<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A-1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 30, 1994
TIDEWATER INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in it charter)
DELAWARE 1-6311 72-0487776
- --------------------------------------------------------------------------------
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification
Incorporation) Number)
1440 Canal Street, Suite 2100, New Orleans, Louisiana 70112
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 568-1010
--------------
NOT APPLICABLE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
================================================================================
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On November 30, 1994, Tidewater Inc. completed its acquisition of the
natural gas compression assets (the "Assets") of Halliburton Company and
Halliburton Canada Inc. (hereinafter collectively referred to as
"Halliburton"). The Assets were acquired by Tidewater Inc.'s wholly-owned
subsidiary, Tidewater Compression Service, Inc. (hereinafter together with
Tidewater Inc. collectively referred to as the "Company"). The purchase price
paid by the Company was approximately $205 million which is subject to
adjustment based on a final balance sheet prepared as of the closing date.
Consideration for the acquisition was arrived at by arms-length negotiations
between the Company and Halliburton.
The terms and conditions of the acquisition are set forth in full in
the Purchase and Sale Agreement dated October 18, 1994 by and between the
Company and Halliburton, which was filed as Exhibit 10 to Tidewater Inc.'s
Report on Form 10-Q for the quarterly period ended September 30, 1994 and is
incorporated herein by reference.
The tangible assets acquired as a result of the merger primarily
consisted of 1,545 natural gas compressor units with a combined horsepower of
approximately 235,300. Prior to the closing date of the acquisition, the
compressors were principally used by Halliburton to provide natural gas
compression services to customers in the production of oil and gas. The
existing agreements entered into by Halliburton for the rental of these
compressors have been assumed by the Company who will carry out their terms.
The Company intends to continue to devote the use of the compressors to the
purpose for which they had been used prior to the closing date of the
acquisition.
With the completion of the acquisition of the Halliburton Assets, the
Company will own and operate approximately 2,900 natural gas compressors with a
combined horsepower of approximately 480,000. The Company believes that the
acquisition provides an opportunity to realize significant and substantial
growth due to the size of the Halliburton fleet, the type of equipment, the
existing customer profile, and the geographic distribution of operations.
The source of the funds used for the acquisition consisted of working
capital and borrowing of $150 million under a Revolving Credit and Term Loan
Agreement among Tidewater Inc. and certain of its domestic subsidiaries, as
borrowers, and First National Bank of Commerce, The First National Bank of
Boston, Texas Commerce Bank National Association, AmSouth Bank of Alabama,
Whitney National Bank, Hibernia National Bank, and Premier Bank National
Association, as lenders.
There is no material relationship between Halliburton, its affiliates,
directors or officers and the Company, its affiliates, directors or officers.
After the closing of the acquisition, certain employees of the Compression
Services Division of Halliburton were offered and accepted employment by the
Company.
Item 7 below contains a list of certain exhibits required to be filed
with respect to the Halliburton Assets.
-2-
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial statements of businesses acquired.
(1) Audited statement of assets, liabilities and parent
company investment of Halliburton Compression
Services (an operating division of Halliburton
Company) as of November 30, 1994, and the related
statements of income and expense, changes in parent
company investment, and cash flows for the 11 months
ended November 30, 1994, including the notes thereto
and the related report of Arthur Andersen L.L.P.
(2) Audited statements of assets, liabilities and parent
company investment of Halliburton Compression
Services (an operating division of Halliburton
Company) as of June 30, 1994 and December 31, 1993
and 1992, and the related statements of income and
expense, changes in parent company investment, and
cash flows for the six months ended June 30, 1994,
and each of the three years in the period ended
December 31, 1993, including the notes thereto and
the related report of Arthur Andersen L.L.P.
(b) Pro forma financial information.
(1) Unaudited Pro Forma Condensed Combined Balance Sheet
of Tidewater Inc. (the "Company") as of September 30,
1994, including the notes thereto.
(2) Unaudited Pro Forma Condensed Combined Statements of
Earnings of the Company for the year ended March 31,
1994 and for the six months ended September 30, 1994,
including the notes thereto.
(c) Exhibits.
10(a) $250 Million Revolving Credit and Term Loan Agreement
(filed with the Commission as Exhibit 10(a) to the
Company's report on Form 8-K for November 30, 1994).
23 Consent of Indpendent Public Accountants.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TIDEWATER INC.
------------------------------------
(Registrant)
Date: January 20, 1995 /s/ Ken C. Tamblyn
------------------------------------
Ken C. Tamblyn
Executive Vice President and
Chief Financial Officer
-3-
<PAGE> 4
INDEX TO FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION,
AND EXHIBITS
FINANCIAL STATEMENTS.
(1) Audited statement of assets, liabilities and parent company investment
of Halliburton Compression Services (an operating division of
Halliburton Company) as of November 30, 1994, and the related
statements of income and expense, changes in parent company
investment, and cash flows for the 11 months ended November 30, 1994,
including the notes thereto and the related report of Arthur Andersen
L.L.P.
(2) Audited statements of assets, liabilities and parent company
investment of Halliburton Compression Services (an operating division
of Halliburton Company) as of June 30, 1994 and December 31, 1993 and
1992, and the related statements of income and expense, changes in
parent company investment, and cash flows for the six months ended
June 30, 1994, and each of the three years in the period ended
December 31, 1993, including the notes thereto and the related report
of Arthur Andersen L.L.P.
PRO FORMA FINANCIAL INFORMATION.
(1) Unaudited Pro Forma Condensed Combined Balance Sheet of Tidewater Inc.
(the "Company") as of September 30, 1994, including the notes thereto.
(2) Unaudited Pro Forma Condensed Combined Statements of Earnings of the
Company for the year ended March 31, 1994 and for the six months ended
September 30, 1994, including the notes thereto.
EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10(a) $250 Million Revolving Credit and Term Loan
Agreement (filed with the Commission as
Exhibit 10(a) to the Company's report on
Form 8-K for November 30, 1994).
23 Consent of Independent Public Accountants
</TABLE>
-4-
<PAGE> 5
Tidewater Inc.
Unaudited Pro Forma Condensed Combined Financial Statements
INTRODUCTION
The following unaudited pro forma condensed combined financial statements give
effect to the November 30, 1994 acquisition of the natural gas compression
assets of Halliburton Company and Halliburton Canada Inc. (hereinafter
collectively referred to as "Halliburton") and the September 30, 1994
acquisition of the assets of Brazos Gas Compressing Company, a subsidiary of
Mitchell Energy & Development Corp. (hereinafter referred to as "Brazos") (the
"Acquisitions").
The unaudited pro forma condensed combined financial statements should be read
in conjunction with the historical financial statements of Tidewater Inc. and
subsidiaries and Halliburton and notes thereto. This pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the results which actually would have been obtained if the Acquisitions had
been effected on the pro forma dates, nor is it necessarily indicative of
future results.
The unaudited pro forma condensed combined financial statements are based upon
the purchase method of accounting for the Acquisitions. The Unaudited Pro
Forma Condensed Combined Statements of Earnings for the year ended March 31,
1994 and for the six months ended September 30, 1994 assume that the
Acquisitions were effected on April 1, 1993. The Unaudited Pro Forma Condensed
Combined Balance Sheet as of September 30, 1994 assumes that the Acquisitions
were effected on that date. Since the Halliburton transaction consists of the
acquisition of only certain assets of the entity, the effects of that
acquisition (allocation of purchase price) are reflected as pro forma
adjustments on the Unaudited Pro Forma Condensed Combined Balance Sheet at
September 30, 1994. The Brazos transaction closed on September 30, 1994;
therefore, the assets acquired in the transaction are included in the balances
of Tidewater Inc. and subsidiaries on the Unaudited Pro Forma Condensed
Combined Balance Sheet at September 30, 1994.
The Unaudited Pro Forma Condensed Combined Statements of Earnings have been
compiled from the following:
- Tidewater Inc. audited Consolidated Statement of Earnings for
the year ended March 31, 1994.
- Tidewater Inc. unaudited Consolidated Statement of Earnings
for the six months ended September 30, 1994.
- Halliburton audited statements of income and expense for the
year ended December 31, 1993.
- Halliburton unaudited statement of income and expense for the
six months ended September 30, 1994.
-5-
<PAGE> 6
- Brazos unaudited statements of operating earnings for the year
ended January 31, 1994 and the six months ended September 30,
1994.
Tidewater's fiscal year end is March 31, while Halliburton's is December 31,
and Brazos' is January 31. The Unaudited Pro Forma Condensed Combined
Statement of Earnings for the year ended March 31, 1994 includes, for
Halliburton, audited financial information for the 12 months ended December 31,
1993 and, for Brazos, unaudited financial information for the 12 months ended
January 31, 1994. During the period from each company's respective fiscal year
end to March 31, 1994, revenues of Halliburton and Brazos totaled approximately
$15.9 million. The Unaudited Pro Forma Condensed Combined Statement of
Earnings for the six months ended September 30, 1994 includes results of each
entity for the six months ended September 30, 1994.
PURCHASE PRICE
The cash purchase price paid by the Company for Halliburton's natural gas
compression assets was approximately $205 million, which is subject to
adjustment based upon a final balance sheet prepared as of the November 30,
1994 closing date. The source of the funds used for this acquisition consisted
of $55 million from cash balances and borrowings of $150 million under a
Revolving Credit and Term Loan Agreement with a group of banks.
The $35 million cash purchase price paid by the Company for Brazos' natural gas
compression assets was funded from existing cash balances. Separate financial
statements of Brazos are not included herein as the transaction is not
considered a significant business combination. As previously described,
historical financial information of Brazos is included in the unaudited pro
forma condensed combined financial statements.
-6-
<PAGE> 7
TIDEWATER INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1994 - UNAUDITED
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Tidewater Adjustments (a) Combined
---------- -------------- ---------
(thousands of dollars)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash, including temporary cash investments $ 64,955 (55,000) 9,955
Trade and other receivables 140,015 5,640 145,655
Inventories 39,952 1,354 41,306
Other current assets 9,430 --- 9,430
---------- --------- ---------
Total current assets 254,352 (48,006) 206,346
---------- --------- ---------
Investments in and advances to unconsolidated
companies 21,033 --- 21,033
Properties and equipment 1,325,890 173,006 1,498,896
Less accumulated depreciation 866,160 --- 866,160
---------- --------- ---------
Net properties and equipment 459,730 173,006 632,736
Other assets 48,979 25,000 73,979
---------- --------- ---------
$ 784,094 150,000 934,094
========== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt 2,391 12,000 14,391
Accounts payable and accrued expenses 74,062 --- 74,062
Income taxes 10,288 --- 10,288
---------- --------- ---------
Total current liabilities 86,741 12,000 98,741
---------- --------- ---------
Deferred income taxes 47,358 --- 47,358
Long-term debt 1,053 138,000 139,053
Accrued property and liability losses 33,335 --- 33,335
Other liabilities and deferred credits 42,108 --- 42,108
Stockholders' equity:
Common stock 5,310 --- 5,310
Additional paid-in capital 332,751 --- 332,751
Retained earnings 246,153 --- 246,153
---------- --------- ---------
584,214 --- 584,214
Less - cumulative foreign currency translation
adjustment 10,715 --- 10,715
---------- --------- ---------
Total stockholders' equity 573,499 --- 573,499
---------- --------- ---------
$ 784,094 150,000 934,094
========== ========= =========
</TABLE>
Note to Unaudited Pro Forma Condensed Combined Balance Sheet:
(a) To record the $205 million acquisition of certain of Halliburton's
natural gas compression assets, financed with $55 million of cash and
$150 million of debt. The purchase price is allocated to the assets
acquired based upon their current fair value. The cost in excess of
fair value of tangible assets acquired amounts to approximately $25
million.
-7-
<PAGE> 8
TIDEWATER INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
YEAR ENDED MARCH 31, 1994 - UNAUDITED
<TABLE>
<CAPTION>
BRAZOS/ PRO FORMA PRO FORMA
TIDEWATER HALLIBURTON ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Revenues:
Marine operations $ 466,601 --- --- 466,601
Compression operations 55,471 62,447 (5,398)(a) 112,520
----------- ----------- ----------- -----------
522,072 62,447 (5,398) 579,121
----------- ----------- ----------- -----------
Costs and expenses:
Marine operations 288,936 --- --- 288,936
Compression operations (h) 30,338 31,900 (2,978)(a) 59,260
Depreciation (f) 83,652 8,918 15,412 (d) 107,982
General and administrative (h) 63,096 --- (g) --- 63,096
----------- ----------- ----------- -----------
466,022 40,818 12,434 519,274
----------- ----------- ----------- -----------
56,050 21,629 (17,832) 59,847
Other income (expenses):
Foreign exchange loss (557) (164) --- (721)
Gain on sales of assets 4,579 --- 2,420 (a) 6,999
Equity in net earnings of unconsolidated
companies 2,686 --- --- 2,686
Minority interests (2,022) --- --- (2,022)
Interest and miscellaneous income 6,109 --- (3,600)(c) 2,509
Other expense (1,253) --- --- (1,253)
Interest expense (7,939) --- (10,300)(b) (18,239)
----------- ----------- ----------- -----------
1,603 (164) (11,480) (10,041)
----------- ----------- ----------- -----------
Earnings from continuing operations before
income taxes 57,653 21,465 (29,312) 49,806
Income taxes 21,523 7,076 (9,744)(e) 18,855
----------- ----------- ----------- -----------
Earnings before extraordinary item (i) $ 36,130 14,389 (19,568) 30,951
=========== =========== =========== ===========
Primary and fully diluted earnings per
common share before extraordinary item(i) $ .67 N/A N/A .58
=========== =========== =========== ===========
Weighted average common shares and
equivalents 53,317,501 N/A N/A 53,317,501
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to March 31, 1994 and September 30, 1994 Unaudited Pro
Forma Condensed Combined Statements of Earnings.
-8-
<PAGE> 9
TIDEWATER INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
SIX MONTHS ENDED SEPTEMBER 30, 1994 - UNAUDITED
<TABLE>
<CAPTION>
BRAZOS/ PRO FORMA PRO FORMA
TIDEWATER HALLIBURTON ADJUSTMENTS COMBINED
----------- ----------- ----------- -----------
(in thousands, except share and per share data)
<S> <C> <C> <C> <C>
Revenues:
Marine operations $ 234,066 --- --- 234,066
Compression operations 30,512 31,451 (1,077)(a) 60,886
----------- ----------- ----------- -----------
264,578 31,451 (1,077) 294,952
----------- ----------- ----------- -----------
Costs and expenses:
Marine operations 144,376 --- --- 144,376
Compression operations (h) 17,509 19,822 (883)(a) 36,448
Depreciation (f) 40,775 4,250 7,915 (d) 52,940
General and administrative (h) 29,982 --- (g) --- 29,982
----------- ----------- ----------- -----------
232,642 24,072 7,032 263,746
----------- ----------- ----------- -----------
31,936 7,379 (8,109) 31,206
Other income (expenses):
Foreign exchange gain (loss) (516) 34 --- (482)
Gain on sales of assets 4,471 --- 194 (a) 4,665
Equity in net earnings of unconsolidated
companies 1,944 --- --- 1,944
Minority interests (692) --- --- (692)
Interest and miscellaneous income 4,253 --- (1,800)(c) 2,453
Other expense --- --- --- ---
Interest expense (648) --- (5,150)(b) (5,798)
----------- ----------- ----------- -----------
8,812 34 (6,756) 2,090
----------- ----------- ----------- -----------
Earnings before income taxes 40,748 7,413 (14,865) 33,296
Income taxes 14,980 2,751 (5,491)(e) 12,240
----------- ----------- ----------- -----------
Net earnings $ 25,768 4,662 (9,374) 21,056
=========== =========== =========== ===========
Primary and fully diluted earnings per
common share $ .48 N/A N/A .39
=========== =========== =========== ===========
Weighted average common shares and
equivalents 53,404,653 N/A N/A 53,404,653
=========== =========== =========== ===========
</TABLE>
Notes to March 31, 1994 and September 30, 1994 Unaudited Pro Forma Condensed
Combined Statements of Earnings:
(a) To reclassify certain amounts to conform to Tidewater's presentation.
(b) To adjust interest expense to reflect the $150 million of debt
incurred as a result of the Halliburton acquisition. In accordance
with terms of the Company's debt agreements, principal payments are
assumed to be $3 million per quarter and the interest rate is assumed
to be 7%. The adjustment also includes amortization of financing
costs associated with the debt (amortized over seven years).
-9-
<PAGE> 10
Notes (continued)
(c) To adjust interest income to reflect the assumed
beginning-of-the-period usage of $90 million of cash in the
Halliburton and Brazos transactions. Interest yield on cash
investments is assumed to be 4%.
(d) To adjust for additional depreciation on the new basis of properties
and equipment acquired from Halliburton and Brazos. Adjustment also
includes amortization of $25 million of cost in excess of fair value
of the tangible assets acquired in the Halliburton transaction
(amortized over 15 years).
(e) To adjust income taxes of the pro forma combined group to Tidewater's
historical effective income tax rate.
(f) Effective October 1, 1994, the salvage value used to determine
depreciation expense for natural gas compressors was raised from 12.5%
to 30% to better reflect the estimated value of this equipment at the
end of its service life. The effect of this change in estimate, which
should total approximately $7.3 million annually, has not been
included in this pro forma combined financial information.
(g) Halliburton and Brazos were divisions of larger corporations and their
general and administrative expenses were not shown separately in their
historical financial information. It is impractical to determine the
general and administrative expenses included in their compression
operating expenses; therefore, no pro forma adjustment is included to
reclassify any of these costs from compression operating expenses to
general and administrative expenses.
(h) The pro forma combined information does not include the operating and
general and administrative cost savings anticipated as a result of the
consolidation of gas compression operations.
(i) For the fiscal year ended March 31, 1994 Tidewater reported an
extraordinary loss on early extinguishment of debt totalling
$11,970,000, net of applicable income taxes, or $.22 per common share.
This loss was not associated with the Acquisitions.
-10-
<PAGE> 11
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
Financial Statements
As Of November 30, 1994
Together With Auditors' Report
-11-
<PAGE> 12
ARTHUR ANDERSEN L.L.P.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Halliburton Company:
We have audited the accompanying statement of assets, liabilities, and
parent company investment of Halliburton Compression Services (an operating
division of Halliburton Company) (the "Company") as of November 30, 1994, and
the related statements of income and expense, changes in parent company
investment, and cash flows for the eleven months ended November 30, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Halliburton Compression
Services as of November 30, 1994, and the results of its operations and its cash
flows for the eleven months ended November 30, 1994, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN L.L.P.
Dallas, Texas
December 21, 1994
-12-
<PAGE> 13
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENT OF ASSETS, LIABILITIES, AND PARENT COMPANY INVESTMENT
(Amounts in Thousands)
NOVEMBER 30, 1994
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Accounts receivable, less allowance for doubtful accounts of $300 $10,655
Inventories 3,027
-------
Total current assets 13,682
-------
PROPERTY AND EQUIPMENT, at cost:
Land 49
Buildings 614
Rental equipment 147,634
Automotive equipment 4,472
Other fixed assets 542
-------
Total cost 153,311
Less -- Accumulated depreciation 114,256
-------
Property and equipment, net 39,055
-------
OTHER ASSETS 1,017
-------
Total assets $53,754
-------
LIABILITIES AND PARENT COMPANY INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accruals $ 3,234
Unearned revenue 3,317
-------
Total current liabilities 6,551
-------
OTHER LIABILITIES 4,305
-------
Total liabilities 10,856
-------
COMMITMENTS AND CONTINGENCIES
PARENT COMPANY INVESTMENT 42,898
-------
Total liabilities and parent company investment $53,754
-------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-13-
<PAGE> 14
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENT OF INCOME AND EXPENSE
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the 11 Months Ended
November 30, 1994
-----------------------
<S> <C>
REVENUE:
Rentals and service $39,317
New equipment sales 9,980
Rental equipment sales 3,527
----------
Total revenue 52,824
----------
COSTS AND EXPENSES:
Rentals and service 24,724
Rentals and service -- depreciation 6,617
New equipment sales 8,220
Rental equipment sales 1,706
----------
Total costs and expenses 41,267
----------
Operating income 11,557
OTHER INCOME (EXPENSE), net (8)
----------
Net income before taxes 11,549
CHARGE IN LIEU OF INCOME TAXES 4,504
----------
NET INCOME $ 7,045
----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-14-
<PAGE> 15
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENT OF CHANGES IN PARENT COMPANY INVESTMENT
(Amount in Thousands)
<TABLE>
<S> <C>
BALANCE, December 31, 1993 $39,855
Net income 7,045
Distributions to Parent, net (4,002)
-------
BALANCE, November 30, 1994 $42,898
-------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-15-
<PAGE> 16
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENT OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the 11 Months Ended
November 30, 1994
-----------------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,045
Adjustments to reconcile net income to net cash from operating
activities --
Depreciation 6,617
Amortization 281
Gain on sale of rental equipment (1,821)
(Increase) decrease in --
Receivables (2,428)
Inventory (1,514)
Other assets 72
Increase (decrease) in --
Accounts payable and accruals 1,958
Unearned revenue (291)
Other liabilities 2,071
-----------
Total cash flows from operating activities 11,990
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sales of property and rental equipment 3,527
Payments for purchase of property and equipment (11,239)
Other (276)
-----------
Total cash flows from investing activities (7,988)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided to parent (4,002)
-----------
NET INCREASE (DECREASE) IN CASH BALANCE $ --
-----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-16-
<PAGE> 17
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
(In Thousands of Dollars)
1. DESCRIPTION OF THE COMPANY:
The accompanying financial statements represent Halliburton Compression
Services (the "Company"), an operating division of Halliburton Company
("Halliburton") that owns natural gas compressors and related production
equipment and leases and provides services related to such equipment to
companies that produce and transport natural gas through pipelines. The Company
also sells new and used natural gas compressors to those same companies.
The Company operates various locations in the United States as a division
of Halliburton and in Canada as part of a Halliburton subsidiary.
On October 18, 1994, Halliburton agreed to sell substantially all of the
assets of the Company to Tidewater Compression Services, Inc., a wholly owned
subsidiary or Tidewater Inc., for cash of $205 million, subject to adjustment,
dollar for dollar, to the extent that the closing net assets are greater or less
than the June 30, 1994, net assets. The closing net assets are based on the
Company's November 30, 1994, financial statements, after adjustment for certain
excluded assets and liabilities. Subsequent to November 30, 1994, the closing
date, Tidewater Inc. has operated and managed the activities of the business.
2. SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
All significant intercompany transactions and balances have been
eliminated. The Company has no investment in subsidiaries or other separate
legal entities.
Foreign Currency Translation
Canada is the only foreign country in which the Company operates.
Canadian dollar receivables and payables are translated at rates in effect
at the balance sheet date. Other balance sheet accounts are translated at
historical rates. Canadian revenues and expenses, excluding depreciation, are
translated at weighted average rates. Translation adjustments for these Canadian
accounts are reflected in other income and expense in the statement of income
and expense.
-17-
<PAGE> 18
Inventories
Inventories are stated at the lower of cost or estimated market. The
average cost method is used to determine the cost of all inventories.
Property and Equipment
Assets are being depreciated on the straight-line method by the Company
using the depreciation lives based on the estimated useful lives of each asset
group as follows:
<TABLE>
<S> <C>
Buildings 20 years
Rental equipment 8-12 years
Automotive equipment 3-5 years
Other fixed assets 5-8 years
</TABLE>
Repairs and maintenance are charged to expense as incurred and major
renewals and betterments are capitalized. Cost and accumulated depreciation
applicable to assets retired or sold are removed from the accounts.
Revenue
Most equipment is leased under leases which have an initial term of six
months, then continue on a month-to-month basis subject to thirty-day notice of
intent to terminate. Lease charges are billed at the end of each month for the
following month. Charges for services performed and other items are billed to
customers after the service or other items have been provided.
Generally, revenues are recognized as rental equipment is provided, as
services are performed, or as equipment is delivered. The Company's Canadian
operation sells certain equipment that is built to customer specifications, for
which the percentage-of-completion method is used. Unearned revenue represents
the excess of billings to customers for rentals over revenues recognized for
elapsed rental periods.
Cash
Since the Company operates as an operating division of Halliburton, no
separate cash balances are maintained for the Company. Cash flows resulting from
the transactions of the Company are treated as distributions to or from the
parent company.
Charges in Lieu of Income Taxes
The Company does not file separate federal and state income tax returns.
All income taxes related to the Company were included in Halliburton's
consolidated tax return. Charges in lieu of income taxes in the accompanying
statement of income and expense were at the marginal rate in effect for the
period pursuant to the intercompany tax allocation policy.
-18-
<PAGE> 19
3. ACCOUNTS PAYABLE AND ACCRUALS:
Accounts payable and accruals at November 30, 1994, consisted of the
following:
<TABLE>
<S> <C>
Trade accounts payable $2,253
Accrued salaries and wages 265
Accrued vacation pay 418
Taxes, other than income and payroll 298
------
$3,234
------
</TABLE>
4. OTHER LIABILITIES:
Other liabilities at November 30, 1994, consisted of the following:
<TABLE>
<S> <C>
Supplemental retirement benefits $ 812
Retirement plan liability 1,445
Postretirement benefits 187
Environmental reserve 1,000
Workers' compensation and general liability claims 861
------
$4,305
------
</TABLE>
5. OTHER ASSETS:
Other assets at November 30, 1994, consisted of the following:
<TABLE>
<S> <C>
Supplemental retirement plan trust assets $ 737
Unamortized incentive stock plan costs 267
Prepayments and deposits 13
------
$1,017
------
</TABLE>
-19-
<PAGE> 20
6. RELATED-PARTY TRANSACTIONS:
Certain financial and operational support services are provided to the
Company by Halliburton Company. The accompanying statement of income and expense
includes charges for such services at amounts the Company believes approximate
third-party rates. These charges include costs for Halliburton owned and leased
facilities that the Company utilizes on a shared basis. Future costs for those
services have not been considered in the Commitments in Note 7. A description of
such services provided and the amount of such support service costs is set forth
below:
<TABLE>
<CAPTION>
For the 11 Months Ended
November 30, 1994
-----------------------
<S> <C>
General and administrative $ 412
Employee benefit charges 525
Insurance 274
Computer system charges 465
Other 283
-------
$ 1,959
-------
</TABLE>
Additionally, the Company purchased two compressors for cash of $766 and
consideration of services to be performed by other divisions of Halliburton
Company in an amount of $440. Parent company investment was reduced by $440, the
amount of services to be performed by other divisions of Halliburton Company.
The Company also sold a compressor to a third party for $235. This sales amount
included $60 in services to be performed by other divisions of Halliburton
Company, which was recorded as a reduction of parent company investment.
7. COMMITMENTS:
Rental and lease expense for the 11 months ended November 30, 1994, totaled
approximately $230. The Company conducts certain operations in leased facilities
and leases vehicles and other equipment.
At December 31, 1993, the Company was committed under noncancelable
operating leases with minimum rentals in succeeding years as follows:
<TABLE>
<S> <C>
1994 $240
1995 207
1996 151
1997 121
1998 and thereafter 56
----
$775
----
</TABLE>
Since the Company leases equipment under short-term operating leases, no
long-term lessor commitments exist.
At November 30, 1994, the Company had contractual commitments of
approximately $4.99 million for the purchase of 17 new compressors in the normal
course of business. At that date, the Company had contractual commitments from
customers of approximately $2.35 million for the sale of 5 of these compressors.
-20-
<PAGE> 21
8. CONTINGENCIES:
The Company owns certain properties in Mineral Wells, Texas, and Lafayette,
Louisiana, that may require certain environmental remediation. The Company has
performed a Phase I site assessment in Mineral Wells, Texas, and both Phase I
and Phase II assessments in Lafayette, Louisiana. In management's opinion,
reserves established are adequate to cover future estimated costs of remediation
of these sites.
From time to time, the Company is involved in litigation or disputes which
arise in the normal course of business. In the opinion of management, uninsured
losses, if any, are not expected to have a materially adverse effect on the
Company's financial position.
9. FINANCIAL INSTRUMENTS AND RISK CONCENTRATION:
The only financial instruments which potentially subject the Company to
concentrations of credit risk are trade receivables. The Company derives the
majority of its revenues from sales and services to companies that produce and
transport natural gas through pipelines. Most sales of new equipment stem from
an exclusive distributor agreement in Canada (the "Agreement") with Cooper
Industries for its Ajax brand compressors. The Agreement covers the sale of Ajax
brand compressors and related parts and runs through August 1, 1995. Within the
energy industry, trade receivables are generated from a broad and diverse group
of customers with no customer accounting for more than 10% of rental revenue for
the 11 months ended November 30, 1994. There are concentrations of receivables
in the United States and in Canada. The Company maintains an allowance for
losses based upon the expected collectibility of all trade accounts receivable.
10. RETIREMENT PLANS:
Retirement Medical Plan
Halliburton offers a postretirement medical plan to certain of the
Company's employees that qualify for retirement and, on the last day of active
employment, are enrolled as participants in the active employee medical plan.
The Company records as expense and accrues as a liability its pro rata share of
Halliburton's expense and liability based on the number of eligible employees
employed by the Company. The Company's liability is limited to a fixed
contribution amount for each participant or dependent. Effective in September
1993, coverage under this plan ceases when the participant reaches age 65.
However, those participants aged 65 or over on January 1, 1994, had the option
to participate in an expanded prescription drug program in lieu of the medical
coverage. The plan participants share the total cost for all benefits provided
above the fixed Company contribution and participants' contributions are
adjusted as required to cover benefit payments. The Company has made no
commitment to adjust the amount of its contributions; therefore, the computed
accumulated postretirement benefit obligation amount is not affected by the
expected future healthcare cost inflation rate.
In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions"
(SFAS 106), which requires accrual, during the years that the employee renders
the services, of the expected cost of providing postretirement benefits. As of
January 1, 1992, the Company recognized the transition obligation of $139 as a
charge to the net income, net of income taxes of $72. At January 1, 1992, the
Company had approximately 276 employees representing approximately 1.78% of the
eligible employees in the Halliburton Plan. At December 31, 1993, the Company's
share of the unfunded plan was approximately $187. The Company recorded expense
under the plan of $42 during the 11 months ended November 30, 1994. The weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 7% in 1993 and 8% in 1992.
-21-
<PAGE> 22
Prior to adoption of SFAS 106, the Company expensed its contributions as
incurred. The estimated future annual expense under SFAS 106 is not expected to
be materially different from the previous method of expensing contributions as
incurred.
Defined Contribution Plans
Employees of the Company are eligible to be (and most are) participants in
retirement plans of Halliburton. The major plan is a defined contribution plan
which provides benefits in return for services rendered, provides an individual
account for each participant, and has terms that specify how contributions to
the participant's account are to be determined rather than the amount of pension
benefits the participant is to receive. Contributions to this plan are based on
pretax income or discretionary amounts determined on an annual basis.
Halliburton made a discretionary contribution to this plan for 1990, and no
subsequent contributions have been made.
Defined Benefit Plans
Most employees of the Company are also participants in the Halliburton
Retirement Plan which is a defined benefit plan. This plan became effective
January 1, 1991, and defines an amount of pension benefit to be provided,
usually as a function of one or more factors such as age, years of service, or
compensation.
The Company recognized net periodic pension cost under this plan of $447
for the 11 months ended November 30, 1994.
The funded status of this plan included, as amounts applicable to employees
of the Company, vested benefit obligations of $281 and nonvested benefit
obligations of $85 as of December 31, 1993. The impact of future compensation
increases was $646 as of December 31, 1993. Assets of the Plan applicable to
employees of the Company were $188 as of December 31, 1993.
The amount of deferred gain was $210 and the unrecognized prior service
cost was $76 as of December 31, 1993. The discount rate used to measure benefit
obligations was 7.5% for 1993, and the anticipated rate of future compensation
increases was 4.25% for 1993. The amounts recorded for November 30, 1994, are
based on the actuarial information as of December 31, 1993. The Company's
pension liabilities are included in other liabilities in the statement of
assets, liabilities, and parent company investment.
Incentive Stock Plan
Under the terms of the Halliburton Company career executive incentive stock
plan, shares of Halliburton common stock have been sold to officers and key
employees of the Company at a purchase price not to exceed par value of $2.50
per share. Shares sold under this plan are restricted as to sale or disposition
by the employee with such restrictions lapsing periodically over an extended
period of time. The fair market value of the stock, on the date of issuance, in
excess of sales price is being amortized and charged to expense generally over
the average period during which the restrictions lapse. At November 30, 1994,
the unamortized excess related to the Company amounted to $267. These amounts
are included in other assets in the accompanying statement of assets,
liabilities, and parent company investment.
-22-
<PAGE> 23
Supplemental Retirement Plan
Certain officers of the Company have been participants in the Halliburton
Senior Executive Deferred Compensation Plan, which is a nonqualified, defined
contribution supplemental retirement plan. Pro rata amounts of undistributed
awards to participants (and accrued interest thereon) and assets contributed to
the Plan are included in the accompanying statement of assets, liabilities, and
parent company investment.
11. OPERATIONS BY GEOGRAPHIC AREA:
The Company has only one business segment but does have operations in
multiple geographic areas for which data is presented for the 11 months ended
November 30, 1994, as follows:
<TABLE>
<S> <C>
REVENUES:
United States $43,727
Canada 9,097
-------
Total $52,824
-------
OPERATING INCOME:
United States $ 9,687
Canada 1,870
-------
Total $11,557
-------
IDENTIFIABLE ASSETS:
United States $48,276
Canada 5,478
-------
Total $53,754
-------
</TABLE>
-23-
<PAGE> 24
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
Financial Statements
As Of June 30, 1994, And
December 31, 1993, 1992 And 1991
Together With Auditors' Report
-24-
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Halliburton Company:
We have audited the accompanying statements of assets, liabilities, and
parent company investment of Halliburton Compression Services (an operating
division of Halliburton Company) (the "Company") as of June 30, 1994, and
December 31, 1993, and 1992, and the related statements of income and expense,
changes in parent company investment, and cash flows for the six months ended
June 30, 1994, and each of the three years in the period ended December 31,
1993. These financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Halliburton Compression
Services as of June 30, 1994, and December 31, 1993, and 1992, and the results
of its operations and its cash flows for the six months ended June 30, 1994, and
for each of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles.
As explained in Note 10 to the financial statements, as required by
generally accepted accounting principles, the Company changed its method of
accounting for postretirement benefits effective January 1, 1992.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules V, VI, and X
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in our audit of
the basic financial statements and, in our opinion, fairly state, in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN L.L.P.
Dallas, Texas,
August 31, 1994
-25-
<PAGE> 26
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENTS OF ASSETS, LIABILITIES, AND PARENT COMPANY INVESTMENT
(Amounts in Thousands)
ASSETS
<TABLE>
<CAPTION>
December 31,
June 30, -------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
CURRENT ASSETS:
Accounts receivable, less allowance for doubtful accounts of
$300,000, $150,000, and $150,000 as of June 30, 1994,
December 31, 1993 and 1992, respectively $ 9,010 $ 8,227 $ 8,689
Inventories 1,354 1,513 1,649
-------- -------- --------
Total current assets 10,364 9,740 10,338
-------- -------- --------
PROPERTY AND EQUIPMENT, at cost:
Land 49 49 49
Buildings 614 613 608
Rental equipment 146,133 140,176 138,193
Automotive equipment 4,304 4,642 4,822
Other fixed assets 2,113 2,216 2,065
-------- -------- --------
Total cost 153,213 147,696 145,737
Less-Accumulated depreciation 114,163 111,833 107,273
-------- -------- --------
Property and equipment, net 39,050 35,863 38,464
-------- -------- --------
OTHER ASSETS 1,132 1,370 1,521
-------- -------- --------
Total assets $ 50,546 $ 46,973 $ 50,323
-------- -------- --------
LIABILITIES AND PARENT COMPANY INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accruals $ 1,020 $ 1,276 $ 2,383
Unearned revenue 3,370 3,608 3,340
-------- -------- --------
Total current liabilities 4,390 4,884 5,723
-------- -------- --------
OTHER LIABILITIES 2,432 2,234 1,813
-------- -------- --------
Total liabilities 6,822 7,118 7,536
-------- -------- --------
COMMITMENTS AND CONTINGENCIES
PARENT COMPANY INVESTMENT 43,724 39,855 42,787
-------- -------- --------
Total liabilities and parent company investment $ 50,546 $ 46,973 $ 50,323
-------- -------- --------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-26-
<PAGE> 27
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENTS OF INCOME AND EXPENSE
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, December 31,
---------------------- -----------------------------
1994 1993 1992 1991
------- 1993 ------- ------- -------
-----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
REVENUE:
Rentals and service $22,027 $21,630 $44,226 $43,631 $45,395
New equipment sales 3,285 764 1,308 562 1,624
Rental equipment sales 867 1,879 5,398 5,268 2,218
------- ----------- ------- ------- -------
Total revenue 26,179 24,273 50,932 49,461 49,237
------- ----------- ------- ------- -------
COST AND EXPENSES:
Rentals and service 12,044 9,890 20,995 20,806 22,216
Rentals and service -- depreciation 3,625 3,636 7,082 7,736 9,324
New equipment sales 2,686 651 1,093 512 1,324
Rental equipment sales 437 861 2,978 3,704 637
------- ----------- ------- ------- -------
Total cost and expenses 18,792 15,038 32,148 32,758 33,501
------- ----------- ------- ------- -------
Operating income 7,387 9,235 18,784 16,703 15,736
OTHER INCOME (EXPENSE), net (19) 10 (164) (68) 116
------- ----------- ------- ------- -------
Net income before taxes 7,368 9,245 18,620 16,635 15,852
CHARGE IN LIEU OF INCOME TAXES 2,873 3,513 7,076 6,321 6,024
------- ----------- ------- ------- -------
Net income before change in
accounting method 4,495 5,732 11,544 10,314 9,828
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
METHOD, net of income tax benefit of $72 -- -- -- (139) --
------- ----------- ------- ------- -------
NET INCOME $ 4,495 $ 5,732 $11,544 $10,175 $ 9,828
------- ----------- ------- ------- -------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-27-
<PAGE> 28
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENTS OF CHANGES IN PARENT COMPANY INVESTMENT
(Amounts in Thousands)
<TABLE>
<S> <C>
BALANCE, December 31, 1990 $ 39,856
Net income 9,828
Distributions to Parent, net (3,504)
--------
BALANCE, December 31, 1991 46,180
Net income 10,175
Distributions to Parent, net (13,568)
--------
BALANCE, December 31, 1992 42,787
Net income 11,544
Distributions to Parent, net (14,476)
--------
BALANCE, December 31, 1993 39,855
Net income 4,495
Distributions to Parent, net (626)
--------
BALANCE, June 30, 1994 $ 43,724
--------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-28-
<PAGE> 29
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, December 31,
-------------------- ----------------------------
1994 1993 1992 1991
------ 1993 ------- ------- --------
-----------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $4,495 $ 5,732 $11,544 $10,175 $ 9,828
Adjustments to reconcile net income to net
cash from operating activities --
Depreciation 3,625 3,636 7,082 7,736 9,324
Amortization 198 91 198 116 83
Gain on sale of rental equipment (430) (1,018) (2,420) (1,564) (1,581)
(Increase) decrease in --
Receivables (783) 1,493 462 (80) (688)
Inventory 159 (88) 136 (323) (114)
Other assets 40 (87) (47) (81) (80)
Increase (decrease) in --
Accounts payable and accruals (256) (1,163) (1,107) (168) 1,658
Unearned revenue (238) 380 268 (480) 199
Other liabilities 198 10 421 410 78
------ ----------- ------- ------- --------
Total cash flows from operating
activities 7,008 8,986 16,537 15,741 18,707
------ ----------- ------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts from sales of property and rental
equipment 867 1,879 5,398 5,268 2,218
Payments for purchase of property and
equipment (7,258) (2,865) (7,472) (7,389) (17,425)
Other 9 -- 13 (52) 4
------ ----------- ------- ------- --------
Total cash flows from investing
activities (6,382) (986) (2,061) (2,173) (15,203)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided to parent (626) (8,000) (14,476) (13,568) (3,504)
------ ----------- ------- ------- --------
NET INCREASE (DECREASE) IN CASH BALANCE $ -- $ -- $ -- $ -- $ --
------ ----------- ------- ------- --------
</TABLE>
The accompanying notes to financial statements are an integral part of these
financial statements.
-29-
<PAGE> 30
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1994 AND DECEMBER 31, 1993, AND 1992
(In Thousands of Dollars)
1. DESCRIPTION OF THE COMPANY:
The accompanying financial statements represent Halliburton Compression
Services (the "Company"), an operating division of Halliburton Company
("Halliburton") that owns natural gas compressors and related production
equipment and leases and provides services related to such equipment to
companies that produce and transport natural gas through pipelines. The Company
also sells new and used natural gas compressors to those same companies.
The Company operates in various locations in the United States as a
division of Halliburton and in Canada as part of a Halliburton subsidiary.
Halliburton has announced its intention to sell the Company but a purchaser
has not yet been identified nor have negotiations been started with prospective
purchasers.
2. SIGNIFICANT ACCOUNTING POLICIES:
Interim Period Presentation
The financial statements for the six months ended June 30, 1993
(unaudited), are presented for comparative purposes and include all normal,
recurring adjustments which are necessary for a fair presentation of the results
of operations for such periods.
Consolidation
All significant intercompany transactions and balances have been
eliminated. The Company has no investment in subsidiaries or other separate
legal entities.
Foreign Currency Translation
Canada is the only foreign country in which the Company operates.
Canadian dollar receivables and payables are translated at rates in effect
at the balance sheet date. Other balance sheet accounts are translated at
historical rates. Canadian revenues and expenses, excluding depreciation, are
translated at weighted average rates. Translation adjustments for these Canadian
accounts are reflected in other income and expense in the statements of
operations.
Inventories
Inventories are stated at the lower of cost or estimated market. The
first-in, first-out (FIFO) method is used to determine the cost of all
inventories.
-30-
<PAGE> 31
Property and Equipment
Assets are being depreciated on the straight-line method by the Company
using the depreciation lives based on the estimated useful lives of each asset
group as follows:
<TABLE>
<S> <C>
Buildings 20 years
Rental equipment 8-12 years
Vehicles 3-5 years
Other equipment 5-8 years
</TABLE>
Repairs and maintenance are charged to expense as incurred and major
renewals and betterments are capitalized. Cost and accumulated depreciation
applicable to assets retired or sold are removed from the accounts.
Revenue
Most equipment is leased under leases which have an initial term of six
months then continue on a month-to-month basis subject to thirty-day notice of
intent to terminate. Lease charges are billed at the end of each month for the
following month. Charges for services performed and other items are billed to
customers after the service or other items have been provided.
Generally revenues are recognized as rental equipment is provided, as
services are performed or as equipment is delivered. Unearned income represents
the excess of billings to customers for rentals over revenues recognized for
elapsed rental periods.
Cash
Since the Company operates as an operating division of Halliburton, no
separate cash balances are maintained for the Company. Cash flows resulting from
the transactions of the Company are treated as distributions to or from the
parent company.
Charges in Lieu of Income Taxes
The Company does not file separate federal and state income tax returns.
All income taxes related to the Company were included in Halliburton's
consolidated tax return. Charges in lieu of income taxes in the accompanying
statements of operations were at the marginal rates in effect for the periods
pursuant to the intercompany tax allocation policy.
Reclassifications
Certain prior-year information has been reclassified to conform with
current-year financial statement presentation.
-31-
<PAGE> 32
3. ACCOUNTS PAYABLE AND ACCRUALS:
Accounts payable and accruals at June 30, 1994, and December 31, 1993, and
1992, consist of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Trade accounts payable $ 312 $ 546 $ 747
Accrued salaries and wages 81 81 341
Accrued vacation pay 413 478 460
Taxes, other than income and payroll 214 171 426
Other liabilities and payables -- -- 409
-------- -------- --------
$1,020 $ 1,276 $ 2,383
-------- -------- --------
</TABLE>
4. OTHER LIABILITIES:
Other liabilities at June 30, 1994, and December 31, 1993, and 1992,
consisted of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Supplemental retirement benefits $ 843 $ 867 $ 810
Retirement plan liability 1,291 1,041 644
Postretirement benefits 187 187 220
Workers compensation and general liability claims 111 139 139
-------- -------- --------
$2,432 $ 2,234 $ 1,813
-------- -------- --------
</TABLE>
5. OTHER ASSETS:
Other assets at June 30, 1994, and December 31, 1993, and 1992, consisted
of the following:
<TABLE>
<CAPTION>
December 31,
June 30, ---------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Supplemental retirement plan trust assets $ 770 $ 791 $ 739
Unamortized incentive stock plan costs 350 561 659
Prepayments and deposits 12 18 123
-------- -------- --------
$1,132 $ 1,370 $ 1,521
-------- -------- --------
</TABLE>
-32-
<PAGE> 33
6. RELATED-PARTY TRANSACTIONS:
Certain financial and operational support services are provided to the
Company by Halliburton Company. The accompanying statements of operations
include charges for such services at amounts the Company believes approximate
third party rates. These charges include costs for Halliburton owned and leased
facilities that the Company utilizes on a shared basis. Future costs for those
services have not been considered in the Commitments in Note 7. A description of
such services provided and the amount of such support service costs is set forth
below.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30, DECEMBER 31,
--------------------- --------------------------
1994 1993 1992 1991
------ 1993 ------ ------ ------
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
General and administrative $ 225 $ 225 $ 450 $ 555 $ 614
Employee benefit charges 218 330 628 538 621
Insurance 162 127 254 333 292
Computer system charges 247 224 610 345 321
Other 157 -- 126 -- --
------ ----------- ------ ------ ------
$1,009 $ 906 $2,068 $1,771 $1,848
------ ----------- ------ ------ ------
</TABLE>
7. COMMITMENTS:
Rental and lease expense for the six months ended June 30, 1994 and 1993
(unaudited), and for the years ended December 31, 1993, 1992, and 1991, totaled
approximately $256, $212, $339, $477, and $480, respectively. The Company
conducts certain operations in leased facilities and leases vehicles and other
equipment.
At December 31, 1993, the Company was committed under noncancelable
operating leases with minimum rentals in succeeding years as follows:
<TABLE>
<S> <C>
1994 $240
1995 207
1996 151
1997 121
1998 and thereafter 56
----
$775
----
</TABLE>
Since the Company leases equipment under short-term operating leases, no
long-term lessor commitments exist.
At June 30, 1994, the company had contractual commitments of approximately
$11.9 million for the purchase of 41 new compressors in the normal course of
business. The compressors are scheduled for delivery in the last half of 1994.
At that date, the Company had contractual commitments from customers of
approximately $5.3 million for the sale of 14 of these compressors.
8. CONTINGENCIES:
From time to time, the Company is involved in litigation or disputes which
arise in the normal course of business. In the opinion of management, uninsured
losses, if any, are not expected to have a materially adverse effect on the
Company's financial position.
-33-
<PAGE> 34
9. FINANCIAL INSTRUMENTS AND RISK CONCENTRATION:
The only financial instruments which potentially subject the Company to
concentrations of credit risk are trade receivables. The Company derives the
majority of its revenues from sales and services to companies that produce and
transport natural gas through pipelines. Most sales of new equipment stem from
an exclusive distributor agreement in Canada (the "Agreement") with Cooper
Industries for its Ajax brand compressors. The Agreement covers the sale of Ajax
brand compressors and related parts and runs through August 1, 1995. Within the
energy industry, trade receivables are generated from a broad and diverse group
of customers with one customer accounting for 9.5% and 11.3% of rental revenue
for the six months ended June 30, 1994, and the year ended December 31, 1993,
respectively. There are concentrations of receivables in the United States and
in Canada. The Company maintains an allowance for losses based upon the expected
collectibility of all trade accounts receivable.
10. RETIREMENT PLANS:
Retirement Medical Plan
Halliburton offers a postretirement medical plan to certain of the
Company's employees that qualify for retirement and, on the last day of active
employment, are enrolled as participants in the active employee medical plan.
The Company records as expense and accrues as a liability its pro rata share of
Halliburton's expense and liability based on the number of eligible employees
employed by the Company. The Company's liability is limited to a fixed
contribution amount for each participant or dependent. Effective in September
1993, coverage under this plan ceases when the participant reaches age 65.
However, those participants aged 65 or over on January 1, 1994, had the option
to participate in an expanded prescription drug program in lieu of the medical
coverage. The plan participants share the total cost for all benefits provided
above the fixed Company contribution and participants' contributions are
adjusted as required to cover benefit payments. The Company has made no
commitment to adjust the amount of its contributions; therefore, the computed
accumulated postretirement benefit obligation amount is not affected by the
expected future healthcare cost inflation rate.
In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106 "Employers' Accounting for Postretirement Benefits Other than Pensions"
(SFAS 106), which requires accrual, during the years that the employee renders
the services, of the expected cost of providing postretirement benefits. As of
January 1, 1992, the Company recognized the transition obligation of $139 as a
charge to the net income, net of income taxes of $72. At January 1, 1992, the
Company had approximately 276 employees representing approximately 1.78% of the
eligible employees in the Halliburton Plan. At December 31, 1993, the Company's
share of the unfunded plan was approximately $187. The Company recorded expense
under the plan of $21 and $25 during the six months ended June 30, 1994, and
year ended December 31, 1993, respectively. The weighted average discount rate
used in determining the accumulated postretirement benefit obligation was 7% in
1993 and 8% in 1992.
Prior to adoption of SFAS 106, the Company expensed its contributions as
incurred. The estimated future annual expense under SFAS 106 is not expected to
be materially different from the previous method of expensing contributions as
incurred.
Defined Contribution Plans
Employees of the Company are eligible to be (and most are) participants in
retirement plans of Halliburton. The major plan is a defined contribution plan
which provides benefits in return for services rendered, provides an individual
account for each participant, and has terms that specify how contributions to
the participant's account are to be determined rather than the amount of pension
benefits the participant is to receive. Contributions to this plan are based on
pretax income or discretionary amounts determined on an annual basis.
Halliburton made a discretionary contribution to this plan for 1990, and no
subsequent contributions have been made.
-34-
<PAGE> 35
Defined Benefit Plans
Most employees of the Company are also participants in the Halliburton
Retirement Plan which is a defined benefit plan. This plan became effective
January 1, 1991, and defines an amount of pension benefit to be provided,
usually as a function of one or more factors such as age, years of service, or
compensation.
The Company recognized net periodic pension cost under this plan of $198,
$176, $358, $322, and $250 for the six months ended June 30, 1994 and 1993, and
for the years ended December 31, 1993, 1992, and 1991, respectively.
The funded status of this plan included as amounts applicable to employees
of the Company, vested benefit obligations of $281, $133, and $74 and nonvested
benefit obligations of $85, $22, and $9 as of December 31, 1993, 1992, and 1991,
respectively. The impact of future compensation increases was $646, $501, and
$229 as of December 31, 1993, 1992, and 1991, respectively. Assets of the Plan
applicable to employees of the Company were $188, $100, and $1 as of December
31, 1993, 1992, and 1991, respectively.
The amount of deferred gains was $210, $82, and $0 and the unrecognized
prior service costs was $76, $45, and $34 as of December 31, 1993, 1992, and
1991, respectively. The discount rate used to measure benefit obligations was
7.5%, 8.5%, and 8.5% for 1993, 1992, and 1991, respectively, and the anticipated
rate of future compensation increases was 4.25%, 5.5%, and 5.5% for 1993, 1992,
and 1991, respectively. The amounts recorded for June 30, 1994, are based on the
actuarial information as of December 31, 1993. The Company's pension liabilities
are included in other liabilities in the statement of assets, liabilities, and
parent company investment.
Incentive Stock Plan
Under the terms of the Halliburton Company career executive incentive stock
plan, shares of Halliburton common stock have been sold to officers and key
employees of the Company at a purchase price not to exceed par value of $2.50
per share. Shares sold under this plan are restricted as to sale or disposition
by the employee with such restrictions lapsing periodically over an extended
period of time. The fair market value of the stock, on the date of issuance, in
excess of sales price is being amortized and charged to expense generally over
the average period during which the restrictions lapse. At June 30, 1994, and
December 31, 1993, and 1992, the unamortized excess related to the Company
amounted to $350, $561, and $659, respectively. These amounts were included in
other assets in the accompanying statement of assets, liabilities, and parent
company investment.
Supplemental Retirement Plan
Certain officers of the Company have been participants in the Halliburton
Senior Executive Deferred Compensation Plan, which is a non-qualified, defined
contribution supplemental retirement plan. Pro rata amounts of undistributed
awards to participants (and accrued interest thereon) and assets contributed to
a trust, to fund benefits under the plan, are included in other liabilities and
other assets, respectively, on the accompanying statement of assets,
liabilities, and parent company investment.
-35-
<PAGE> 36
11. OPERATIONS BY GEOGRAPHIC AREA:
The Company has only one business segment but does have operations in
multiple geographic areas for which data is presented as follows:
<TABLE>
<CAPTION>
For the Six Months
Ended June 30, December 31,
------------------ -----------------------------
1994 1993 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
REVENUES:
United States $21,449 $21,759 $46,726 $47,374 $45,399
Canada 4,730 2,514 4,206 2,087 3,838
------- ------- ------- ------- -------
Total $26,179 $24,273 $50,932 $49,461 $49,237
------- ------- ------- ------- -------
OPERATING INCOME:
United States $ 6,253 $ 8,451 $17,245 $16,575 $14,828
Canada 1,134 784 1,539 128 908
------- ------- ------- ------- -------
Total $ 7,387 $ 9,235 $18,784 $16,703 $15,736
------- ------- ------- ------- -------
IDENTIFIABLE ASSETS:
United States $47,853 $47,249 $44,578 $48,101 $51,375
Canada 2,693 1,889 2,395 2,222 2,580
------- ------- ------- ------- -------
Total $50,546 $49,138 $46,973 $50,323 $53,955
------- ------- ------- ------- -------
</TABLE>
-36-
<PAGE> 37
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
SCHEDULE V -- PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In thousands)
<TABLE>
<CAPTION>
Balance
at Additions/ Balance
Beginning Transfers (1) at End of
of Period at Cost Retirements Changes Period
--------- ---------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Land $ 49 $ -- $ -- $ -- $ 49
Buildings 608 5 -- -- 613
Rental equipment 138,193 6,547 4,604 40 140,176
Automotive equipment 4,822 784 550 (414) 4,642
Other fixed assets 2,065 136 227 242 2,216
--------- ---------- ----------- ------- ---------
Total $ 145,737 $ 7,472 $ 5,381 $(132) $ 147,696
--------- ---------- ----------- ------- ---------
YEAR ENDED DECEMBER 31, 1992:
Land $ 49 $ -- $ -- $ -- 49
Buildings 608 $ -- $ -- $ -- 608
Rental equipment 137,999 6,184 5,990 $ -- 138,193
Automotive equipment 4,534 917 629 -- 4,822
Other fixed assets 1,756 288 9 30 2,065
--------- ---------- ----------- ------- ---------
Total $ 144,946 $ 7,389 $ 6,628 $ 30 $ 145,737
--------- ---------- ----------- ------- ---------
YEAR ENDED DECEMBER 31, 1991:
Land $ 49 $ -- $ -- $ -- 49
Buildings 608 $ -- $ -- $ -- 608
Rental equipment 126,038 16,050 4,089 $ -- 137,999
Automotive equipment 4,145 1,174 785 $ -- 4,534
Other fixed assets 1,555 201 $ -- $ -- 1,756
--------- ---------- ----------- ------- ---------
Total $ 132,395 $ 17,425 $ 4,874 $ -- $ 144,946
--------- ---------- ----------- ------- ---------
</TABLE>
(1) Changes reflect various adjustments to the property, plant and equipment
accounts.
-37-
<PAGE> 38
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY,
PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance at
Beginning Depreciation (1) End of
of Period Expense Retirements Changes Period
---------- ------------ ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Buildings $ 369 $ 17 $ -- $ -- $ 386
Rental equipment 102,047 5,895 1,631 -- 106,311
Automotive equipment 3,272 903 545 (241) 3,389
Other fixed assets 1,585 267 227 122 1,747
---------- ------------ ----------- ------- ----------
Total $ 107,273 $7,082 $ 2,403 $(119) $ 111,833
---------- ------------ ----------- ------- ----------
YEAR ENDED DECEMBER 31, 1992:
Buildings $ 351 $ 18 $ -- $ -- $ 369
Rental equipment 97,861 6,547 2,310 (51) 102,047
Automotive equipment 2,814 1,063 605 -- 3,272
Other fixed assets 1,457 108 9 29 1,585
---------- ------------ ----------- ------- ----------
Total $ 102,483 $7,736 $ 2,924 $ (22) $ 107,273
---------- ------------ ----------- ------- ----------
YEAR ENDED DECEMBER 31, 1991:
Buildings $ 334 $ 17 $ -- $ -- $ 351
Rental equipment 93,106 8,225 3,470 -- 97,861
Automotive equipment 2,571 1,006 763 -- 2,814
Other fixed assets 1,381 76 4 4 1,457
---------- ------------ ----------- ------- ----------
Total $ 97,392 $9,324 $ 4,237 $ 4 $ 102,483
---------- ------------ ----------- ------- ----------
</TABLE>
(1) Changes reflect various adjustments to the accumulated depreciation
accounts.
-38-
<PAGE> 39
SCHEDULE X
HALLIBURTON COMPRESSION SERVICES
(A Division of Halliburton Company)
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED DECEMBER 31, 1993
(In Thousands)
<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Maintenance and repairs(1) $4,524 $4,307 $8,145
Taxes other than payroll and income taxes 204 135 70
</TABLE>
(1) The amounts shown above reflect the sum of the accounts designated as
maintenance and repairs in the system of accounts of the Company. The
accounts do not segregate in all instances the amounts of salaries, wages,
and supplies applicable to maintenance and repairs from the amounts
applicable to operations; thus, the operating accounts may contain expenses
which could be classified as maintenance and repairs.
-39-
<PAGE> 40
INDEX TO EXHIBITS
10(a) $250 Million Revolving Credit and Term Loan Agreement
(filed with the Commission as Exhibit 10(a) to the
Company's report on Form 8-K for November 30, 1994).
23 Consent of Independent Public Accountants
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
dated August 31, 1994, and December 21, 1994, related to the financial
statements of Halliburton Compression Services as of June 30, 1994, and
December 31, 1993 and 1992, and for the six months ended June 30, 1994, and the
three years in the period ended December 31, 1993, and as of November 30, 1994,
and for the eleven months ended November 30, 1994, respectively, included in
this Form 8-K/A-1 of Tidewater Inc., and to the incorporation by reference of
our reports included in this Form 8-K/A-1 into Tidewater Inc.'s previously
filed Registration Statements 2-69356 and 33-38240 on Form S-8.
ARTHUR ANDERSEN L.L.P.
Dallas, Texas
January 19, 1995
