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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
Form 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------
Date of Report (Date of Earliest Event Reported): February 10, 1998
GulfMark Offshore, Inc.
------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
000-22853 76-0526032
------------------------- ----------------------
(Commission File Number) (I.R.S. Employer Identification No.)
5 Post Oak Park, Suite 1170, Houston, Texas 77027
------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(713)963-9522
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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EXPLANATORY NOTE
This current report on Form 8-K/A amends and restates in its entirety
Item 7 of the current report on Form 8-K of GulfMark Offshore, Inc. (the
"Company") dated February 10, 1998 and filed with the Securities and Exchange
Commission on February 25, 1998 (the "Original Form 8-K").
ITEM 7. Financial Statements and Exhibits
- ------- ---------------------------------
(a) Financial Statements of Business Acquired.
The Consolidated Statements of Operations of Brovig Supply ASA ("Brovig")
for the period from July 1, 1997 through December 31, 1997, and the
accompanying Consolidated Balance Sheet of Brovig as of December 31, 1997 are
attached hereto as Annex II. Additionally, audited statements of revenues and
direct operating expenses for the six month period ending June 30, 1997 and for
the year ended December 31, 1996 are included in Annex II.
(b) Pro Forma Financial Information.
Pro forma financial information of the Company is attached hereto as
Annex I.
(c) Exhibits.
Exhibit No. Description
- ----------- ----------------------------------------
*10.1 Floating Rate Bridge Loan Facility and
Guarantee Facility dated February 4,
1998 among GulfMark Offshore, Inc.,
Christiania Bank of Kreditkasse ASA
for itself as Agent for the other banks
and financial institutions listed.
23.1 Consent of Coopers and Lybrand ANS
*Previously filed as an exhibit to the Original Form 8-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant had duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GulfMark Offshore, Inc.
Date: April 24, 1998 By: /s/ Frank R. Pierce
-------------------------
Executive Vice President
EXHIBIT INDEX
Exhibit No. Description
- ----------- ----------------------------------------
*10.1 Floating Rate Bridge Loan Facility and
Guarantee Facility dated February 4,
1998 among GulfMark Offshore, Inc.,
Christiania Bank of Kreditkasse ASA
for itself as Agent for the other banks
and financial institutions listed.
23.1 Consent of Coopers and Lybrand ANS
*Previously filed as an exhibit to the Original Form 8-K.
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Annex I
The following unaudited pro forma consolidated financial statements as of
December 31, 1997 and for the year ended December 31, 1997 illustrate the
effect of the acquisition of Brovig Supply ASA ("Brovig"), as described in Note
1 to the unaudited pro forma financial statements. The unaudited pro forma
consolidated balance sheet as of December 31, 1997 has been prepared assuming
that the acquisition was consummated as of December 31, 1997. The unaudited
pro forma consolidated statement of income for the year ended December 31, 1997
has been prepared assuming that such transaction was consummated as of January
1, 1997.
The historical results of operations for the Company have been derived
from the Company's consolidated financial statements. The historical results
of Brovig as of and for the six months ended December 31, 1997 have been
derived from Brovig's consolidated financial statements as adjusted for
generally accepted accounting principles in the United States ("US GAAP") and
have been translated into U.S. dollars in accordance with US GAAP. The
historical statements of Brovig's Revenues less Direct Operating Expenses of
the Brovig vessels for the period prior to July 1, 1997 have been derived from
certain financial information from Brovig Offshore ASA, a Norwegian shipping
concern, which relates to the fleet of four vessels demerged from Brovig
Offshore ASA effective, for accounting purposes on July 1, 1997 as adjusted for
US GAAP and have been translated into US dollars in accordance with US GAAP.
The pro forma adjustments and the resulting unaudited pro forma financial
statements are based upon available information and certain assumptions and
estimates as described in the Notes to the Unaudited Pro Forma Financial
Statements. A final determination of the required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values, has not
yet been made. Accordingly, the purchase accounting adjustments reflected in
the pro forma information are preliminary and have been made solely for the
purposes of developing such information. The unaudited pro forma financial
statements and the notes thereto should be read in conjunction with the
historical consolidated financial statements of the Company and Brovig.
The unaudited pro forma consolidated financial statements do not purport
to be indicative of the results of operations that would actually have occurred
if the transactions described had occurred at the beginning of 1997, in such
statements or the results that may be obtained in the future.
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GULFMARK OFFSHORE, INC.
Unaudited Pro Forma Consolidated Balance Sheet
As of December 31, 1997
(In thousands)
<TABLE>
<CAPTION>
Brovig
GulfMark Supply Pro Forma
Historical Historical Adjustments Total
---------- ---------- ------------- --------
<S> <C> <C> <C> <C>
ASSETS
Cash . . . . . . . . . . . . . . . . . . $ 25,885 $ 779 $ 16,428 (A) $ 17,928
(25,164)(B)
Accounts Receivable. . . . . . . . . . . 10,505 2,295 12,800
Other Current Assets . . . . . . . . . . 633 199 832
----------- ---------- ---------
Total Current Assets . . . . . . . . . . 37,023 3,273 31,560
Vessels and Other Fixed Assets . . . . . 105,262 38,505 18,995 (B) 162,762
Brovig Investment . . . . . . . . . . . 8,388 - (8,388)(B) -
Goodwill . . . . . . . . . . . . . . . . - - 18,212 (B) 18,212
Other assets . . . . . . . . . . . . . . 3,988 - 3,988
----------- ---------- ---------
Total Assets . . . . . . . . . . . . . . $ 154,661 $ 41,778 $216,522
=========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Portion of Long-term Debt. . . . $ 10,506 3,976 16,428 (A) 30,910
Accounts Payable . . . . . . . . . . . . 3,839 477 4,316
Accrued Liabilities & Other . . . . . . 3,261 502 500 (B) 4,263
----------- ---------- ---------
Total Current Liabilities . . . . . . . 17,606 4,955 39,489
Long-term Debt . . . . . . . . . . . . . 42,918 33,678 76,596
Accrued Drydocking . . . . . . . . . . . - 367 (367)(B) -
Deferred Taxes . . . . . . . . . . . . . 8,255 1,056 5,244 (C) 14,555
Minority Interest . . . . . . . . . . . 610 - 610
Common Stock . . . . . . . . . . . . . . 79 1,722 (1,722)(B) 79
Additional Paid-in Capital . . . . . . . 60,487 - 60,487
Retained Earnings . . . . . . . . . . . 26,271 - 26,271
Cumulative Translation Adjustment . . . (1,565) - (1,565)
----------- ---------- ---------
85,272 1,722 85,272
----------- ---------- ---------
Total Liabilities & Stockholders' Equity $ 154,661 $ 41,778 $216,522
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of this financial statement.
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GULFMARK OFFSHORE, INC.
Unaudited Pro Forma Consolidated Statement of Income
For The Year Ended December 31, 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Brovig Brovig
Supply Supply
Historical Pro Forma Pro
GulfMark July 1 Jan 1 to Forma
Historical to Dec 31 June 30 (D) Adjust. Total
---------- ----------- ----------- -------- ------
<S> <C> <C> <C> <C> <C>
Revenues. . . . . . . . . . . . . . . . $ 46,019 $ 7,777 $ 6,623 (D) $ (59)(F) $ 60,360
Direct Operating Expenses. . . . . . . . 18,231 3,533 3,290 (D) (59)(F) 24,662
(333)(G)
General and Administrative Expenses . . 5,364 271 284 (D) 5,919
Depreciation and Amortization. . . . . . 6,711 1,294 1,207 (D) 1,240 (H) 10,907
455 (I)
---------- ----------- --------
Operating Income . . . . . . . . . . . . 15,713 2,679 18,872
Interest Expense, net. . . . . . . . . . (3,819) (1,169) (1,169)(E) (1,595)(J) (7,752)
Other . . . . . . . . . . . . . . . . . (73) (87) 87 (K) (73)
---------- ----------- --------
Income from Continuing Operations
Before Income Tax. . . . .. . . . 11,821 1,423 11,047
Tax Provision . . . . . . . . . . . . . (3,626) (427) 644 (L) (3,409)
---------- ----------- --------
Income from Continuing Operations. . . . $ 8,195 $ 996 $ 7,638
========== =========== ========
Basic earnings per share . . . . . . . . $ 1.15 $ 1.07
Diluted earnings per share . . . . . . . 1.11 1.03
Weighted average shares
outstanding (basic). . . . . . . . . 7,155 7,155
Weighted average shares
outstanding (diluted). . . . . . . . 7,413 7,413
</TABLE>
The accompanying notes are an integral part of this financial statement.
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GULFMARK OFFSHORE, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND:
On February 10, 1998, GulfMark Offshore, Inc. ("GulfMark" or the
"Company")completed its acquisition of approximately 96 percent of the
outstanding shares of Brovig Supply ASA, a publicly traded Norwegian company
("Brovig"). The remaining 4 percent was acquired on March 26, 1998 (the
"Acquisition"). Total consideration for the Acquisition was approximately
$73.0 million, which includes the assumption of debt of approximately NOK 277
million ($37.4 million). Approximately $16.4 million of the purchase price was
funded through a Floating Rate Bridge Loan Facility dated February 4, 1998 from
Christiania Bank og Kreditkasse ASA (the "Bridge Loan"). The balance of the
purchase price was funded by the Company's cash on hand. The shares were
acquired pursuant to a public bid made by GulfMark in accordance with Norwegian
law and the requirements of the Oslo Stock Exchange. Brovig owns five offshore
support vessels including one newly built vessel which was delivered on
December 19, 1997 which provide marine support and transportation services to
companies engaged in offshore exploration and production of oil and gas in the
North Sea. The Unaudited Pro Forma Statement of Income includes the results of
the newly delivered vessel only for the period from delivery to year end.
2. BASIS OF PRESENTATION:
The accompanying unaudited pro forma balance sheet has been prepared
assuming that 100 percent of the outstanding shares of Brovig were acquired and
the Acquisition and the related financing transactions were consummated as of
December 31, 1997. The accompanying unaudited pro forma statement of income
for the year ended December 31, 1997 has been prepared assuming that such
transactions were consummated as of January 1, 1997.
3. PRO FORMA ADJUSTMENTS AND MANAGEMENT ASSUMPTIONS:
The unaudited pro forma financial statements reflect the following pro
forma adjustments related to the Acquisition and the related financing
transactions:
(A) Receipt of aggregate proceeds of the $16.4 million Bridge Loan.
(B) Acquisition of Brovig for total consideration of approximately $72.2
million plus $0.5 million in transaction expenses. Based on preliminary
determinations of the fair values of assets and liabilities acquired,
approximately $57.5 million of the total purchase cost has been allocated to
property and equipment, representing a $19.0 million step up from historical
cost. Additional adjustments to reflect the acquisition include elimination of
the historical capital accounts of Brovig, recording $18.2 million of goodwill,
removal of existing investment in Brovig and a conforming change to remove
accrued drydocking.
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(C) Deferred taxes provided based on the difference in the aggregate book
and tax bases of assets at the statutory rate for Brovig.
(D) Full separate results for Brovig are only available for the period
from July 1, 1997 to December 31, 1997. Prior to July 1, 1997, the operations
of Brovig Supply were included with its parent company, Brovig Offshore ASA.
These amounts reflect the historical operating results associated with the
assets transferred to Brovig from Brovig Offshore ASA.
(E) Interest expense during the period operated as a segment of Brovig
Offshore ASA was estimated assuming the same amount as the period operated
separately.
(F) Elimination of revenue and operating expenses related to management
fees charged by GulfMark to Brovig related to one vessel managed by GulfMark
during the period.
(G) Decrease in operating expense based on conforming Brovig's accounting
policy of accruing for future drydockings to GulfMark's policy of amortizing
past drydockings.
(H) Increase in depreciation and amortization due to depreciation on step
up in basis of vessels over remaining useful lives and to conform accounting
policies regarding salvage values.
(I) Increase in depreciation and amortization due to amortization of
goodwill with an estimated life of 40 years.
(J) Increase in interest expense, net, due to the increased indebtedness
of $16.4 million from the Bridge Loan as well as the assumed reduction in
interest income related to the cash paid for Brovig.
(K) Decrease in other expense relates to the removal of certain
translation losses during the period from July 1, 1997 to December 31, 1997
based on the exchange rate in effect on those dates. Using the exchange rate
changes from December 31, 1996 to December 31, 1997, no such losses would
exist.
(L) Income tax effects of Brovig pro forma adjustments herein, based on a
Norwegian income tax rate of 28 percent; all income taxes are deferred under
the Norwegian Shipping Tax Act.
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Annex II
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
of Brovig Supply ASA
We have audited the accompanying consolidated balance sheet of Brovig
Supply ASA and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations and cash flows for the six-month period
ended December 31, 1997, all expressed in Norwegian kroner. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Norway, which are substantially the same as those followed 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Brovig
Supply ASA and subsidiaries as of December 31, 1997, and the results of its
operations and its cash flows for the six-month period ended December 31, 1997,
in conformity with generally accepted accounting principles in Norway.
Generally accepted accounting principles in Norway vary in certain
respects from generally accepted accounting principles in the United States.
The application of the latter would have affected the determination of net
income for the six-month period ended December 31, 1997, and determination of
shareholders' equity at December 31, 1997 to the extent summarized in Note 12
to the consolidated financial statements.
Coopers & Lybrand ANS
Oslo, Norway
April 23, 1998
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<PAGE>10
Brovig Supply ASA
Consolidated Statements of Operations
for the six-month period ended December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1997
NOK USD
------ ------
<S> <C> <C>
Operating revenues:
Net freight revenues ships . . . . . . . . . . . . . . . . 54,692 7,427
------ ------
Total operating revenues . . . . . . . . . . . . . . . . . 54,692 7,427
Operating expenses:
Crew expenses ships . . . . . . . . . . . . . . . . . . . 15,169 2,060
Other operating expenses ships . . . . . . . . . . . . . . 9,673 1,314
General and administrative expenses . . . . . . . . . . . 1,907 259
------ ------
Total operating expenses . . . . . . . . . . . . . . . . . 26,749 3,633
------ ------
Operating income before depreciation . . . . . . . . . . . 27,943 3,794
------ ------
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 9,100 1,235
------ ------
Operating income . . . . . . . . . . . . . . . . . . . . . 18,843 2,559
------ ------
Financial items:
Interest income . . . . . . . . . . . . . . . . . . . . . . 92 12
Interest expenses . . . . . . . . . . . . . . . . . . . . . (8,314) (1,129)
Foreign exchange gains . . . . . . . . . . . . . . . . . . 51 7
Foreign exchange losses . . . . . . . . . . . . . . . . . . (665) (90)
------ ------
Net financial items . . . . . . . . . . . . . . . . . . . . (8,836) (1,200)
------ ------
Income before extraordinary items . . . . . . . . . . . . . 10,007 1,359
------ ------
Extraordinary items:
Extraordinary expenses . . . . . . . . . . . . . . . . . . (3,764) (511)
------ ------
Income before taxes . . . . . . . . . . . . . . . . . . . . 6,243 848
------ ------
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
------ -----
Net income . . . . . . . . . . . . . . . . . . . . . . . . 6,243 848
====== ======
</TABLE>
The accompanying notes are an integral part of this financial statement.
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Brovig Supply ASA
Consolidated Balance Sheet
As of December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1997
NOK USD
------- -------
<S> <C> <C>
ASSETS
Current assets:
Bank deposits . . . . . . . . . . . . . . . . . . . . . 5,740 779
Accounts receivable . . . . . . . . . . . . . . . . . . 16,901 2,295
Other current assets . . . . . . . . . . . . . . . . . 1,460 199
------- -------
Total current assets . . . . . . . . . . . . . . . 24,101 3,273
------- -------
Fixed assets:
Supply ships . . . . . . . . . . . . . . . . . . . . . . 283,539 38,505
------- -------
Total fixed assets . . . . . . . . . . . . . . . . 283,539 38,505
------- -------
Total assets . . . . . . . . . . . . . . . . . . . 307,640 41,778
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade creditors . . . . . . . . . . . . . . . . . . . . 1,086 147
Accrued interest . . . . . . . . . . . . . . . . . . . . 2,429 330
Other current liabilities . . . . . . . . . . . . . . . 3,696 502
------- -------
Total current liabilities . . . . . . . . . . . . . 7,211 979
------- -------
Long-term liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . 277,275 37,654
Accrued dry-dock expenses . . . . . . . . . . . . . . . 2,700 367
Deferred taxes . . . . . . . . . . . . . . . . . . . . .
------- -------
Total long-term liabilities . . . . . . . . . . . . 279,975 38,021
------- -------
Total liabilities . . . . . . . . . . . . . . . . . 287,186 39,000
------- -------
Shareholders' equity:
Share capital, 11,648,380 shares
outstanding at NOK 3.08 par value . . . . . . . . . 35,877 4,872
Other equity . . . . . . . . . . . . . . . . . . . . . . (15,423) (2,094)
------- -------
Total shareholders' equity . . . . . . . . . . . . . 20,454 2,778
------- -------
Total liabilities and shareholders' equity . . . . . 307,640 41,778
======= =======
Mortgages . . . . . . . . . . . . . . . . . . . . . . . 277,275 37,654
</TABLE>
The accompanying notes are an integral part of this financial statement.
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Brovig Supply ASA
Consolidated Statements of Cash Flows
For the six-month period ended December 31, 1997
(Amounts in thousands)
<TABLE>
<CAPTION>
1997 1997
NOK USD
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . 6,243 848
Depreciation . . . . . . . . . . . . . . . . . . . . . . . 9,100 1,235
Change in accounts receivables . . . . . . . . . . . . . . (16,901) (2,295)
Change in other current assets . . . . . . . . . . . . . . (1,460) (198)
Change in trade creditors and other current liabilities . . 7,211 981
Change in accrued drydock expenses . . . . . . . . . . . . 1,170 159
Unrealized foreign exchange losses . . . . . . . . . . . . 665 90
------- -------
Net cash flows from operating activities . . . . . . . . 6,028 820
------- -------
Cash flows from investing activities:
Cash paid to purchase 50% of newbuilding contract . . . . . (63,153) (8,576)
------- -------
Net cash flows from investing activities . . . . . . . . (63,153) (8,576)
------- -------
Cash flows from financial activities:
Cash received from long-term borrowings . . . . . . . . . . 128,000 17,380
Cash used on repayment of long-term debt . . . . . . . . . (184,308) (25,029)
Cash received from shareholders as new equity . . . . . . . 119,173 16,184
------- -------
Net cash flows from financial activities . . . . . . . . 62,865 8,535
------- -------
Net change in cash and bank deposits . . . . . . . . . . . . . 5,740 779
Cash and bank deposits at start of period . . . . . . . . . . . - -
Cash and bank deposits at end of period . . . . . . . . . . . . 5,740 779
------- -------
Net change in cash and bank deposits . . . . . . . . . . . . . 5,740 779
======= =======
</TABLE>
The accompanying notes are an integral part of this financial statement.
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1. Accounting Policies
FORMATION OF BROVIG SUPPLY ASA & BROVIG SUPPLY SKIBS AS
The supply vessel activities of Brovig Offshore ASA were transferred to a
wholly-owned, newly established subsidiary of Brovig Offshore ASA named Brovig
Supply Skibs AS with financial effect from July 1, 1997. Brovig Supply Skibs AS
was set up in order to qualify for taxation according to the new tax regime for
shipping companies in Norway, and does not have any employees. Brovig Offshore
ASA transferred 4 supply ships and a 50 % share of a newbuilding contract for
a platform supply vessel at market values. Corresponding long term ship loans
and accrued dry-dock expenses were transferred at book values. The net asset
value transferred was financed by an intercompany loan of NOK 140 million from
Brovig Offshore ASA to the subsidiary and the rest was financed by equity
capital.
Brovig Supply ASA was established on September 26, 1997 through a demerger
of Brovig Offshore ASA. The entire shareholding in Brovig Supply Skibs AS was
transferred from Brovig Offshore ASA to the new Brovig Supply ASA. All
shareholders in Brovig Offshore ASA at the time of the demerger received one
share in Brovig Supply ASA for one share held in Brovig Offshore ASA.
The consolidated financial statements presented are the actual financial
statements of Brovig Supply ASA and subsidiaries (the "Company") as of and for
the six month period ended December 31, 1997.
BASIS FOR PRESENTATION
The financial statements have been prepared in accordance with Norwegian
generally accepted accounting principles ("Norwegian GAAP"). Norwegian GAAP
differs in certain significant respects from accounting principles generally
accepted in the United States ("U.S. GAAP"). For additional information
relating to U.S. GAAP and Norwegian GAAP, see note 11.
The Company maintains its accounting records and prepares its financial
statements in Norwegian kroner (NOK). Amounts included in the financial
statements and notes are stated in thousands of Norwegian kroner (or thousands
of any other currency used herein), except where otherwise noted. The U.S.
dollar (USD) amounts disclosed in the accompanying financial statements are
presented solely for the convenience of the reader at the exchange rate on
December 31, 1997 of $1.00= NOK 7.3637. Such translations should not be
construed as representations that the NOK amounts represent, or have been or
could be converted into, U.S. dollars at that or any other rate.
CONSOLIDATION PRINCIPLES
The Company consists of the parent company Brovig Supply ASA and the
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<PAGE>14
wholly-owned subsidiary Brovig Supply Skibs AS. In the accounts of the Company,
the purchase cost of the vessels as per July 1, 1997 corresponds to the book
value in the accounts of Brovig Offshore ASA as per June 30, 1997. The parent
Company's purchase price for the shares in the subsidiary has been eliminated
against the equity at the time of purchase. All intercompany items have been
eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make 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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
COMPARABLE ACCOUNTING FIGURES FOR 1996
There are no official, comparable accounting figures for periods prior to
July 1, 1997 since both the parent company Brovig Supply ASA and the wholly-
owned subsidiary Brovig Supply Skibs AS were established with financial effect
from July 1, 1997. Therefore no comparable, official figures are shown in the
financial statements.
PRO FORMA FINANCIAL FIGURES FOR 1996
Pro forma financial figures are additional information to the accounts,
and are stated in note 9. In Brovig Supply ASA the depreciation period for the
supply ships was extended from 20 years to 25 years. The annual effect of the
increased depreciation period of 5 years is about NOK 4 million. The pro forma
figures given in note 9 have been adjusted for the change in depreciation
period. Pro forma figures stop at "operating income" level.
CASH FLOW STATEMENT
The indirect method has been used.
CLASSIFICATION OF BALANCE SHEET ITEMS
Cash, receivables and liabilities are classified as current assets and
liabilities if maturity is within one year of the balance sheet date. Assets
and liabilities not maturing within a year are classified as non-current assets
and long-term liabilities, respectively.
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<PAGE>15
ACCOUNTS RECEIVABLE
Accounts receivable are recorded at face value less allowance for doubtful
accounts. No allowance for losses has been made since the clients are large
Norwegian and international oil companies.
FOREIGN CURRENCY
All amounts are reported in Norwegian kroner (NOK). Items in foreign
currency in the profit and loss account are recorded at the exchange rate at
the transaction date. Bank deposits, receivables and short-term liabilities
denominated in foreign currency are converted using the year-end exchange rate.
Long-term debt including first year repayment is recorded at either the
drawdown rate or the exchange rate at year-end, whichever is higher.
FIXED ASSETS AND DEPRECIATION
The ships are included in the balance sheet at their purchase cost less
accumulated depreciation. The rate of depreciation is calculated on a straight-
line basis over the assets' expected, remaining economic life. In general the
expected economic life of a supply vessel is set to 25 years, and any residual
value after 25 years is ignored. Upgrading expenses of a vessel which have a
major effect on the vessel's capacity or economic life, are capitalized. In the
accounts of the Company, the purchase cost of the vessels as per July 1, 1997
corresponds to the book value in the accounts of Brovig Offshore ASA as per
June 30, 1997.
DRYDOCKING AND CLASSIFICATION EXPENSES
Provisions are made for periodic drydocking and classification expenses.
Future, total classification expenses are estimated for each vessel at year-end
and this year's proportional share of the costs are provided for as liabilities
and expensed. The normal procedure for supply ships is that drydocking and
classification work take place every second year.
REPORTING OF INCOME AND EXPENSES
The financial accounts are compiled using the historical cost principle.
Income and expenses related to the vessels' voyages are recorded on a daily
accrual basis. Normal charter party conditions for supply ships mean that fuel
expenses are reimbursed by the charterer. Lube oil is expensed at time of
purchase.
15
<PAGE>16
TAXES - BROVIG SUPPLY ASA
Taxes consist of payable taxes and this year's change in deferred taxes.
Deferred taxes are calculated at current tax rates based on temporary
differences between book and tax values and tax losses carried forward. Brovig
Supply ASA has net negative temporary differences after considering tax losses
carried forward. The effect of this situation is possible, future tax gains
which have not been stated as assets. See note 10. Negative temporary
differences in Brovig Supply ASA cannot be used to offset positive temporary
differences in Brovig Supply Skibs AS.
TAXES - NEW TAXATION ACT FOR SHIPPING COMPANIES
Brovig Supply Skibs AS, the subsidiary, was established to satisfy the new
tax rules for shipping companies in Norway. Since there are no plans to declare
a dividend subject to taxation in the foreseeable future no deferred tax is
calculated on the positive temporary differences. (NOK 204.6 million at the
time of foundation of the Company)
INCOME TAXES
Income tax expense includes current taxes and changes in deferred taxes.
Deferred taxes are computed in accordance with the liability method, which
bases the estimated amount of future taxes to be refunded or paid on the
temporary differences between financial and tax reporting bases of assets and
liabilities using the prevailing tax laws as of the most recent balance sheet
date. Deferred tax assets may only be recorded to the extent there are
offsetting deferred tax liabilities and that it is highly probable that such
assets will be realized in future periods.
2. Supply ships and newbuilding contract
<TABLE>
<CAPTION>
Ownership Accumulated Book Ordinary
Per Purchase Additions depreciation Value depreciation
31.12.97 cost as per (disposals) per as per in
Name of vessel, built year (percent) 01.07.97 in period 31.12.97 31.12.97 period
--------- ------------ ----------- ------------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
M/V Skandi Hawk, 1990. . . . 100 69,600 - (2,570) 67,030 (2,570)
M/V Skandi Fortune, 1983. . 100 48,267 - (2,730) 45,537 (2,730)
M/V North Prince, 1978. . . 100 18,474 - (1,642) 16,832 (1,642)
M/V North Crusader, 1984. . 100 42,395 - (2,030) 40,365 (2,030)
M/V North Challenger, 1997*. 100 50,750 63,153 (128) 113,775 (128)
--------- ------------ ----------- ------------ -------- -----------
Total supply ships. . . . . . . . . . 229,486 63,153 (9,100) 283,539 (9,100)
*M/V North Challenger was booked as a newbuilding contract as per 01.07.97. (50 percent was
acquired in second half of 1997.
</TABLE>
16
<PAGE>17
3. Extraordinary expenses
The shares in Brovig Supply Skibs AS were owned 100 percent by Brovig
Offshore ASA until 26.09.97. Through a demerger of Brovig Offshore ASA on this
date, the shares were transferred to Brovig Supply ASA. After the demerger a
private issue towards new investors took place on 03.10.97. The subscription
price was based on projected appraised equity. The extraordinary expense was
charged in order to meet the appraised equity level as stated in the demerger
prospectus.
4. Additions and disposals of fixed assets last five years
<TABLE>
<CAPTION>
Supply ships
------------
<S> <C> <C>
1997. . . . Disposals . . . -
1997. . . . Additions. . . 292,639
</TABLE>
5. Shares in subsidiaries
<TABLE>
<CAPTION>
Share No. of Percent Total Book
Name of subsidiary capital shares owned par value value
- ------------------- ------- ------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Brovig Supply Skibs AS . . 87,000 87,000 100 87,000 165,356
</TABLE>
6. Long-term debt
Long-term debt as per 31.12.97 consisted of a multicurrency bank loan in
NOK (74 percent) and GBP (26 percent). The GBP part of the loan is booked at
the exchange rate at year-end(1GBP=12.25NOK). The interest paid is linked to 3-
12 months LIBOR/NIBOR.
The repayment schedule for the loan is as follows:
<TABLE>
<CAPTION>
Year Amount
- -------------------------- ---------
<S> <C>
Due in 1998 . . . . . . . . . . . . . 29,275
Due in 1999 . . . . . . . . . . . . . 26,000
Due in 2000. . . . . . . . . . . . . 26,000
Due in 2001 . . . . . . . . . . . . . 26,000
Due in 2002 . . . . . . . . . . . . . 26,000
Due after January 1, 2003 . . . . . . 144,000
---------
Total long term debt . . . . . . . . 277,275
17
<PAGE>18
</TABLE>
7. Mortgages
<TABLE>
<CAPTION>
31.12.97 01.07.97
---------- ----------
<S> <C> <C>
Mortgage debt . . . . . . . . . . . . . . . . . 277,275 149,780
Book values of assets pledged as security:
Bank deposits and receivables . . . . . . . . . 24,101 -
Supply ships . . . . . . . . . . . . . . . . . . 283,539 178,735
---------- ----------
Total book value of assets . . . . . . . . . . . 307,640 178,735
</TABLE>
8. Changes in shareholders' equity
<TABLE>
<CAPTION>
Share Reserves Total
Brovig Supply capital in group equity
- ------------------------------------ ------- --------- ---------
<S> <C> <C> <C>
Equity as per 01.07.97 . . . . . . . 10,846 (115,808) (104,962)
Private issue, decided on 03.10.97 . 21,692 75,314 97,006
Private issue, decided on 10.10.97 . 2,672 14,984 17,656
Private issue, decided on 03.11.97 . 667 3,844 4,511
Net result for the Group of companies - 6,243 6,243
------- --------- ----------
Equity as per 31.12.97 . . . . . . . 35,877 (15,423) 20,454
</TABLE>
Equity raised through private issues and expenses related to private
issues:
Expenses related to equity issues of NOK 3.39 mill. are booked against free
reserve/reserve in group. Expenses for raising new equity were ca. 2.8 percent
of gross equity raised (NOK 122.56 mill). Net equity raised after deducting
for expenses was NOK 119.17 mill.
18
<PAGE>19
9. Pro forma figures for the Company
<TABLE>
<CAPTION>
Accounts Pro forma Pro forma Pro forma
2nd half 97 2nd half 96 total 1997 total 1996
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net freight revenues ships . . . . . . . 54,692 40,596 101,264 77,342
Operating expenses excl. depreciation . 26,749 23,055 51,883 47,929
------- ------ ------- -------
Operating income before depreciation . . 27,943 17,541 49,381 29,413
Depreciation . . . . . . . . . . . . . . 9,100 7,992 17,590 15,455
------- ------ ------- -------
Operating income . . . . . . . . . . . . 18,843 9,549 31,791 13,958
</TABLE>
10. Taxes
<TABLE>
<CAPTION>
Deferred taxes:
31.12.97 01.07.97
--------- ---------
<S> <C> <C>
Gains & losses account . . . . . . . . (19,867) (24,834)
Losses carried forward* . . . . . . . . (21,036) (12,452)
Total temporary differences . . . . . . (40,903) (37,286)
Deferred tax assets at 28 percent** . . (11,453) (10,440)
</TABLE>
<TABLE>
<CAPTION>
Year 1991 Year 1992 Year 1993 Year 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
*Year of origin for taxable losses . . 221 11,085 1,146 8,584
</TABLE>
** Potential future tax gains have not been stated as an asset.
11. Subsequent event
Subsequent to year end, the Company gave notice to cancel the management
agreement with Brovig Offshore ASA effective October 1, 1998 under the terms of
the Company's loan agreement (see note 6), the bank has the right to terminate
its existing loan facility at that time. The bank has given formal
notification under the loan agreement at that time dated 7 May 1996 (as
subsequently amended) to terminate the loan at that time.
19
<PAGE>20
12. Differences between generally accepted accounting principles in Norway and
in the United States
The financial statements are prepared in accordance with the generally
accepted accounting principles in Norway, which differ in certain respects from
generally accepted accounting principles in the United States.
Following is a summary of the significant adjustments under U.S. GAAP that
would affect the Company's net income and shareholders' equity as of and for
the six months ended December 31, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED DECEMBER 31, 1997 1997
NOK USD
------ ------
<S> <C> <C>
(Amounts in thousands, except for per share amounts)
Reconciliation of net income:
Net income reported under N.GAAP . . . . . . . . . . . . 6,243 848
U.S. GAAP adjustments:
Extraordinary expenses. . . . . . . . . . . . . . . . . . 3,764 511
Deferred taxes on retained earnings of shipping companies (4,018) (545)
Deferred taxes on negative temporary differences and
net operating losses. . . . . . . . . . . . . . . . . . 1,014 137
------ ------
Approximate net income under U.S. GAAP. . . . . . . . . . 7,003 951
====== ======
Approximate basic and diluted earnings per share 0.94 0.13
AS OF DECEMBER 31,
1997 1997
NOK USD
---- ----
(Amounts in thousands, except for per share amounts)
Reconciliation shareholders' equity:
Shareholders' equity reported under N. GAAP . . . . . . . . 20,454 2,778
U.S. GAAP adjustment:
Deferred taxes on retained earnings of shipping companies. (19,229) (2,611)
Deferred taxes on negative temporary differences and
net operating losses . . . . . . . . . . . . . . . . . . 11,453 1,555
------ ------
Approximate shareholders' equity under U.S. GAAP . . . . . 12,678 1,722
====== ======
</TABLE>
Translation of amounts from Norwegian kroner (NOK) into United States
dollars (USD) has been made for the convenience of the reader at the exchange
rate on December 31, 1997 of $1.00 = NOK 7.3637.
20
<PAGE>21
a) Extraordinary expenses
Norwegian GAAP defines "extraordinary items" as events or transactions
that do not have a regular or frequent occurence over the life of the Company,
are material and are not connected to the normal business.
U.S. standards define "extraordinary items" as events or transactions that
are distinguished by both their unusual nature and infrequency of occurence.
Extraordinary items take place outside the normal course of business and are
not expected to occur again in the foreseeable future.
As a direct result of the Company's demerger in September 1997, the
Company had to pay approximately NOK 3,764 to Brovig Offshore ASA, the sole
shareholder before the demerger. This amount was paid to ensure that the
appraised equity in the Company after the demerger was equal to the amount
represented in the demerger prospectus. As these costs were unrelated to
corporate operations and thus are not properly chargeable to expense, the
substance of the transaction related to the Company's financing activity and
accordingly should be deducted against shareholders equity.
b) Deferred taxes
Under Norwegian GAAP deferred taxes for companies that will be taxed under
the "Shipping Tax Act" are permitted to be calculated based upon the present
value of the tax effect on the earnings of the Company's subsidiaries. Under
U.S. GAAP deferred taxes are provided at the nominal tax rate for the earnings
of its domestic subsidiaries versus the present value.
The result of applying the nominal tax rate of 28 percent to the temporary
differences attributable to the retained earnings of its subsidiaries is to
increase deferred taxes and reduce equity by NOK 19,229 (US$ 2,611). The 1997
deferred income tax calculated under SFAS 109 would have been approximately NOK
4,018 (US$ 545).
The Company has tax assets related to negative temporary differences
between book and tax values and net operating losses. Under Norwegian GAAP the
benefit of deferred tax assets is not recognized because there is no
corresponding deferred tax liability which the assets can be offset against.
Under U.S. GAAP the benefit of the deferred tax asset may be recognized if it
is more likely than not that the asset will be realized. The Company has
determined that it is more likely that not that it will realize the benefit of
this deferred tax asset through future taxable earnings. The result of
recording deferred tax assets related to negative temporary differences and tax
operating loss carry forwards is to increase deferred tax assets and increase
equity by NOK 11,453 (US$ 1,555). The 1997 deferred income tax income
calculated under SFAS 109 would have been approximately NOK 1,014 (US$ 137).
c) Classification difference - First year's installment on long-term debt
21
<PAGE>22
The Company presents all amounts that are related to debt facilities which
are long-term in nature as long-term liabilities, without classifying amounts
due within the following year as a current liability. As of December 31, 1997,
NOK 29,275 (US$ 3,976) of amounts classified as long-term borrowings were due
within the following year.
Under U.S. GAAP, amounts that are due or payable within one year of the
reporting date are classified as a current liability. Amounts that are due or
payable after one year of the reporting date are classified as long-term.
d) Foreign currency
Under Norwegian GAAP, items in foreign currency in the statement of
operations are booked at the exchange rate on the transaction date at the time
they incurred. Bank deposits, short-term receivables and short-term liabilities
denominated in foreign currency are converted using the year-end exchange rate.
Long-term debt including first year repayment is recorded at either the
drawdown rate or the exchange rate at year-end, whichever is the higher. Long-
term debt including first year repayment as of December 31, 1997 was converted
using the year-end exchange rate.
Under U.S. GAAP, all assets and liabilities denominated in a foreign
currency are translated using the year-end exchange rate and the resulting
gains and losses are recognized currently and included in income. The balance
sheet is also individually adjusted by the resulting gains and losses.
e) Earnings Per Share
For the 6 month period ended December 31, 1997
<TABLE>
<CAPTION>
Weighted
Average
Shares Earnings
Income Outstanding Per Share
(Amounts in thousands, except per share amounts) (Numerator) (Denominator) Amount
NOK NOK
----------- ------------- ----------
<S> <C> <C> <C>
Basic And Diluted Earnings Per Share 7,003 7,427 0.94
</TABLE>
22
<PAGE>23
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Shareholders
of Brovig Supply ASA and subsidiaries:
We have audited the accompanying Combined Statement of Operating Revenues
less Operating Expenses (the "Statement") of Brovig Supply ASA and Subsidiaries
(the "Company") for the twelve month period ended December 31, 1996 and for the
six month period ended June 30, 1997. The Statement is the responsibility of
the Company's management. Our responsibility is to express an opinion on the
Statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in Norway which are substantially the same as those followed in the
United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement is free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the statement.
We believe that our audit provide a reasonable basis for our opinion.
The accompanying Combined Statement of Operating Revenues less Operating
Expenses of the Company was prepared for the purpose as described in Note 1 and
is not intended to be a complete presentation of the results of operations for
the Company.
In our opinion, the statements referred to above present fairly, in all
material respects, the Combined Statements of Operating Revenues less Operating
Expenses of the Company for the twelve month period ended December 31, 1996 and
for the six month period ended June 30, 1997, in conformity with generally
accepted accounting principles in Norway.
Generally accepted accounting principles in Norway vary in certain
respects from generally accepted accounting principles in the United States.
The application of the latter on the Statement of Operating Revenues less
Operating Expenses would have affected the determination of operating income
for the twelve month period ended December 31, 1996 and for the six month
period ended June 30, 1997 to the extent summarized in Note 4 to the financial
statements.
Coopers & Lybrand ANS
Oslo, Norway
April 23, 1998
23
<PAGE>24
Brovig Supply ASA
Statements of Operating Revenues Less Operating Expenses
for the 12 Month Period Ended December 31, 1996 and the
6 Month Period Ended June 30, 1997
<TABLE>
<CAPTION>
For the For the For the For the
12 month 6 month 12 month 6 month
period ended period ended period ended period ended
December 31, 1996 June 30, 1997 December 31, 1996 June 30, 1997
NOK NOK USD USD
------------- ------------- ---------------- ---------------
<S> <C> <C> <C>> <C>
Operating revenues: 77,342 46,572 10,503 6,325
Operating expenses:
Ship operating expenses . . 43,929 23,134 5,966 3,142
Depreciation . . . . . . . . 19,408 10,594 2,636 1,439
------------- ------------- ---------------- ---------------
Total operating expenses . . 63,337 33,728 8,602 4,581
------------- ------------- ---------------- ---------------
Operating income . . . . . . 14,005 12,844 1,901 1,744
============= ============= ================ ===============
</TABLE>
The accompanying notes are an integral part of this statement.
1. Basis of presentation
The Combined Statement of Operating Revenues less Operating Expenses (the
Statement) for the twelve-month period ended December 31, 1996 and for the six-
month period ended June 30, 1997 have been prepared in accordance with
Norwegian Generally Accepted Accounting Principles.
Translation of amounts from Norwegian kroner (NOK) into United States
dollars (USD) for the six-month period ended June 30, 1997 has been made for
the convenience of the reader at the exchange rate on December 31, 1997 of
$1.00 = NOK 7.3637. Such translations should not be construed as
representations that the NOK amounts represent or have been or could be
converted into U.S. dollars at that or any other rate.
The Company was established on September 26, 1997. Prior to September 26,
1997, the Company was part of Brovig Offshore ASA. The supply vessel activity
of Brovig Offshore ASA, a Norwegian shipping Group, was transferred to a
wholly-owned, newly established subsidiary of Brovig Offshore ASA named Brovig
Supply Skibs AS, with financial effect from July 1, 1997. When Brovig Supply
ASA was established, Brovig Supply Skibs AS was transferred as a wholly owned
subsidiary to Brovig Supply ASA. For purposes of the Statement, operating
revenues less operating expenses have been derived from a certain financial
24
<PAGE>25
information of Brovig Offshore ASA that relates to the Company. It is the
opinion of the Board of Directors of Brovig Offshore ASA that the Company's
operating revenue and operating expenses provides the most relevant financial
information, and accordingly, the non-operating revenues and expenses have not
been included in the Statement.
This Statement may not be indicative of the operating activity of the
Company that may have resulted if the Company had been operating on a stand-
alone basis.
2. Operating income and expense
The financial accounts are compiled using the historical cost principle.
Income and expense related to the vessels' voyages are recorded on a daily
accrual basis. Normal charter party conditions for supply ships mean that fuel
expenses are reimbursed by the charterer. Lube oil is expensed at time of
purchase.
3. Depreciation
The rate of depreciation is calculated on a straight-line basis over the
assets' expected, remaining economic life. In general the expected economic
life of a supply vessel is set to 20 years, and any residual value after 20
years is ignored.
4. Differences between generally accepted accounting principles in Norway
and the United States
The Combined Statement of Operating Revenues less Operating Expenses for
the twelve-month period ended December 31, 1996 and for the six-month period
ended June 30, 1997, have been prepared in accordance with Norwegian Generally
Accepted Accounting Principles(Norwegian GAAP), which differ in certain
respects from accounting principles generally accepted in the United States
(U.S. GAAP).
There were no material differences which impacted operating income between
Norwegian GAAP and U.S. GAAP for the twelve-month period ended December 31,
1996 and for the six-month period ended June 30, 1997.
25
CONSENT OF COOPERS & LYBRAND ANS
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our reports
dated April 23, 1998 on the consolidated financial statements of Brovig
Supply ASA as of and for the six months ended December 31, 1997 and on
the consolidated statements of operating revenues less operating
expenses for the twelve month period ended December 31, 1996 and the
six month period ended June 30, 1997, included in this Form 8-K/A of
GulfMark Offshore, Inc.
Coopers & Lybrand ANS
Oslo, Norway
April 23, 1998
