<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
// TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-22853
GULFMARK OFFSHORE, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 76-0526032
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 POST OAK PARK, SUITE 1170 77027
Houston, Texas
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(713) 963-9522
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 such filing requirements for the past 90
days. YES /X/ No //
Number of shares of Common Stock, $0.01 Par Value, outstanding as of
May 15, 2000: 8,161,399.
(Exhibit Index Located on Page 18)
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FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements included
herein have been prepared by the Company. In the opinion of
management, all adjustments, which include reclassifications and
normal recurring adjustments necessary to present fairly the
financial statements for the periods indicated have been made.
Certain information relating to the Company's organization and
footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles
has been condensed or omitted in this form 10-Q pursuant to such
rules and regulations. However, the company believes that the
disclosures herein are adequate to make the information presented not
misleading. It is recommended that these financial statements be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
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GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS (In thousands)
CURRENT ASSETS:
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . $ 29,193 $ 28,650
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . 16,953 19,639
Prepaids and other . . . . . . . . . . . . . . . . . . . . . . . 1,881 1,365
-------- --------
Total current assets. . . . . . . . . . . . . . . . . . . . . 48,027 49,654
VESSELS AND EQUIPMENT, at cost, net of accumulated depreciation
of $42,283,000 (unaudited) in 2000 and $40,087,000 in 1999. . . . 190,999 195,358
INVESTMENT IN UNCONSOLIDATED VENTURE . . . . . . . . . . . . . . . 552 566
GOODWILL, NET. . . . . . . . . . . . . . . . . . . . . . . . . . . 17,137 18,062
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . 7,473 6,942
-------- --------
$ 264,188 $ 270,582
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings and current portion of long-term debt . . $ 53 $ 55
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 6,962 8,638
Accrued personnel costs. . . . . . . . . . . . . . . . . . . . . 935 1,185
Accrued interest expense . . . . . . . . . . . . . . . . . . . . 3,790 947
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . 2,972 3,057
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . 14,712 13,882
-------- --------
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . 130,122 130,128
DEFERRED TAXES AND OTHER . . . . . . . . . . . . . . . . . . . . . 21,569 21,894
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 2,000,000 authorized; no
shares issued. . . . . . . . . . . . . . . . . . . . . . . . . -- --
Common stock, $.01 par value; 15,000,000 shares authorized
8,161,399, and 8,136,830 shares issued and outstanding . . . . 82 81
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 62,987 62,913
Retained earnings . . . . . . . .. . . . . . . . . . . . . . . . 46,769 48,921
Cumulative translation adjustment. . . . . . . . . . . . . . . . (12,053) (7,237)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . 97,785 104,678
-------- --------
$ 264,188 $ 270,582
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
2000 1999
------ ------
(In thousands, except per share amounts)
<S> <C> <C>
REVENUES . . . . . . . . . . . . . . . . . . . . . . . $14,413 $ 21,127
COSTS AND EXPENSES:
Direct operating expenses . . . . . . . . . . . . . 7,971 8,191
Bareboat charter expense. . . . . . . . . . . . . . 1,756 1,755
General and administrative expenses . . . . . . . . 1,607 1,643
Depreciation and amortization . . . . . . . . . . . 3,093 3,120
------ ------
14,427 14,709
------ ------
OPERATING INCOME (LOSS). . . . . . . . . . . . . . . . (14) 6,418
OTHER INCOME (EXPENSES):
Interest expense . . . . . . . . . . . . . . . . . . (3,140) (2,751)
Interest income . . . . . . . . . . . . . . . . . . 326 579
Loss from unconsolidated venture . . . . . . . . . . (359) --
Other............. . . . . . . . . . . . . . . . . . 69 (108)
------ ------
(3,104) (2,280)
------ ------
Income (Loss) before taxes . . . . . . . . . . . . . . (3,118) 4,138
INCOME TAX (PROVISION) BENEFIT . . . . . . . . . . . . 966 (1,230)
------ ------
NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . $(2,152) $ 2,908
====== ======
BASIC EARNINGS PER SHARE:
Net Income (Loss) . . . . . . . . . . . . . . . . . . $ (0.26) $ 0.36
------ ------
WEIGHTED AVERAGE SHARE OUTSTANDING (BASIC) . . . . . . 8,140 $ 8,123
====== ======
DILUTED EARNINGS PER SHARE:
Net Income (Loss). . . . . . . . . . . . . . . . . . $ (0.26) $ 0.35
------ ------
WEIGHTED AVERAGE SHARES OUTSTANDING (DILUTED). . . . . 8,140 8,251
====== ======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------
2000 1999
-------------------
(In thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)...................................................... $(2,152) $ 2,908
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................................... 3,093 3,120
Deferred and other income tax provision................................ (956) 1,162
Change in operating assets and liabilities:
Accounts receivable.................................................. 2,472 (497)
Prepaids and other................................................... (530) (153)
Accounts payable..................................................... (1,195) (1,982)
Other accrued liabilities............................................ 2,223 2,531
Other, net............................................................. 433 (385)
-------- --------
Net cash provided by operating activities............................ 3,388 6,704
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of vessels and equipment..................................... (1,383) (6,243)
Expenditures for drydocking and main engine overhaul................... (1,332) (896)
-------- --------
Net cash used in investing activities................................ (2,715) (7,139)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt..................................................... (15) (9)
Proceeds form issuance of common stock................................. 75 --
-------- --------
Net cash provided by (used in) financing activities.................. 60 (9)
Effect of exchange rate changes on cash.................................. (190) (111)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................... 543 (555)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD..................... 28,650 32,007
-------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD........................... $ 29,193 $ 31,452
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid, net of interest capitalized............................... $ 12 $ (226)
======== ========
Income taxes paid........................................................ $ 10 $ 26
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
The consolidated financial statements include the accounts of
GulfMark Offshore, Inc and its majority owned subsidiaries
("GulfMark" or the "Company"). Investments in unconsolidated
subsidiaries are accounted for on the equity method. All significant
intercompany accounts and transactions between GulfMark and its
subsidiaries have been eliminated.
The Company operates offshore support vessels, principally in
the North Sea, Southeast Asia and Brazil. The vessels provide
transportation of materials, supplies and personnel to and from
offshore platforms and drilling rigs. Some of these vessels also
perform anchor handling and towing services.
(2) EARNINGS PER SHARE ("EPS")
Basic EPS is computed by dividing net income by the weighted
average number of shares of common stock outstanding during the
period. Diluted EPS is computed using the treasury stock method for
common stock equivalents. For the three months ended March 31, 2000,
all options are excluded as their effect is anti-dilutive. The
details of the EPS calculations for the three months ended March 31,
1999 are as follows (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
-----------------------------
Per Share
Income Shares Amount
-------- -------- ---------
<S> <C> <C> <C>
Net Income Per Share, Basic................... $ 2,908 8,123 $ 0.36
=========
Dilutive effect of common stock options....... -- 128
-------- --------
Net Income per share, diluted................. $ 2,908 8,251 $ 0.35
======== ======== =========
</TABLE>
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(3) NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and hedging
activities. SFAS No. 133 was to be effective beginning in 2000;
however, in June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities Deferral of the
Effective Date" which delayed the effective date to fiscal years
beginning after June 15, 2000. The Company does not expect the
adoption of this statement to have a material effect on its financial
position or results of operations.
(4) COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, for
the three months ended March 31, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
---------- ----------
<S> <C> <C>
Net Income (Loss)...................................... $ (2,152) $ 2,908
Foreign currency translation adjustments,
net of tax of $2,064 for 2000
and $1,896 for 1999, respectively.................... (4,816) (4,425)
---------- ----------
Comprehensive Loss..................................... $ (6,968) $ (1,517)
========== ==========
</TABLE>
The Company's only accumulated comprehensive income item relates to
its cumulative foreign currency translation adjustment.
(5) VESSEL ACQUISITIONS
The Company entered into an agreement with Bender Shipbuilding &
Repair, Inc. of Mobile, Alabama for the construction of two 217'
offshore support vessels. The first vessel was delivered in August
1999 and the second vessel was delivered in September 1999. The
specifications of these vessels were developed jointly between the
Company and the shipyard for use in international applications.
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Interest is capitalized in connection with the construction of
vessels. During the three months ended March 31, 1999, $0.3 million
was capitalized in connection with the construction of these two
vessels.
(6) OPERATING SEGMENT INFORMATION
The operations of the Company are reported in a single business
segment, offshore marine services. The business operates offshore
support vessels in various geographic locations. The vessels provide
transportation of materials, supplies and personnel to and from
offshore platforms and drilling rigs. Some of the vessels also
perform anchor handling and towing services.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company provides marine support and transportation services
to companies involved in the offshore exploration and production of
oil and natural gas. The Company's vessels transport drilling
materials, supplies and personnel to offshore facilities, as well as
move and position drilling structures. The majority of its
operations are conducted in the North Sea and, with the exception of
three vessels operating in Brazil and one in West Africa, the balance
of the Company's operations are conducted in Southeast Asia. The
Company's fleet has grown in size and capability from an original 11
vessels acquired in late 1990 to its present level of 50 vessels
through strategic acquisitions and new construction of
technologically advanced vessels, which have partially been offset by
dispositions of certain older, less profitable vessels. Thirty
vessels in GulfMark's fleet are owned, four are bareboat chartered
and sixteen are managed.
The Company's results of operations are affected primarily by
day rates, fleet utilization and the number and type of vessels in
its fleet. These factors are driven by trends within the oil and
natural gas exploration and production industry, which affect the
demand for vessels, as well as by trends impacting the broader
economy and capital markets, which generally affect the supply of
vessels. While offshore support vessels service existing oil and
natural gas production platforms and exploration and development
activities, incremental demand depends primarily upon drilling
activity, which, in turn, is related to both short-term and long-term
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trends in oil and natural gas prices. As a result, trends in oil and
natural gas prices may significantly affect fleet utilization and day
rates.
Industry conditions in the North Sea and Southeast Asia markets
continued to show weakness during the early part of the first quarter
of 2000 as a result of an oversupply of vessels and the delayed
rebound in upstream activities of oil companies. The oversupply has
been caused by a combination of factors, including (1) a reduction in
the exploration and development activities reflecting earlier
commodity price decreases and the consolidations among certain major
oil companies; (2) delays in the delivery of several newbuild
drilling rigs; and (3) the 1998 and 1999 deliveries of newly
constructed vessels in anticipation of the expanded deepwater
drilling rig fleet. As the first quarter was concluding, there were
signs of strengthening in the North Sea as several rig operators
initiated new tenders for vessels and the seasonal construction
period began. This combined with several North Sea vessels
mobilizing to other parts of the world has led to an increase in both
utilization and rates for that region.
The Southeast Asia market has also encountered reductions in
activity similar to the North Sea due to economic conditions in the
area and lower commodity prices. The region has experienced some
sporadic activity which has resulted in periods with improved rates
and utilization; however, thus far there has not been any sustained
upward momentum in the region.
The Company provides management services to other vessel owners
for a fee. Charter revenues and vessel expenses of managed vessels
are not included in the Company's operating results, however,
management fees are included in operating revenues. These vessels
have been excluded for purposes of calculating fleet rates per day
worked and utilization in the applicable periods shown in the table
that follows.
The Company's operating costs are primarily a function of fleet
size and utilization levels. The most significant direct operating
costs are wages paid to vessel crews, maintenance and repairs,
bareboat charter fees and marine insurance. Generally, fluctuations
in vessel utilization affect only that portion of the Company's
direct operating costs that are incurred when the vessels are active.
As a result, direct operating costs as a percentage of revenues may
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vary substantially due to changes in day rates and utilization.
In addition to these variable costs, the Company incurs fixed
charges related to the depreciation of its fleet and costs for
routine drydock inspections, maintenance and repairs designed to
ensure compliance with applicable regulations and maintaining
certifications for its vessels with various international
classification societies. Maintenance and repair expenses and marine
inspection amortization charges are generally determined by the
aggregate number of drydockings and other repairs undertaken in a
given period. Costs incurred for drydock inspection and regulatory
compliance are capitalized and amortized over the period between such
drydockings, typically two to three years.
Under applicable maritime regulations, vessels must be drydocked
twice in a five-year period for inspection and routine maintenance
and repair. Should the Company undertake a large number of
drydockings in a particular fiscal quarter, comparative results may
be affected due to the loss of revenue incurred during the drydocking
period. For the three months ended March 31, 2000, five vessels were
required to be drydocked at an aggregate cost of $1.3 million,
compared to the three months ended March 31, 1999, when three vessels
were drydocked at an aggregate cost of $0.9 million.
Results of Operations
The table below sets forth, by region, the average day and
utilization rates for the Company's vessels and the average number of
vessels owned or chartered during the periods indicated. These
vessels generate substantially all of the Company's revenues and
operating profit. The information that follows is used by the
Company's management to evaluate the performance of the business.
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<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
2000 1999
---------- ----------
<S> <C> <C>
Rates Per Day Worked (a)(b):
North Sea Based Fleet (c) $ 7,608 $ 10,758
Southeast Asia Based Fleet 3,861 4,879
Brazil Based Fleet 8,066 9,390
Overall Utilization (a)(b):
North Sea Based Fleet (percent) 78.4 95.1
Southeast Asia Based Fleet(percent) 53.8 63.6
Brazil Based Fleet (percent) 83.7 98.9
Average Owned/Chartered Vessels (a)(d)
North Sea Based Fleet 19.0 18.0
Southeast Asia Based Fleet 12.0 11.0
Brazil Based Fleet 3.0 2.0
--------- ---------
Total 34.0 31.0
========= =========
</TABLE>
- ----------------------------------
(a) Includes all owned or bareboat chartered vessels.
(b) Rates per day worked is defined as total charter revenues divided
by number of days worked. Utilization rate is defined as the total
days worked divided by total days of availability in the period.
(c) Revenues for vessels in the North Sea based fleet are primarily earned
in Sterling (GBP) and have been converted to U.S. Dollars (US$) at
the average exchange rate (US$/GBP) for the periods indicated.
The average rates were GBP=$1.608 and GBP=$1.625 for the quarters
ended March 31, 2000 and 1999, respectively.
(d) Adjusted for vessel additions and dispositions occurring during
each period.
Comparison of the Three Months Ended March 31, 2000 with the Three
Months Ended March 31, 1999.
For the quarter ended March 31, 2000, the Company showed a net
loss of $2.2 million $0.26 per share on revenues of $14.4 million.
Net income during the same period in 1999 was $2.9 million or $0.35
per diluted share on revenues of $21.1 million.
Revenues for the Company's North Sea based fleet decreased by
$6.1 million when compared to the same quarter a year ago, while the
Southeast Asia based fleet decreased by $0.8 million, partially
offset by an increase in the Brazil based fleet of $0.2 million. The
average North Sea day rate and utilization have declined from $10,758
and 95.1%, respectively in the first quarter of 1999 to $7,608 and
78.4% in the current year's first quarter as a direct result of an
oversupply of vessels in the North Sea. Average day rates and
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utilization for Southeast Asia of $3,861 and 53.8% for the quarter
ended March 31, 2000 were significantly lower than the $4,879 and
63.6% for the same quarter in 1999. These rate reductions more
than offset the impact of the increase in the number of owned and
chartered vessels.
Operating income decreased $6.4 million between the quarter
ended March 31, 1999 and March 31, 2000, reflecting the revenue
decreases in the period offset in part by a slight decrease in
operating expenses and depreciation.
Interest expense between the two periods increased slightly as a
result of $0.3 million of interest costs that were capitalized during
the three months ended March 31, 1999.
The Company's tax provision in the current quarter was impacted
by the inclusion of certain foreign tax credits as well as lower
statutory income tax rates in several of the Company's operating
markets. The tax rate for the three months ended March 31, 2000
reflects the estimated effective tax rate for the Company for the
year.
The Company's current financial position reflects approximately
$33.3 million of net working capital, including $29.2 million of cash
and equivalents. Additionally, the Company has $75 million of
availability under its credit facility. Cash flow from operations
during the first quarter was $3.4 million. Budgeted capital
expenditures for drydocking in the remaining three quarters of 2000
are expected to be less than $2.0 million.
Liquidity and Capital Resources
The Company's ongoing liquidity requirements are generally
associated with its need to service debt, fund working capital,
acquire or improve equipment and make other investments. Since its
inception, the Company has been active in the acquisition of
additional vessels through both the resale market and new
construction. Bank financing and internally generated funds have
provided funding for these activities. In June 1998, the Company
sold $130 million of 8.75% Senior Notes due June 1, 2008 (the "Senior
Notes Offering") and used the proceeds of the Senior Notes Offering
to repay substantially all of the outstanding indebtedness of the
Company under various bank credit facilities which were secured by
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<PAGE>13
mortgages on many of the Company's vessels.
The Company has also entered into a $75 million credit facility
(the "Credit Facility") with three banks. The Credit Facility
requires the Company, on a consolidated basis, to not exceed a
maximum Leverage Ratio and to maintain a specified interest coverage
ratio and a minimum net worth. The Company was in compliance with
all of the covenants of this agreement except for the interest
coverage ratio which was not met as a result of operations for the
fourth quarter of 1999 and the first quarter of 2000. The Company
has received a waiver of this requirement for the period ended March
31, 2000. There can be no assurance that the Company will meet the
interest coverage requirement in future periods as compliance is
dependent on the results of operations, nor can there be any
assurance that future waivers will be granted under the agreement.
At March 31, 2000, the Company had total outstanding debt of
$130.2 million. Scheduled interest payments are expected to total
approximately $11.4 million for the remaining three quarters of 2000.
Net cash provided by operating activities was $3.4 million for
the three month period ended March 31, 2000 as compared to $6.7
million for the same period in 1999.
Net cash used in investing activities was $2.7 million and $7.1
million for the three months ended March 31, 2000 and 1999,
respectively. The 1999 period includes progress payments for the
construction of two vessels which were delivered in August and
September of 1999, while the 2000 period includes conversion costs
for the Highland Sprite. In the three month period ended March 31,
2000, the Company drydocked five vessels compared to 3 vessel
drydockings in the same prior year period.
During the period ended March 31, 2000, no financing
transactions were completed and only nominal principal repayments
were required. Net cash provided by financing activities for the
period ended March 31, 2000 was $0.1 million.
Substantially all of the Company's tax provision is for deferred
taxes. The net operating loss available in the United Kingdom is
primarily the result of accelerated depreciation allowances under
United Kingdom tax law.
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The Company believes that the current reserves of cash and short
term investments, cash flows from operations and access to various
credit arrangements will provide sufficient resources to finance its
operating requirements. However, the ability of the Company to fund
working capital, capital expenditures and debt service in excess of
cash on hand will be dependent upon the success of the Company's
operations. To the extent that internal sources are insufficient to
meet those cash requirements, the Company intends to seek other debt
or equity financing; however, the Company can give no assurances that
such debt or equity financing would be available on terms acceptable
to the Company.
Currency Fluctuations and Inflation
Substantially all of the operations of the Company are
international; therefore it is exposed to currency fluctuations and
exchange rate risks. Charters for vessels in the North Sea fleet are
primarily denominated in Sterling ("GBP") with a portion denominated
in Norwegian Kroner. Operating costs are substantially denominated
in the same currency as charter hire in order to reduce the risk of
currency fluctuations. For the three months ended March 31, 2000,
currency fluctuations in Norwegian Kroner did not have a material
impact on the results of the Company's operations. For the quarter
ended March 31, 2000, the average Norwegian Kroner/U.S. Dollar
exchange rate was 1 USD = 8.2 Norwegian Kroner. In the first quarter
of 2000, the Sterling/U.S. Dollar exchange rate ranged from a high of
GBP - $1.655 to a low of GBP = $1.569 with an average rate of GBP =
$1.608. The average exchange rate in the comparable 1999 period was
GBP = $1.624. As of March 31, 2000, the Sterling/U.S. Dollar
exchange rate was GBP = $1.591. The Company's North Sea based fleet
generated $10.4 million in revenues and $0.2 million in operating
income for the three months ended March 31, 2000.
In areas where currency risks are potentially high, the Company
normally accepts only a small percentage of charter hire in local
currency and the remainder is paid in U.S. Dollars.
Reflected in the accompanying balance sheet as of March 31,
2000, is a $12.1 million cumulative translation adjustment primarily
relating to the lower Sterling and Norwegian Kroner exchange rates as
of March 31, 2000 in comparison to the exchange rate when the Company
invested capital in these subsidiaries. Changes in the cumulative
translation adjustment are non-cash items that are attributable to
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<PAGE>15
investments in vessels and dollar denominated loans between the
Company and its foreign subsidiaries.
With the completion of the Senior Notes Offering in June 1998,
the Company's debt is predominantly denominated in U.S. Dollars,
while a substantial portion of the Company's revenue is generated in
Sterling. The Company has carefully evaluated these conditions and
determined that it is in the best interest of the Company not to use
any financial instruments to hedge this exposure under present
conditions. The Company's decision is based on a number of factors,
including, among others, (i) the cost of using such instruments in
relation to the risks of currency fluctuations, (ii) the propensity
for adjustments in Sterling denominated vessel day rates over time to
compensate for changes in the purchasing power of Sterling as
measured in U.S. Dollars, (iii) the Company's strong cash position
substantially held in U.S. Dollars, (iv) the level of U.S. Dollar
denominated borrowings available to the Company, and (v) the
conditions in the Company's U.S. Dollar generating regional markets.
One or more of these factors may change and the Company, in response,
may choose to use financial instruments to hedge risks of currency
fluctuations.
The Company will, from time to time, hedge known liabilities
denominated in foreign currencies to reduce the effects of exchange
rate fluctuations on the Company's financial results. As of March
31, 2000, the Company had no foreign currency contracts outstanding.
To date, general inflationary trends have not had a material
effect on the operating revenues or expenses of the Company.
Forward-Looking Statements
This form 10-Q contains certain forward-looking statements and
other statements that are not historical facts concerning, among
other things, markets conditions, the demand for marine support
services and future capital expenditures. Such statements are
subject to certain risks, uncertainties and assumptions, including,
without limitation, dependence on the oil and gas industry, oil and
gas prices, ongoing capital expenditure requirements, uncertainties
surrounding environmental and government regulation, risk relating to
leverage, risk of foreign operations assumptions concerning
competition, risk of currency fluctuations and other matters. There
15
<PAGE>16
can be no assurance that the Company has accurately identified and
properly weighed all of the factors which affect market conditions
and demand for the Company's vessels, that the information upon which
the Company has relied is accurate or complete, that the Company's
analysis of the market and demand for its vessels is correct, or that
the strategy based on such analysis will be successful.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Sensitivity
The Company's financial instruments that are potentially
sensitive to changes in interests rates include the notes sold in the
Senior Notes Offering. As of March 31, 2000, the fair value of these
notes, based on quoted market prices, was approximately $117.3
million compared to a carrying amount of $129.6 million.
Exchange Rate Sensitivity
Other than accounts receivable and trade accounts payable, the
Company does not currently have financial instruments that are
sensitive to foreign currency exchange rates. Other information
required under Item 3 has been incorporated into Management's
Discussion and Analysis of Financial Condition and Results of
Operations.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
*27.1 - Financial Data Schedule
*Filed herewith.
(b) Reports on Form 8-K.
On March 8, 2000, the Company filed a report on Form 8-K
announcing the release of the results of its operations
for the quarter ended December 31, 1999.
16
<PAGE>17
On April 14, 2000, the Company filed a report on Form
8-K announcing appointment of Ernst & Young LLP as the
Company's auditors.
On May 10, 2000, the Company filed a report on Form 8-K
announcing the release of the results of its operations
for the quarter ended March 31, 2000.
17
<PAGE>18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GulfMark Offshore, Inc.
(Registrant)
By: /s/ Edward A. Guthrie
-------------------------
Edward A. Guthrie
Executive Vice President and
Chief Financial Officer
Date: May 15, 2000
18
<PAGE>19
EXHIBIT INDEX
Exhibit No.
*27.1 - Financial Data Schedule
*Filed herewith.
19
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