ITEM 1. BUSINESS.
GENERAL
TransCoastal Marine Services, Inc. ("the Company") is a marine construction company with worldwide operations onshore, in the transition zone and offshore (up to 800 feet). The Company has two operating groups: the Pipeline and Marine Group and the Fabrication and Offshore Group. The Pipeline and Marine Group performs pipeline installation and repair worldwide utilizing a fleet of company-owned vessels. This group also provides construction support services, including hydrostatic testing and commissioning of pipelines. The Fabrication and Offshore Group fabricates, refurbishes, and installs production platforms, offshore drilling rigs, barges and performs other related fabrication services.
The Company currently conducts operations from port facilities and fabrication yards strategically positioned along the U.S. Gulf Coast. In order to conduct its international activities, the Company currently has offices in West Africa, Venezuela and Mexico. The Company's principal executive offices are located at 4900 Woodway, Suite 500, Houston, Texas 77056, and its telephone number is (713) 626-8899.
PIPELINE AND MARINE GROUP
The efficient development of an offshore oil and gas field frequently involves the addition or extension of an infrastructure of gathering lines and trunklines (large diameter pipelines). The Pipeline and Marine Group performs pipeline installation and repair onshore, in the transition zone and in water depths up to 800 feet utilizing a fleet of company-owned vessels and equipment.
This group also conducts onshore and offshore hydrostatic testing and commissioning of pipelines for oil and gas producers and pipeline construction companies. During hydrostatic testing, water is pumped into a newly installed or existing pipeline to increase the internal pressure beyond the designed capacity of the pipeline in order to test its structural integrity. Pipeline commissioning involves final preparation of a completed and successfully tested pipeline for operation in accordance with applicable regulatory standards. In connection with its hydrostatic testing and commissioning services, the Pipeline and Marine Group also performs pipeline cleaning, drying and dehydration services. This group also manufactures amphibious undercarriages for marine construction equipment used in transition zone waters.
Prior to 1998, the Pipeline and Marine Group's traditional market was the water region along the U.S. Gulf Coast. During 1998, this group expanded its activities into international offshore markets including West Africa, the Caribbean and Mexico. Management believes the Company is the only company providing pipeline installation and repair services and hydrostatic testing and commissioning services from water depths of 800 feet through the transition zone and to onshore gathering and processing facilities in the markets it serves.
The Company's fleet includes: (i) four anchor barges and three multipurpose vessels (used in both pipeline installation and repair and hydrostatic testing, commissioning and related operations), primarily operated in water depths beyond 20 feet, and (ii) 15 spud barges and ancillary equipment, operated in water depths of up to 20 feet. The Company also owns specialized equipment for offshore pipeline jetting (a specialized pipeline burying technique) and testing services, marine dredging and trench digging. See Item 2.
ITEM 2. PROPERTIES.
MARINE VESSELS AND EQUIPMENT
The Company's fleet includes three multi-purpose vessels, four anchor barges and 15 spud barges. During February 1998, the Company expanded its oil and gas pipeline installation capabilities with the acquisition of the Vermilion Bay (formerly the LB 207) a Vanuatu flagged pipe laying barge. The Company further expanded its oil and gas pipeline installation capabilities in April 1998, with the acquisition and refurbishment of the Atchafalaya Bay(formerly the BB 356) a United States flagged barge to be used as a dedicated pipe bury barge. The Atchafalaya Bay was placed in service in the second quarter of 1999.
The following table describes the Company's principal marine vessels and construction equipment:
FACILITIES
Administration. The Company owns administrative buildings in Lafayette and Belle Chasse, Louisiana, and leases office space in Houston, Texas.
Pipeline and Marine Group. This Group's marine construction activities are supported by three onshore bases which provide administrative functions for projects and dock space for the Company's floating equipment with the ability to supply the vessels with provisions and fuel, and to perform maintenance and repairs to vessels and equipment. The facility located in Belle Chasse, Louisiana is owned by the Company. The facilities and dock frontage at Amelia and Delcambre, Louisiana are leased, with remaining lease terms ranging from 10 to 15 years. The Company also has a leased office in Mexico to support its operations there.
Fabrication and Offshore Group. The Company's fabrication operations are primarily conducted from four locations in Louisiana, one in New Iberia and three in the greater New Orleans area. The New Iberia fabrication facility includes approximately 14 acres of leased land and a 23,200 square foot fabrication shop that is supplied with automatic welding, heavy fabrication and material handling equipment. This fabrication yard, with waterfront docking and direct, deep channel access to the Gulf of Mexico, has specially designed concrete reinforcements and approximately 700 linear feet of water frontage. The Company has improved the fabrication yard to provide it with the ability to load out structures weighing up to 5,000 tons. The fabrication yard also has a rail spur which provides it direct access to rail transportation.
During the first quarter of 1998, the Company expanded its fabrication operations through two separate lease transactions. Long-term lease rights were secured to a shipyard in New Orleans capable of servicing
deep-water drilling rigs, jack-ups, semi-submersibles and drill ships in January 1998. This 29-acre yard is located at the intersection of the Intracoastal Waterway and the Michoud Canal. A 32-foot water depth is maintained at the site, which has no height or width restrictions and a maximum 3,000 feet of bulkhead dock space. During February 1998, the Company signed a long-term lease for a fabrication facility located on an 18-acre site on the Inner Harbor Navigation Canal in eastern New Orleans. The site has 1,400 feet of waterfront and includes a covered, 68,000 square foot fabrication shop with eave height exceeding 40 feet and overhead crane capacity totaling 75 tons with a hook height of 28 feet. With the acquisition of Dickson in the third quarter of 1998, the Company acquired a 10-acre fabrication yard with 900 feet of water frontage on the Mississippi River Gulf Outlet. The Company can fabricate structures as large as 6,500 tons at this location.
The Company also owns a 18,000 square foot fabrication facility situated on approximately two acres of land in Lafayette, Louisiana, and a 20,000 square foot fabrication facility with a 2,000 square foot warehouse on approximately 3.5 acres of land in Belle Chasse, Louisiana. The fabrication facility in Belle Chasse, Louisiana also includes 8,000 square feet of office space.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
In December 1999, Chevron Global Technologies Services Company ("Chevron") informed the Company of its intention to seek reimbursements totaling approximately $27.0 million for various disputed billings associated with certain fabrication projects (the "Chevron Claims"). The Company believes that the claims made by Chevron are without merit and intends to vigorously contest the Chevron Claims. At December 31, 1999, the Company had outstanding two letters of credit, totaling $8.6 million, issued in favor of Chevron. If Chevron were to prevail, it would have a significant impact on the operations of the Company's subsidiary, TransCoastal Fabrication & Offshore Group, Inc. (formerly Dickson GMP International, Inc.) and the Company.
The Company is involved in various lawsuits arising in the ordinary course of business. While the outcome of these lawsuits cannot be predicted with certainty, management believes these matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Since October 30, 1997, the common stock of the Company (the "Common Stock") has been listed for trading on the Nasdaq National Market under the symbol "TCMS." The following table sets forth the range of high and low sale prices for the Common Stock for the periods indicated:
At February 29, 2000, there were approximately 2,200 stockholders of record of the Company's Common Stock. On April 10, 2000, the closing sale price of the Common Stock on the Nasdaq National Market was $1.22 per share.
DIVIDENDS
TCMS currently intends to retain its earnings, if any, to finance the expansion of its business and for general corporate purposes, including future acquisitions. The Company does not anticipate paying any cash dividends on its Common Stock for the foreseeable future. Any future dividends will be at the discretion of the Board of Directors, after taking into account various factors, including, among other things: the Company's financial condition, results of operations, cash flows from operations, current and anticipated cash needs and expansion plans, the income tax laws then in effect, the requirements of Delaware law, the restrictions currently imposed by the "Credit Facility" and any restrictions that may be imposed by the Company's future credit arrangements. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations."
SALE OF UNREGISTERED SECURITIES
The following information relates to securities of the Company issued or sold by the Company during the past three years which were not registered under the Securities Act:
(i) 2,142,441 shares of Common Stock were issued to the Founding Companies on closing of the Acquisitions and the initial public offering (the "Offering"). Shareholders of the Founding Companies have certain registration rights with respect to 1,975,775 shares of Common Stock received by them in the Acquisitions, and
(ii) 1,256,000 shares of Common Stock which were issued to founders of TCMS and certain of its executive officers and consultants in conjunction with the Offering, and
(iii) 1,300,000 shares of Common Stock were issued to the stockholders of Dickson GMP International, Inc. and four affiliated companies, ("Dickson") on closing of the acquisition on September 1, 1998. The former Dickson stockholders have certain registration rights with respect to 1,300,000 shares of Common Stock received by them in the acquisitions of Dickson by the Company, and
(iv) 400,000 shares of Common Stock; 1,680 shares of Series B 5% cumulative convertible preferred stock ("Series B"); and 140 shares of Series A 7% redeemable cumulative preferred stock were issued on May 19, 1999. The shares were issued to the former stockholders of Dickson as final settlement of the earn-out provision of the acquisition agreement between the Company and Dickson.
(v) at the Annual Meeting of the Stockholders on May 26, 1999 the stockholders approved the issuance of 400,000 shares of common stock to which the Series B was convertible. The Series B was subsequently converted to the 400,000 shares of common stock.
All of the aforementioned shares, as well as: (1) an aggregate of 50,000 shares issuable pursuant to a warrant (the "MG Warrant") issued by TCMS to McFarland, Grossman & Company, Inc. ("MGCO"), a financial advisory firm that assisted the Company in connection with the acquisitions of four privately owned construction companies and in arranging a credit agreement, and (2) an aggregate of 408,000 shares issuable pursuant to two warrants (the "Lender Warrants") issued by the Company to Joint Energy Development Investments, Limited Partnership, an affiliate of Enron Capital & Trade Resources Corp., in connection with the Credit Agreement, may be resold publicly only following their effective registration under the Securities Act or pursuant to an exemption from the registration requirements of that act, such as Rule 144 thereunder.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
In accordance with the applicable accounting rules of the Securities and Exchange Commission (the "Commission"), Woodson Construction Company (collectively with three affiliated companies, "Woodson"), one of the Founding Companies, was identified as the "accounting acquiror" for financial statement presentation purposes. Consequently, the Company's historical financial statements for periods ended on or before October 31, 1997, the effective date of the acquisitions of the Founding Companies for accounting purposes, are the consolidated historical financial statements of Woodson. As used in this discussion, the "Company" means (i) Woodson prior to October 31, 1997 and (ii) TCMS and its consolidated subsidiaries on that date and thereafter. The following selected historical financial information has been derived from the audited financial statements of the Company for each of the years presented. The summary financial information below should be read in conjunction with the historical financial statements and notes thereto included elsewhere herein.
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(1) Includes a $2.2 million non-cash compensation charge related to the issuance of shares of Common Stock to management of the Company.
(2) Represents pro forma provision for income taxes. See Note 2 to the consolidated financial statements.
(3) 1998 Statement of Operations data includes the operating results of Dickson from the date of acquisition, September 1, 1998, through December 31, 1998.
(4) Negative working capital is primarily the result of reclassifying $57.6 million of long-term debt to current due to defaults on the Revolving Facility, Term Loan, and Subordinated Debt. See Note 1 to the consolidated financial statements.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the consolidated financial statements and related notes thereto and "Selected Financial Data" appearing elsewhere in this Annual Report on Form 10-K. The following information contains forward-looking statements. For a discussion of certain limitations inherent in such statements, see "Business -- Forward-Looking Statements".
INTRODUCTION
The Company's revenues are primarily derived from providing services related to pipeline installation and repair, hydrostatic testing and commissioning of pipelines, and fabrication and refurbishment of components for oil and gas production platforms and drilling rigs.
The majority of services provided by the Company are under fixed-priced contracts, which are generally completed within one year. These contracts are usually accounted for using the percentage-of-completion method of accounting. Under this method, the percentage-of-completion is determined by comparing contract costs incurred to date with total estimated contract costs. Any significant revision in cost and income estimates is reflected in the accounting period in which the facts that require the revision become known. Income is recognized by applying the percentage completed to the projected total income for each contract in progress. Cost of revenues consists of direct material, labor and subcontracting costs and indirect costs related to contract performance, such as indirect labor, supplies and tools. Selling, general and administrative expenses consist primarily of compensation of sales and administrative employees, fees for professional services and other general office expenses.
The marine construction industry along the U.S. Gulf Coast is highly seasonal as a result of the timing of capital expenditures by oil and gas companies, weather conditions, and the availability of daylight hours. Historically, the Company has performed a substantial portion of its pipeline construction support services during the period from March through November and, therefore, a disproportionate portion of these contract revenues, gross profit and net income generally has been earned during the second and third quarters of the calendar year. Because of this seasonality, the Company's future full year results are not likely to be a direct multiple of any particular quarter or combination of quarters.
Additionally, the Company's results of operations will also be affected by the level of oil and gas exploration and development activity maintained by oil and gas companies in the Gulf of Mexico. The level of exploration and development activity is related to several factors, including trends of oil and gas prices, exploration and production companies' expectations of future oil and gas prices, and changes in technology which reduce costs and improve expected returns on investment.
Certain risks are inherent under contracts that are priced on a fixed-price basis. The revenues, costs and gross profit realized on a contract will often vary from the estimated amounts for various reasons including changes in the availability and cost of labor and material, weather delays and variations in productivity from the original estimates and errors in estimates or bidding. These variations and the risks inherent in the marine construction industry may result in revenues and gross profits different from those originally estimated and can result in reduced profitability or losses on projects.
In accordance with the applicable accounting rules of the Commission, Woodson was identified as the "accounting acquiror" for financial statement presentation purposes. Consequently, the Company's historical financial statements for periods ended on or before October 31, 1997, the effective date of the acquisitions of the Founding Companies for accounting purposes, are the consolidated historical financial statements of Woodson. As used in this discussion, the "Company" means (i) Woodson prior to October 31, 1997 and (ii) TCMS and its consolidated subsidiaries on that date and thereafter.
RESULTS OF OPERATIONS -- THE COMPANY
The current state of the oil and gas services industry in which the Company operates has been adversely impacted by the uncertainty and volatility in oil and natural gas commodity prices. These factors have adversely impacted the major and independent oil and gas companies, which comprise the Company's customer base. The Company's customers have reacted to this environment by reducing capital spending on oil and gas exploration projects. The Company continued to be affected by these industry factors throughout 1999 and into 2000. The Company expects this environment to improve during 2000 and believes the current recovery in energy commodity prices will begin to have a positive impact on the oil and gas services sector, and on the Company's operations.
The operating results for the year ended December 31, 1999 included the operating results of all the Founding Companies and Dickson for the entire period. The Company's operating results for 1998 include all the Founding Companies' results for the entire year and the Dickson operating results for the last four months during the period. Revenues, cost of revenues and selling, general and administrative expense levels were significantly lower for the year ended December 31, 1999 as compared to the year ended December 31, 1998. The operating results for 1997 are the results of operations of Woodson for the entire year and the other Founding Companies for the final two months of 1997.
The following table sets forth certain selected financial data of the Company and that data as a percentage of the Company's revenues for the periods indicated (dollars in thousands):
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(1) The provision for income taxes for the year ended December 31, 1997 represents pro forma provisions for income taxes. See Note 2 to the consolidated financial statements.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues. Revenues decreased $41.9 million, or 22.2%, from $188.9 million for the year ended December 31, 1998 to $147.0 million for the year ended December 31, 1999. The Pipeline and Marine Group's revenues decreased $53.6 million, or 48.3%, from $110.9 million for the year ended December 31, 1998 to $57.3 million for the year ended December 31, 1999. The decline in revenue for the Pipeline and Marine Group was the result of delays in pipeline construction projects due to decreased capital expenditure
budgets in 1999 by the Company's customers as a result of the fall of oil and gas prices in 1998. The Fabrication and Offshore Group's revenues increased $12.2 million, or 15.8%, from $77.4 million for the year ended December 31, 1998 to $89.6 million for the year ended December 31, 1999. The increase in revenue for the Fabrication and Offshore Group was primarily the result of a $86.0 million time and material project that began in 1998 and was completed in July of 1999. The increase in revenues for the Fabrication and Offshore Group were partially offset by reduced activities due to delays in oilfield fabrication projects resulting from decreased capital expenditure budgets in 1999 by the Company's customers as a result of the fall of oil and gas prices in 1998.
Cost of revenues. Cost of revenues decreased $10.6 million, or 6.9%, from $154.1 million for the year ended December 31, 1998 to $143.5 million for the year ended December 31, 1999. The Pipeline and Marine Group's cost of revenues decreased $35.8 million, or 41.7%, from $85.9 million for the year ended December 31, 1998 to $50.1 million for the year ended December 31, 1999. Cost of revenues as a percentage of revenues increased from 81.6% of revenues in 1998 to 97.6% of revenues in 1999. This decline in gross profit percentage in 1999 as compared to 1998 was primarily due to increased competition for fewer pipeline installation projects and lower utilization of capital equipment. The Fabrication and Offshore Group's cost of revenues increased $16.0 million, or 23.5%, from $68.2 million for the year ended December 31, 1998 to $84.2 million for the year ended December 31, 1999. Cost of revenues as a percentage of revenues for the Fabrication and Offshore Group increased from 88.1% of revenues in 1998 to 94.0% of revenues in 1999. This decrease in gross profit percentage in 1999 as compared to 1998 was primarily due to two factors. First, a significantly greater percentage of the Fabrication and Offshore Group's revenues were generated from time and material projects which have lower margins as the Company assumes less financial risk in completing the projects. Second, the group experienced lower overall utilization of its fabrication facilities in the second half of 1999 as compared to 1998 due to reduced levels of contracts being awarded.
Selling, general and administrative expenses. Selling, general and administrative expenses decreased $1.4 million, or 10.8%, for the year ended December 31, 1999 compared to the 1998 period. The decrease was primarily due to reductions in the headcount of the administrative staff and in the use of third party services. As a percentage of revenues, selling, general and administrative expenses were 7.0% during 1998, as compared to 8.0% during 1999.
Depreciation and amortization. Depreciation and amortization expenses increased $3.1 million, or 31.6%, from $9.8 million for the year ended December 31, 1998 to $12.9 million for the year ended December 31, 1999. The increase was primarily due to $36.0 million of capital expenditures in 1998, the majority of which were placed in service late in the third quarter 1998, and a full year of depreciation and amortization of goodwill associated with the acquisition of Dickson effective September 1, 1998.
Restructuring and special charges. During 1999, the Company completed a review of its Fabrication and Offshore Group's operations and foreign and domestic facilities. As a result of the review, the Company recorded a special charge in the amount of $1.7 million. The components of the charge consists of: (a) $1.2 million severance costs related to former employees terminated as a result of the Company's headcount reduction initiative and (b) $0.5 million in costs associated with the closing of foreign facilities and reduction in operations in Nigeria and South America. During 1998 the Company recorded a special charge in the amount of $2.4 million. The components of the charge consisted of: (1) $1.8 million severance costs related to former officers and employees terminated as a result of the Company's headcount reduction initiative and (2) $0.6 million for the sale of facilities resulting from the planned consolidation of certain operating facilities.
Loss on asset impairment. During 1999, the Company recognized a loss of $96.6 million on the impairment of certain long-lived assets after reviewing their respective carrying amounts compared to appraisals and discounted future cash flows. The write-off of goodwill, which was primarily recorded at the time of the formation of the Company, accounted for $86.3 million of the impairment loss. The remainder of the loss of $10.3 million related principally to the Company's vessels, barges and certain leasehold improvements.
Interest income (expense), net. Interest expense, net of interest income, totaled $7.2 million during the year ended December 31, 1999, as compared to net interest expense of $4.4 million during 1998. The increase
was due to higher average debt levels in 1999 compared to 1998 and an increase in the weighted average interest rate in 1999 as compared to 1998, from 8.75% to 9.99%. See "Liquidity and Capital Resources -- The Company" below for discussion of credit agreement and related financings.
Other income (expense), net. During 1999 other income (expense), net consisted primarily of settlement of insurance claims. During 1998 other income (expense), net consisted primarily of expenses incurred associated with the settlement of outstanding litigation.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenues. Revenues increased $131.4 million, or 228.4%, from $57.5 million for the year ended December 31, 1997 to $188.9 million for the year ended December 31, 1998. The Pipeline and Marine Group's revenues increased $57.7 million, or 108.5%, from $53.2 million for the year ended December 31, 1997 to $110.9 million for the year ended December 31, 1998. The inclusion of the Founding Companies' operations (other than Woodson) for the entire year of 1998 versus the last two months of 1997 accounted for $52.2 million of the increase in revenues. The Fabrication and Offshore Group's revenues increased $73.1 million, or 1690.0%, from $4.3 million for the year ended December 31, 1997 to $77.4 million for the year ended December 31, 1998. The acquisition of Dickson in September 1998 accounted for $42.9 million of the increase in revenues for the year. The inclusion of a Founding Company's operations for the entire year of 1998 versus the last two months of 1997 accounted for an additional $9.5 million of the increase in revenues for 1998. The remaining increase in revenues of $20.7 million was the result of the Fabrication and Offshore Group obtaining larger projects than it had historically been able to obtain due to its expanded resources and capabilities as a result of the TCMS merger and initial public offering.
Cost of revenues. Cost of revenues increased $107.6 million, or 231.4%, from $46.5 million for the year ended December 31, 1997 to $154.1 million for the year ended December 31, 1998. The Pipeline and Marine Group's cost of revenues increased $42.4 million, or 97.4%, from $43.5 million for the year ended December 31, 1997 to $85.9 million for the year ended December 31, 1998. The inclusion of the Founding Companies' operations (other than Woodson) for the entire year of 1998 versus the last two months of 1997 accounted for $35.3 million of the increase in cost of revenues. Cost of revenues as a percentage of revenues decreased from 81.8% of revenues in 1997 to 77.1% of revenues in 1998. This improvement in gross profit percentage in 1998 as compared to 1997 was primarily due to three factors. In 1998, the Company experienced: (a) higher utilization of equipment, (b) a higher percentage of work performed offshore which were higher margin projects, and (c) a greater percentage of revenues being generated from projects outside the United States which were also at higher margins. The Fabrication and Offshore Group's cost of revenues increased $65.2 million, or 2173.3%, from $3.0 million for the year ended December 31, 1997 to $68.2 million for the year ended December 31, 1998. The acquisition of Dickson in September 1998 accounted for $38.1 million of the increase in cost of revenues in 1998 as compared to 1997. The inclusion of a Founding Company's operations for the entire year of 1998 versus the last two months of 1997 accounted for $7.4 million of the increase in cost of revenues. The balance of the increase in cost of revenues was consistent with the increase in revenues experienced by the Fabrication and Offshore Group. Cost of revenues as a percentage of revenues for the Fabrication and Offshore Group increased from 70.1% of revenues in 1997 to 88.1% of revenues in 1998. This decrease in gross profit percentage in 1998 as compared to 1997 was primarily due to a significant percentage of the Dickson revenues being generated from time and material projects which have lower margins as the Company assumes less financial risk in completing the projects.
Selling, general and administrative expenses. Selling, general and administrative expenses increased $6.9 million, or 109.3%, for the year ended December 31, 1998 compared to the 1997 period. As a percentage of revenues, selling, general and administrative expenses (exclusive of the non-cash compensation charge related to the issuance of shares of Common Stock to management of the Company) were 7.1% during 1997, as compared to 7.0% during 1998. The percentage increase was primarily due to short-term expenses incurred during the initial consolidation of the Founding Companies and the integration of Dickson into the Company.
Depreciation and amortization. Depreciation and amortization expenses increased $7.7 million, or 367.6%, from $2.1 million for the year ended December 31, 1997 to $9.8 million for the year ended December 31, 1998. The increase was due to: (1) additional depreciation on $36.0 million of equipment
placed in service during 1998, (2) a full year's depreciation on the equipment owned by the Founding Companies and amortization of goodwill recorded under the purchase method of accounting as compared to two months of depreciation and amortization in 1997, and (3) the additional depreciation and amortization of goodwill associated with the acquisition of Dickson effective September 1, 1998.
Restructuring charges. During the fourth quarter of 1998 the Company recorded a special charge in the amount of $2.4 million. The components of the charge consisted of: (1) $1.8 million severance costs related to former officers and employees terminated as a result of the Company's headcount reduction initiative and (2) $0.6 million for the sale of facilities resulting from the planned consolidation of certain operating facilities.
Interest income (expense), net. Interest expense, net of interest income totaled $4.4 million during the year ended December 31, 1998, as compared to net interest expense of $0.5 million during 1997. The significant increase was due to higher average debt levels in 1998 compared to 1997. See "Liquidity and Capital Resources -- The Company" below for discussion of credit agreement and related financings.
Other income (expense), net. During 1998 other income (expense), net consisted primarily of expenses incurred associated with the settlement of outstanding litigation. During 1997 other income (expense), net consisted primarily of gains recognized on the sale of available-for-sale securities.
LIQUIDITY AND CAPITAL RESOURCES -- THE COMPANY
Uncertainty and volatility in oil and natural gas commodity pricing during 1999 and 2000 caused the Company's Customer Base to significantly reduce capital spending. As a result, the Company experienced significantly reduced revenues and operating cash flows. Revenues for 1999 decreased 22.2% while costs of revenues decreased 6.9%. Additionally, the Company's earnings before interest, taxes, depreciation and amortization (EBITDA) declined by over $16 million. The decline in cash flow combined with the delayed collection on a foreign receivable (the "Foreign Receivable") discussed below negatively impacted the Company's liquidity. The uncertainty surrounding collection of the Foreign Receivable and the Chevron Claim materially impacted the Company's ability to obtain additional financing to remedy the liquidity issues and to satisfy the requirements to raise additional equity contained in the agreements with the Company's lenders. As a result, the Company currently is in default under its Credit Facility and has received notification from its Lenders of the default. In the absence of collecting a significant amount on the Foreign Receivable, or a recapitalization and a waiver or amendment to its agreements with the banks, the Company may not continue as a going concern.
At December 31, 1999, the Company has a contract receivable in the amount of $19.8 million with a foreign joint venture in financial difficulty. The Company has continued to negotiate with the joint venture and subsequent to year end received assurances regarding future payments. The Company has provided a reserve for management's estimate of amounts which may not be collected. In addition, the Company has two letters of credit outstanding issued in the favor of Chevron Global Technologies Services Company ("Chevron") in lieu of retainage on two fabrication projects totaling $8.6 million. In December of 1999, Chevron informed the Company that it had approximately $27.0 million in billing disputes on the two fabrication contracts. If Chevron were to call on either of the two letters of credit or the Company was unable to collect on the $19.8 million receivable from the foreign joint venture, it would have a material adverse impact on the Company's operations, financial position, and cash flow.
In January 1999, the Company entered into a Credit Facility with financial institutions, replacing the existing credit agreement with an aggregate credit facility of $70 million. The Credit Facility is a $10 million increase in borrowing capacity over the credit facility in place at December 31, 1998. The Credit Facility is comprised of three separate credit agreements: (a) a three-year revolving credit agreement ("Revolving Facility") for up to $15.0 million; (b) a seven-year term credit agreement ("Term Loan") for $35.0 million; and (c) a five-year subordinated debt agreement ("Subordinated Debt") for $20.0 million.
At December 31, 1999, the Company had a working capital deficit of $66.6 million, which represented an $82.1 million decrease from the $15.5 million in working capital at December 31, 1998. The indebtedness of the Company at December 31, 1999, consisted of $7.5 million of borrowings under the Revolving Facility,
$37.3 million of borrowings under the Term Loan, $20.0 million of borrowings under the Subordinated Debt, and $4.6 million of borrowings under other term loans. This indebtedness totaled approximately $69.4 million as of December 31, 1999, of which $67.3 million has been classified as a current liability in the accompanying financial statements due to various debt covenant violations. Subsequent to year end the Company has failed to meet the debt service requirements of the Revolving Facility and the Term Loan.
In November 1999, the Company amended the Revolving Facility and the Term Loan by reducing the borrowing capacity under the Revolving Facility by $5.0 million and increasing the current borrowings under the Term Loan by $5.0 million. The Company at this time also amended the financial covenants in the Credit Facility to take into consideration current operating results and the current market environment in which the Company operates. The revised financial covenants required a $7.5 million equity investment by January 31, 2000 and either an additional $7.5 million equity infusion or increased earnings of a similar amount in the first quarter of the year 2000. The Company has not secured any commitments for additional financing and is currently in default of the financial covenants of the Credit Facility. The Company is currently pursuing new third party equity investments, waivers of covenant failures, amendments to the debt covenants or forbearance from its lenders as well as other recapitalization opportunities that might become available and has retained an investment bank to assist in these endeavors.. There is no assurance that the Company will actually complete any financial recapitalization. Subsequent to March 30, 2000, the Company has failed to meet the debt service requirements of the Revolving Facility and the Term Loan. See Notes 1 and 6 to the consolidated financial statements.
Net cash used in operating activities during the year ended December 31, 1999 was $4.0 million. Net cash used in investing activities during the twelve months ended December 31, 1999 was $11.5 million. Investment activities' cash expenditures were primarily for capital expenditures of $6.8 million and $4.7 million for the final settlement on the Dickson earn-out. Net cash consumed by investing activities were funded through additional borrowings on the revolving credit facility. During 1999, the net Revolving Facility and Term Loan borrowings were $8.8 million resulting in an outstanding Revolving Facility and Term Loan balance of $44.8 million at December 31, 1999. Additional borrowing capacity under the Company's revolver and term loan facility at December 31, 1999 totaled $2.5 million.
YEAR 2000
The Company successfully completed its program to prepare its computer systems and applications for the Year 2000 and experienced no significant system or application failures. Based on present information, management does not believe there are any ongoing business risks associated with processing of date-sensitive data by the Company's computerized information systems and equipment as it relates to the Year 2000. The Company was able to complete the Year 2000 conversion tasks within the total projected cost of approximately $750,000.
INFLATION
Inflation has not had a material impact on the Company's results of operations for the last three years.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, the Company is exposed to market risk, primarily from changes in interest rates. The Company continually monitors exposure to market risk and develops appropriate strategies to manage this risk. Accordingly, the Company may enter into certain derivative financial instruments such as interest rate swap agreements. The Company does not use derivative financial instruments for trading or to speculate on changes in interest rates.
Interest Rate Exposure
The Company's exposure to market risk for changes in interest rates relates primarily to the Company's long-term debt. At December 31, 1999, $64.8 million of the Company's indebtedness was subject to variable interest rates with a weighted average effective interest rate of 9.9% for the year then ended. The detrimental effect of a hypothetical 100 basis point increase in interest rates would be to reduce income before taxes by $0.6 million. At December 31, 1999, the fair value of the Company's fixed rate debt is approximately $4.6 million based upon discounted future cash flows using current market prices.
Foreign Currency Exposure
The Company believes its exposure to foreign currency fluctuations is minimal in that contracts for work performed in or to be delivered to countries outside the United States ("Foreign Contracts") are primarily denominated in U.S. dollars. It is Company policy to limit the portion of any Foreign Contracts denominated in local currency to that portion of the total revenue required to be spent in country to complete the project. The Company's operations outside the United States currently are in Latin America and West Africa and all current Foreign Contracts are denominated in U.S. dollars.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To TransCoastal Marine Services, Inc.:
We have audited the accompanying consolidated balance sheets of TransCoastal Marine Services, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998 and 1999, and the related consolidated statements of operations and other comprehensive income (loss), stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 consolidated financial position of TransCoastal Marine Services, Inc. and subsidiaries as of December 31, 1998 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recent operating losses, negative cash flows, debt covenant violations, significantly decreased liquidity and in 2000, has failed to meet debt service requirements of certain of its debt agreements. Additionally, as discussed in Notes 1 and 11, should there be an adverse outcome related to the collection of a receivable from a Mexican joint venture or should significant payments be required to resolve existing disputes with a customer, the Company's liquidity and viability would be further negatively impacted. The Company is expected to continue to experience negative cash flows as it pursues its business strategy which will necessitate additional financing. The Company has not secured any commitments for any such additional financing requirements, and there can be no assurance that the Company will be able to meet its obligations as they become due or be able to restructure the debt with its lenders and other creditors. These matters raise substantial doubt as to the Company's ability to continue as a going concern. Management's plans with regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.
ARTHUR ANDERSEN LLP
Houston, Texas April 7, 2000
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
The accompanying notes are an integral part of these consolidated financial statements.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The accompanying notes are an integral part of these consolidated financial statements.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
The accompanying notes are an integral part of these consolidated financial statements.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
The accompanying notes are an integral part of these consolidated financial statements.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION AND FINANCIAL CONDITION
Business and Organization
TransCoastal Marine Services, Inc. ("TCMS") was organized in April 1996, to create a fully integrated marine construction company focusing on transition zone and shallow water regions of the U.S. Gulf Coast. On November 4, 1997, TCMS acquired, simultaneously with the closing of its initial public offering (the "Offering"), four privately owned marine construction businesses (the "Founding Companies") and certain real properties used in the businesses of the Founding Companies in exchange for consideration consisting of cash, common stock of TCMS (the "Common Stock") and debt assumption. Unless otherwise indicated, all references herein to the "Company" mean TransCoastal Marine Services, Inc., after the Offering, and references to "TCMS" mean TransCoastal Marine Services, Inc., prior to the consummation of the acquisitions of the Founding Companies.
The Woodson Companies ("Woodson"), one of the Founding Companies, was identified as the "accounting acquiror" for financial statement presentation purposes. The acquisitions of the remaining Founding Companies were accounted for using the purchase method of accounting, with the results of operations included from October 31, 1997, the effective closing date of the acquisitions for accounting purposes. The allocation of purchase price to the assets acquired and liabilities assumed was assigned and recorded based on fair value of the assets acquired and liabilities assumed.
Financial Condition
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended December 31, 1999, the Company incurred a net loss of $104.3 million and also had a working capital deficit at December 31, 1999 of $66.6 million due to the classification of long-term debt as current as a result of covenant violations on the debt. The Company has also experienced negative operating cash flows, failed to comply with certain debt covenants and in 2000, has failed to meet debt service requirements of certain of its debt agreements. Additionally, should there be an adverse outcome related to the collection of a receivable from a Mexican joint venture (see Note 11) or should significant payments be required to resolve existing disputes with a customer (see Note 11), the Company's liquidity and viability would be further negatively impacted. The Company is expected to continue to experience negative cash flows as it pursues its business strategy, which will necessitate additional financing. The Company has not secured any commitments for additional financing and there can be no assurance that the Company will be able to meet its obligations as they become due or be able to restructure the debt with its lenders. The debt covenant violations could cause the lenders to seek remedies including asset seizure and/or asset liquidation. These matters raise substantial doubt as to the Company's ability to continue as a going concern. The consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. Management is currently pursuing new third party equity investments, waivers of covenant violations, amendments to the debt covenants or forbearance from its lenders as well as other recapitalization opportunities that might become available. There is no assurance that the Company will actually complete any financial recapitalization. In the absence of a satisfactory recapitalization, the Company anticipates its liquidity problems will likely continue, and the Company may be forced to seek protection from its creditors through bankruptcy.
The current state of the oil and gas services industry in which the Company operates has been adversely impacted by the uncertainty and volatility in oil and natural gas commodity prices. These factors have adversely impacted the major and independent oil and gas exploration and production companies, certain drilling contractors, hydrocarbon transportation companies and other marine construction companies (collectively, the Company's "Customer Base"). The Company's customer base has reacted to this environment by reducing capital spending on oil and gas exploration projects. The Company continues to be affected by these industry factors into 2000.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
Pro forma net income for 1997 consists of the historical net income of the Company, including two S Corporations, adjusted for income taxes that would have been recorded had each company operated as a C Corporation for all of 1997.
Use of Estimates
The Company's financial statements are prepared in accordance with generally accepted accounting principles ("GAAP"). Financial statements prepared in accordance with GAAP require the use of management estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Additionally, management estimates affect the reported amounts of revenues and expenses during the reporting period (see revenue recognition policy). Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents excluding certain restricted amounts.
Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from 3 years to 31.5 years. Leasehold improvements are capitalized and amortized over the shorter of the lives of the leases or the estimated useful lives of the assets. The Company reviews the carrying value of property and equipment for impairment whenever factors indicate that the carrying value of an asset may not be realizable. Impairment losses would be recorded when an asset's carrying value exceeds its fair value. Fair value is generally based on third party appraisals, discounted cash flows or management's estimates. (See Note 5 regarding a $10.3 million loss on asset impairment recorded in 1999.)
Expenditures for repairs and maintenance are charged to expense when incurred. Expenditures for major renewals and betterments, which extend the useful lives of existing equipment, are capitalized and depreciated.
Goodwill
Goodwill represents the excess of the aggregate purchase price paid by the Company over the fair market value of the net tangible assets acquired. Goodwill is being amortized on a straight-line basis over 40 years, which represents management's estimation of the related benefit to be derived from the acquired businesses. The Company periodically evaluates whether events and circumstances after the acquisition date indicate that the remaining balance of goodwill may not be recoverable. If factors indicate that goodwill should be evaluated for possible impairment, the Company would compare estimated undiscounted future cash flow from the related operations to the carrying amount of goodwill. If the carrying amount of goodwill was greater than undiscounted future cash flow, an impairment loss would be recognized. Any impairment loss would be computed as the excess of the carrying amount of goodwill over the estimated fair value of the goodwill (calculated based on discounting estimated future cash flows). Accumulated amortization of goodwill was
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$0.3 million, $2.2 million and $90.7 million as of December 31, 1997, 1998 and 1999, respectively. (See Note 5 regarding an $86.3 million loss on goodwill impairment recorded in 1999.)
Dry-dock Costs
Dry-dock costs are third-party costs associated with scheduled maintenance on the Company's marine construction vessels. Costs incurred in connection with dry-docking are capitalized and amortized over the period to the next scheduled dry-docking.
Mobilization Costs
Mobilization costs incurred on moving marine vessels and associated equipment to their contractual locations to commence operations are capitalized and amortized over the contract term.
Debt Issuance Costs
Debt issuance costs are included in other noncurrent assets and are amortized to interest expense over the scheduled maturity of the debt. As of December 31, 1998 and 1999, debt issuance costs, net of accumulated amortization, were $1.5 million and $2.3 million, respectively.
Revenue Recognition
Revenues from construction contracts, which are typically less than twelve months in duration, are recognized on the percentage-of-completion method. Under this method, the percentage of completion is determined by comparing contract costs incurred to date with total estimated contract costs. Income is recognized by applying the percentage complete to the projected total income for each contract in progress. Contract costs include all direct material, labor and subcontract costs and those indirect costs related to contract performance, such as indirect labor, supplies and tools. Revisions in cost and income estimates are reflected in the accounting period in which the facts requiring revision become known. In addition, anticipated losses to be incurred on contracts in progress are charged to income in the period such losses are determined. With regard to pipeline testing services performed, the Company recognizes revenues as services are provided.
Fair Value of Financial Instruments
The Company considers the fair value of all financial instruments to not be materially different from their carrying values at each year-end based on management's estimate of the Company's ability to borrow funds under terms and conditions similar to those applicable to the Company's existing debt.
Income Taxes
The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized differently in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates and laws in effect in the years in which the differences are expected to reverse. Deferred tax assets are evaluated for realization based on a more-likely-than-not criteria in determining if a valuation allowance should be provided. Income tax expense is the tax payable for the year and the change during the year in deferred tax assets and liabilities.
Two of the three companies comprising the Woodson Companies elected to be taxed as S Corporations for federal and state income tax purposes whereby shareholders are liable for individual federal and state income taxes on their allocated portions of the applicable entity's taxable income. Upon the closing of the Offering, the S Corporation status was changed to that of a C Corporation. Accordingly, the historical
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statements as they relate to the period prior to the Offering do not include provisions for income taxes relating to those entities.
Concentrations of Credit
The Company's Customer Base potentially exposes the Company to concentrations of credit risk. The Company performs ongoing credit evaluation of its customers and requires posting of collateral or lien rights when deemed appropriate. The Company provides allowances for possible credit losses when necessary.
Income (Loss) Per Share
Basic income (loss) per share excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The weighted average number of common shares outstanding used to compute basic and diluted income (loss) per share for the year ended December 31, 1997 were 3,363,000 and 3,393,000, respectively. The weighted average number of common shares outstanding used to compute basic and diluted income (loss) per share for years ended December 31, 1998 and 1999 were 9,583,000 and 10,951,000, respectively. Calculation of diluted earnings (loss) per share is similar to basic income (loss) per share except that the denominator includes dilutive common stock equivalents such as stock options and warrants. Common stock equivalents are excluded from fully diluted calculations in those periods in which a net loss is reported as they would be anti-dilutive. Weighted average shares outstanding for calculation of diluted income (loss) per share totaled 3,393,000, 9,583,000, and 10,951,000 for 1997, 1998 and 1999, respectively. Weighted average diluted shares outstanding at December 31, 1997 included 30,000 shares related to a warrant issued to a financial advisory firm that provided services in conjunction with the Acquisitions (see Note 3).
Reclassifications
The accompanying consolidated financial statements for prior years contain certain reclassifications to conform with current year presentation.
3. BUSINESS COMBINATIONS
On November 4, 1997, TCMS acquired in separate transactions (collectively, the "Acquisitions"), simultaneously with the closing of the Offering, the Founding Companies and certain real properties used in the businesses of the Founding Companies. The Acquisitions have been accounted for under the purchase method of accounting. The aggregate consideration paid for the Acquisitions was $85.7 million in cash, issuance of $3.0 million in 8% notes payable over a ten-year term ending in 2007, and 2,142,441 shares of Common Stock. Funding of the cash portion of the consideration was provided by funds raised through the Offering. The purchase price allocations resulted in goodwill recognized of $71.5 million representing the excess of purchase price over fair value of the net assets acquired. The goodwill allocation includes $14.0 million of excess purchase price attributable to the 975,000 shares of Common Stock issued to the founders of TCMS during 1996 which were revalued to a fair market value of $14.40 per share.
On September 1, 1998, the Company consummated the acquisition of Dickson GMP International, Inc. and four affiliated companies ("Dickson") for $10 million in cash and 1,300,000 shares of Common Stock of the Company and an earn-out. In May, 1999, in final settlement of the earn-out with Dickson, the Company paid an additional $4.7 million in cash, issued 800,000 shares of common stock to the former stockholders of Dickson.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Set forth below are unaudited pro forma combined revenues and income data reflecting the pro forma effect of the acquisition of Dickson on the Company's results from operations for the year ended December 31, 1998. The unaudited pro forma data presented below consist of the income statement data from operations as presented in these consolidated financial statements plus the Dickson income statement data from operations for the eight months ended August 31, 1998 (in thousands, except per share amounts). These pro forma results are not necessarily indicative of the results that would actually have occurred if the acquisition of Dickson had taken place at the beginning of 1998, nor are they necessarily indicative of future results. The Company made no acquisitions in 1999.
4. RESTRUCTURING AND SPECIAL CHARGES
In September of 1999, the Company completed a functional review of its Fabrication & Offshore Group's operations and foreign and domestic facilities. As a result of this review, the Company recorded a special charge in the amount of $1.7 million ($1.0 million, net of tax, or $0.09 per diluted share for year ended December 31, 1999). The components of the charge consists of: (a) $1.2 million severance costs related to former employees terminated as a result of the Company's 1999 headcount reduction initiative and (b) $0.5 million in costs associated with the closing of foreign facilities and reduction in operations in Nigeria and South America.
In December 1998, under direction of the Company's new chief executive officer appointed in November 1998, the Company's management undertook a comprehensive review of its operations, properties and lease commitments and personnel. As a result of this review, the Company recorded a special charge in the amount of $2.4 million ($1.6 million, net of tax, or $0.17 per diluted share). The components of the charge consist of: (a) $1.8 million severance costs related to former officers and employees terminated as a result of the Company's 1998 headcount reduction initiative and (b) $0.6 million for the estimated loss on the planned sale of facilities resulting from the planned consolidation of certain operating facilities. These actions were completed in 1999.
At December 31, 1998 and 1999, the net realizable value of the land, buildings, and improvements held for sale totaled $3.4 million, and has been included in other current assets in the accompanying 1998 and 1999 balance sheets. Additionally, accrued liabilities totaling approximately $1.3 million and $2.2 million as of December 31, 1998 and 1999, respectively, have been recorded for severance and other costs related to the change in the Company's operating plan. For 1999, these amounts are preliminary in nature pending the ultimate sale of identified facilities.
5. LOSS ON ASSET IMPAIRMENT
As described in Note 1, the Company's Customer Base has been adversely impacted by the uncertainty and volatility in oil and natural gas commodity prices, which has adversely impacted the Company's operations, resulting in negative cash flows, operating losses, debt covenant violations and significantly decreased liquidity, all of which have continued in 2000. These factors have caused the Company's future to be uncertain and management to evaluate the realization of the Company's long-lived assets, including property, equipment and goodwill.
In accordance with the Company's policies for evaluating impairment, and based on forecasts and other objective data, management believes it is unlikely that the Company will recover any of the carrying value of TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
goodwill. The entire $86.3 million balance of goodwill as of December 31, 1999, has been impaired and accordingly is being written-off.
The Company also recorded an impairment write-off of approximately $10.3 million related primarily to the Company's vessels, barges and certain leasehold improvements. The impairment was in part based on current forecasts as well as independent appraisals on specific assets. After recording the total of $96.6 million in impairment allowances, the Company's remaining net book value approximates the Company's current market capitalization, further supporting management's decision.
Although the Company's Customer Base has been adversely impacted by uncertainty and volatility for several years, the Company had generated income and positive cash flow from operations for the years ended December 31, 1997 and 1998. Based on management's prior assessments of the realization of the Company's assets, no impairment was considered necessary in prior years. The prolonged nature and severity of the adverse industry conditions resulted in the Company's financial difficulties as previously described. The Company's financial difficulties became critical in the latter half of 1999 and have continued into 2000. Management believes the impairments were appropriately recorded in the fourth quarter of 1999.
6. DETAIL OF CERTAIN BALANCE SHEET ACCOUNTS
Contracts and accounts receivable consisted of the following (in thousands):
Information with respect to uncompleted contracts is as follows (in thousands):
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The above amounts are included in the accompanying balance sheets under the following captions (in thousands):
Other current assets consisted of the following (in thousands):
Property and equipment consisted of the following (in thousands):
Other noncurrent assets consisted of the following (in thousands):
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Accrued expenses consisted of the following (in thousands):
7. SUMMARY OF FINANCING ARRANGEMENTS
Long-term debt at December 31, 1998 and 1999 consisted of the following (in thousands):
Credit Facility
In January 1999, the Company entered into a "Credit Facility" with financial institutions, replacing the existing credit agreement with an aggregate credit facility of $70 million. The Credit Facility is comprised of three separate credit agreements: (a) a three year revolving credit agreement ("Revolving Facility") for up to $15.0 million; (b) a seven year term credit agreement ("Term Loan") for $35.0 million, and (c) a five year subordinated debt agreement ("Subordinated Debt") of $20.0 million.
In November 1999 the Company renegotiated the terms of its Revolving Facility to reduce the facility to $10.0 million and amend the financial covenants. At that time the Company also obtained waivers for financial covenant defaults at September 1999. Borrowings under the Revolving Facility bear interest on a sliding scale of 175 to 275 basis points over either the Base Rate or LIBOR, depending upon the ratio of senior funded debt to the Company's earnings before interest, taxes, depreciation, and amortization (EBITDA). The choice of using the Base Rate or the LIBOR rate is at the option of the Company. The Base Rate is defined as the
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
higher of the federal funds rate plus 50 basis points or the prime rate. Interest is payable monthly. At December 31, 1999, the average interest rate on borrowings under the Revolving Facility was 9%. The borrowing capacity under the Revolving Facility is calculated using a borrowing base that includes accounts receivable and inventory. At December 31, 1999, the Company was in default with regard to certain financial and other covenants. The Company is currently seeking waivers for these defaults. However, there can be no assurance that the Company will be able to obtain such waivers. Therefore, the outstanding balance of $7.5 million at December 31, 1999, has been classified as current in the accompanying financial statements.
In November 1999 the Company renegotiated the terms of its Term Loan to increase the then outstanding balance of the facility by $5.0 million and amended the financial and other covenants. At that time the Company also obtained waivers for financial covenant defaults at September 1999. Borrowings under the Term Loan Facility bear interest at LIBOR plus 250 basis points. At December 31, 1999, the interest rate on borrowings under the Term Loan was 8.6%. Principal and interest are due monthly beginning January 1, 2000 with the first principal payment being in the amount of $1,083,000. The remaining balance is to be paid in 46 payments of approximately $542,000 plus interest; 25 payments of approximately $437,000 plus interest, and the final payment for the then outstanding balance plus interest. At December 31, 1999, the Company is in default with regard to certain financial and other covenants and subsequent to year-end has failed to meet the scheduled debt service payment requirements of the Term Loan. The Company is currently seeking waivers for these defaults. However, there can be no assurance that the Company will be able to obtain such waivers. Therefore, the outstanding balance of $37.3 million at December 31, 1999 has been classified as current in the accompanying financial statements.
In November 1999 the Company re-negotiated the terms of its Subordinated Debt and amended the financial covenants. At that time the Company also obtained waivers for financial and other covenant defaults at September 1999. Borrowings under the Subordinated Debt bear interest on a sliding scale of 275 to 575 basis points over the Prime Rate depending upon the ratio of senior funded debt to the Company's earnings before EBITDA. The Prime Rate is defined as the higher of the federal funds rate plus 50 basis points or the prime rate. At December 31, 1999, the interest rate on borrowings under the Subordinated Debt was 14.3%. Interest is payable quarterly beginning March 31, 1999, with principal due upon maturity on the fifth anniversary of the subordinated debt agreement. At December 31, 1999, the Company is in default with regard to certain financial and other covenants. The Company is currently seeking waivers for these defaults. However, there can be no assurance that the Company will be able to obtain such waivers. Therefore, the outstanding balance of $20.0 million at December 31, 1999 has been classified as current in the accompanying financial statements.
Commitment fees on the daily average unused commitment under the Revolving Facility are payable monthly at an annual rate ranging from 0.25% to .375%. Borrowings under the Credit Facility are secured by liens on substantially all of the Company's assets (including accounts receivable and subsequently acquired property) and a pledge of the capital stock of all subsidiaries. The Credit Facility requires the Company to comply with various loan covenants, including (a) maintenance of certain financial ratios, (b) restrictions on additional indebtedness and (c) restrictions on liens, guarantees, advances and dividends. In connection with the Subordinated Debt, the Company issued to the subordinated lender a warrant to acquire 233,000 shares of Common Stock at an exercise price of $3.12 per share and cancelled the previously issued warrant to acquire 175,000 shares of Common Stock issued in conjunction with the 1997 credit agreement. In November 1999 the Company issued the subordinated lender an additional warrant to acquire 175,000 shares of Common Stock at an exercise price of $3.69 per share in conjunction with obtaining the waiver of the September 1999 defaults and amendment to the financial covenants. The warrants are exercisable for five years from the date of issuance. Upon issuance, the 408,000 warrants were valued at $668,000 based on fair market value as determined by management and use of the Black-Scholes pricing mode.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Annual maturities of long-term debt at December 31, 1999, after giving effect to acceleration due to debt covenant violations, are as follows (in thousands):
8. STOCKHOLDERS' EQUITY
Common Stock
On November 4, 1997, TCMS completed the Offering, which involved the issuance of 5,750,000 shares of Common Stock at a price of $18.00 per share (before deducting underwriting discounts and commissions), including 750,000 shares pursuant to an over-allotment option granted by the Company to the underwriters in connection with the Offering. The net proceeds to TCMS after deducting underwriter discounts and commissions totaled $94.7 million.
In March and April 1997, 175,000 shares and 100,000 shares of Common Stock, respectively, were sold to management at $.001 per share. TCMS recorded a non-recurring, non-cash compensation charge of $2.2 million effective with the closing of the Offering, representing the difference between the amount paid for the shares and the estimated fair value of the shares on the date of sale of such Common Stock.
In April 1997, TCMS issued 3,000 shares of Common Stock to a consultant for services performed in connection with the Offering. The difference of $12,200 between the amount paid and the estimated fair market value of the shares on the date of issue was recorded as deferred offering costs in the second quarter of 1997. In July 1997, an additional 3,000 shares of Common Stock were issued with the same terms to another consultant for services performed in connection with the Offering. An additional $32,000 was recorded as deferred offering costs in the third quarter of 1997. Such costs were charged to additional paid-in capital upon consummation of the Offering.
In September 1998, the Company issued 1,300,000 shares of Common Stock to the former stockholders of Dickson as partial consideration for all the outstanding stock of Dickson. The Company valued the shares at $5.5 million or $4.25 per share, which was the quoted closing price of the stock on the day preceding the closing of the acquisition.
On May 19, 1999, the Company issued 400,000 shares of Common Stock to the former stockholders of Dickson. The shares were issued in partial consideration of the earn-out portion of the acquisition price of all the outstanding stock of Dickson.
Preferred Stock
On May 19, 1999, the Company issued 1,680 shares of Series B 5% cumulative convertible preferred stock and 140 shares of Series A 7% redeemable cumulative preferred stock (Series A Preferred Stock) to the former stockholders of Dickson. The shares were issued in partial consideration of the earn-out portion of the acquisition price of all the outstanding stock of Dickson. On May 26, 1999, the 1,680 shares of Series B 5% cumulative convertible preferred stock were automatically converted into 400,000 shares of Common Stock upon the approval by the stockholders of the Company. The approval of the issuance of the Common Stock
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(as part of the acquisition of Dickson) by the stockholders was required in accordance with the rules and regulations of Nasdaq National Market.
The Series A Preferred Stock vote as a single class on matters which adversely affect any right, preference, privilege, or voting power of the Series A Preferred Stock. The Series A Preferred Stock votes as a class on the issuance of additional shares of Series A Preferred Stock or the creation of a class or series of preferred stock which is senior to the Series A Preferred Stock. The Series A Preferred Stock, as presented in the accompanying balance sheets, has a redemption price of $1,000 per share, together with accrued and unpaid dividends thereon. Redemption is at the option of the holders for any or all the outstanding shares after May 19, 2004 or at the option of the Company after May 19, 2005. In the event of any liquidation, dissolution or winding up of the affairs of the Company, holders of the Series A Preferred Stock shall be paid the redemption price plus all accrued dividends to the date of liquidation, dissolution or winding up of affairs before any payment to other stockholders.
Restricted Common Stock
All outstanding shares of Restricted Common Stock were converted into shares of Common Stock during 1999.
Dividends and Distributions to Woodson Stockholders
Dividends recorded in the consolidated statements of stockholders' equity and cash flows represent amounts paid to Woodson stockholders prior to the Offering.
Distributions to Woodson stockholders recorded in the consolidated statements of stockholders' equity and cash flows represent the cash portion of the purchase price paid to the Woodson stockholders for the acquisition of Woodson.
Stock Options
In August 1997, the Board of Directors and the stockholders of TCMS approved the 1997 Stock Option Plan (the "Plan"). The Plan provides for the granting of stock options to directors, executive officers, certain other employees and certain non-employee consultants of the Company. The Plan, which was amended during 1998 to permit up to 950,000 shares of Common Stock to be issued, terminates in August 2007. In general, the terms of the option awards provide for vesting up to 5 years and expire 10 years from date of grant.
In December 1998, the Board of Directors approved the Transcoastal Marine Services, Inc. 1998 Stock Option Plan (the "1998 Plan"). The 1998 Plan provides for granting of stock options to the Chairman and CEO and the Executive Vice President necessary to fulfill the Company's obligations under their respective employment agreements. The 1998 Plan terminates in November 2001. In general, that the terms of the option awards provide for vesting up to 5 years and expire 10 years from date of grant.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes activity under the Plan for the years ended December 31, 1997, 1998 and 1999:
The following table summarizes certain information about stock options outstanding at December 31, 1999:
At December 31, 1997, 1998 and 1999, exercisable option shares were 0, 767,131 and 1,371,329, respectively. Unexercised options expire during the years 2007 through 2009.
Entities are permitted to choose between a fair value-based method of accounting for employee stock options or similar equity instruments and the intrinsic, value-based method of accounting. The Company has elected the intrinsic, value-based method and accordingly must make pro forma disclosures of net income and income (loss) per share as if the fair value method of accounting had been applied. Since options have been issued at fair market value, no deferred compensation expense has been recorded in the accompanying financial statements.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma summary of the Company's consolidated results of operations have been prepared as if the fair value based method of accounting for stock based compensation had been applied (in thousands, except per share amounts):
Fair value of the options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 1998 and 1999.
Common Stock Warrants
During the first quarter of 1997, TCMS entered into an advisory agreement with an investment banking firm which provided for the issuance of a warrant to acquire 50,000 shares of Common Stock at a per share exercise price equal to $8.00. The warrant may be exercised in whole or, from time to time, in part, at any time during the five-year period beginning six months after the Offering closes. In connection with the warrant, TCMS granted certain registration rights to the firm. Additionally, in connection with the Credit Agreement, the Company issued to its subordinated lender warrants to acquire 233,000 and 175,000 shares of Common Stock at an exercise price of $3.12 and $3.69, respectively (See Note 7 regarding cancellation of warrant in 1999). As of December 31, 1997, 1998 and 1999, no warrants had been exercised. These warrants were valued by management, using the Black-Scholes pricing model, at approximately $0.7 million.
9. LEASES
The Company leases facilities under noncancellable operating leases. The following represents future minimum rental payments under noncancellable operating leases (in thousands):
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Rental expense for the years ended December 31, 1997, 1998 and 1999 was approximately $163,000, $1,173,000 and $1,037,000, respectively. Included in these amounts are rent expenses and commissions paid to related parties for the years ended December 31, 1997, 1998 and 1999 of approximately $90,000, $8,000 and $0, respectively.
10. INCOME TAXES
Federal and state income tax provisions (benefits) are as follows (in thousands):
Actual income tax expense differs from income tax expense computed by applying the U.S. federal statutory corporate tax rate of 34% to income before income tax as follows (in thousands):
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income tax provisions result from temporary differences in the recognition of revenues and expenses for financial reporting purposes and for tax purposes. The tax effects of these temporary differences representing deferred assets and liabilities result principally from the following (in thousands):
As of December 31, 1999, the Company had a net operating loss (NOL) of approximately $42.0 million which is available to offset future taxable income. Due to uncertainties regarding the Company's ability to fully utilize the NOL during the carryforward period, the Company has provided a valuation allowance of approximately $9.3 million at December 31, 1999.
11. COMMITMENTS AND CONTINGENCIES
Chevron Dispute
In December 1999, Chevron Global Technologies Services Company ("Chevron") informed the Company of its intention to seek reimbursements totaling approximately $27.0 million for various disputed billings associated with certain fabrication projects. The Company has begun proceedings with Chevron in order to bring a resolution to the matters regarding the disputed billings. At December 31, 1999, the Company had outstanding two letters of credit, totalling $8.6 million, issued in favor of Chevron. While the Company is unable to estimate precisely the ultimate dollar amount of exposure, if any, related to this matter, it has made accruals for management's estimate of the exposure. Due to the evolving nature of the disputed items with Chevron, the inherent shortcomings of the estimation process and other factors, amounts accrued could vary significantly from amounts required to be paid, if any. If Chevron were to prevail, it would have a significant impact on the operations of the Company's subsidiary, TransCoastal Fabrication & Offshore Group, Inc. (formerly Dickson GMP International, Inc.) and the Company.
Contract Receivable
During 1999, the Company was informed that the Mexican joint venture, also the general contractor, of one of the Company's major vessel charter contracts was in poor financial condition and would cease to perform construction in the Gulf of Mexico. At December 31, 1999, the contract receivable outstanding was $19.8 million. The Company has continued to negotiate with the joint venture as to future payments. While the Company is unable to estimate precisely the ultimate amount that may be collected, it has provided a reserve for management's estimate of amounts which may not be collected. The Company believes that the current reserve is adequate to cover any uncollectable portion of the contract receivable and expects final resolution of this matter will occur during the second or third quarter of 2000.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Litigation
During 1998, the Company was involved in two class action lawsuits for unspecified personal injury and property damages arising from events in October 1991 and January 1992 during the course of a pipeline installation project for a third party gas transmission company. One of the class actions, involving approximately 9,840 class members, entitled Rivera v. United Gas Pipeline Co., No. 28738, was instituted against Woodson Construction Company, Inc. on October 29, 1991 in the 40th Judicial District Court, Parish of St. John the Baptist, State of Louisiana. This lawsuit was settled during 1998. The Company's contribution towards the settlement was approximately $50,000, and was expensed in 1998. The second class action lawsuit, involving approximately 7,858 class members, entitled Husseiney v. United Gas Pipeline Co., No. 29089, was instituted on January 27, 1992 against Woodson Construction Company, Inc. in the 40th Judicial District Court, Parish of St. John the Baptist, State of Louisiana. This lawsuit was settled during 1999. The Company's contribution towards the settlement was approximately $600,000, and was expensed in 1998.
The Company is involved in various other lawsuits arising in the ordinary course of business, some of which involve substantial claims for damages. While the outcome of these other lawsuits cannot be predicted with certainty, management believes these other matters will not have a material adverse effect on the consolidated financial position or results of operations of the Company.
Consulting Agreements
During February 1997, TCMS entered into a consulting and financial advisory agreement (the "Consulting Agreement") with a promoter of TCMS ("J&D"). The Consulting Agreement provided for a monthly fee of $12,500 through the closing of the Offering and was to provide for a monthly consulting fee and non-qualified stock options under the 1997 Stock Option Plan. Shortly after the Offering, the Consulting Agreement was terminated in exchange for the payment to J&D of approximately $800,000. In connection with the Consulting Agreement, a total of 36,667 options were issued to J&D. The options expired concurrent with the termination of the Consulting Agreement.
In April 1997, TCMS entered into consulting services agreements with certain officers of the Company. Pursuant to these agreements, the officers provided executive services in connection with the formation of TCMS and the closing of the Offering. Expenses related to these contract services totaled $64,000 through the closing of the Offering, at which time these agreements terminated.
Employment Agreements
Members of the management team have executed employment agreements that extend through November 2001 which provide for compensation of $590,000 and $560,000 in 2000 and 2001, respectively.
12. EMPLOYEE BENEFIT PLANS
The Company has a 401(K) Plan (the "Plan") which provides for certain contributions of up to 10 percent of the annual compensation of each participant. The Plan includes employees of at least 21 years of age with 6 months of completed service. The Company obtained a favorable tax determination letter from the Internal Revenue Service with respect to the Plan. The Company has agreed to fund 50% per dollar of contribution by an eligible employee, up to contributions totaling 6% of the employee's annual salary. The Company made contributions to the Plan of $59,000, $359,000 and $447,000 in 1997, 1998 and 1999, respectively.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. SALES TO MAJOR CUSTOMERS
The customer base for the Company is primarily concentrated in the oil and gas industry. The revenues earned from each customer vary from year to year based on the contracts awarded. Sales to customers comprising 10% or more of the Company's total revenues are summarized as follows:
14. SEGMENT INFORMATION
Operating Segments
The Company has two primary operating segments the Pipeline & Marine Group and the Fabrication & Offshore Group. The Pipeline & Marine Group's operations focus on the construction, burial and testing of pipelines onshore, in the transition zone and in water depths up to 800 feet. The Fabrication & Offshore Group's primary operations focus on the fabrication of shallow water barges, drilling rigs and oil and gas production platforms. The two segments are managed separately because each business requires different technology and marketing strategies. The accounting policies of the segments are the same as those described in the summary of significant accounting policies except that certain corporate expenses such as amortization of goodwill as well as interest expense, interest income and income taxes are not allocated between the segments in the Company's evaluation of segment profit or loss.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following shows segment information for the reportable segments for the three years in the period ended December 31, 1999 (in thousands):
During 1999, the Company operated in principally four geographic segments: the United States, Venezuela, Mexico, and Nigeria. Revenues derived from sales generated in Venezuela and export sales to Venezuela for the two years ended December 31, 1999 were approximately 12.8% and 27.4% of total revenues. Revenues generated from services provided in Mexico represented approximately 2.4% and 11.3% of total revenues for the years ended December 31, 1998, and 1999, respectively. Revenues generated from services provided in Nigeria represented approximately 1.0% and 7.4% of total revenues for the years ended December 31, 1998, and 1999, respectively. Prior to 1998, export sales or revenue generated in foreign countries was not significant to the Company's operations. In 1997 approximately 4.3% of its revenues were generated outside the United States. All of the Company's contracts are denominated in U.S. Dollars.
TRANSCOASTAL MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's foreign operations and sales to foreign locations are subject to local government regulations and to uncertainties of economics and political conditions of those areas. In addition, because of the impact of local laws, the Company also conducts some of its foreign projects pursuant to arrangements in which local entities participate in the project. Revisions to project revenues or costs, including those arising from changes or revisions to foreign regulatory requirements and revisions to arrangements with local entities, are recognized in the period in which the revisions are determined.
The following shows geographic segment information for the three years in the period ended December 31, 1999 (in thousands):
15. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental cash flow information for each of the three years in the period ended December 31, 1999 are as follows (in thousands):
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For the information called for by Items 10, 11, 12, and 13, reference is made to the Company's definitive proxy statement for its 2000 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission (the "Commission") within 120 days after December 31, 1999, and which is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Exhibits
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or because the required information is contained in the Financial Statements or Notes thereto.
(c) Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
TRANSCOASTAL MARINE SERVICES, INC.
By: /s/ WARREN L. WILLIAMS ---------------------------------- Warren L. Williams Chief Financial Officer
April 13, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated.
EXHIBIT INDEX
However, an unfavorable outcome in the Company's billing dispute with Chevron Global Technologies Services Company ("Chevron") could have a materially adverse impact on the operations of the Company's wholly-owned subsidiary, TransCoastal Fabrication & Offshore Group, Inc. (formerly Dickson GMP International, Inc.). See discussion in Note 11 to the Consolidated Financial Statements of the Company.