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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) - For the Fiscal Year Ended March 31, 1994
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) - For the Transition Period From
___________________________ to ___________________________
Commission file number 1-6311
TIDEWATER INC.
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(Exact name of registrant as specified in its Charter)
Delaware 72-0487776
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1440 Canal Street, New Orleans, Louisiana 70112
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(Address of principal executive offices) (Zip Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which registered
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Common Stock, par value $0.10 New York Stock Exchange, Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange, Pacific Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
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As of May 2, 1994, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $982,195,105.
53,072,749 shares of Tidewater Inc. common stock $0.10 par value per
share were outstanding on May 2, 1994. Registrant has no other class of common
stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
TABLE OF CONTENTS
PART I
Page
Item Number
---- ------
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . 11
4A. Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PART II
5. Market for the Registrant's Common Stock and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . 31
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 31
PART III
10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . 32
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . 45
PART IV
14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
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PART I
ITEM 1. BUSINESS
GENERAL
Tidewater Inc. (the "Company") was incorporated in Delaware in 1956. The
Company's principal executive offices are located at 1440 Canal Street, New
Orleans, Louisiana 70112, and its telephone number is (504) 568-1010. Unless
otherwise required by the context, the term "Company" as used herein refers to
Tidewater Inc. and its consolidated subsidiaries.
The Company's two principal divisions are Tidewater Marine and Tidewater
Compression. Tidewater Marine principally provides support services to the
international offshore petroleum industry. Tidewater Compression principally
provides natural gas and air compression equipment and services, primarily to
the oil and gas and petrochemical industries.
The Company pioneered the offshore marine services industry in the
mid-1950's with the construction of the first forward pilothouse vessels
designed exclusively for use in the support of the offshore oil and gas
industry. Operating in all major offshore exploration and production areas of
the world, Tidewater Marine principally offers support services for the entire
cycle of the offshore exploration and production process, including: towing
and anchor handling of mobile drilling rigs and equipment; transporting
supplies necessary to sustain drilling, workover and production activities; and
supporting offshore pipelaying and construction activities. At March 31, 1994,
approximately 35% of Tidewater Marine's vessels operated in the U.S. Gulf of
Mexico and off the East and West Coasts of the United States. The remainder of
Tidewater Marine's fleet operated internationally in areas such as offshore
Australia, Brazil, Egypt, India, Indonesia, Malaysia, Mexico, New Zealand,
Taiwan, Trinidad, Venezuela, and West Africa and in the North Sea and the
Persian Gulf.
On January 15, 1992, the Company significantly expanded its marine
equipment operations through the acquisition of Zapata Gulf Marine Corporation
("Zapata Gulf") pursuant to a merger of a wholly-owned subsidiary of the
Company into Zapata Gulf (the "Zapata Gulf Merger"). The Zapata Gulf Merger
was completed pursuant to an Agreement and Plan of Merger dated June 19, 1991
between the Company, Zapata Gulf, and each of the shareholders of Zapata Gulf.
On the date of the Zapata Gulf Merger, the shareholders of Zapata Gulf received
23,786,000 shares of the Company's common stock in exchange for all of the
issued and outstanding capital stock of Zapata Gulf. Information concerning
the Zapata Gulf Merger appears in Note 1 to the Consolidated Financial
Statements included herein.
Tidewater Compression is one of the leading suppliers of compression
services in the United States. Tidewater Compression provides, mainly on a
rental basis, natural gas and air compression equipment and services for a
variety of applications, including all phases of
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natural gas and oil production. Natural gas compressor demand is more closely
related to the number of producing natural gas wells than to the level of
natural gas exploration. Air compression units are used in a variety of
industries, including petrochemical, refining, pulp/paper, pipeline, and
electronics, as well as in oil and gas production. Tidewater Compression also
provides the international energy industry with a broad range of engineered
products and technical services used primarily in natural gas processing and
the production, enhanced recovery, and transmission of natural gas.
Information concerning revenues, operating profits and assets for each of
the Company's business segments and the geographic distribution of its
operations is set forth in Item 7 of this report.
TIDEWATER MARINE
Tidewater Marine is the world's largest provider of offshore supply
vessels and marine support services. With a fleet of approximately 600
vessels, Tidewater Marine operates, and has a leading market share, in most of
the world's significant oil and gas exploration and production markets.
Tidewater Marine provides services supporting all phases of offshore
exploration, development and production, including: towing of and
anchor-handling of mobile drilling rigs and equipment; transporting supplies
and personnel necessary to sustain drilling, workover and production
activities; and supporting pipelaying and other offshore construction
activities.
United States Operations. The Company's domestic activities are
primarily conducted in the U.S. Gulf of Mexico. In addition, the Company has
vessels on the East and West Coasts of the United States, including Alaska.
For information concerning revenues derived from domestic marine operations,
see "Marine Segment" in Item 7 of this report.
Foreign Operations. The Company's principal areas of foreign marine
equipment operations, which are primarily conducted through wholly-owned
subsidiaries, currently include areas offshore Brazil, Egypt, India, Indonesia,
Malaysia, Mexico, Taiwan, Trinidad, Venezuela, and West Africa and in the North
Sea and the Persian Gulf. In addition, the Company conducts marine equipment
operations in Abu Dhabi, Australia, Brunei, Egypt, Malaysia, Mexico, New
Zealand, Nigeria, Saudi Arabia and Venezuela through joint ventures. For
information concerning revenues derived from foreign marine operations, see
"Marine Segment" in Item 7 of this report.
The Company's foreign marine equipment operations are subject to the
usual risks inherent in doing business in foreign countries. Such risks
include political changes, possible vessel seizure, company nationalization or
other governmental actions, currency restrictions and revaluations, and
import/export restrictions, all of which are beyond the control of the Company.
Although it is impossible to predict the likelihood of such occurrences or
their effect on the Company, the Company believes these risks to be within
acceptable limits, and,
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in view of the mobile nature of the Company's principal revenue producing
assets, does not consider them to constitute a factor materially adverse to the
conduct of its foreign marine equipment operations as a whole.
Marine Services Equipment. Tables comparing the number of vessels in the
Company's marine fleet by class and geographic distribution appear under
"Marine Segment" in Item 7 of this report.
Towing-Supply and Supply Vessels. The Company charters its towing-supply
and supply vessels to customers for use principally in transporting supplies
and equipment from shore bases to offshore drilling rigs, platforms and other
installations. Towing-supply vessels (from 180 to 218 feet in length and up to
8,000 horsepower) and supply vessels (from 165 to 194 feet in length) carry
drill pipe, drilling mud, drilling water, fuel and miscellaneous equipment to
offshore locations. In addition, vessels of the towing- supply class are
equipped for and are capable of towing drilling rigs and other marine equipment
and setting anchors for positioning and mooring drilling rigs.
Crew and Utility Vessels. Crew and utility vessels are chartered to
customers for use principally in transporting supplies and personnel from shore
bases to offshore drilling rigs, platforms and other installations. Crewboats
(25 to 120 feet in length) transport personnel, food and supplies, while
utility vessels (100 to 120 feet in length) perform a variety of oilfield
support functions.
Offshore Tugs. Offshore tugs are engaged in towing floating drilling
rigs to and from drilling locations in the Gulf of Mexico and foreign operating
areas. Offshore tugs also dock tankers, tow barges, including Company barges,
and assist pipelaying and construction barges. Additionally, the Company's
offshore tugs are used in a variety of other commercial towing operations,
including towing barges carrying bulk cargo, rail cars, and containerized
cargo. The Company generally operates such tugs with its own personnel and
charges for their operation primarily on an hourly or daily basis.
Other Vessels. The Company's other vessels include inshore tugs and both
inshore and offshore barges, production, line- handling, and various special
purpose vessels. Inshore tugs, which are operated principally within inland
waters, tow drilling rigs to and from their locations, tow barges carrying
equipment and materials for use principally in inland water drilling and
production operations. Inshore towing vessels are generally operated by the
Company's personnel and the Company charges for these operations primarily on a
daily or hourly basis. Barges are either used in conjunction with Company tugs
or are bareboat chartered to others.
Recent Vessel Acquisitions. In fiscal 1994, the Company acquired 5 used
vessels, including 2 towing supply vessels, 1 crewboat, and 2 other vessels.
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Contributions of Main Classes of Vessels. Of the Company's revenues from
marine vessel equipment operations, the following percentages were contributed
by the main classes of vessels:
Year Ended March 31,
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1994 1993 1992
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Towing-supply and supply vessels . . . . . . . . . . . . . . . . . . . . 67% 68% 71%
Crew and utility vessels . . . . . . . . . . . . . . . . . . . . . . . . 9% 8% 7%
Offshore tugs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20% 19% 16%
Other vessels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4% 5% 6%
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Risks of Operation and Insurance. The operation of any marine equipment
involves an inherent risk of catastrophic marine disaster, adverse weather
conditions, mechanical failure, collisions, property losses to the vessel and
business interruption due to political action in foreign countries. Any such
event may result in a reduction in revenues or increased costs. The Company's
vessels are insured for estimated market value against damage or loss,
including war and pollution risks. The Company also carries workers
compensation, maritime employer's liability, general liability (including third
party pollution), and other insurance customary in the industry.
Competition and Customers. The principal competitive factors for the
offshore vessel service industry are suitability and availability of equipment,
price, and service. The Company has numerous competitors in virtually all
areas in which it operates. Certain customers of the Company own and operate
vessels to service certain of their offshore activities.
Although one customer accounted for 6% and the five largest customers
accounted for approximately 24% of its marine revenues during the year ended
March 31, 1994, the Company does not consider its marine operations dependent
on any single customer.
Contractual arrangements with customers vary widely depending on the type
of vessel and on the needs of the customer.
Government Regulations. The Company's vessels are subject to various
statutes and regulations governing their operation and maintenance.
Under the Merchant Marine Act of 1936 and the Shipping Act, 1916, if
persons other than U.S. citizens should in the aggregate own in excess of 25%
of the Company's outstanding stock, the Company would lose the privilege of
engaging in the transportation of passengers or merchandise in U.S. coastwise
trade.
Through an amendment to its Restated Certificate of Incorporation, the
Company has instituted a dual stock certificate system to prevent non-U.S.
citizens from owning more than 25% of the outstanding shares of the Company's
common stock. In addition, the Company's
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Restated Certificate of Incorporation provides that any transfer or purported
transfer of shares of the Company's common stock that would result in the
ownership by non-U.S. citizens of more than 24% of the then outstanding common
stock will not be effective against the Company except for purposes of
effecting certain remedies. Based on information supplied to the Company by
its transfer agent, approximately 10.1% of the Company's common stock
outstanding was owned by non-citizens as of May 2, 1994.
At March 31, 1994, 187 vessels wholly owned by the Company were
registered under flags other than the United States. In addition, all of the
Company's 43 joint venture owned vessels were registered under non-U.S. flags
at March 31, 1994. The laws of the United States provide that once a vessel is
registered under a flag other than the United States, it cannot thereafter
engage in U.S. coastwise trade. Therefore, the Company's non-U.S. flag vessels
must continue to be operated abroad, and if the Company were not able to secure
charters abroad for them, and work would otherwise have been available for them
in the United States, its operations would be adversely affected.
All of the Company's offshore vessels are subject to international safety
and classification standards. U.S. flag towing- supply and supply vessels are
required to undergo periodic inspections and to be recertified under drydock
examination at least twice every five years. Non-U.S. flag vessels are also
subject to various similar regulations.
TIDEWATER COMPRESSION
Tidewater Compression provides natural gas and air compression equipment
and services principally to the energy industry, primarily in the United
States.
Gas Compression. The Company provides gas compressors to the oil and gas
and petrochemical industries. The compressors are used primarily to boost the
pressure of natural gas from the wellhead into gas gathering systems, into
nearby gas processing plants, or into high pressure pipelines. Gas compression
equipment and services offered by the Company are also used in the production
of coalbed methane and in enhanced recovery projects such as fire-flooding, gas
lift, or gas injection, with the objective of increasing the recovery of oil or
condensate that can be recovered from a reservoir. Compressors are often
rented rather than sold because the required compressor horsepower and stage
configuration can change several times in the lifetime of a project. The
primary market served is natural gas production activities in the United
States, although the Company is actively seeking to establish markets outside
the United States. A table setting forth utilization, rental rates, and fleet
size of the Tidewater Compression gas rental fleet appears in "Compression
Segment" in Item 7 of this report.
Air Compression. The Company sells and rents industrial and portable air
compressors, coolers, dryers, vacuum pumps, and other related equipment to the
oil and gas and petrochemical industries and to manufacturing and other
concerns that use compressed air to
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operate machinery, for instrumentation, and in manufacturing processes. A
table setting forth utilization, rental rates, and fleet size of the Tidewater
Compression air rental fleet appears in "Compression Segment" in Item 7 of
this report.
Engineered Products. The Company's compression operations include a
fabrication facility at which the Company designs and fabricates gas and air
compression packages for sale. The highly-specialized compression packages
consist of skid-mounted compressors designed to meet complex customer
specifications for specialized applications.
Distributorships. The Company holds distributorships for various
manufacturers of air and gas compressors, related equipment and a wide range of
accessories. These manufacturers are the source for equipment and accessories
sold by the Company.
Competition and Customers. The compression equipment market is highly
competitive, with the principal competitive factors being price, service, and
availability. The Company competes with a large number of companies, some of
which have larger compression operations than the Company.
Although one customer accounted for 6% and the five largest customers
accounted for approximately 14% of its compression revenues during the year
ended March 31, 1994, the Company does not consider itself dependent on any one
customer.
OTHER OPERATIONS
Shipyards. Quality Shipyards, Inc., a wholly-owned subsidiary of the
Company, operates two shipyards in Houma, Louisiana, which build, repair,
modify, and drydock vessels. Approximately 49% of the shipyards' business for
the year ended March 31, 1994 related to repairs, modifications, and
drydockings of the Company's vessels. The results of shipyard operations are
included in marine equipment operations.
DISCONTINUED OPERATIONS
On March 31, 1993, a 70%-owned subsidiary of the Company, Marine
Transportation Services Sea-Barge Group, Inc. ("Sea-Barge") sold substantially
all of its assets and liabilities to Sea-Barge, Inc., an entity controlled by
the Company's joint venture partner, S.E.L. Maduro (Florida), Inc. Prior to
the sale, Sea-Barge provided ocean transportation services of containers with
cargo principally using tugs and barges owned by the Company between the
continental United States and Puerto Rico and countries in the Caribbean basin.
Since the sale, Sea-Barge, Inc. has continued to use tugs and barges furnished
by the Company. See Note 2 of the Notes to Consolidated Financial Statements
included in this report.
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SEASONALITY
Tidewater Marine generally has its highest utilization rates in the
warmer weather months when the weather is more favorable for offshore
exploration, development and construction work. Tidewater Compression
generally has its best results in the winter months when natural gas is in
greater demand. However, business volume for both Tidewater Marine and
Tidewater Compression is more dependent on oil and gas prices and the global
supply and demand conditions for the Company's services than any seasonal
variation.
EMPLOYEES
As of March 31, 1994, the Company had approximately 6,900 employees. The
Company considers relations with employees to be satisfactory. The Company is
not a party to any union contracts in the United States but through several
subsidiaries is a party to union agreements covering local nationals in several
foreign countries.
ITEM 2. PROPERTIES
MARINE SERVICES
At March 31, 1994, there were 594 vessels in the Company's marine fleet,
including vessels operated by joint ventures in which the Company is a
participant, of which 38 vessels were leased under operating and capitalized
leases and the remaining vessels were owned. The Company's marine operations
are conducted worldwide. The Company's vessels regularly and routinely move
from one operating area to another, often to and from offshore operating areas
of different continents. At March 31, 1994, approximately 35% of the Company's
vessels operated in the U.S. Gulf of Mexico and off the East and West Coasts of
the United States, including Alaska. The remainder of the Company's marine
fleet operated internationally. For a description of the Company's marine
vessels, see "Tidewater Marine" in Item 1 of this report.
COMPRESSION SERVICES
At March 31, 1994, the gas compression rental fleet of the Company was
comprised of 988 units ranging from 25 to 2,250 horsepower and the air
compression fleet consisted of 126 units ranging from 900 to 2,400 cubic feet
per minute. These units are available for employment on an international
basis, but are primarily rented only in the United States. At March 31, 1994,
the Company owned all such units, except for 14 units that were leased under
capitalized leases. For a description of the Company's compression fleet, see
"Tidewater Compression" in Item 1 of this report.
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REAL ESTATE
The Company's shipyard operations are conducted in Houma, Louisiana and
include approximately 189 acres of land owned by the Company, of which about 44
acres are developed. The Company's Compression division is headquartered in
Houston, Texas and is situated on an approximately 30-acre industrial site
owned by the Company, of which about 13 acres are developed. The Company owns
or leases various other properties incidental to its operations.
ITEM 3. LEGAL PROCEEDINGS
During the ordinary course of business, the company's operations are
subject to a wide variety of environmental laws and regulations. The company
attempts to comply with these laws and regulations in order to avoid costly
accidents and related damage. The company is currently involved in litigation
with the Environmental Protection Agency (EPA) concerning the legal disposal of
oilfield wastes from drilling sites it previously operated, as well as from the
disposal of other fluids used in the marine operations.
In August of 1989, the EPA notified a subsidiary of the company, Hilliard
Oil and Gas, Inc. ("Hilliard"), that it was a PRP for cleanup costs at a
National Priorities List site. EPA later nominated Hilliard a de minimis
participant for this site, i.e., EPA determined that Hilliard's involvement in
the site was minimal, and that the toxicity and amount of substance contributed
by Hilliard was minimal in comparison to the other hazardous substances found
at the site. EPA alleges that residue from trucks transporting Hilliard's
saltwater (a non-hazardous substance) to a third party site, was subsequently
washed out of the trucks' tanks at the subject site, thus making Hilliard a PRP
for cleanup of the subject site. Hilliard believes that this is an
insufficient nexus to establish liability, and has chosen to challenge EPA on
this theory. Based upon the facts as Hilliard currently understands them, it
is the company's belief that the ultimate resolution of this litigation will
not have a material adverse effect on the company's financial position.
In 1983, the United States Environmental Protection Agency (the "EPA")
notified two subsidiaries of the Company, Zapata Gulf Marine Operators, Inc.
("Zapata Gulf") and Gulf Fleet Supply Vessels, Inc. ("Gulf Fleet") that they
were potentially responsible parties ("PRPs") for cleanup costs at the Western
Sand and Gravel site in Rhode Island. Zapata Gulf and Gulf Fleet are among 53
PRPs. At this time, Tidewater does not believe that the potential liability of
Zapata Gulf and Gulf Fleet associated with these sites would be materially
adverse to Tidewater's financial condition.
The Company is not a party to any other litigation which, in the opinion
of management, is likely to have a material adverse effect on the Company's
financial position or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of fiscal 1994.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
Name Age Position
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John P. Laborde . . . . . . . . . 70 Chairman of the Board of Directors,
President and Chief Executive Officer
Richard M. Currence . . . . . . . 55 Executive Vice President
Ken C. Tamblyn . . . . . . . . . . 51 Executive Vice President and Chief
Financial Officer
William C. Hightower . . . . . . . 52 Senior Vice President
Victor I. Koock . . . . . . . . . 54 Senior Vice President, Secretary, and
Co-General Counsel
Cliffe F. Laborde . . . . . . . . 42 Senior Vice President and Co-General
Counsel
Stephen A. Snider . . . . . . . . 46 Senior Vice President
Michael L. Goldblatt . . . . . . . 45 Vice President and Assistant Secretary
J. Keith Lousteau . . . . . . . . 47 Vice President and Treasurer
Thomas E. Hartford . . . . . . . . 44 Vice President
Gary D. Pope . . . . . . . . . . . 59 Vice President
Larry T. Rigdon . . . . . . . . . 46 Vice President
Robert D. Ryan . . . . . . . . . . 39 Vice President
Joseph C. Sarne . . . . . . . . . 50 Vice President
Joseph M. Bennett . . . . . . . . 38 Controller
In addition to its executive officers, the officers of the Company also
include the following:
Alvin A. Arcemont . . . . . . . . 49 Vice President
Van C. DeWitt . . . . . . . . . . 42 Vice President
Stephen W. Dick . . . . . . . . . 44 Vice President
Peter F. Fortier . . . . . . . . . 41 Vice President
J. Peter Laborde, Jr. . . . . . . 39 Vice President
Dean E. Taylor . . . . . . . . . . 45 Vice President
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There are no family relationships between the officers of the Company,
except that Cliffe F. Laborde and J. Peter Laborde, Jr. are the sons of John
P. Laborde. The Company's officers are elected annually by the Board of
Directors and serve for one-year terms or until their successors are elected.
The following describes the business experience of the Company's officers.
John P. Laborde - Chief Executive Officer and Chairman of the Board of
Directors since 1956. President of the Company from 1956 to 1981 and since
June 1988.
Richard M. Currence - Elected Executive Vice President in March 1992 and
prior thereto served as Senior Vice President since 1986. Mr. Currence joined
the Company in 1966 and had a break in service from 1973 to 1985.
Ken C. Tamblyn - Elected Executive Vice President in March 1992 and prior
thereto served as Senior Vice President since 1986. Mr. Tamblyn joined the
Company in March 1986.
William C. Hightower - Elected Senior Vice President in June 1992 and
prior thereto served as Vice President since February 1985. Mr. Hightower
joined the Company in 1975.
Victor I. Koock - Elected Senior Vice President in October 1986, elected
Secretary in February 1986, and appointed General Counsel in 1984. Mr. Koock
joined the Company in 1968.
Cliffe F. Laborde - Joined the Company in January 1992 as a Senior Vice
President and Co-General Counsel. Mr. Cliffe F. Laborde was previously a
shareholder in Gelpi, Sullivan, Carroll & Laborde, a professional law
corporation, from 1979 through 1992.
Stephen A. Snider - Joined the Company in September 1991 as a Senior Vice
President. Prior thereto Mr. Snider joined the Company in 1975 and had a break
in service from 1983 to 1991. During his break in service, Mr. Snider owned
and operated Learning Associates, Inc.
Michael L. Goldblatt - Elected Vice President in October 1992 and prior
thereto served as Associate General Counsel and Assistant Secretary since March
1986. Mr. Goldblatt joined the Company in 1974 and had breaks in service from
1974 to 1976 and 1984 to 1986.
J. Keith Lousteau - Elected Vice President in 1985 and elected Treasurer
in 1987. Mr. Lousteau joined the Company in 1977.
Thomas E. Hartford - Elected Vice President in April 1994. Mr. Hartford
joined the company in 1982.
Gary D. Pope - Elected Vice President of the Company in January 1992.
Prior thereto he was employed by Zapata Gulf Marine Corporation where he served
as Vice President since 1984.
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Larry T. Rigdon - Elected Vice President of the Company in January 1992.
Prior thereto he was employed by Zapata Gulf Marine Corporation where he served
as Vice President since 1984.
Robert D. Ryan - Elected Vice President in April 1994. Mr. Ryan joined
the Company in 1980.
Joseph C. Sarne - Elected Vice President of the Company in January 1992.
Prior thereto he was employed by Zapata Gulf Marine Corporation where he served
as Executive Vice President since 1984.
Joseph M. Bennett - Joined the Company in 1990. He was elected to the
office of Controller in May 1992. Mr. Bennett was previously employed by KPMG
Peat Marwick from January 1978 through March 1990.
Alvin A. Arcemont - Elected Vice President in April 1990. Mr. Arcemont
joined the Company in 1972.
Van C. DeWitt - Elected Vice President in October 1993. Mr. DeWitt
joined the Company in 1987.
Stephen W. Dick - Elected Vice President in April 1990. Mr. Dick has
been Manager of the Company's towing division since 1985. Mr. Dick joined the
Company in 1971 and had a break in service from 1983 to 1985.
Peter F. Fortier - Elected Vice President in October 1993. Mr. Fortier
joined the Company in 1980.
J. Peter Laborde, Jr. - Elected Vice President in October 1993. Mr.
Laborde joined the Company in 1980.
Dean E. Taylor - Elected Vice President in 1991. Mr. Taylor joined the
Company in 1978.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on the New York Stock Exchange and
the Pacific Stock Exchange under the symbol TDW. At March 31, 1994, there were
approximately 2,600 record holders of the Company's common stock, based upon
the record holder list maintained by the Company's stock transfer agent. The
following table sets forth the high and low closing sales price of the
Company's common stock as reported on the New York Stock Exchange Composite
Tape and the amount of cash dividends per share declared on the common stock
for the periods indicated.
- ---------------------------------------------------------------------------------------------------------
Fiscal Year Quarter High Low Dividend
- ---------------------------------------------------------------------------------------------------------
1994 First $26-3/8 $21-1/8 ---
Second 23-1/4 19 $0.100
Third 25-3/4 19-1/2 0.100
Fourth 23-1/8 19-1/2 0.100
1993 First 17-1/8 12 0.075
Second 19-1/2 14-7/8 0.075
Third 21 17-1/4 0.075
Fourth 24-3/4 16-3/8 0.100
- ---------------------------------------------------------------------------------------------------------
The payment of dividends on common and preferred stock are subject to
limitations under the Company's revolving credit and term loan agreement,
although no preferred stock is currently outstanding. A further discussion of
this matter is contained in Note 6 to the Consolidated Financial Statements
included in this report.
As a result of the timing of the fiscal 1994 Board of Directors meetings,
only three quarterly dividends of $.10 per common share each were declared
during fiscal 1994.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for
each of the last five fiscal years. This information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company included in this report.
Years Ended March 31
(in thousands, except ratio and per share amounts)
1994 1993 1992 1991 1990
- ----------------------------------------------------------------------------------------------------------------
Revenues:
Marine operations $ 466,601 413,439 430,681 394,325 322,401
Compression operations 55,471 62,099 54,561 61,479 52,151
- ----------------------------------------------------------------------------------------------------------------
$ 522,072 475,538 485,242 455,804 374,552
================================================================================================================
Earnings (loss) from
continuing operations $ 36,130 27,809 25,904 36,904 (14,054)
Discontinued operations (1) --- 3,099 357 (2,258) (1,371)
Extraordinary loss on early
debt retirement (2) (11,970) --- --- --- ---
Accounting change (3) --- (6,640) --- --- ---
- ----------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 24,160 24,268 26,261 34,646 (15,425)
================================================================================================================
Per common share:
Earnings (loss) from continuing
operations $ .67 .53 .49 .70 (.30)
Discontinued operations (1) --- .06 .01 (.04) (.03)
Extraordinary loss on early
debt retirement (2) (.22) --- --- --- ---
Accounting change (3) --- (.13) --- --- ---
- ----------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ .45 .46 .50 .66 (.33)
================================================================================================================
Total assets $ 809,886 838,748 867,573 896,420 883,799
================================================================================================================
Long-term debt $ 1,952 95,722 123,896 181,622 233,322
================================================================================================================
Working capital $ 156,126 201,399 171,231 140,066 119,927
================================================================================================================
Current ratio 2.20 3.10 2.43 2.04 2.05
================================================================================================================
Cash dividends declared per
common share (4) $ .30 .325 -- -- --
================================================================================================================
(1) See Note (2) of Notes to Consolidated Financial Statements for further
information concerning the disposal of the Container Shipping segment.
(2) For further details concerning the early debt retirement see Note (6) of
Notes to Consolidated Financial Statements.
(3) For further details concerning the accounting change see Note (7) of
Notes to Consolidated Financial Statements.
(4) As a result of the timing of the fiscal 1994 Board of Directors meetings,
only three quarterly dividends of $.10 per common share each were
declared during fiscal 1994.
-15-
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements, the related disclosures and the selected financial data.
Fiscal 1994 earnings from continuing operations grew 30% and 40% above
the fiscal 1993 and fiscal 1992 levels, respectively. The growth in earnings
from continuing operations over the prior fiscal years is directly attributable
to higher levels of utilization and day rates for the domestic-based vessel
fleet which resulted from higher natural gas exploration and production
activity in the U.S. Gulf of Mexico. Demand for offshore marine services in
foreign markets throughout fiscal 1994 was generally weaker than in fiscal 1993
and fiscal 1992. Although the decline in demand for foreign offshore marine
services appears to have stabilized, the future supply and price of oil are
uncertain and could adversely impact demand and future operating results.
As had been the case in fiscal years 1993 and 1992, the Company's overall
financial condition was again significantly improved during fiscal 1994 as a
result of strong cash flows and the substantial reduction in long-term debt.
With the early retirement of $51.1 million of long-term debt in September 1993
and the early redemption of the Company's convertible subordinated debentures
in April 1994, Tidewater is essentially debt-free.
Even though the early debt retirements had an adverse impact on fiscal
1994 net earnings, future net earnings will benefit from lower interest costs.
Improved financial condition over the past three fiscal years has and should
continue to provide the necessary foundation to withstand cyclical fluctuations
of the energy services industry.
LIQUIDITY AND CAPITAL RESOURCES
Selected financial ratios at March 31 are compared in the following table
and illustrate the substantial improvement in financial condition achieved
during fiscal 1994.
- ---------------------------------------------------------------------------------------------------------------
1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------
Cash to long-term debt 5,471% 114% 92%
Long-term debt to total capitalization 0.3% 15% 19%
Equity to total assets 69% 65% 62%
================================================================================================================
Fiscal 1994 operating activities generated a substantially higher level
of cash than the corresponding amounts for fiscal 1993 and fiscal 1992. Marine
operating margins primarily determine the overall level of net cash generated
from operating activities. The following table compares operating margins for
the Company's business segments.
-16-
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(in thousands)
1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Marine $ 177,665 161,012 176,751
Compression 25,133 25,816 25,372
- ------------------------------------------------------------------------------------------------------------
$ 202,798 186,828 202,123
============================================================================================================
Operating margin is defined as revenues less operating expenses, excluding
depreciation.
Fluctuations in the level of Marine operating margins over the past three
fiscal years were attributable primarily to increased levels of utilization and
average day rates for the domestic-based vessel fleet from fiscal 1993 to
fiscal 1994 and lower average day rates for the same vessel fleet from fiscal
1992 to fiscal 1993. Fiscal 1994 Compression operating margins were down
slightly from fiscal 1993 due to an anticipated drop in sales of engineered
products. For the past three fiscal years operating activities have generated
cash in excess of the amount required to satisfy current obligations.
Anticipated fiscal 1995 utilization levels and day/rental rates for the Marine
vessel fleet and Compression rental equipment should maintain this condition.
Investing activities for fiscal 1994 consumed a slightly greater amount
of cash compared with fiscal 1993. The principal components that determine the
level of cash used in investing activities are additions to properties and
equipment and proceeds from asset sales. The following tables compare these
two items by business segment for the years ended March 31:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Additions to Properties and Equipment:
- -------------------------------------
Marine:
- ------
Additional equipment $ 11,761 27,055 3,800
Modifications/additions to existing equipment 18,936 17,518 24,460
Other 1,697 1,530 2,124
- -----------------------------------------------------------------------------------------------------------
32,394 46,103 30,384
- -----------------------------------------------------------------------------------------------------------
Compression:
- -----------
Additional equipment 15,976 3,579 6,687
Modifications/additions to existing equipment 3,729 1,177 1,368
Other 840 869 335
- -----------------------------------------------------------------------------------------------------------
20,545 5,625 8,390
General Corporate 380 638 572
- -----------------------------------------------------------------------------------------------------------
$ 53,319 52,366 39,346
===========================================================================================================
Proceeds from sales of assets:
- -----------------------------
Marine equipment $ 8,107 3,890 8,654
Compression equipment 3,376 4,215 2,036
- -----------------------------------------------------------------------------------------------------------
$ 11,483 8,105 10,690
===========================================================================================================
-17-
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During fiscal 1994 the Marine segment added only 5 used vessels to the
fleet consisting of 2 towing-supply vessels, a crewboat, an inland tug and an
offshore barge whereas fiscal 1993 additions of 42 used vessels to the Marine
fleet consisted of 10 towing-supply and supply vessels, 15 offshore tugs, 16
crew and utility vessels, and an offshore barge. Fiscal 1994 Compression
additions consisted primarily of 191 gas compressors. Fiscal 1993 Compression
additions included the purchase of several oil-free air compressors. Over the
past several years expansion of the Marine vessel fleet and Compression rental
fleet has come primarily from existing, excess industry supplies. Because
current economic circumstances do not generate an adequate return on investment
relative to the costs of new construction, major new construction of Marine
vessels or Compression rental equipment is not anticipated during the next
fiscal year.
Financing activities conducted during fiscal 1994 required a much higher
level of cash than was consumed for fiscal years 1993 and 1992. The increase
is primarily the result of higher principal payments on long-term debt. During
fiscal 1994 approximately $57.6 million of available cash was used to retire,
prior to maturity, $51.1 million of notes bearing interest rates ranging from
9.17% to 10%. The remainder of the cash used to retire the notes was for
associated prepayment penalties. Fiscal 1994 principal payments also include
approximately $9.0 million for termination of capitalized lease obligations and
the related purchase of five marine vessels. Fiscal 1993 cash used in
financing activities includes approximately $38.0 million of long-term debt
retired prior to maturity of which approximately $3.0 million was used to
redeem, at par value plus accrued interest, the 7-3/4% convertible subordinated
debentures. Fiscal 1992 cash used in financing activities includes the January
15, 1992 retirement of approximately $86.5 million of Zapata Gulf indebtedness
using available cash and $70.0 million in proceeds from borrowings under credit
agreements.
On March 16, 1994 the Company called for redemption all of the
approximately $47.2 million of 7% convertible subordinated debentures due 2010.
Holders converted $1,113,000 of debentures into 44,520 shares of the Company's
common stock at a conversion price of $25.00 per share. The remainder of the
debentures were redeemed at 101.4% of par value plus accrued interest on April
18, 1994. An extraordinary charge to earnings of approximately $7.5 million
(net of income taxes), or $.14 per common share, was recorded in the fourth
quarter of fiscal 1994. The extraordinary charge consisted of $.6 million of
prepayment premium and $11.0 million of unamortized original issue discount and
deferred financing costs, less $4.1 million of income tax benefits.
A $60.0 million revolving credit and term loan agreement was expanded to
$130.0 million during fiscal 1994 in order to provide additional resources to
finance future cash needs.
Prior to fiscal 1993, dividend payments on common stock had been
suspended since the first quarter of fiscal 1987. During fiscal 1993 dividends
of $.075 per common share were declared and paid in each of the first three
quarters and a $.10 per common share dividend was declared in the fourth
quarter. Due to the timing of the meetings of the Board of Directors,
-18-
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three quarterly dividends were declared in fiscal 1994, each at $.10 per common
share. Continued dividend payments are subject to declaration by the Board of
Directors and are subject to limitation by the Company's revolving credit and
term loan agreement.
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits," prescribes the accounting for the
estimated costs of benefits provided to former or inactive employees after
employment but before retirement. Because of the very limited nature of
postemployment benefits offered to employees by the Company, the impact of
Statement No. 112 is not material with respect to financial condition or
results of operations.
In fiscal 1993 the Company adopted the methods of accounting for
reinsuring of insurance contracts, for income taxes, and for postretirement
benefits other than pensions prescribed by Statements of Financial Accounting
Standards Nos. 113, 109, and 106, respectively. Adoption of Statement No. 113
resulted in the restatement of gross assets and gross liabilities for fiscal
years prior to fiscal 1993. There was no cumulative effect of adopting
Statement No. 109 and adoption of Statement No. 106 resulted in a cumulative
charge to earnings, net of income taxes, of $6.6 million.
-19-
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RESULTS OF OPERATIONS
Revenues, operating profits and certain other information by business segment
and geographic distribution for the years ended March 31 are:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Revenues:
Marine:
United States $ 197,262 131,229 149,425
Foreign (A) 269,339 282,210 281,256
- -----------------------------------------------------------------------------------------------------------
466,601 413,439 430,681
Compression - United States 55,471 62,099 54,561
- -----------------------------------------------------------------------------------------------------------
$ 522,072 475,538 485,242
===========================================================================================================
Operating profit:
Marine:
United States 35,018 912 3,236
Foreign (A) 30,765 52,085 55,353
- -----------------------------------------------------------------------------------------------------------
65,783 52,997 58,589
- -----------------------------------------------------------------------------------------------------------
Compression - United States 6,895 10,177 10,380
Equity in net earnings of unconsolidated companies 2,686 2,525 2,225
Other income 1,034 367 4,374
Other expense --- (3,771) ---
Gain on settlement of litigation --- --- 14,160
Merger expenses --- --- (22,014)
General corporate expenses (10,806) (9,797) (6,144)
Interest expense (7,939) (12,323) (18,600)
- -----------------------------------------------------------------------------------------------------------
Earnings from continuing operations before income taxes $ 57,653 40,175 42,970
===========================================================================================================
Identifiable assets:
Marine:
United States 271,040 295,008 292,167
Foreign (A) 327,975 348,767 367,886
- -----------------------------------------------------------------------------------------------------------
599,015 643,775 660,053
Compression - United States 68,285 57,143 62,447
- -----------------------------------------------------------------------------------------------------------
Total operating segments 667,300 700,918 722,500
Investments in and advances to unconsolidated companies:
Marine (A) 21,843 23,103 23,712
Other --- 1,321 1,581
Disposed businesses and discontinued segments 284 2,258 9,691
Corporate 120,459 111,148 110,089
- -----------------------------------------------------------------------------------------------------------
Total $ 809,886 838,748 867,573
===========================================================================================================
Depreciation:
Marine 74,343 71,673 70,820
Compression 9,144 8,352 8,730
- -----------------------------------------------------------------------------------------------------------
Total operating segments 83,487 80,025 79,550
Corporate 165 292 286
- -----------------------------------------------------------------------------------------------------------
Total $ 83,652 80,317 79,836
===========================================================================================================
-20-
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(A) Marine equipment operations are conducted worldwide with assets that are
highly mobile. Revenues and identifiable assets attributable to these
operations in any one country are not "significant" as that term is
defined by Financial Accounting Standards No. 14. Further, most
identifiable assets in each country are comprised of offshore service
vessels, which regularly and routinely move from one operating area to
another, often to and from offshore operating areas of different
continents. Equity in net assets of foreign subsidiaries is
$192,038,000, $224,905,000, and $184,228,000 at March 31, 1994, 1993 and
1992, respectively. Other foreign identifiable assets include accounts
receivable and other balances denominated in foreign currencies
aggregating approximately $7,295,000, $8,837,000, $10,104,000 at March
31, 1994, 1993 and 1992, respectively. These amounts are subject to the
usual risks of fluctuating exchange rates and government-imposed exchange
controls.
Fiscal 1994 consolidated revenues and earnings from continuing operations
before income taxes rose 9.7% and 43.5%, respectively, above the corresponding
amounts for the prior fiscal year primarily because of higher utilization and
substantially higher average vessel day rates for the domestic-based vessel
fleet. Fiscal 1994 revenues and operating profits for the foreign- based
vessel fleet reflect weaker demand in certain foreign markets resulting from
uncertainties associated with the future supply and price of oil. Fiscal 1994
foreign operating profits also include a higher level of repair and maintenance
costs resulting from the timing of vessel drydockings. Lower fiscal 1994
Compression revenues and operating profits compared with the corresponding
amounts for the prior fiscal year are primarily the result of a lower level of
engineered product sales. Fiscal 1994 Marine and Compression operating profits
also include approximately $.3 million and $1.0 million, respectively, of
severance costs associated with the early retirement of several employees.
Fiscal 1993 consolidated revenues fell 2% below the fiscal 1992 amount
primarily because the market for energy-related services in fiscal 1993 was not
as strong as in fiscal 1992. Increased domestic offshore activity in the third
and fourth quarters of fiscal 1993 resulted from renewed interest in offshore
drilling and exploration for natural gas in the U.S. Gulf of Mexico. Foreign
offshore activity was fairly stable throughout fiscal 1993 although certain
foreign markets experienced slight reductions. Fiscal 1993 earnings from
continuing operations before income taxes fell below the prior year's amount
principally due to lower demand for offshore marine services discussed above,
significantly higher vessel insurance costs and a continued high level of
repair and maintenance expense. General corporate expenses for fiscal 1993
were higher than in fiscal 1992 principally due to charges related to a new
incentive plan, compensation expense associated with the restricted stock plan
and additional costs from expanded legal, personnel and safety programs.
Fiscal 1993 other income dropped significantly below the fiscal 1992 amount
primarily as a result of considerably lower interest income, reflective of
lower interest rates, and provisions booked relating to potential losses from
the financial instability of certain reinsurance companies. Considerably lower
fiscal 1993 interest expense compared with fiscal 1992 resulted from scheduled
repayments and significant prepayments of long-term debt in fiscal 1993 and
fiscal 1992.
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Fiscal 1993 non-recurring charges totaling $3.8 million relate to an
amendment of an employment and consulting agreement with the Company's chairman
of the board, president and chief executive officer. For its benefit, the
Company elected to amend the agreement in view of the possible changes to tax
laws then under consideration by the Clinton administration and Congress. The
amendment accelerated the vesting of all outstanding shares of restricted stock
such that these shares became fully vested and freely transferable immediately.
The original terms of the restricted stock shares included restrictions during
the employment term of the agreement. Due to the acceleration of the vesting
of the restricted stock shares on March 31, 1993, the remaining deferred
compensation associated with the restricted stock of $2,850,000 was charged to
other expense in the Consolidated Statements of Earnings in fiscal 1993.
The amendment also provided for an immediate lump-sum distribution of the
present value of benefits under the Company's supplemental retirement plan,
including the additional benefits that would have accrued assuming he remained
employed by the Company through September 24, 1994. The lump sum distribution
amounted to $2,212,000 and included $921,000 for unaccrued benefits which was
charged to other expense in the Consolidated Statements of Earnings in fiscal
1993.
Fiscal 1992 consolidated revenues grew 6% over the preceding fiscal year.
Earnings before income taxes for fiscal 1992 were below the preceding fiscal
year's level due primarily to significant merger expenses and additional Marine
operating costs, offset partially by a gain on settlement of litigation. The
additional Marine operating costs consisted of a $5 million loss provision
established to recognize estimated underinsured losses related to a Zapata Gulf
insurance program which existed prior to fiscal 1992. Repair and maintenance
costs were also higher in fiscal 1992 due to the scheduling of drydockings on
certain vessels. Certain other vessels had their maintenance schedules
accelerated to prepare them for new contracts.
Consolidated general and administrative expenses for the years ended
March 31 consist of the following components:
(in thousands)
1994 1993 1992
- -------------------------------------------------------------------------------------------------------------
Type:
- ----
Personnel $ 37,518 36,058 36,365
Office and property 10,363 9,947 10,499
Sales and marketing 4,190 4,254 4,932
Professional services 4,580 3,741 4,085
Taxes other than income taxes 2,392 1,926 2,147
Insurance 1,750 1,197 1,003
Other 2,303 1,356 2,140
- -------------------------------------------------------------------------------------------------------------
$ 63,096 58,479 61,171
=============================================================================================================
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General and administrative expenses in fiscal 1994 were approximately
7.9% higher than the preceding fiscal year due primarily to higher personnel
costs, higher professional service costs, and higher insurance costs. Fiscal
1994 personnel costs include approximately $700,000 of severance payments to
former Zapata Gulf employees in Nigeria and payments to settle former Zapata
Gulf employee union claims in Nigeria. The remainder of the increase over
fiscal 1993 is principally the result of higher incentive plan expenses.
Fiscal 1994 professional service costs include approximately $600,000 of
expenses associated with two secondary stock offerings. Higher fiscal 1994
insurance costs are primarily the result of higher premiums for worker's
compensation and certain other liability coverages.
General and administrative expenses for fiscal 1993 fell 4.4% below the
preceding year's amount due principally to savings resulting from the
consolidation of worldwide marine operations following the fiscal 1992 merger
with Zapata Gulf. Additions to the Company's legal and personnel staffs and
new expanded safety programs during fiscal 1993 partially offset the merger
savings.
MARINE SEGMENT
The Marine segment provides a diverse range of services and equipment to
the offshore oil and gas industry. Because operating costs and depreciation do
not change proportionally with changes in revenues, the amount of operating
profit for the Marine segment is primarily determined by vessel fleet
utilization and day rates.
Marine segment revenues for the years ended March 31 consist of the
following:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Owned or chartered vessels:
Domestic $ 178,726 132,496 139,098
Foreign 269,169 281,983 279,872
- -----------------------------------------------------------------------------------------------------------
447,895 414,479 418,970
Brokered vessels 10,083 7,081 11,905
Shipyard sales 8,623 3,014 10,206
Intercompany eliminations (A) --- (11,135) (10,400)
- -----------------------------------------------------------------------------------------------------------
$ 466,601 413,439 430,681
===========================================================================================================
(A) Revenues earned from the charter of equipment to the discontinued
Container Shipping segment.
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Marine fleet utilization is affected primarily by market conditions. It
is also influenced to a lesser degree by drydockings to satisfy safety and
inspection requirements. Marine vessels must undergo periodic inspections to
remain properly classified and certified. These inspections, whenever
possible, are done during seasonally slow periods to minimize the impact on
vessel operations and are only done if the vessel is considered to have
continuing economic viability. The following table compares day- based Marine
fleet utilization percentages by vessel class and in total for the years ended
March 31:
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
UTILIZATION:
- -----------
Domestic-based fleet:
--------------------
Towing Supply/Supply 90.2% 83.8% 85.2%
Crew/Utility 92.0% 88.3% 83.4%
Offshore tugs 64.4% 69.3% 66.1%
Other 67.4% 69.8% 75.5%
Total 82.2% 79.6% 79.1%
Foreign-based fleet:
-------------------
Towing Supply/Supply 77.7% 82.9% 87.9%
Crew/Utility 72.6% 81.9% 86.8%
Offshore Tugs 78.7% 80.3% 78.9%
Other 72.2% 86.9% 85.3%
Total 76.2% 83.2% 86.3%
Worldwide fleet:
---------------
Towing Supply/Supply 81.6% 83.1% 87.1%
Crew/Utility 82.5% 85.2% 85.5%
Offshore Tugs 71.6% 74.5% 72.5%
Other 71.0% 82.1% 81.3%
Total 78.4% 81.9% 83.6%
===========================================================================================================
The domestic fleet is comprised of vessels operating in U.S. waters while the
foreign fleet is comprised of vessels operating outside U.S. waters.
Marine vessel utilization for all periods presented reflects demand
trends for offshore marine services. Higher fiscal 1994 utilization compared
with fiscal 1993 and slightly higher fiscal 1993 utilization compared with
fiscal 1992 of the domestic-based vessel fleet reflects increasing demand for
offshore marine services in the U.S. Gulf of Mexico. Higher demand resulted
from increased natural gas exploration and drilling activity which began late
in the third quarter and continued through the fourth quarter of fiscal 1993
and throughout most of fiscal 1994. Towards the end of the fourth quarter of
fiscal 1994, the normal seasonal slowdown of offshore activity caused a slight
drop in utilization. However, utilization of the domestic-based vessel fleet
should rebound in fiscal 1995 if the anticipated resumption of offshore
activity occurs. Fiscal 1994 utilization of the foreign- based vessel fleet
below the fiscal 1993 level results primarily from softening demand for
offshore marine services in certain foreign markets, principally the West
African market. Lower utilization of the foreign-
-24-
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based vessel fleet in fiscal 1993 compared with fiscal 1992 resulted from a
combination of a higher level of vessel drydockings and decreases in demand for
offshore marine services in certain foreign areas.
Marine vessel day rates are primarily determined by the demand created
through the level of offshore exploration, development and production spending
by energy exploration and production companies. Suitability of equipment, the
degree of service provided and the overall supply of marine service vessels
also influence vessel day rates. The following table provides a comparison of
average day rates by vessel class and in total for the years ended March 31:
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
AVERAGE VESSEL DAY RATES:
- ------------------------
Domestic-based fleet:
--------------------
Towing Supply/Supply $ 3,551 2,696 3,082
Crew/Utility 1,230 1,121 1,004
Offshore tugs 4,259 3,850 4,342
Other 1,826 1,598 906
Total $ 2,934 2,412 2,507
Foreign-based fleet:
-------------------
Towing Supply/Supply $ 3,660 3,592 3,461
Crew/Utility 1,727 1,610 1,549
Offshore Tugs 2,923 2,906 2,298
Other 567 572 853
Total $ 2,793 2,701 2,618
Worldwide fleet:
---------------
Towing Supply/Supply $ 3,622 3,339 3,350
Crew/Utility 1,445 1,349 1,341
Offshore Tugs 3,516 3,365 3,230
Other 875 816 873
Total $ 2,848 2,601 2,580
===========================================================================================================
The domestic fleet is comprised of vessels operating in U.S. waters while the
foreign fleet is comprised of vessels operating outside U.S. waters.
In fiscal 1994 a higher average day rate for a larger domestic-based
vessel fleet was the principal factor contributing to the growth in Marine
revenues and operating profits. During fiscal 1994 average day rates for the
domestic-based vessel fleet rose steadily in contrast to fiscal 1993 when
average day rates for a smaller vessel fleet declined. The average day rate
for the foreign-based vessel fleet for fiscal 1994, although higher than the
fiscal 1993 average day rate, did not significantly change compared with the
ending fiscal 1993 level. The fiscal 1994 increase in the average day rate for
the foreign-based vessel fleet is primarily a result of a favorable shift in
the mix of vessels working in certain foreign locations.
-25-
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As the global supply of Marine service vessels continues to decline,
prospects for higher average vessel day rates should improve. However, given
the volatile nature of demand for offshore marine services any sustained
improvement in vessel day rates is not assured.
The following table compares the average number of vessels by class and
geographic distribution during the years ended March 31 and the actual March
31, 1994 vessel count:
Actual
vessel Average number of
count at vessels during year
March 31, ended March 31,
- ----------------------------------------------------------------------------------------------------------------
1994 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------
Domestic-based fleet:
- --------------------
Towing Supply/Supply 98 88 78 83
Crew/Utility 48 47 42 27
Offshore Tugs 46 47 44 38
Other 13 21 25 44
- ----------------------------------------------------------------------------------------------------------------
Total 205 203 189 192
- ----------------------------------------------------------------------------------------------------------------
Foreign-based fleet:
- -------------------
Towing Supply/Supply 174 191 200 196
Crew/Utility 41 45 40 42
Offshore Tugs 50 49 40 38
Other 61 61 64 64
- ----------------------------------------------------------------------------------------------------------------
Total 326 346 344 340
- ----------------------------------------------------------------------------------------------------------------
Owned or chartered vessels included in marine revenues 531 549 533 532
Vessels withdrawn from active service 20 15 13 12
Joint venture owned vessels 43 43 43 43
- ----------------------------------------------------------------------------------------------------------------
Total 594 607 589 587
================================================================================================================
Worldwide fleet:
- ---------------
Towing Supply/Supply 311 313 308 307
Crew/Utility 96 99 92 92
Offshore Tugs 98 98 87 89
Other 89 97 102 99
- ----------------------------------------------------------------------------------------------------------------
Total 594 607 589 587
================================================================================================================
Near the end of fiscal 1994 several vessels were withdrawn from active
service because of their age and anticipated high repair and maintenance costs.
Additional vessels in the Marine fleet may be withdrawn in the future as they
become uneconomical to operate.
Oil and gas industry analysts predict that future spending for offshore
exploration, development and production of natural gas in the U.S. Gulf of
Mexico should continue to favorably affect demand for offshore marine services.
Anticipated expenditures for offshore exploration, development and production
activity in foreign markets is expected to continue declining for the first
half of fiscal 1995 and then rebound to a level slightly below the current
level of activity. Subject to certain regulatory restrictions, the Marine
segment is able to
-26-
27
relocate vessels to markets which offer better opportunities. If future
offshore activity in the U.S. Gulf of Mexico exceeds current forecasts, the
Marine segment is well positioned to capitalize on any additional opportunities
because it owns the majority of the vessels within the industry which are able
to return to the U.S. Gulf of Mexico.
The following table compares major components of Marine operating costs
and compares selected statistics for owned and chartered vessels:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Crew costs $ 135,374 122,244 119,871
Repair and maintenance 68,625 63,440 69,817
Vessel insurance 24,918 24,969 18,897
Fuel, lube and supplies 22,296 20,631 18,846
Charter fees, mobilization/demobilization 8,113 8,835 11,115
Other 12,094 14,910 7,365
- -----------------------------------------------------------------------------------------------------------
Total operating costs of owned and chartered vessels 271,420 255,029 245,911
Brokered vessels' costs 9,274 6,248 10,810
Shipyard costs 8,242 2,116 7,609
Intercompany eliminations (A) --- (10,966) (10,400)
- -----------------------------------------------------------------------------------------------------------
$ 288,936 252,427 253,930
===========================================================================================================
For owned and chartered vessels:
- -------------------------------
Overall percentage increase in operating costs 6.4% 3.7% 18.8%
===========================================================================================================
Operating costs as a percentage of related revenues 60.6% 61.5% 58.7%
===========================================================================================================
(A) Costs incurred from the charter of equipment to the discontinued
Container Shipping segment.
Changes in fleet size and utilization are the principal factors which
cause fluctuations in the amount of crew costs. Higher fiscal 1994 crew costs
compared with fiscal 1993 is principally the result of the higher activity
level of the domestic-based vessel fleet, which generally has higher crewing
costs than the foreign-based vessel fleet, and the addition of 19 vessels
purchased on March 15, 1993. Higher activity for the domestic-based vessel
fleet during the third and fourth quarters of fiscal 1993 is primarily
responsible for the growth in fiscal 1993 crew costs above the fiscal 1992
level. The absence of significant new vessel construction within the energy
services industry over the past 10 to 12 years has caused the average age of
the Company's Marine vessel fleet to rise. Currently the average age of the
Company's Marine vessel fleet is approximately 15 years. The increase in
average age of the fleet combined with normal inflationary effects has, in
turn, resulted in higher levels of repair and maintenance costs. Though
primarily dictated by regulatory agencies, the scheduling of vessel drydockings
affects the amount of repair and maintenance expense in any year. Vessel
drydockings, whenever possible, are also done to minimize any impact on vessel
revenues. Higher fiscal 1994 and fiscal 1993 insurance costs compared with the
respective prior period are partially the result of a much tougher insurance
market which is unwilling to provide past
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levels of coverage at the same rates enjoyed in prior periods. In an effort to
control future insurance costs, new and expanded vessel safety programs were
added in fiscal 1993. These programs, while designed to maximize vessel safety
and, in turn, control future insurance costs, cannot totally prevent future
cost increases. Fiscal 1993 vessel insurance costs also include a $2.0 million
provision to record estimated underinsured marine losses related to Zapata Gulf
insurance programs. Lower mobilization costs were incurred in fiscal 1993
compared to fiscal 1992 as approximately the same number of vessels were moved,
but over shorter distances. Other vessel costs for fiscal 1993 include
approximately $2 million of write-offs which resulted from a comprehensive
review of marine inventories and a significantly higher amount of broker
commissions.
Gains on asset sales contributed $3.3 million, $2.9 million and $1.7
million for the fiscal years ended March 31, 1994, 1993 and 1992, respectively.
Operating margins from brokered vessel and shipyard activities generally
contribute nominally to Marine operating profits.
COMPRESSION SEGMENT
The Compression segment provides natural gas and air compression services
and equipment for a variety of applications primarily in the oil and gas and
petrochemical industries. It also designs, fabricates and installs engineered
compressor systems. Compression segment operating profit is significantly
affected by the mix of sales and rental revenues. Gross profit on sales are
generally less than operating margins for rental revenues.
Compression segment revenues are compared in the following table on a
dollar basis and as a percentage of total Compression revenues for the years
ended March 31:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Rentals:
Gas compressors $ 30,868 26,653 29,465
Air compressors 4,115 4,947 4,336
- -----------------------------------------------------------------------------------------------------------
Total rental revenues 34,983 31,600 33,801
Equipment and parts sales 18,385 28,662 18,955
Repair and service 2,103 1,837 1,805
- -----------------------------------------------------------------------------------------------------------
$ 55,471 62,099 54,561
===========================================================================================================
As a percentage of total Compression revenues:
Rental revenues 63% 51% 62%
Equipment and parts sales 33% 46% 35%
Repair and service 4% 3% 3%
- -----------------------------------------------------------------------------------------------------------
100% 100% 100%
===========================================================================================================
Gas compressor utilization is affected primarily by oil and natural gas
storage levels and by the number and age of producing oil and gas wells which,
in turn, are dependent upon the price level of oil and natural gas. Air
compressor utilization is heavily dependent upon short-
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term customer needs. Suitability, availability and rental rates for equipment
are also major factors which affect utilization of both gas and air compression
equipment. Gas compressor rentals are generally for a longer term than are air
compressor rentals. The following table compares utilization, average rental
rates and average fleet size for gas and air compressors for the years ended
March 31:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Gas Compressors (Horsepower based statistics):
Utilization 86% 78% 84%
Average monthly rental rate $ 16.74 16.49 17.04
Average fleet size 179,725 172,711 171,494
===========================================================================================================
Air Compressors (Cubic feet per minute based statistics):
Utilization 34% 40% 37%
Average daily rental rate $ .21 .22 .21
Average fleet size 157,500 154,000 156,000
===========================================================================================================
Higher fiscal 1994 gas compressor utilization and higher average monthly
rental rates are a direct result of greater demand for natural gas compressor
services as a result of higher U.S. natural gas prices. Fiscal 1994 gas
compressor rental revenues also rose as a result of a larger compression fleet.
Fiscal 1993 gas compressor utilization and rental rates decreased below prior
year levels primarily because weak U.S. natural gas prices depressed demand for
natural gas compression services.
Fiscal 1994 air compression utilization and average daily rental rates
fell below prior year levels due to weakened demand for air compression
services. During fiscal 1994 the air compression market has generally suffered
from stagnant demand and any significant near-term improvement is not
anticipated.
Fluctuations in the level of revenues generated from equipment and parts
sales over the past three fiscal years are primarily the result of changes in
the sales volume of engineered products.
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Operating costs of the Compression segment consist of the following:
(in thousands)
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
Field operating expenses:
Wages and benefits $ 6,209 5,672 5,851
Repairs and maintenance 6,043 5,833 5,431
Other 3,109 2,635 3,499
- -----------------------------------------------------------------------------------------------------------
15,361 14,140 14,781
Costs of sales 14,977 22,143 14,408
- -----------------------------------------------------------------------------------------------------------
$ 30,338 36,283 29,189
===========================================================================================================
Field operating costs as a percentage of
rental and repair and service revenues 41% 42% 42%
===========================================================================================================
Costs of sales as a percentage of
related revenues 81% 77% 76%
===========================================================================================================
Field operating expenses relate to gas and air compressor rental operations.
Field operating expenses are generally consistent from period-to-period and
usually vary in the short-term due to fluctuations in the level of repairs and
maintenance expense. Long-term growth in field operating expenses will occur
primarily as a result of increased fleet size and general inflationary factors.
Costs of sales consist primarily of wages and benefits and material costs
associated with the design, fabrication and installation of packaged compressor
systems. Increases in costs of sales as a percentage of the related revenues
over the past three years is primarily the result of reduced demand and, in
turn, more competitive pricing.
Gain on sales of equipment over the past three years contributed $1.3
million, $1.4 million, and $.8 million for the fiscal years ended March 31,
1994, 1993 and 1992, respectively.
CURRENCY FLUCTUATIONS AND INFLATION
Because of its significant foreign operations, the Company is exposed to
currency fluctuations and exchange risks. To minimize the financial impact of
these items the Company attempts to contract a majority of its services in
United States dollars.
Day-to-day operating costs are generally affected by inflation. However,
because the energy services industry requires specialized goods and services,
general economic inflationary trends may not affect the Company's operating
costs. The major impact on operating costs is the level of offshore
exploration and development spending by energy exploration and production
companies. As this spending increases, prices of goods and services used by
the oil and gas industry and the energy services industry will increase.
Future improvements in
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vessel day rates and compressor rental rates may buffer the Company from the
inflationary effects on operating costs.
ENVIRONMENTAL MATTERS
During the ordinary course of business the Company's operations are
subject to a wide variety of environmental laws and regulations. The Company
attempts to comply with these laws and regulations in order to avoid costly
accidents and related environmental damage. The Company is currently involved
in litigation with the Environmental Protection Agency (EPA) concerning the
disposal of oilfield wastes.
In 1983, the EPA notified two subsidiaries of the Company that they were
among 53 potentially responsible parties (PRP's) for cleanup costs at the
Western Sand and Gravel site in Rhode Island.
In 1989, the EPA notified another subsidiary of the Company that it was a
PRP for cleanup costs at a National Priorities List site. EPA later nominated
the subsidiary a de minimis participant for this site.
In the opinion of management, the ultimate liability with respect to
these matters will not have a material adverse effect on the Company's
financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is included in Part IV of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS OF THE COMPANY
The Company's Restated Certificate of Incorporation and Bylaws (i) provide
that the number of directors shall not be less than five nor more than ten as
may be fixed by the Board of Directors, and (ii) classify the Board of
Directors into three classes, as nearly equal in number as possible, with each
class serving for a three year term. There are currently eight directors. The
term of office of one class of directors expires each year in rotation so that
one class is elected at each annual meeting for a full three-year term.
Because of the resignation of two directors, both of whom had terms expiring in
1995, thereby reducing the size of the Board from 10 directors to eight, the
Board of Directors expects that the eight remaining directors will be
reallocated among the classes in advance of the next annual meeting of
stockholders. As of May 2, 1994, the directors of the Company were as follows:
Term
Name Age Expiring
---- --- --------
Robert H. Boh . . . . . . . . . . . . . . . . . . . . . . . . 63 1996
Donald T. Bollinger . . . . . . . . . . . . . . . . . . . . . 44 1996
Arthur R. Carlson . . . . . . . . . . . . . . . . . . . . . . 53 1994
Hugh J. Kelly . . . . . . . . . . . . . . . . . . . . . . . . 69 1996
John P. Laborde . . . . . . . . . . . . . . . . . . . . . . . 70 1994
Paul W. Murrill . . . . . . . . . . . . . . . . . . . . . . . 59 1994
Lester Pollack . . . . . . . . . . . . . . . . . . . . . . . . 60 1995
J. Hugh Roff, Jr. . . . . . . . . . . . . . . . . . . . . . . 62 1994
Robert H. Boh has been the President and Chief Executive Officer of Boh
Bros. Construction Co., Inc. since 1967. He is Chairman of Hibernia
Corporation and Hibernia National Bank. He has been a director of the Company
since 1978.
Donald T. Bollinger has been Chairman of Bollinger Machine Shop &
Shipyard, Inc. since 1989 and its Chief Executive Officer since 1985. He is a
director of Premier Bancorp, Inc. and Premier Bank N.A. - South Louisiana. He
has been a director of the Company since 1990.
Arthur R. Carlson has been a Managing Director of The Trust Company of
the West since March 1982. He has been a director of the Company since 1982.
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Hugh J. Kelly has been an oil and gas consultant since 1989. He was
Chief Executive Officer of Ocean Drilling and Exploration Company from 1977 to
1989. He is Vice Chairman of Hibernia Corporation and a director of Chieftan
International, Inc. (oil and gas producer) and Central Louisiana Electric Co.
(utility). He has been a director of the Company since 1990.
John P. Laborde is Chairman of the Board, President, and Chief Executive
Officer of the Company. He is a director of Hibernia Corporation, Hibernia
National Bank, American Bankers Insurance Group, Stolt Comex Seaway S.A., Stone
Energy Corporation, and American Bureau of Shipping. He has been a director of
the Company since 1956.
Paul W. Murrill, professional engineer, served as Special Advisor to the
Chairman of Gulf States Utilities Co. from 1987 to 1989, its Chairman of the
Board from 1982 to 1987, and its Chief Executive Officer from 1982 to 1986. He
is a director of Entergy Corporation, Howell Corporation, Pavilion
Technologies, Inc., Piccadilly Cafeterias, Inc., ZYGO Corp., First Mississippi
Corporation (chemicals and fertilizer) and FirstMiss Gold Inc. (gold mining).
He has been a director of the Company since 1981.
Lester Pollack has been Senior Managing Director of Corporate Advisors,
L.P. since 1988, a general partner of Lazard Freres & Co. and Chief Executive
Officer of Centre Partners, L.P. (an investment partnership affiliated with
Lazard) since 1986. Mr. Pollack also serves as a director of Continental
Cablevision, Inc, Kaufman & Broad Home Corporation, Loews Corporation, Parlex
Corp., Polaroid Corporation, and SunAmerica, Inc. He became a director of the
Company in January 1992.
J. Hugh Roff, Jr. has been Chairman of the Board of PetroUnited
Terminals, Inc. since November 1986. He is a director of Texas Commerce
Bancshares, Inc. He has been a director of the Company since 1986.
EXECUTIVE OFFICERS
Information with respect to the Company's executive officers is contained
in Item 4A of this report.
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ITEM 11. EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table summarizes, for each of the three fiscal years ended
March 31, 1992, 1993 and 1994, the compensation of the Company's Chief
Executive Officer and each of the next four most highly compensated executive
officers of the Company in all capacities in which they served:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
===========================================================================================================
Restricted No. of All
Name and Fiscal Stock Options Other
Principal Position Year Salary Bonus Other Awards (1) Awarded Compensation
- -----------------------------------------------------------------------------------------------------------
John P. Laborde, 1994 $600,000 $450,000 -0- -0- $ 20,976
Chairman of the 1993 560,000 275,000 $3,800,000 (2) -0- 2,231,260 (3)(4)
Board, President, 1992 440,000 300,000 -0- -0- 15,519 (4)
and Chief
Executive Officer
- -----------------------------------------------------------------------------------------------------------
Richard M. 1994 $232,500 $140,000 $43,607 (5) 20,000 $9,951
Currence 1993 218,750 90,000 -0- 30,000 9,538 (4)
Executive Vice 1992 200,000 100,000 -0- -0- 8,319 (4)
President
- -----------------------------------------------------------------------------------------------------------
Ken C. Tamblyn 1994 $222,500 $135,000 $43,607 (5) 20,000 $9,649
Executive Vice 1993 205,000 80,000 -0- 29,600 9,126 (4)
President and 1992 175,000 90,000 -0- -0- 7,569 (4)
Chief Financial
Officer
- -----------------------------------------------------------------------------------------------------------
Cliffe F. Laborde (6) 1994 $186,250 $90,000 $32,715 (5) 15,000 $8,563
Senior Vice 1993 175,000 50,000 -0- 13,600 2,976 (4)
President and Co- 1992 32,532 0 -0- 20,000 387 (4)
General Counsel
- -----------------------------------------------------------------------------------------------------------
Victor I. Koock 1994 $143,000 $50,000 $21,803 (5) 10,000 $7,266
Senior Vice 1993 133,750 40,000 -0- 8,000 6,639 (4)
President, 1992 115,000 50,000 -0- -0- 5,852 (4)
Secretary and Co-
General Counsel
===========================================================================================================
(1) Reflects the number of shares of restricted stock awarded multiplied by
the closing market price of the Company's common stock on the date of
grant.
(2) These Restricted Shares vested on March 31, 1993.
(3) Includes $2,212,321 in an accelerated lump sum payment of benefits under
the Company's S