ltd. (50%-owned joint venture Scotland corporation)
Can Dive Marine Services, Inc. (a Washington corporation)
Hard Suits Marine, Inc. (a Delaware corporation)
Hard Suits Gulf, Inc. (a Delaware corporation)
Can Dive Marine Services, Ltd. (a U.K. corporation)
GMC-Candive Ltd. (a 50% owned joint venture Scotland corporation)
Can Dive Marine Services, ltd. (a British Columbia corporation)
BMD-Can-Dive Ltd. (a 50% owned joint venture Ontario corporation)
485836 British Columbia Ltd. (a British Columbia corporation)
Exhibit 23.1
Consent of Independent Accountants
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-66702 and 33-83594) of American Oilfield
Divers, Inc. of our report dated February 17, 1997 appearing on page
K-35 of the Annual Report of Shareholders which is incorporated in this
Annual Report on Form 10-K.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New Orleans, Louisiana
March 26, 1997
EXHIBIT 24.1
POWER OF ATTORNEY
BE IT KNOWN that the undersigned, in his or her capacity or capacities
as an officer or a member of the Board of Directors of American Oilfield
Divers, Inc., a Louisiana corporation (the "Company"), does hereby make,
constitute and appoint QUINN J. HEBERT and CATHY M. GREEN, and each of them
acting individually, his or her true and lawful attorney-in-fact with power
to act without the other and with full power of substitution to execute,
deliver and file, for and on behalf of the undersigned, in his or her name
and in his or her capacity or capacities as aforesaid, an Annual Report of
the Company on Form 10-K for the year ended December 31, 1996, and any
amendment or amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said attorneys,
and each of them, full power and authority to do and perform each and every
act and thing whatsoever that said attorney or attorneys may deem necessary
or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things that said
attorney or attorneys may do or cause to be done by virtue of this Power
of Attorney.
EXECUTED this 11th day of March, 1997
/s/ William C. O'Malley
___________________________
WILLIAM C. O'MALLEY
<PAGE>
POWER OF ATTORNEY
BE IT KNOWN that the undersigned, in his or her capacity or capacities
as an officer or a member of the Board of Directors of American Oilfield
Divers, Inc., a Louisiana corporation (the "Company"), does hereby make,
constitute and appoint QUINN J. HEBERT and CATHY M. GREEN, and each of them
acting individually, his or her true and lawful attorney-in-fact with power
to act without the other and with full power of substitution to execute,
deliver and file, for and on behalf of the undersigned, in his or her name
and in his or her capacity or capacities as aforesaid, an Annual Report of
the Company on Form 10-K for the year ended December 31, 1996, and any
amendment or amendments thereto and any other document in support thereof or
supplemental thereto, and the undersigned hereby grants to said attorneys,
and each of them, full power and authority to do and perform each and every
act and thing whatsoever that said attorney or attorneys may deem necessary
or advisable to carry out fully the intent of the foregoing as the
undersigned might or could do personally or in the capacity or capacities as
aforesaid, hereby ratifying and confirming all acts and things that said
attorney or attorneys may do or cause to be done by virtue of this Power
of Attorney.
EXECUTED this 11th day of March, 1997
/s/ Stephen A. Lasher
___________________________
STEPHEN A. LASHER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
INFORMATION STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,322
<SECURITIES> 0
<RECEIVABLES> 20,595
<ALLOWANCES> 500
<INVENTORY> 4,651
<CURRENT-ASSETS> 35,734
<PP&E> 65,469
<DEPRECIATION> 22,428
<TOTAL-ASSETS> 92,907
<CURRENT-LIABILITIES> 23,512
<BONDS> 0
0
0
<COMMON> 1,373
<OTHER-SE> 44,472
<TOTAL-LIABILITY-AND-EQUITY> 92,907
<SALES> 105,772
<TOTAL-REVENUES> 105,772
<CGS> 70,066
<TOTAL-COSTS> 96,367
<OTHER-EXPENSES> 434
<LOSS-PROVISION> 398
<INTEREST-EXPENSE> 1,246
<INCOME-PRETAX> 8,971
<INCOME-TAX> 3,950
<INCOME-CONTINUING> 5,021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,021
<EPS-PRIMARY> .74
<EPS-DILUTED> 0
</TABLE>
