UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
for the quarterly period ended June 30, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from __________ to __________
________________________
Commission File Number: 0-22032
________________________
AMERICAN OILFIELD DIVERS, INC.
(Exact Name of Registrant as Specified in its Charter)
Louisiana 72-0918249
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
900 Town & Country Lane, Suite 400
Houston, Texas 77024
(Address of Principal Executive Offices) (Zip Code)
(713) 430-1100
(Registrant's telephone number,
including area code)
________________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13(b) or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes /x/ No / /
At August 12, 1997 there were 10,591,420 shares of common stock, no
par value, outstanding.
<PAGE>
AMERICAN OILFIELD DIVERS, INC.
INDEX
Part I. Financial Information Page
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 ........................ 1
Consolidated Statements of Income -
Three and Six Months Ended June 30, 1997
and June 30, 1996........................................ 2
Consolidated Statements of Changes in Stockholders' Equity -
Six Months Ended June 30, 1997 and June 30, 1996............ 3
Consolidated Statements of Cash Flows -
Three and Six Months Ended June 30, 1997 and June 30, 1996.. 4
Notes to Consolidated Financial Statements.................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 8
Part II. Other Information
Item 1. Legal Proceedings................................... 15
Item 6. Exhibits and Reports on Form 8-K.................... 15
Signatures................................................... 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
American Oilfield Divers, Inc.
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
-------------- -----------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 13,119 $ 1,322
Accounts receivable, net of allowance for
doubtful accounts of $400 and $500 19,896 20,095
Unbilled revenue 10,494 5,929
Other receivables 2,313 2,171
Inventories 5,163 4,651
Prepaid expenses 2,165 1,566
_____________ ___________
Total current assets 53,150 35,734
Property, plant and equipment, net of
accumulated depreciation of $25,708 and $22,428 51,337 43,041
Trademarks and patents, net of accumulated
amortization 8,681 9,307
Other assets, net of accumulated amortization 7,879 4,825
_____________ ___________
$121,047 $92,907
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,371 $ 9,609
Other liabilities 16,163 10,895
Short-term borrowings --- 1,306
Current portion of long-term debt 2,264 1,702
_____________ ___________
Total current liabilities 20,798 23,512
Borrowings under a line of credit agreement --- 12,450
Long-term debt, less current portion 8,913 8,459
Other liabilities 2,653 2,641
_____________ ___________
Total liabilities 32,364 47,062
Stockholders' equity:
Common stock, no par value 1,813 1,373
Other stockholders' equity 86,870 44,472
_____________ ___________
Total stockholders' equity 88,683 45,845
_____________ ___________
$121,047 $92,907
============= ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
American Oilfield Divers, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
Three Months Six Months Ended
Ended June 30, June 30,
----------------- -----------------
(unaudited) 1997 1996 1997 1996
---- ---- ---- ----
Diving and related revenues $28,177 $26,829 $56,753 $46,057
------- ------- ------- -------
Costs and expenses:
Diving and related expenses 17,297 17,652 37,119 30,273
Selling, general and
administrative expenses 6,282 4,781 12,117 9,501
Depreciation and amortization 2,258 1,404 4,576 3,266
------- ------- ------- ------
Total costs and expenses 25,837 23,837 53,812 43,040
------- ------- ------- ------
Operating income 2,340 2,992 2,941 3,017
Other income (expense), net 537 (7) 332 142
------- ------- ------- ------
Income before income taxes 2,877 2,985 3,273 3,159
Income tax provision 1,235 1,250 1,405 1,320
------- ------- ------- ------
Net income $1,642 $1,735 $1,868 $1,839
======= ======= ======= ======
Net income per share $ .16 $ .26 $ .19 $ .27
======= ======= ======= ======
Weighted average common shares
outstanding 10,516 6,788 9,707 6,750
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
American Oilfield Divers, Inc.
Consolidated Statements of Changes in Stockholders' Equity
(in thousands, except share data)
<TABLE>
<CAPTION>
Foreign (Accumulated
Common Stock Additional Currency Deficit)
-------------- Paid-in Translation Retained
(unaudited) Shares Amount Capital Adjustment Earnings Total
------ ------ --------- ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 6,709,497 $1,360 $40,837 $(132) $(2,510) $39,555
Adjustment to valuation of
common stock issued in
connection with an acquisition (52) (52)
Exercise of stock options 24,000 2 135 137
Net effects of translation of
foreign currency (8) (8)
Net income 104 104
---------- --------- ---------- ---------- ---------- ---------
Balance at June 30, 1996 6,733,497 $1,362 $40,920 $(140) $(2,406) $39,736
========== ========= ========== ========== ========== =========
Balance at December 31, 1996 6,879,867 $1,373 $42,059 $ (98) $2,511 $45,845
Issuance of common stock
in a secondary stock offering 3,128,315 379 34,871 35,250
Issuance of common stock
from underwriter's
exercise of overallotment
option 425,000 52 4,818 4,870
Issuance of common stock
for asset purchases 48,193 5 495 500
Exercise of stock options 50,065 4 410 414
Net effects of translation of
foreign currency (64) (64)
Net income 1,868 1,868
----------- --------- --------- ---------- ---------- ----------
Balance at June 30, 1997 10,531,440 $1,813 $82,653 $ (162) $ 4,379 $88,683
=========== ========= ========= ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
American Oilfield Divers, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
(unaudited)
Net cash flows from operating
activities:
Net income $ 1,642 $ 1,735 $ 1,868 $ 1,839
Non-cash items included in net
income:
Depreciation and amortization 2,258 1,404 4,576 3,266
Net (gain) loss on disposition of
assets 470 (179) 470 (577)
Other (488) (383) (8,736) 3,400
------ ------- ------- ------
Net cash provided by (used
by) operating activities 3,882 2,577 (1,822) 7,928
Cash flows from investing
activities:
Capital expenditures (11,317) (7,935) (13,663) (10,221)
Proceeds from disposal of assets 2,358 207 2,358 6,204
Other (804) (660) (1,135) 329
-------- ------- --------- ---------
Net cash used by investing
activities (9,763) (8,388) (12,440) (3,688)
Cash flows from financing
activities:
Proceeds from issuance of common
stock 86 --- 40,532 136
Proceeds from long-term borrowing --- 10,500 --- 10,500
Repayments of term debt (483) (6,413) (1,855) (6,913)
Net borrowings (payments) under
line-of-credit agreement --- 350 (12,618) (7,525)
--------- -------- --------- ---------
Net cash provided by (used by)
financing activities (397) 4,437 26,059 (3,802)
--------- -------- --------- ---------
Net increase (decrease)in cash (6,278) (1,374) 11,797 438
Cash and cash equivalents at
beginning of period 19,397 2,600 1,322 788
--------- -------- --------- ---------
Cash and cash equivalents at end of
period $13,119 $ 1,226 $13,119 $1,226
========= ======== ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
American Oilfield Divers, Inc.
Notes to Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Principles
- -----------------------------------------------------------
The consolidated financial statements include the accounts of American
Oilfield Divers, Inc. and its wholly-owned and majority-owned subsidiaries
(the "Company"). The Company provides subsea construction, installation,
and repair and maintenance services to the offshore oil and gas industry,
primarily in the United States Gulf of Mexico, the U.S. West Coast and
select international areas, and to inland industrial and governmental
customers. In addition, the Company manufactures and markets subsea
pipeline connectors, a patented marginal well production system and concrete
storage barges to the domestic and international oilfield industry, as well
as a one-atmosphere diving suit and a submarine rescue vehicle for sale to
worldwide navies. All material intercompany transactions and balances have
been eliminated in consolidation.
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 fiscal year end,
this quarterly report on Form 10-Q includes results of operations as of and
for the three and six months ended June 30, 1997 and 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 and has
used and continues to use the remaining proceeds for general corporate
purposes, including working capital requirements and to fund capital
expenditures and strategic asset acquisitions.
A description of the organization and operations of the Company, the
significant accounting policies followed, and the financial condition and
results of operations as of December 31, 1996, are contained in the audited
consolidated financial statements included in the Company's annual report on
Form 10-K for the year ended December 31, 1996. These unaudited second
quarter financial statements should be read in conjunction with the audited
1996 financial statements.
The unaudited financial statements at, and for the three and six months
ended, June 30, 1997 and 1996 and the notes thereto have been prepared in
accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 for Regulation S-X. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair statement of the financial position and
results of operations have been included.
Operating results for interim periods are not necessarily indicative of the
results that can be expected for full fiscal years. The offshore oilfield
services industry in the Gulf of Mexico is highly seasonal as a result of
weather conditions and the timing of capital expenditures by the oil and gas
industry. Utilization of the company's dive crews and diving support vessels
("DSV") and therefore the related scope and extent of the company's offshore
diving operations are limited by winter weather conditions generally
prevailing in the Gulf of Mexico and in certain of the Company's inland
markets from December to April. Although adverse weather conditions
occurring from time to time from May through November may also adversely
affect vessel utilization and diving operations, historically a greater
proportion of the Company's diving services has been performed during the
period from May through November. The Company expects a higher
concentration of its total revenues and net income to be earned during the
third (July through September) and fourth (October through December)
quarters of its fiscal year, compared to the first (January through March)
and second (April through June) quarters.
Effective January 1, 1996, the Company implemented 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). This
pronouncement requires a review for impairment whenever circumstances
indicate that the carrying amount of long-lived assets, certain identifiable
intangibles and goodwill may not be recoverable through future cash flows.
In accordance with SFAS 121, the Company recognized a pre-tax charge of
$500,000 ($290,000 after tax, or $.04 per share), effective January 1, 1996.
The charge is included in depreciation and amortization in the consolidated
statement of income for the six months ended June 30, 1996.
On April 27, 1997, the jack-up derrick barge, the "American Intrepid", which
the Company operated under lease from a third party, sank in the Gulf of
Mexico. The vessel was covered by insurance maintained by the Company and
the Company believes that loss in excess of insurance coverage, if any, will
not be material to its financial condition.
On June 21, 1997, the Company acquired substantially all of the assets of
Contract Diving Services, Pty Ltd., and its affiliates, a subsea services
provider based in Perth, Western Australia. The purchase price was paid
through an initial cash payment and a non-interest-bearing note for the
balance, payable over three years. The fair market value of the assets
acquired, along with goodwill created as a result of the purchase, has been
included in the accompanying consolidated balance sheet as of June 30, 1997.
Also, the results of operations since the purchase date are included in the
accompanying consolidated statements of income for the three and six months
ended June 30, 1997. Pro forma results of operations, assuming the acquisition
had occurred at the beginning of each year presented, would not be materially
different from the results reported.
Note 2 - Inventories
- ---------------------
The major classes of inventories consist of the following (in thousands):
June 30, December 31,
1997 1996
---- ----
(Unaudited)
Fuel $ 77 $ 152
Supplies 662 659
Work-in-process 2,122 2,491
Finished goods 2,302 1,349
------- ------
$5,163 $4,651
======= ======
Note 3 - Earnings per Share
- ----------------------------
Earnings per share are calculated by dividing net income by the
weighted average number of common shares, including redeemable
common shares, outstanding during each period. Outstanding
stock options are common stock equivalents but are excluded
from earnings per common share as the effect would not be
materially dilutive.
In March 1997 the FASB issued SFAS 128, "Earnings per Share."
This Statement replaces APB No. 15 "Earnings per Share,"
establishes standards for computing and presenting earnings per
share ("EPS"), and is effective for the year ended December 31,
1997. This statement is not expected to have a material effect
on the Company's reported EPS amounts.
Note 4 - Commitments and Contingencies
- --------------------------------------
Legal Matters
In November 1996, 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 at this time that the
product was fully suitable for service and intends to defend
itself vigorously against the claim, although no assurance can
be given as to the ultimate outcome of the litigation. There
have been no material developments in the second quarter ended
June 1996.
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
Although the Company's operations involve a higher degree of
risk than that found in some other service industries,
management is of the opinion that it maintains insurance at
levels generally at or above industry standards to insure
itself against the normal risks of operations.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following tables set forth, for the periods indicated,
additional information on the operating results of the Company
in its geographic and product markets:
<TABLE>
<CAPTION>
Three Months Ended June 30, 1997
==============================================================================================
Inland and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diving and Related Revenues $17,025 $3,036 $3,823 $4,293 $28,177
Diving and Related Expenses $10,062 $2,013 $2,736 $2,486 $17,297
Gross Profit $ 6,963 $1,023 $1,087 $1,807 $10,880
Gross Profit Percentage 40.9% 33.7% 28.4% 42.1% 38.6%
Three Months Ended June 30, 1996
==============================================================================================
Inland and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diving and Related Revenues $11,453 $3,132 $9,811 $2,433 $26,829
Diving and Related Expenses $ 7,772 $2,000 $6,526 $1,354 $17,652
Gross Profit $ 3,681 $1,132 $3,285 $1,079 $ 9,177
Gross Profit Percentage 32.1% 36.1% 33.5% 44.3% 34.2%
<F1> Includes diving and related services, derrick barge services
provided by American Marine Construction, Inc. and
environmental remediation and oil spill response services
provided by American Pollution Control, Inc., all of which
were performed in the Gulf of Mexico.
<F2> Includes all diving and related services performed outside the
United States and its coastal waters except for Latin America,
which is included in Inland and West Coast Services.
<F3> Includes diving and related services off the U.S. West Coast
by American Pacific Marine, Inc. and diving and related services
provided by American Inland Divers, Inc.
<F4> Includes manufacturing and marketing of Big Inch pipeline
connectors, Hard Suits Inc. products and Tarpon marginal well
production systems and concrete storage systems.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30, 1997
==============================================================================================
Inland and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diving and Related Revenues $30,486 $5,877 $11,612 $8,778 $56,753
Diving and Related Expenses $20,004 $3,620 $ 8,574 $4,921 $37,119
Gross Profit $10,482 $2,257 $ 3,038 $3,857 $19,634
Gross Profit Percentage 34.4% 38.4% 26.2% 43.9% 34.6%
Six Months Ended June 30, 1996
==============================================================================================
Inland and
Gulf International West Coast Subsea
Services<F1> Services<F2> Services<F3> Products<F4> Total
-------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Diving and Related Revenues $22,257 $5,432 $14,776 $3,592 $46,057
Diving and Related Expenses $15,460 $3,022 $ 9,871 $1,920 $30,273
Gross Profit $ 6,797 $2,410 $ 4,905 $1,672 $15,784
Gross Profit Percentage 30.5% 44.4% 33.2% 46.5% 34.3%
<F1> Includes diving and related services, derrick barge services
provided by American Marine Construction, Inc. and
environmental remediation and oil spill response services
provided by American Pollution Control, Inc., all of which
were performed in the Gulf of Mexico.
<F2> Includes all diving and related services performed outside the
United States and its coastal waters except for Latin America,
which is included in Inland and West Coast Services.
<F3> Includes diving and related services off the U.S. West Coast
by American Pacific Marine, Inc. and diving and related services
provided by American Inland Divers, Inc.
<F4> Includes manufacturing and marketing of Big Inch pipeline
connectors, Hard Suits Inc. products and Tarpon marginal well
production systems and concrete storage systems.
</TABLE>
The following discussion of the Company's financial
condition, results of operations, and liquidity and capital
resources should be read in conjunction with the Company's
consolidated financial statements and the notes thereto
included elsewhere in this Quarterly Report on Form 10-Q.
Results of Operations
For the second quarter ended June 30, 1997, the Company
reported revenue of $28.2 million and net income of $1.6
million compared to revenue of $26.8 million and net income
of $1.7 million for the same period of the previous year.
During the current quarter, the Company benefited from the
continued strength of the oil and gas industry, particularly
in the Gulf of Mexico, and experienced strong demand for its
subsea services and related products in the Gulf of Mexico
despite the fact that the second quarter is not traditionally
associated with uniformly high activity in this market. This
strong demand led to an increase in both the utilization and
the day rates charged for the Company's divers and DSVs, as
well as increased demand for the Company's subsea pipeline
connector products in the Gulf of Mexico. Based on a variety
of traditional industry indicators that are currently
positive such as stable commodity prices, increased Gulf of
Mexico drilling rig count, large number of pipeline
construction projects, lease sales and other similar indices,
the Company believes that this trend will continue for the
remainder of fiscal 1997.
Although the Company experienced strong results of operations
in its Gulf Services group in the second quarter of 1997,
this was partially offset by lower activity and decreased
demand for the Company's diving and marine construction
services in the Inland and West Coast Services sector,
primarily as a result of the non-recurring nature of the
Chevron platform abandonment project off the coast of
California performed in the second quarter of 1996.
Also in the second quarter of 1997, the Company's new
subsidiary, Hard Suits Inc., continued to experience
operating losses as a result of, among other things,
management's strategy not to make commercial sales of
NEWTSUITs(TM) to third party operators, which was the
traditional revenue source for Hard Suits prior to AOD's
acquisition. Management's continued focus going forward is
to utilize Hard Suits technology to support the Company's
intervention technologies group, develop the substantial
opportunities the Company believes exist in the military
market and review ways to reduce costs. However, the Company
believes Hard Suits will continue to experience operating
losses for the remainder of fiscal 1997, due in large part to
the long lead time necessary to develop military sales
opportunities. Nonetheless, management believes its strategy
will lead to greater earnings potential through longer-term
military contracts and internal intervention services offered
through AOD. Excluding these operating losses from Hard
Suits, the Company would have reported net income of
approximately $2.1 million.
For the six months ended June 30, 1997, the Company reported
revenue of $56.7 million and net income of $1.9 million
compared to revenue of $46.1 million and net income of $1.8
million for the same period of 1996. During this period the
Company benefited from (i) increased utilization of the
Company's dive crews and vessels in the Gulf Services sector;
(ii) increased sales of Big Inch pipeline connectors and tie-
ins; and (iii) sales of products manufactured by newly-
acquired Tarpon Concrete Storage Systems and Hard Suits Inc.
These increases were offset by a decrease in activity from
the Inland and West Coast Services sector and operating losses
at Hard Suits.
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. Weather conditions in
the Gulf of Mexico and in certain of the Company's inland
markets, particularly the winter weather conditions that are
generally present from December through April, substantially
reduce the work that could otherwise be performed by the
Company's dive crews and limit the utilization of the
Company's support vessels in the Gulf of Mexico. The Company
expects winter weather patterns and other adverse weather
conditions to continue to have an adverse effect on the
Company's diving operations, both in the Gulf of Mexico and
elsewhere.
On April 27, 1997, the jack-up derrick barge, the "American
Intrepid," which the Company operated under lease from a
third party, sank in the Gulf of Mexico. The vessel was
covered by insurance maintained by the company and the
Company believes that loss in excess of insurance coverage,
if any, will not be material to its financial condition.
On June 21, 1997, the Company acquired substantially all of
the assets of Contract Diving Services, Pty Ltd., and its
affiliates, a subsea services provider based in Perth, Western
Australia. The purchase price was paid through an initial
cash payment and a non-interest-bearing note for the balance,
payable over three years. The fair market value of the assets
acquired, along with goodwill created as a result of the
purchase, has been included in the accompanying consolidated
balance sheet as of June 30, 1997. Also, the results of
operations since the purchase date are included in the
accompanying consolidated statements of income for the three
and six months ended June 30, 1997. Pro forma results of
operations, assuming the acquisition had occurred at the
beginning of each year presented, would not be materially
different from the results reported.
Three Months Ended June 30, 1997 Compared to Three Months
Ended June 30, 1996
Total revenues. The Company's consolidated revenues
increased $1.4 million, or 5%, from $26.8 million for the
three months ended June 30, 1996 to $28.2 million for the
current quarter. The $1.4 million increase was primarily
attributable to (i) an increase of approximately $6.4 million
in the Gulf Services group, primarily as a result of
increased diving and vessel activity in the Gulf of Mexico
and (ii) an increase of approximately $1.9 million from the
Company's manufactured products. These revenue increases
were offset by a decrease of $6.0 million in the Inland and
West Coast Services markets, primarily as a result of the
non-recurring nature of the Chevron platform abandonment
project performed in the second quarter of 1996.
Selling, general and administrative expenses. Selling,
general and administrative expenses increased $1.5 million,
or 31%, to $6.3 million during the second quarter of 1997,
compared to $4.8 million for the same period of 1996. The
increase was primarily attributable to, among other things,
supporting higher diving and vessel activity in the Gulf of
Mexico, supporting the manufacturing operations of the newly
acquired Tarpon Concrete Storage Systems and Hard Suits
subsidiaries, and to costs incurred as a result of the
Company's relocation of its corporate headquarters to
Houston, Texas, a portion of which was non-recurring, and
offset by a gain on the sale of the Company's headquarters
building in Lafayette, Louisiana. During the second quarter
of 1997, selling, general and administrative expenses as a
percentage of revenues increased to 22%, compared to 18% for
the second quarter of 1996. Management is actively reviewing
measures to reduce its selling, general and administrative
expenses and is analyzing its existing cost structure
companywide seeking ways to reduce costs and improve
efficiencies.
Depreciation and amortization. Depreciation and amortization
increased $854,000, or 61%, to $2.3 million for the second
quarter of 1997, compared to $1.4 million for the second
quarter of 1996. The increase was primarily attributable to
the acquisition of Hard Suits, Inc. and other additions and
improvements to the Company's operational and administrative
assets, primarily in the Gulf Services group.
Operating income. Although the Company experienced an
overall revenue increase in the second quarter of 1997
primarily as a result of increased activity in the Gulf of
Mexico, diving and related expenses did not increase at the
same level, primarily as a result of the Company's ability to
increase successfully the rates charged for its dive crews
and vessels in the Gulf of Mexico, while at the same time
control its diving and related expenses in a period of rising
costs. As a result, the Company's overall gross profit and
related percentage increased from $9.2 million and 34% in the
second quarter of 1996 to $10.9 million and 39% in the
current quarter. This gross profit improvement was offset by
the increased selling, general and administrative expenses,
and depreciation and amortization expenses in the current
quarter such that the resulting operating income decreased
from $3.0 million to $2.3 million.
Other income/expense. During the current quarter, other
income (net) of $537,000 was comprised of gains on the
disposal of assets of $470,000 and interest income of
$236,000, partially offset by interest expense of $169,000.
The net gain on the disposal of assets includes the non-
recurring gain on the sale of the Company's corporate
headquarters in Lafayette, Louisiana. This compares to other
expense (net) of $7,000 for the comparable period of 1996,
which was comprised of interest expense of $245,000,
partially offset by gains on the disposal of assets of
$179,000 and other income of $59,000.
Net income. As a result of the factors discussed above, the
Company recorded net income of $1.6 million, or $.16 per
share on 10.5 million weighted average common shares for the
three months ended June 30, 1997, compared to net income of
$1.7 million, or $.26 per share on 6.8 million weighted
average common shares for the same period of 1996.
Six Months Ended June 30, 1997 Compared to Six Months Ended
June 30, 1996
Total revenues. The Company's consolidated revenues
increased 23% from $46.1 million for the six months ended
June 30, 1996 to $56.8 million in the current period. The
$10.7 million revenue increase consisted of (i) an increase
of approximately $10.7 million in the Gulf Services group,
primarily as a result of increased diving and vessel activity
in the Gulf of Mexico; and (ii) an increase of approximately
$5.2 million as a result of increased sales of the Company's
manufactured products, including those of the newly acquired
Tarpon Concrete Storage Systems and Hard Suits Inc.
subsidiaries. These revenue increases were offset by
decreases of (i) $3.2 million in the Inland and West Coast
Services sector, primarily as a result of the one-time nature
of the Chevron platform abandonment project in the second
quarter of 1996; (ii) approximately $969,000 from the
operations of the "American Intrepid", which sank in April
1997 and (iii) approximately $1.3 million attributable to the
"American Enterprise", the Company's pipelay/bury barge sold
on March 1, 1996.
Diving and Related Expenses. The Company's consolidated
diving and related expenses increased $6.8 million, or 23%,
from $30.3 million for the six months ended June 30, 1996 to
$37.1 million for the current six month period. Of the $6.8
million increase, (i) approximately $6.1 million was
attributable to the Gulf Services group, primarily as a
result of increased diving and vessel activity in the Gulf of
Mexico; and (ii) approximately $3.0 million was due to
expenses related to the Company's manufactured products.
These expense increases were offset by decreases of (i)
approximately $1.3 million attributable to the lower activity
of the Inland and West Coast Services sector, as previously
discussed; and (ii) approximately $1.0 million attributable
to the "American Enterprise".
Selling, general and administrative expenses. Selling,
general and administrative expenses increased $2.6 million,
or 28%, to $12.1 million during the six months ended June 30,
1997 compared to $9.5 million for the six months ended June
30, 1996. The increase was primarily attributable to, among
other things, supporting the manufacturing operations of the
newly acquired Tarpon Concrete Storage Systems and Hard Suits
Inc. subsidiaries, supporting higher diving and vessel
activity in the Gulf of Mexico and to costs incurred as a
result of the Company's relocation of its corporate
headquarters to Houston, Texas, a portion of which was non-
recurring, and offset by a gain on the sale of the Company's
headquarters building in Lafayette, Louisiana. Although
there was an overall increase in the level of selling,
general and administrative expenses during the six months
ended June 30, 1997, selling, general and administrative
expenses as a percentage of revenues remained flat at 21% for
the six months ended June 30, 1997 and 1996. Management is
actively reviewing measures to reduce its selling, general
and administrative expenses and is analyzing its existing
cost structure companywide seeking ways to reduce costs and
improve efficiencies.
Depreciation and amortization. Compared to the six months
ended June 30, 1996, depreciation and amortization increased
$1.3 million, or 40%, to $4.6 million for the six months
ended June 30, 1997. The increase was primarily attributable
to the acquisition of Hard Suits, Inc. and other additions
and improvements to the Company's operational and
administrative assets, primarily in the Gulf Services group.
Depreciation and amortization for the six months ended June
30, 1996 includes a pre-tax charge of $500,000 attributable
to the implementation of SFAS 121, "Accounting for the
Impairment of Long-lived Assets to be Disposed of".
Operating income. Although the Company's revenues increased
by $10.7 million in the current six month period, and the
gross profit percentage was approximately 34% in both six
month periods, increases in both selling, general and
administrative expense, and depreciation and amortization
expense more than offset this overall increase in gross profit,
such that the resultant operating income for the current six
month period was $2.9 million compared to $3.0 million in
the prior six month period.
Other income/expense. For the first six months of 1997,
other income of $332,000 was comprised of gains on the
disposal of assets of $470,000 and interest income of
$342,000, partially offset by interest expense of $480,000.
The net gain on the disposal of assets includes the non-
recurring gain on the sale of the Company's corporate
headquarters in Lafayette, Louisiana. This compares to other
income of $142,000 for the comparable period of 1996, which
was comprised of gains on the disposal of assets of $578,000
and other income of $92,000, partially offset by interest
expense of $528,000.
Net income. As a result of the conditions discussed above,
the Company recorded net income of $1.9 million, or $.19 per
share on 9.7 million weighted average common shares for the
six months ended June 30, 1997 compared to net income of $1.8
million, or $.27 per share on 6.8 million weighted average
common shares for the comparable period of 1996.
Liquidity and Capital Resources
The Company's primary liquidity needs are, generally, to fund
working capital requirements and to make capital expenditures
for acquisitions of, and improvements to, its facilities and
to its DSVs and diving and related equipment. The Company
also incurs expenses for mobilization and project execution
on an ongoing basis throughout the course of its contracts,
while collections from customers typically do not occur until
approximately 90 to 120 days after completing the project.
The Company has traditionally supported these working capital
requirements by using a combination of internally generated
funds and short-term and long-term debt.
As previously discussed, the Company's new subsidiary, Hard
Suits Inc. has continued to experience operating losses
during fiscal 1997, resulting in increased working capital
requirements. Although the Company expects this trend to continue
for the remainder of fiscal 1997, management believes it will
eventually be reversed through its strategy to utilize Hard
Suits technology to support the Company's intervention
technologies group, develop the substantial opportunities the
Company believes exist in the military market and review ways
to reduce costs.
The Company has a $15 million revolving line of credit with a
bank at the prime rate. No amounts were outstanding at June
30, 1997. The Company has a long-term note with a bank at a
fixed interest rate of 7.9%. At June 30, 1997 the
outstanding principal balance of the note was $8,875,000.
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. Also at June 30, 1997,
the Company has various government assistance notes which are
non-interest bearing, unsecured and are payable in various
installments through July 1999. Finally, in connection with
its purchase of the assets of Contract Diving Services, Inc.,
the Company entered into a $2.2 million non-interest bearing
note, payable annually over a three year term, to the former
shareholders.
In February 1997, the Company completed a secondary stock
offering of 3,553,315 shares of common stock. This offering
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 and has used
and continues to use the remaining proceeds for general
corporate purposes, including working capital requirements
and to fund future capital expenditures and strategic asset
acquisitions.
The Company believes that cash flows from operations and
borrowings available under its bank credit facility will
provide sufficient funds for the next twelve to eighteen
months to meet its working capital and capital expenditure
requirements and to fund any further expansion into new
geographic markets or development of new product lines.
Net cash provided by operating activities was $3.9 million
for the three months ended June 30, 1997 compared to $2.6
million provided by operating activities for the comparable
prior year period. Changes in cash flows from operating
activities are primarily due to timing differences in cash
received from customers and cash paid to employees and suppliers.
For the most recent three month period, net cash used by
investing activities was approximately $9.8 million, which
consisted mainly of $11.3 million expended for the
acquisition of and improvements to operating assets to be
used in the Company's operations, partially offset by $2.4
million received from the disposal of assets. For the same
three month period of the prior year, net cash used by
investing activities was approximately $8.4 million, which
consisted primarily of $7.9 million expended for the
acquisition of and improvements to operating assets to be used
in the Company's operations.
Cash flows used by financing activities of approximately
$397,000 for the three months ended June 30, 1997, was
primarily attributable to payments on term debt totaling
$483,000, partially offset by the exercise of stock options
which provided $86,000. For the second quarter of 1996, cash
provided by financing activities of approximately $4.4
million was primarily attributable to the proceeds from long-
term borrowings totaling $10.5 million , partially offset by
net payments on short-term and long-term debt of $6.1
million.
Net cash used by operating activities was $1.8 million for
the six months ended June 30, 1997 compared to $7.9 million
provided by operating activities for the comparable prior
year period. Changes in cash flows from operating activities
are primarily due to timing differences in cash received from
customers and cash paid to employees and suppliers.
For the most recent six month period, net cash used by
investing activities was approximately $12.4 million, which
consisted mainly of $13.4 million expended for the
acquisition of and improvements to operating assets to be
used in the Company's operations, partially offset by $2.4
million received from the disposal of assets. For the same
six month period of the prior year, net cash used by investing
activities was approximately $3.7 million, which consisted
primarily of $10.2 million expended for the acquisition of
and improvements to operating assets to be used in the Company's
operations, partially offset by $6.2 million received from
the disposal of assets.
Cash flows provided by financing activities were
approximately $26.1 million for the six months ended June 30,
1997, primarily attributable to proceeds of $40.5 million
from the Company's secondary stock offering, partially offset
by payments of $12.6 million on the line of credit agreement
and $1.9 million on term debt. For the same six months of
1996, cash used by financing activities of approximately $3.8
million was attributable to payments on term debt totaling
$6.9 million and on the line of credit agreement of $7.5
million, partially offset by $10.5 million in proceeds from
new long-term borrowings.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K, dated
April 10, 1997, with respect to the announcement of the
resignation of the Company's Chief Operating Officer and
the announcement that an agreement in principle had been
reached to acquire the assets of Contract Diving
Services Pty. Ltd.
The Company filed a current report on Form 8-K, dated
May 1, 1997, with respect to the announcement of the
Company's 1997 first quarter earnings.
The Company filed a current report on Form 8-K, dated
May 21, 1997, with respect to the announcement that the
Company hired a new Executive Vice President and
Director.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
AMERICAN OILFIELD DIVERS, INC.
Date: August 13, 1997 /s/ Cathy M. Green
_____________________________
Cathy M. Green
Vice President - Finance, and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 13,119
<SECURITIES> 0
<RECEIVABLES> 20,296
<ALLOWANCES> 400
<INVENTORY> 5,163
<CURRENT-ASSETS> 53,150
<PP&E> 77,045
<DEPRECIATION> 25,708
<TOTAL-ASSETS> 121,047
<CURRENT-LIABILITIES> 20,798
<BONDS> 0
0
0
<COMMON> 1,813
<OTHER-SE> 86,870
<TOTAL-LIABILITY-AND-EQUITY> 121,047
<SALES> 56,753
<TOTAL-REVENUES> 56,753
<CGS> 37,119
<TOTAL-COSTS> 53,812
<OTHER-EXPENSES> (332)
<LOSS-PROVISION> 120
<INTEREST-EXPENSE> 480
<INCOME-PRETAX> 3,273
<INCOME-TAX> 1,405
<INCOME-CONTINUING> 1,868
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,868
<EPS-PRIMARY> .19
<EPS-DILUTED> 0
</TABLE>
