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, 1998
( ) 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
________________________
CEANIC CORPORATION
(Formerly 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 77024
Houston, Texas
(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 13, 1998 there were 10,690,893 shares of common stock, no
par value, outstanding.
<PAGE>
CEANIC CORPORATION
INDEX
Part I. Financial Information Page
Item 1. Condensed Financial Statements
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997.......................... 1
Condensed Consolidated Statements of Income -
Three and Six Months Ended June 30, 1998 and June 30, 1997... 2
Condensed Consolidated Statements of Changes in Stockholders'
Equity -
Six Months Ended June 30, 1998 and June 30, 1997............. 3
Condensed Consolidated Statements of Cash Flows -
Three and Six Months Ended June 30, 1998 and June 30, 1997... 4
Notes to Condensed Consolidated Financial Information....... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K....................... 15
Signatures...................................................... 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Ceanic Corporation
Condensed Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
(unaudited)
<S>
ASSETS
Current assets: <S> <C>
Cash and cash equivalents $ 1,997 $ 1,407
Accounts receivable, net of allowance for
doubtful accounts of $757 and $600 35,668 32,604
Unbilled revenue 19,644 10,870
Other receivables 2,371 3,225
Inventories 7,321 5,428
Prepaid expenses 5,794 1,752
------------ -----------
Total current assets 72,795 55,286
Property, plant and equipment, net of
accumulated depreciation of $30,414 and $28,305 75,701 63,318
Trademarks and patents, net of accumulated
amortization 7,570 8,104
Other assets, net of accumulated amortization 6,849 7,592
------------ -------------
$162,915 $134,300
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,086 $ 8,379
Other liabilities 29,258 10,348
Borrowings under a line of credit agreement 18,017 8,808
Current portion of long-term debt 2,028 2,163
----------- ------------
Total current liabilities 58,389 29,698
Long-term debt, less current portion 7,252 8,060
Other liabilities 6,016 6,291
----------- ------------
Total liabilities 71,657 44,049
Stockholders' equity:
Common stock, no par value 1,828 1,824
Other stockholders' equity 89,430 88,427
----------- ------------
Total stockholders' equity 91,258 90,251
----------- ------------
$162,915 $134,300
=========== ============
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
Ceanic Corporation
Condensed Consolidated Statements of Income
(in thousands, except per share data)
Three Months Ended Six Months
June 30, Ended June 30,
------------------ ---------------
(unaudited) 1998 1997 1998 1997
---- ----- ---- -----
Diving and related revenues $41,728 $28,177 $77,745 $56,753
------- ------- ------- -------
Costs and expenses:
Diving and related expenses 28,288 17,797 53,244 38,119
Selling, general and administrative 7,247 5,782 13,765 11,117
expenses
Depreciation and amortization 3,078 2,258 6,075 4,576
Restructuring charges 1,071 - 1,071 -
------- ------- ------- ------
Total costs and expenses 39,684 25,837 74,155 53,812
------- ------- ------- ------
Operating income 2,044 2,340 3,590 2,941
Other income (expense), net (23) 537 (467) 332
Income before income taxes 2,021 2,877 3,123 3,273
Income tax provision 875 1,235 1,350 1,405
------- ------- ------ -----
Net income $1,146 $1,642 $1,773 $1,868
======= ======= ====== ======
Earnings per common share:
Basic $ .11 $ .16 $ .17 $ .19
======= ======= ====== ======
Diluted $ .11 $ .16 $ .17 $ .19
======= ======= ====== ======
Weighted average common shares
outstanding:
Basic 10,646 10,516 10,643 9,707
======= ======= ====== =====
Diluted 10,756 10,524 10,720 9,735
======= ======== ====== =====
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Ceanic Corporation
Condensed Consolidated Statements of Changes in Stockholders' Equity
(in thousands, except share data)
<TABLE>
<CAPTION> Accumulated
Common Stock Additional Other
---------------- Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income(Loss) Total
------ ------ ------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 6,879,867 $1,373 $42,059 $2,511 $ (98) $45,845
Issuance of common stock
in a 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 under exercise of
stock 50,065 4 410 414
Issuance of common
stock for asset purchases 48,193 5 495 500
Comprehensive income:
Net income 1,868 1,868
Other comprehensive
income, net of tax
(foreign currency
translation adjustments (64) (64)
--------- ------ ------- --------- --------- -------
Comprehensive income 1,868 (64) 1,804
--------- ------ ------- --------- --------- -------
Balance at June 30, 1997 10,531,440 $1,813 $82,653 $4,379 $ (162 ) $88,683
========== ======= ======= ========= ========= ========
Balance at December 31, 1997 10,640,760 $1,824 $84,065 $4,742 $ (380) $90,251
Issuance of common stock under
exercise of stock options 35,383 4 393 397
Compensation expense related
to employee stock options 50 50
Comprehensive income:
Net income 1,773 1,773
Other comprehensive
income, net of tax
(foreign currency translation
adjustments) (1,213) (1,213)
---------- --------- -------- ------- ----------- --------
Comprehensive income 1,773 (1,213) 560
---------- --------- -------- ------- ----------- --------
Balance at June 30,1998 10,676,143 $ 1,828 $84,508 $6,515 $ (1,593) $91,258
========== ========== ======== ======= =========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Ceanic Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1998 1997 1998 1997
(unaudited)
Net cash flows from operating
activities:
Net income $ 1,146 $ 1,642 $1,773 $1,868
Non-cash items included in
net income:
Depreciation and amortization 3,078 2,258 6,075 4,576
Net loss (gain) on
disposition of assets (362) 470 (446) 470
Other 3,333 (488) 1,061 (8,736)
---------- ---------- --------- ---------
Net cash provided by
(used by) operating
activities 7,195 3,882 8,463 (1,822)
Cash flows from investing
activities:
Capital expenditures (9,145) (11,317) (18,186) (13,663)
Proceeds from sale of assets 481 2,358 1,039 2,358
Other 236 (804) 613 (1,135)
--------- ----------- --------- ---------
Net cash used by investing
activities (8,428) (9,763) (16,534) (12,440)
Cash flows from financing
activities:
Proceeds from issuance of
common stock 393 86 396 40,532
Repayments of term debt (496) (483) (943) (1,855)
Net payments (borrowings)
under line-of-credit
agreement 2,102 (--) 9,208 (12,618)
--------- ---------- ---------- ----------
Net cash provided by (used
by) financing activities 1,999 (397) 8,661 26,059
-------- ---------- ---------- ----------
Net increase (decrease) in
cash 766 (6,278) 590 11,797
Cash and cash equivalents at
beginning of period 1,231 19,397 1,407 1,322
------- ---------- ---------- ----------
Cash and cash equivalents at
end of period $ 1,997 $ 13,119 $ 1,997 $13,119
======= ========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Ceanic Corporation
Notes to Condensed Consolidated Financial Statements
Note 1 - Organization and Significant Accounting Principles
The consolidated financial statements include the accounts of Ceanic
Corporation and its wholly-owned and majority-owned subsidiaries (the
"Company" or "Ceanic"). The Company provides subsea services and products,
including field development services to the offshore oil and gas industry,
as well as industrial and governmental customers in the U.S. Gulf of Mexico,
U.S. West Coast, and certain U.S. inland markets, as well as to customers in
the Europe Africa and Asia Pacific Regions. Operations in the U.S. Gulf of
Mexico represent a significant portion of the Company's business. The
Company's primary customers include major and independent oil and gas
companies, offshore engineering and construction companies and major
pipeline transmission firms. All material intercompany transactions and
balances have been eliminated in consolidation.
On June 26, 1998, the Company entered into a definitive merger agreement
with Stolt Comex Seaway S.A. ("Stolt Comex") pursuant to which Stolt Comex
will acquire all of the outstanding common stock of Ceanic for $20.00 per
share in cash. The merger agreement is subject to approval by Ceanic's
shareholders and other conditions customary to transactions of this type.
The special shareholder meeting to consider and approve the merger is
scheduled for August 17, 1998 and Ceanic expects the transaction to close
promptly thereafter.
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, 1997, 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, 1997. The unaudited second
quarter financial statements contained herein should be read in conjunction
with the audited 1997 financial statements.
The unaudited financial statements at, and for the three and six months
ended June 30, 1998 and 1997 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 normally recurring accruals)
considered necessary for a fair statement of the financial position and
results of operations have been included.
A reclassification of approximately $500,000 and $1,000,000 of selling,
general and administrative expenses to diving and related expenses was
made to the results of operations for the three and six months ended
June 30, 1997 respectively, to conform the classification of such expenses to
the 1998 presentation.
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. In a typical year, 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.
Note 2 - Inventories
The major classes of inventories consist of the following (in thousands):
June 30, December 31,
1998 1997
-------- ------------
(Unaudited)
Fuel $ 213 $ 224
Supplies 1,491 1,197
Work in Process 4,882 2,769
Finished Goods 735 1,238
------- -------
$7,321 $5,428
======= =======
Note 3 - Borrowings Under a Line of Credit Agreement
During the six months ended June 30, 1998, the Company's
revolving line of credit agreement with a bank was
increased to $25 million with no other changes in terms to
facilitate the Company's expanded working capital and
capital requirements. The agreement expired on April 30,
1998, was extended to July 31, 1998 and was subsequently
extended to October 31, 1998.
Note 4 - Earnings per Share
The Company adopted Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings Per Share,"
beginning with the year ended December 31, 1997. All prior
period earnings per share data have been restated to conform
to the provisions of this statement. Basic earnings per
common share is computed using the weighted average number of
shares outstanding for the period. Diluted earnings per
common share is computed using the weighted average number of
shares outstanding per common share adjusted for the
incremental shares attributed to outstanding options to
purchase common stock. The reconciliation between the
computations is as follows (table amounts in thousands,
except per share data):
<TABLE>
<CAPTION>
Weighted Average Shares Earnings Per Share
Net ----------------------------- ---------------
income Basic Incremental Diluted Basic Diluted
<S> <C> <C> <C> <C> <C> <C>
Three months ended:
June 30, 1998 $1,146 10,646 110 10,756 $.11 $.11
June 30, 1997 $1,642 10,516 8 10,524 .16 .16
Six month ended:
June 30, 1998 $1,773 10,643 77 10,720 $.17 $.17
June 30, 1997 $1,868 9,707 28 9,735 $.19 $.19
</TABLE>
Note 5 - Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS 130
establishes new requirements for reporting comprehensive income and its
components. Adoption of this statement had no impact on the Company's net
income or stockholders' equity for the periods presented. SFAS 130 requires
unrealized gains or losses on the Company's foreign currency translation
adjustments, which prior to adoption were reported separately in
stockholders' equity, to be included in other comprehensive income. Total
comprehensive income for the six months ended June 30, 1998 and 1997
amounted to approximately $560,000 and $1,804,000, respectively, and is
included as a component of stockholders equity.
Note 6 - Commitments and Contingencies
The Company has commitments for future purchases of capital assets totaling
approximately $22 million at June 30, 1998.
During the second quarter ended June 30, 1998, the Company entered into
commitments to charter three dynamically positioned vessels with the first
charter beginning in August 1998. Two of the agreements provide purchase
options at the end of the charter. Each of the charters is for a three year
period with total payments under the charter agreements aggregating $25
million.
Legal Matters
In November 1996, a large oil and gas company 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 30, 1998.
In November 1997, an oilfield service company instituted litigation against
the Company in United States Federal Court in New Orleans, Louisiana seeking
damages on the basis of allegations that the Company had breached the terms
of a time-charter contract. The plaintiff leased to the Company a jack-up
derrick barge which had been reoutfitted by the company and which foundered
and sank on April 27, 1997 while performing a platform abandonment project.
The plaintiff alleges the losses incurred as a result of the barge's sinking
to be $13 million plus interest and costs, of which the Company had paid the
plaintiff insurance proceeds of $3 million. The plaintiff alleges the
losses to be in excess of the insured value of the barge. The plaintiff and
Company unsuccessfully attempted to mediate this matter. The Company
believes the barge's value was equal to its insured value and intends to
defend the claim vigorously, 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 30, 1998.
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.
Note 7 - Subsequent Event
On July 13, 1998, the Company entered into a loan agreement with Stolt Comex
for $15,000,000 to fund the Company's working capital needs and capital
expenditure requirements. The terms of the loan call for LIBOR plus 2.75%,
and repayment of the loan on October 12, 1998. The repayment of the loan is
secured by mortgages on two vessels and four remotely operated vehicles.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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, and
in conjunction with the Company's annual report on Form 10-K for the year
ended December 31, 1997.
On June 26, 1998, the Company entered into a definitive merger agreement
with Stolt Comex Seaway S.A. pursuant to which Stolt Comex Seaway will
acquire all of the outstanding common stock of Ceanic for $20.00 per share
in cash (the "SCS Acquisition"). The merger agreement is subject to
approval by Ceanic's shareholders and other conditions customary to
transactions of this type. The special shareholder meeting to consider
and approve the SCS Acquisition is scheduled for August 17, 1998 and
Ceanic expects the transaction to close promptly thereafter.
The following tables set forth, for the periods indicated, additional
information on the operating results of the Company in its geographic and
product markets:
Three Months Ended June 30, 1998
(dollar amounts in thousands)
----------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $21,374 $1,731 $3,554 $8,665 $6,404 $41,728
Expenses $13,021 $1,365 $2,979 $6,940 $3,983 $28,288
Gross profit $8,353 $ 366 $ 575 $1,725 $2,421 $13,440
Gross profit
percentage 39.1% 21.1% 16.2% 19.9% 37.8% 32.2%
Three Months Ended June 30, 1997<F1>
(dollar amounts in thousands)
-----------------------------------------------------------
(Unaudited)
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
Revenues $17,025 $ 298 $2,738 $3,823 $4,293 $28,177
Expenses $10,177 $ 153 $1,860 $3,021 $2,586 $17,797
Gross profit $6,848 $ 145 $ 878 $ 802 $1,707 $10,380
Gross profit
percentage 40.2% 48.7% 32.1% 21.0% 39.8% 36.8%
(F1) Certain amounts presented in the 1997 results of operations have been
reclassified to conform with the 1998 presentation.
(F2) Includes operations in the Company's Americas Region, which encompasses diving,
intervention technology, vessel and related services, all of which were
performed in the Gulf of Mexico.
(F3) Includes diving and related services in U.S. inland markets, off the U.S. West
Coast and in Latin America.
(F4) Includes manufacturing and marketing of Big Inch pipeline connectors, Tarpon
marginal well production systems, Tarpon Concrete Storage Systems and Ceanic
Hard Suits Inc. products.
</TABLE>
Six Months Ended June 30, 1998
(dollar amounts in thousands)
----------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $40,694 $2,845 $5,254 $15,811 $13,141 $77,745
Expenses $25,221 $2,491 $4,491 $13,116 $7,925 $53,244
Gross profit $15,473 $ 354 $ 763 $2,695 $5,216 $24,501
Gross profit
percentage 38.0% 12.4% 14.5% 17.0% 39.7% 31.5%
Six Months Ended June 30, 1997
(dollar amounts in thousands)<F1>
-------------------------------------------------
(Unaudited)
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
Revenues $30,486 $ 298 $5,579 $11,612 $8,778 $56,753
Expenses $20,234 $ 153 $3,467 $9,143 $5,122 $38,119
Gross profit $10,252 $ 145 $2,112 $2,469 $3,656 $18,634
Gross profit
percentage 33.6% 48.7% 37.9% 21.3% 41.6% 32.8%
(F1) Certain amounts presented in the 1997 results of operations have been
reclassified to conform with the 1998 presentation.
(F2) Includes operations in the Company's Americas Region, which encompasses diving,
intervention technology, vessel and related services, all of which were
performed in the Gulf of Mexico.
(F3) Includes diving and related services in U.S. inland markets, off the U.S. West
Coast and in Latin America.
(F4) Includes manufacturing and marketing of Big Inch pipeline connectors, Tarpon
marginal well production systems, Tarpon Concrete Storage Systems and Ceanic
Hard Suits Inc. products.
</TABLE>
Results of Operations
The Company experienced solid growth and profitability in the second quarter
ended June 30, 1998 with revenue increasing from $28.2 million in 1997 to
$41.7 million in the current quarter. Excluding the impact of $1.1 million
in pre-tax restructuring charges, net income would have been $1.8 million
for the current quarter compared to $1.6 million in the second quarter of
1997. Reported income, including the restructuring charges, was $1.1
million for the three months ended June 30, 1998.
For the six months ended June 30, 1998, revenue growth was also strong with
revenues increasing from $56.8 million to $77.7 million. Net income would
have been $2.4 million excluding the restructuring charges ($1.8 million
including the restructuring charges) compared to $1.9 million in the six
month period of 1997.
The results of operations for both the three and six months ended June 30,
1998 reflect the Company's emerging position as a deepwater intervention
technology provider. Demand for the Company's services in the Americas
Region has been significantly impacted by the addition in late 1997 of
several new deepwater assets including the American Defender, a 220-foot
dynamically positioned (DP) vessel, and several new remotely operated
vehicles (ROVs). At the same time, the Americas Region's core diving market
continued to grow.
The Products Division recorded strong sales in the three and six months
ended June 30, 1998. The Field Development Group completed the fabrication
and installation of a Tarpon Guyed Monotower in Indonesia. Hard Suits
completed its manufacturing of a HARDSUIT(TM) diving suit for delivery to
the Italian Navy and substantially completed work on its U.S. Navy
contracts. The Big Inch and Concrete Storage Divisions experienced
continued strong demand for their products in the first six months of 1998.
Despite a slow start in the first quarter 1998 results, the General
Contracting Division activity levels rebounded in the second quarter as a
result of a strong backlog and work beginning on several recently awarded
projects.
These generally strong operating results in the Company's domestic markets
have continued to be offset by lower than expected results from the
Company's international expansion strategy. However, in the second quarter
of 1998, activity and profitability levels in both West Africa and the Asia
Pacific Region increased over that of the first quarter of 1998. Management
continues to develop Ceanic's market presence in its international regions,
but is currently evaluating the cost structure of operations in those
regions in an effort to make them more cost effective.
Although selling, general and administrative expenses continue to increase
as the Company expands into deepwater Gulf of Mexico markets and certain
international markets, as a percentage of revenues, SG&A decreased from 21%
in the second quarter of 1997 to 17% in the second quarter of 1998. In
connection with an initiative to reduce SG&A, the Company recorded a
charge of approximately $1.1 million as a result of severance and
related costs associated with layoffs of approximately 30 persons, severance
arrangements for two executive officers and closure of four offices, as well
as costs incurred in connection with the pending sale of the Company to
Stolt Comex.
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.
During the six months ended June 30, 1998, the Company has made commitments
to add several DP vessels to its fleet over the course of 1998. The Company
committed to purchase the Ceanic Legend, a 240-foot DP vessel in the fourth
quarter of 1998. The Company also committed to three-year charters of the
Ceanic Invincible and the Ceanic Rover, two 234-foot DP vessels. Both
charter agreements provide purchase options at the end of the charter
period. Finally, the Company entered into a three-year charter beginning
August 1998 for the Kommandor 3000, a 313-foot multi-purpose construction
vessel. The owner of this vessel has notified the Company of its intention
to terminate the charter party as a result of the SCS Acquisition. The
Company disputes the basis of this termination.
On May 1, 1998, Rodney W. Stanley resigned as President and Chief Executive
Officer and director and Kevin C. Peterson was elected President and Chief
Executive Officer; Peterson has been with the Company for approximately one
year, serving as its Chief Operating Officer and director. Prior to joining
Ceanic, Peterson served in various capacities with the Coflexip-Stena
Offshore group, most recently as President and Chief Executive Officer of
Coflexip-Stena Offshore USA and Perry Tritech.
On April 16, 1998, the Company's Chief Financial Officer, Cathy M. Green,
resigned her position and Bradley M. Parro was appointed as the Company's
new Vice President-Finance and Chief Financial Officer. Parro has
approximately 18 years of financial management experience. Parro served as
CFO of Perry Tritech, an international subsea robotics manufacturer and
subsidiary of Coflexip-Stena for the past seven years. Prior to Perry,
Parro served in various financial management capacities with a large
telecommunications manufacturer including manager of financial planning and
analysis. Parro graduated from the University of Illinois with a Bachelor
of Science in Finance and earned an MBA from Loyola University of Chicago.
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30,
1997
Revenues. The Company's consolidated revenues increased $13.5 million, or
48%, from $28.2 million for the three months ended June 30, 1997 to $41.7
million for the current quarter. The increase was primarily attributable to
increased demand in the Americas Region for the Company's services related
to its newly acquired deepwater ROVs and vessels as well as its core
diving business. The Company also experienced increased activity for
its General Contracting Division and increased demand for its subsea
products in the second quarter of 1998.
Diving and related expenses. The Company's consolidated diving and related
expenses increased $10.5 million, or 59%, from $17.8 million for the three
months ended June 30, 1997 to $28.3 million for the current three-month
period. The increase was primarily attributable to the increased activity
levels of the Americas Region, and General Contracting and Subsea Products
divisions, as discussed above.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.4 million or 24%, to $7.2 million
during the second quarter of 1998, compared to $5.8 million for the same
period of 1997. The increase was primarily attributable to the Company's
international expansion into Southeast Asia and Europe, coupled with
supporting the increased activity levels and deepwater management
infrastructure in the Americas Region.
Beginning in 1998, the Company began classifying certain costs that had
previously been presented in selling, general and administrative expenses
into direct expenses to better report the nature of the expenses. Amounts
totaling approximately $500,000 presented in the statement of operations for
the three months ended June 30, 1997 have been reclassified to conform with
this presentation.
Depreciation and amortization. Depreciation and amortization increased
$820,000 or 36%, to $3.1 million for the second quarter of 1998, compared to
$2.3 million for the second quarter of 1997 primarily due to capital
expenditures made in 1997 for ROV's, diving equipment, a dynamically
positioned vessel and upgrades to other vessels in the Gulf of Mexico.
Depreciation and amortization also increased as a result of assets acquired
for the Company's new operation in Southeast Asia and expansion of its
Europe Africa region.
Restructuring charges. In connection with an initiative to reduce SG&A, the
Company recorded charge of approximately $1.1 million in the three month
period ended June 30, 1998 as a result of severance and related
costs associated with layoffs of approximately 30 persons, severance
arrangements for two executive officers and closure of four offices, as well
as costs incurred in connection with the pending sale of the Company to
Stolt Comex Seaway S.A.
Other expense. During the current quarter, other expense (net) of $23,000
was comprised of interest expense of $389,000, partially offset by a gain on
the disposal of assets of $362,000 and other income of $4,000. This
compares to other income (net) of $537,000 for the comparable period of
1997, which 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.
Net income. As a result of the factors discussed above, the Company
recorded net income of $1.1 million, or $.11 per share (basic and diluted)
on 10.6 million weighted average common shares for the three months ended
June 30, 1998, compared to net income of $1.6 million, or $.16 per share
(basic and diluted) on 10.5 million weighted average common shares for the
same period of 1997.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Revenues. The Company's consolidated revenues increased $20.9 million, or
37%, from $56.8 million for the six months ended June 30, 1997 to $77.7
million for the current six month period. The increase was primarily
attributable to increased demand in the Americas Region for the Company's
services related to its newly acquired deepwater ROVs and vessels as well as
its core diving business. The Company also experienced increased activity
for its General Contracting Division and increased demand for its
subsea products in the six months
ended June 30, 1998.
Diving and related expenses. The Company's consolidated diving and related
expenses increased $15.1 million, or 40%, from $38.1 million for the six
months ended June 30, 1997 to $53.2 million for the current six-month
period. The increase was primarily attributable to the increased activity
levels of the Americas Region, and General Contracting and Subsea Products
divisions, as discussed above.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased $2.7 million or 24%, to $13.8 million
during the six months ended June 30, 1998, compared to $11.1 million for the
same period of 1997. The increase was primarily attributable to the
Company's international expansion into Southeast Asia and Europe, coupled
with supporting the increased activity levels and deepwater management
infrastructure in the Americas Region.
Beginning in 1998, the Company began classifying certain costs that had
previously been presented in selling, general and administrative expenses
into direct expenses to better report the nature of the expenses. Amounts
totaling approximately $1,000,000 presented in the statement of operations
for the six months ended June 30, 1997 have been reclassified to conform
with this presentation.
Depreciation and amortization. Depreciation and amortization increased $1.5
million or 33%, to $6.1 million for the six months ended June 30, 1998,
compared to $4.6 million for the same period of 1997 primarily due to
capital expenditures made in 1997 for ROV's, diving equipment, a dynamically
positioned vessel and upgrades to other vessels in the Gulf of Mexico.
Depreciation and amortization also increased as a result of assets acquired
for the Company's new operation in Southeast Asia and expansion of its
Europe Africa region.
Restructuring charges. In connection with an initiative to reduce SG&A, the
Company recorded a charge of approximately $1.1 million in the six month
period ended June 30, 1998 as a result of severance and related
costs associated with layoffs of approximately 30 persons, severance
arrangements for two executive officers and closure of four offices, as well
as costs incurred in connection with the pending sale of the Company to
Stolt Comex Seaway S.A.
Other expense. During the current six-month period, other expense (net) of
$467,000 was comprised of interest expense of $943,000, partially offset by
a gain on the disposal of assets of $446,000 and other income of $30,000.
This compares to other income (net) of $332,000 for the comparable period of
1997, which 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.
Net income. As a result of the factors discussed above, the Company
recorded net income of $1.8 million, or $.17 per share (basic and diluted)
on 10.6 million weighted average common shares for the six months ended
June 30, 1998, compared to net income of $1.9 million, or $.19 per share
(basic and diluted) on 9.7 million weighted average common shares for the same
period of 1997.
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, its DSVs, diving and related equipment,
and other capital 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, including
the approximately 30 days required to invoice completed projects. The
Company has traditionally supported these working capital requirements by
using a combination of internally generated funds and short-term and long-
term debt.
The Company has a revolving line of credit agreement with a bank at the
prime rate that is limited and secured by eligible accounts receivable up to
a maximum borrowing of $25 million. The agreement expired on April 30,
1998, was extended until July 31, 1998 and was subsequently extended to
October 31, 1998. At August 13, 1998, the balance outstanding under the
line was $12.8 million and, based on eligible accounts receivable at that
time, the remaining balance available to borrow was $6.6 million.
On July 13, 1998, the Company entered into a loan agreement with Stolt Comex
for $15 million to fund the Company's working capital needs and capital
expenditure requirements. The terms of the loan call for LIBOR plus 2.75%,
and repayment of the loan on October 12, 1998. The debt is secured by two
vessels and four ROVs.
The Company has a long-term note with a bank at a fixed interest rate of
7.9%. At June 30, 1998 the outstanding principal balance of the note was
$7,375,000. 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, 1998, the Company has various government assistance notes
which are non-interest bearing, unsecured and are payable in various
installments through July 1999.
During 1998, the Company has made certain commitments, both in terms of
capital expenditures as well as long-term charters agreements, for the
addition of remotely operated vehicles and four dynamically positioned
vessels that will require significant amounts of liquidity and capital
resources. The charter agreements call for aggregate payments of $25
million over a three year period and the purchase commitments are
approximately $22 million at June 30, 1998. Although the Company does not
have firm arrangements in place at this time for its long-term financing
needs, and the existing line of credit facility is in the process of being
renewed, the Company believes that it will be able to finalize its overall
financing arrangements in the near term and that such financing, coupled
with cash flows from operations and other sources, will provide sufficient
funds to meet its working capital and capital expenditure requirements for
1998.
Net cash provided by operating activities was $7.2 million for the three
months ended June 30, 1998 compared to $3.9 million used 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 $8.4 million, which consisted mainly of $9.1
million expended for the acquisition of and improvements to operating
assets, partially offset by proceeds of $481,000 received from the disposal
of assets and a decrease of $236,000 in other assets. For the same three
month period of the prior year, net cash used by investing activities was
approximately $9.8 million, which consisted primarily of $11.3 million
expended for the acquisition of and improvements to operating assets and
$804,000 for other assets, partially offset by proceeds of $2.4 million
received from the disposal of assets.
Cash flows provided by financing activities were approximately $2.0 million
for the three months ended June 30, 1998, primarily attributable to net
borrowings of $2.1 million on the line of credit agreement and proceeds from
the issuance of common stock from employee stock option exercises of
$393,000, partially offset by repayments of $496,000 on term debt. For the
same three months of 1997, cash used by financing activities of
approximately $397,000 was attributable to payments on term debt of
$483,000, offset by proceeds of $86,000 from issuance of the Company's
common stock from employee stock option exercises.
Net cash provided by operating activities was $8.5 million for the six
months ended June 30, 1998 compared to $1.8 million used 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 $16.5 million, which consisted mainly of $18.2 million
expended for the acquisition of and improvements to operating assets,
partially offset by proceeds of $1.0 million received from the disposal of
assets and a decrease of $613,000 in other assets. For the same six month
period of the prior year, net cash used by investing activities was
approximately $12.4 million, which consisted primarily of $13.7 million
expended for the acquisition of and improvements to operating assets and
$1.1 million for other assets, partially offset by proceeds of $2.4 million
received from the disposal of assets.
Cash flows provided by financing activities were approximately $8.7 million
for the six months ended June 30, 1998, primarily attributable to net
borrowings of $9.2 million on the line of credit agreement and proceeds from
the issuance of common stock from employee stock option exercises of
$396,000, partially offset by repayments of $943,000 on term debt. For the
same six months of 1997, cash provided by financing activities of
approximately $26.1 million was attributable to proceeds of $40.5 million
from issuance of the Company's common stock, offset by payments on term debt
of $1.9 million and on the line of credit agreement of $12.6 million.
Impact of the Year 2000
The Company has assessed and continues to assess the impact of the Year
2000 on its reporting systems and operations. The year 2000 issue is the
result of computer programs being written using two digits rather than four
to define the applicable year. Any of the Company's computer programs that
have date-sensitive software may recognize a date using "00" as the year
1900 rather than the year 2000. This could potentially result in a system
failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in other similar normal business activities.
The Company had planned, independent of Year 2000 concerns, to implement
new computer accounting and management information software to increase
operational efficiencies and information analysis and, to that end,
purchased software and committed to implement the software over the course
of early 1998 to mid 1999. The Company believes that, with the
implementation of this new software, most or all Year 2000 issues should be
resolved for the Company's accounting and management systems. The Company
believes, at this time, that the cost of the implementation of the new
software will not have a material adverse effect on the Company's
consolidated financial position or results of operations. Although the
Company is still assessing the impact of the Year 2000 issue on its other
operating systems, at this time the Company believes it will not have a
material impact on the Company's financial position or results of operations.
The Company has not yet initiated formal communications with all of its
significant suppliers and vendors to ensure that those parties have
appropriate plans to address year 2000 issues where they may otherwise
impact the operations of the Company; however, the Company does not have any
significant suppliers or vendors that directly interface with the Company's
information technology systems. There is no guarantee that the systems of
other companies on which the Company relies will be converted timely and
will not have an adverse effect on the Company.
New Accounting Pronouncement
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up
Activities," which requires that start-up costs, including organization
costs, be expensed as incurred. The Company plans to adopt SOP 98-5 for the
year ended December 31, 1999. The Company is currently evaluating the
impact of this statement on its financial position and results of
operations.
PART II. OTHER INFORMATION
Item 6.Exhibits and Reports on Form 8-K.
(a)Exhibits
27.1 Financial Data Schedule
99.1 Press Release dated June 30, 1998 regarding the execution of
the merger agreement between Stolt Comex Seaway, S.A. and
Ceanic Corporation relating to SCS's acquisition of Ceanic for
$20 per share cash.
99.2 Press Release dated August 6, 1998 regarding Ceanic's profitable
1998 second quarter.
(b)Reports on Form 8-K
Date of Report Item Reported:
May 14, 1998 Item 5 announcing Ceanic's 1998
first quarter earnings and other
matters.
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.
CEANIC CORPORATION
Date: August 13, 1998 /s/ Bradley M. Parro
______________________________
Bradley M. Parro
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
STATMENTS FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,997
<SECURITIES> 0
<RECEIVABLES> 35,668
<ALLOWANCES> 757
<INVENTORY> 7,321
<CURRENT-ASSETS> 72,795
<PP&E> 75,701
<DEPRECIATION> 30,414
<TOTAL-ASSETS> 162,915
<CURRENT-LIABILITIES> 58,389
<BONDS> 0
0
0
<COMMON> 1,828
<OTHER-SE> 89,430
<TOTAL-LIABILITY-AND-EQUITY> 162,915
<SALES> 41,728
<TOTAL-REVENUES> 41,728
<CGS> 28,288
<TOTAL-COSTS> 39,684
<OTHER-EXPENSES> 23
<LOSS-PROVISION> 221
<INTEREST-EXPENSE> 389
<INCOME-PRETAX> 2,021
<INCOME-TAX> 875
<INCOME-CONTINUING> 1,146
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,146
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
EXHIBIT 99.1
NEWS RELEASE
For further information contact:
Kevin C. Peterson
Ceanic Corporation
Chief Executive Officer
(713) 430-1100
FOR IMMEDIATE RELEASE
TUESDAY, JUNE 30, 1998
STOLT COMEX SEAWAY AND CEANIC ANNOUNCE EXECUTION
OF MERGER AGREEMENT RELATING TO SCS'S ACQUISTION
OF CEANIC FOR $20 PER SHARE CASH
Houston, Texas - June 29, 1998 - Stolt Comex Seaway S.A. (NASDAQ: SCSWF;
OSE: SCS) and Ceanic Corporation (NASDAQ: DIVE) today jointly announced
the signing of a merger agreement for Stolt Comex Seaway to acquire all of
the outstanding common stock of Ceanic for $20 per share in cash, or about
$222 million. The two companies announced the execution of a letter of
intent related to the combination transaction earlier this month.
The merger agreement is subject to Ceanic shareholder approval and
conditions customary to transactions of this type, including governmental
approval, and includes a termination fee. Due diligence has generally been
completed and Ceanic expects the transaction to close as early as mid-August
1998.
Stolt Comex Seaway is a leading subsea contractor to the oil and gas
industry, specializing in technologically sophisticated subsea engineering,
flowline lay, construction, inspection and maintenance services. The
company operates in Europe, the Middle East, West Africa, Asia Pacific, and
the Americas.
Ceanic is a leading provider of diving services, intervention
technologies, subsea products, field development, general contracting and
marine construction services to offshore, governmental and industrial
customers in the U.S. and internationally.
This news release contains forward looking statements as defined in the
U.S. Private Securities Litigation Reform Act of 1995. Actual future
results and trends could differ materially from those set forth in such
statements due to various factors. Additional information concerning these
factors is contained from time to time in Stolt Comex Seaway's and Ceanic's
U.S. SEC filings, including but not limited to Stolt Comex Seaway's report
on form 20-F for the year ended November 30, 1997 and Ceanic's Annual Report
on Form 10-K for the fiscal year ended December 30, 1997, respectively.
Copies of these filings may be obtained by contacting the Companies or the
SEC.
# # # #
EXHIBIT 99.2
NEWS RELEASE
For further information contact:
Kevin C. Peterson Bradley M. Parro
Chief Executive Officer Chief Financial Officer
(713) 430-1100 (713) 430-1100
FOR IMMEDIATE RELEASE
THURSDAY, AUGUST 6, 1998
CEANIC ANNOUNCES PROFITABLE 1998 SECOND QUARTER
Houston, Texas - Ceanic Corporation (NASDAQ: DIVE) today announced revenue
of $41.7 million and net income of $1.8 million ($0.17 per share) for the
second quarter ended June 30, 1998 compared with revenue of $28.2 million
and net income of $1.6 million ($0.16 per share) for the same period a year
ago. However, as a result of approximately $1.1 million in non-recurring,
pre-tax restructuring charges, the Company reported net income of $1.1
million or $0.11 per share.
For the six months ended June 30, 1998, net income was $2.4 million ($0.22
per share) on revenue of $77.7 million, compared to net income of $1.9
million ($0.19 per share) on revenue of $56.8 million for the six months
ended June 30, 1997. However, as a result of the non-recurring charges, the
Company reported net income of $1.8 million or $0.17 per share.
"We are pleased with our second quarter results and note our deepwater
intervention technology strategy is providing solid returns," said Kevin
Peterson, Ceanic's President and CEO. "Our Americas Region is particularly
busy and profitable, exceeding even our own internal expectations, which
unfortunately, is partially offset by lower than expected results from our
international expansion strategy. Moreover, in spite of weaker oil prices,
our activity levels in the Gulf have remained high."
Revenue increased by $13.6 million or 48% primarily due to increased
demand in the Americas Region for the Company's services related to its
newly acquired deepwater ROVs and vessels. Ceanic also experienced
increased activity in its General Contracting Division and increased demand
for its subsea products in the second quarter of 1998.
Ceanic's gross profit margins decreased from 36.8% in the second quarter
of 1997 to 32.2% in the current quarter primarily as a result of lower
margins in its international regions and Subsea Products Division.
Ceanic's SG&A increased 25% to $7.2 million in the second quarter of 1998
compared to $5.8 million for the prior year quarter primarily due to the
Company's international expansion into Southeast Asia and Europe, coupled
with supporting the increased activity levels in the Americas Region.
However, as a percentage of revenue, SG&A for the second quarter decreased
to 17%, down from 21% for the same period of last year and down from 18% in
the first quarter of 1998. In connection with its previously announced SG&A
reduction initiative completed in July 1998, the Company recorded a non-
recurring charge of approximately $1.1 million as a result of severance and
related costs associated with layoffs of approximately 30 persons, severance
arrangements for two executive officers and closure of four offices, as well
as costs incurred in connection with the pending sale of the Company to
Stolt Comex Seaway S.A. The SG&A initiative is expected to reduce the
Company's annualized SG&A run rate by approximately 15% which is expected to
be realized in the 1998 third quarter.
Ceanic's depreciation and amortization expense increased 36% to $3.1
million for the second quarter of 1998 compared to $2.3 million in the
second quarter of 1997. This increase is primarily attributable to capital
expenditures made in 1997 for additions to the Company's product and service
offerings, particularly in the deepwater Gulf of Mexico market.
As previously announced, Stolt Comex Seaway S.A. and Ceanic have executed
a definitive merger agreement pursuant to which Stolt Comex Seaway will
acquire all of the outstanding common stock of Ceanic for $20.00 per share
in cash. The merger agreement is subject to approval by Ceanic's
shareholders and other conditions customary to transactions of this type.
The special shareholder meeting to consider and approve the merger is
scheduled for August 17, 1998 and Ceanic expects the transaction to close
promptly thereafter.
Regional Review/Outlook
Americas Region
Ceanic's Americas Region continued to experience strong operating results
in the second quarter of 1998 with revenues increasing by $4.3 million or
26% over the prior year quarter and overall gross profit margins remaining
stable from period to period. The most significant activity increases came
from the utilization of deepwater ROVs and vessels which include the
American Defender, a 220 foot dynamically positioned vessel placed in
service in late 1997, as well as the growth of the Company's core diving
business.
Asia Pacific Region
Although both activity and profitability of this region have steadily
improved in the second quarter of 1998 compared to earlier in the year,
management is disappointed by the region's results and continues to evaluate
its market presence in this Asia Pacific Region.
Europe Africa Region
In the second quarter of 1998, activity in West Africa increased over that
of the first few months of 1998 as well as the second quarter of 1997;
however, results were well below Ceanic's expectations. The Aberdeen office
did not contribute to the 1998 second quarter results due to a lack of
marketable assets; however, two ROVs have been deployed to this region to
pursue available opportunities.
General Contracting Division
As a result of a strong backlog and work beginning on several recently
awarded projects, Ceanic's General Contracting Division experienced strong
second quarter results with revenues increasing 127% from $3.8 million in
the second quarter of 1997 to $8.7 million in the second quarter of 1998.
Gross profit percentages remained stable from period to period.
Subsea Products
Ceanic's Products Division experienced strong sales in the second quarter
of 1998. The Field Development group completed the installation of a Tarpon
Guyed Monotower in Indonesia. Hard Suits completed its manufacturing of a
HARDSUIT(TM) diving suit for delivery to the Italian Navy and continued
progress on U.S. Navy contracts. The Big Inch and Concrete Storage
Divisions continued to experience strong demand for their products.
Statements in this press release regarding profitability of the Company in
general; utilization and dayrates in the Gulf of Mexico; opportunities in
the General Contracting, Asia Pacific and Europe Africa markets; and other
statements included herein that are not statements of historical fact are
forward-looking statements involving factors that could cause actual results
to vary materially from those predicted. Other forward-looking statements,
including statements as to the Company's profitability, depend upon, among
other things, prices of crude oil and natural gas, weather conditions in
offshore markets, capital expenditures by customers and the Company's
ability to procure large turnkey projects.
Ceanic is a leading provider of diving services, intervention
technologies, subsea products, field development, general contracting and
marine construction services to offshore, governmental and industrial
customers in the U.S. and internationally.
Tables follow . . .
CEANIC CORPORATION
Consolidated Results of Operations and Financial Position
($ in thousands except for per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
Income Statement 1998 1997(F1) 1998 1997(F1)
---- ----- ---- ----
Revenues $41,728 $28,177 $77,745 $56,753
Gross profit 13,440 10,380 24,501 18,634
Selling, general and administrative
expenses 7,247 5,782 13,765 11,117
Depreciation and amortization 3,078 2,258 6,075 4,576
Restructuring charges 1,071 - 1,071 -
-------- -------- ------- --------
Operating income 2,044 2,340 3,590 2,941
Other income (expense), net (23) 537 (467) 332
-------- -------- ------- --------
Income before income taxes 2,021 2,877 3,123 3,273
Income tax provision 875 1,235 1,350 1,405
Net income $1,146 $1,642 $ 1,773 $1,868
====== ====== ======= ======
Net income per share $ .11 $ .16 $ .17 $ .19
====== ====== ======= ======
Weighted average shares outstanding 10,646 10,516 10,643 9,707
====== ======= ======= ======
Operational Data
Dive crew days 13,112 12,284 23,530 23,809
Dive crews per day 144 135 130 132
Diving support vessel utilization 44% 54% 44% 51%
Earnings before interest, taxes,
depreciation and
amortization (EBITDA) $5,122 $4,598 $9,665 $7,517
EBITDA as % of revenue 12.3% 16.3% 12.4% 13.2%
SG&A as % of revenue 17.4% 20.5% 17.7% 19.6%
Gross profit % 32.2% 36.8% 31.5% 2.8%
June 30, December 31,
Balance Sheet 1998 1997
------- ------
Assets:
Current assets $72,795 $55,286
Other long-term assets 90,120 79,014
--------- ---------
Total assets $162,915 $134,300
========= =========
Liabilities & Stockholders' Equity:
Current liabilities $58,389 $29,698
Long-term debt 7,252 $8,060
Other liabilities 6,016 6,291
Stockholders' equity 91,258 90,251
--------- ---------
Total liabilities & stockholders equity $162,915 $134,300
========== =========
<F1> Certain amounts presented in the results of operations for the three
and six months ended June 30, 1997 have been reclassified to conform with
the 1998 presentation.
More...
Three Months Ended June 30, 1998
(dollar amounts in thousands)
----------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $21,374 $1,731 $3,554 $8,665 $6,404 $41,728
Expenses $13,021 $1,365 $2,979 $6,940 $3,983 $28,288
Gross profit $8,353 $ 366 $ 575 $1,725 $2,421 $13,440
Gross profit
percentage 39.1% 21.1% 16.2% 19.9% 37.8% 32.2%
Three Months Ended June 30, 1997<F1>
(dollar amounts in thousands)
-----------------------------------------------------------
(Unaudited)
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
Revenues $17,025 $ 298 $2,738 $3,823 $4,293 $28,177
Expenses $10,177 $ 153 $1,860 $3,021 $2,586 $17,797
Gross profit $6,848 $ 145 $ 878 $ 802 $1,707 $10,380
Gross profit
percentage 40.2% 48.7% 32.1% 21.0% 39.8% 36.8%
<F1> Certain amounts presented in the 1997 results of operations have been
reclassified to conform with the 1998 presentation.
<F2> Includes operations in the Company's Americas Region, which encompasses diving,
intervention technology, vessel and related services, all of which were
performed in the Gulf of Mexico.
<F3> Includes diving and related services in U.S. inland markets, off the U.S. West
Coast and in Latin America.
<F4> Includes manufacturing and marketing of Big Inch pipeline connectors, Tarpon
marginal well production systems, Tarpon Concrete Storage Systems and Ceanic
Hard Suits Inc. products.
</TABLE>
Six Months Ended June 30, 1998
(dollar amounts in thousands)
----------------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Revenues $40,694 $2,845 $5,254 $15,811 $13,141 $77,745
Expenses $25,221 $2,491 $4,491 $13,116 $7,925 $53,244
Gross profit $15,473 $ 354 $ 763 $2,695 $5,216 $24,501
Gross profit
percentage 38.0% 12.4% 14.5% 17.0% 39.7% 31.5%
Six Months Ended June 30, 1997
(dollar amounts in thousands)<F1>
-------------------------------------------------
(Unaudited)
Asia Europe
Americas Pacific Africa General Subsea
Region<F2> Region Region Contracting<F3>Products<F4> Total
-------- ------- ------ ----------- --------- -----
Revenues $30,486 $ 298 $5,579 $11,612 $8,778 $56,753
Expenses $20,234 $ 153 $3,467 $9,143 $5,122 $38,119
Gross profit $10,252 $ 145 $2,112 $2,469 $3,656 $18,634
Gross profit
percentage 33.6% 48.7% 37.9% 21.3% 41.6% 32.8%
(F1) Certain amounts presented in the 1997 results of operations have been
reclassified to conform with the 1998 presentation.
(F2) Includes operations in the Company's Americas Region, which encompasses diving,
intervention technology, vessel and related services, all of which were
performed in the Gulf of Mexico.
(F3) Includes diving and related services in U.S. inland markets, off the U.S. West
Coast and in Latin America.
(F4) Includes manufacturing and marketing of Big Inch pipeline connectors, Tarpon
marginal well production systems, Tarpon Concrete Storage Systems and Ceanic
Hard Suits Inc. products.
</TABLE>
