SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 0-5567
SEAL FLEET, INC.
3305 AVENUE S
GALVESTON, TEXAS 77553
Nevada 74-1670096
(State of Incorporation) (IRS Employer ID No.)
(409) 763-8878
(issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Class A Common
Stock, par
value $.10
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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[ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B contained herein, and no disclosure will 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-KSB or
any amendment to this Form 10-KSB [x]
State issuer's revenues for its most recent fiscal year: $6,543,000
State the aggregate market value of the voting stock held
by non-affiliates of the Registrant as of February 21, 1996: $ 432,000
State the number of shares outstanding of the issuer's
classes of common stock as of February 21, 1996:
Class A common stock, $.10 par value 1,984,627 shares
Class B common stock, $.10 per value 50,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual shareholders meeting to be
held June 11, 1996 are incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Seal Fleet, Inc. ("Seal Fleet" or "the Company") is a corporation
organized in November 1969 under the laws of the state of Nevada. All its
business is carried on through subsidiaries. As used in this report, the
terms "Seal Fleet" and "the Company" refer to Seal Fleet, Inc. and its
subsidiaries unless the context indicates otherwise.
Prior to 1979, Seal Fleet's primary business was life insurance and the
Company operated under the name of First National Corporation. In 1979,
the Company went through a quasi-reorganization where it sold its
insurance business, and had a simultaneous reverse and forward stock
split. At that time the Company purchased an offshore service boat
company and amended its Articles of Incorporation to change its name from
First National Corporation to Seal Fleet, Inc. to better describe the
nature of its business.
During the year ended December 31, 1995, the Company was not involved in
any bankruptcy, receivership or similar proceedings, the disposition of
any material subsidiary or any acquisition or disposition of any material
amount of assets other than in the ordinary course of business. During
such year, there were no material changes in the method in which the
Company conducts its business.
BUSINESS OF COMPANY
Principal Products and Services.
The primary business of the Company is the ownership and operation of
offshore service ships. The Company's ships range in size from 176 to 250
feet in length and are capable of carrying drill pipe, drilling mud and
other equipment and supplies to offshore drilling rigs and other
locations. Some of the ships are modified for seismic operations which
allows customers to gather geophysical data to assist them in evaluating
areas of geological interest. Secondly, the Company owns and operates a
travel agency through which it provides travel services for the Company's
crew members, related parties and the general public.
Seal Fleet's wholly-owned subsidiary, Sealcraft Operators, Inc.
("Sealcraft"), manages the Company's fleet of ten vessels. Eight ships
are operated under management agreements, and two are under bare-boat
charters. The ten ships are owned as follows: three ships are owned by
subsidiaries of the Company, five ships by individual limited partnerships
of which Three R Trusts is the general partner, one ship by National Boat
Corporation, and one ship by Hornbeck Offshore Services, Inc. (Robert
Moody is settlor of Three R Trusts.)
Sealcraft-operated ships are chartered principally to oil and geophysical
companies. The terms of each charter are determined through negotiation
and therefore vary. Under a typical charter, Sealcraft provides a
designated ship with a specified crew for the term of the charter.
Sealcraft agrees to maintain the ship, pay wages and other operating
expenses and, in general, to be responsible for the operation of the ship.
The charter specifies in detail the rights and duties of the parties.
Some charters and operating agreements are cancelable upon relatively
short notice.
Sealcraft-operated ships are hired primarily by United States customers
<PAGE>
for use throughout the world. At the present time, one ship is working
in foreign waters. The ships are chartered to, or operated for, United
States companies, and all payments under their charters are made in United
States dollars.
If the Company charters ships to foreign customers, and to the extent that
current charters call for use in foreign waters, the Company is or would
be subject to the laws and regulations of foreign nations as well as those
of the United States.
Seal Marine Management Company ("SMMCO"), a wholly-owned subsidiary of the
Company, manages a vessel brokerage business. SMMCO acts as broker for
vessels owned by unrelated companies. SMMCO's sales force has a knowledge
of the industry jobs available as well as the equipment available. For a
fee, SMMCO brings together a company who has a job but needs equipment and
a company who has equipment but needs a job. The Company brokered over
100 different vessels in 1995 and is expected to do as well in 1996.
Caribe Company, a wholly-owned subsidiary of the Company, operates a
travel agency which began business in February 1990. The travel agency
provides travel arrangements for Sealcraft's crew members during the crew
changes of the ships. The agency also provides travel services for other
related parties and for the general public.
Significant Customers.
Seal Fleet's ships are hired principally by oil and gas producers and
independent seismic exploration concerns. Western Geophysical Company
accounted for approximately 35% of the total charter revenues for 1995
while Oryx Energy and Kilgore Offshore accounted for 17% and 10%,
respectively.
The loss of these major customers could have a material adverse effect on
the Company. The Company believes that its relationship with its major
customers is good. Further demand from the Company's customers will
depend upon future activities, as to which the Company can give no
assurance.
Competitive Conditions.
The Company competes with numerous other owners and operators of offshore
service vessels in its operating areas which include the Gulf of Mexico
<PAGE>
and various foreign waters. In addition, since vessels can be easily
moved from one geographic area to another, additional competition could
come from operators not now active in the Gulf of Mexico or other areas in
which the Company operates. Some of these competitors own many more
vessels and have much greater financial resources than the Company.
The Company believes that its largest competitor in the industry
is Tidewater, Inc. which is publicly owned. Other larger competing
concerns are privately owned or are subsidiaries of other corporations.
Therefore, the Company cannot accurately estimate its competitive position
in its industry, although it considers itself to be only a minor factor in
its market. Furthermore, some potential customers own and maintain
offshore service and geophysical ships.
Competition in the offshore service ship industry involves such factors as
availability of vessels of the type needed by a customer, experience and
reputation of the operator and its crews, quality and availability of
equipment, price and charter terms. Charters are sometimes obtained in
competitive bidding, but with established customers they are typically
obtained through negotiation.
Governmental Regulations.
Many aspects of the offshore service ship business are subject to direct
governmental regulation. Seal Fleet is subject to the jurisdiction of the
United States Coast Guard, the National Transportation Safety Board and
the United States Customs Service, as well as private industry
organizations such as the American Bureau of Shipping. The Coast Guard
and the National Transportation Safety Board set safety standards and are
authorized to investigate vessel accidents and to recommend improved
safety standards. The United States Customs Service is authorized to
inspect vessels at will. To the extent the Company's vessels operate in
foreign waters, the Company is also subject to regulation by the foreign
governments in whose waters it operates.
All of the ships operated by the Company are United States flag vessels,
and their operation and maintenance are subject to federal
statutes and regulations. They are regularly inspected by the United
States Coast Guard and by the American Bureau of Shipping.
In addition to laws and regulations directly affecting the Company, the
Company's business is also influenced by laws, regulations and policies
which impact its customers and the oil and gas industry as a whole.
While management expects the operation of its ships to be subjected to
increasingly stringent industry regulation and that such regulation will
increase its costs of operation, management also believes that any such
additional regulations will affect the Company's competitors in the same
manner and therefore will not adversely impact the Company's relative
position.
Although offshore service vessels are used in almost every phase of
offshore oil and gas exploration, development and production, demand for
<PAGE>
them is significantly impacted by the level of drilling activity. The
level of drilling activity in turn is affected by a number of complex
factors, principally the net after-tax prices received or expected to be
received for oil and gas. At least some oil and gas prices are, and
probably will continue to be, controlled or affected directly, or
indirectly, by federal and state regulations. However, they are also
affected by a variety of other factors outside the control of the Company
and its customers, including the cost and availability of imported oil,
the effect of economic conditions on demand for oil and gas, and the cost
and availability of alternative energy sources. The Company can give no
assurance whatsoever as to future prices of oil or gas.
Environmental Disclosure.
During the past several years a number of federal, state and local laws
relating to environmental quality control have been enacted, and some of
these directly affect the Company. The Oil Pollution Act of 1990 imposes
responsibility for cleanup of any spill on the owner of the product
spilled. It also imposes liability for the cost of cleanup and damages to
marine facilities on the party that caused the spill. Regulations
promulgated by the United States Coast Guard pursuant to these laws,
dealing with matters such as taking on and discharging of fuel, have
generally increased the cost of operating vessels. It is possible that
even more stringent laws or regulations will be imposed in the future.
Number of Employees.
The Company employs approximately 150 persons, most of whom are members of
ships' crews. None of these employees is represented by a labor union,
and employee relations are believed to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
The principal assets of Seal Fleet are its three ships. These ships
contain various equipment and fixtures necessary for their operation. The
Company believes that they are well maintained and in good operating
condition. The Company also owns vessel maintenance materials and
supplies, leasehold improvements, furniture and equipment.
Seal Fleet's ships are subject to marine hazards such as
capsizing, grounding, collision, fire and damage by storm. However, the
Company has never lost a ship and has experienced no uninsured losses
material to its financial condition as a whole.
Each ship is insured against loss or damage in an amount equal to at least
80% of its estimated market value. The Company also maintains substantial
liability insurance as well as insurance against loss or damage to cargo,
pollution clean-up liability and war risks.
The following is a summary of the ships owned by the Company:
<PAGE>
<TABLE>
<CAPTION>
YEAR LENGTH HORSEPOWER
NAME BUILT IN FEET OF ENGINES TYPE OF SERVICE
<S> <C> <C> <C> <C>
China Seal 1977 176 1,700 Seismic
Hawke Seal 1982 185 2,500 Seismic
Pegasus Seal 1982 185 2,500 Supply
</TABLE>
The Company owns a 516-acre tract of unimproved land in Brazoria County,
Texas which is recorded at its estimated fair market value of $154,000.
The corporate and general offices of the Company occupy lease space in
Galveston, Texas.
Substantially all the Company's physical assets are pledged to secure
long-term debt. Reference is made to Note C of consolidated financial
statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved only in litigation which it deems to be in the
ordinary course of business and immaterial in relation to its assets or
business. No legal proceedings against the Company were terminated during
the fourth quarter of 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 1995 through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
There is no public market for the class B common stock, all of which is
owned by the Three R Trusts.
The class A common stock (2,432,248 shares outstanding, including 447,621
shares held in treasury, as of February 21, 1996) is publicly traded in
the over-the-counter market and through November 1987, was listed on the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
under the symbol SEALA. In November 1987, NASDAQ dropped the listing
because the Company no longer maintained the required equity level.
Subsequent to November 1987, the stock has been listed on the National
Daily Quotation Service ("Pink Sheets"). The following table provides
information regarding the prices for class A common stock during the
periods indicated.
<PAGE>
<TABLE>
<CAPTION>
1995 1994
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First Quarter $ .50 $ .37 $ .88 $ .63
Second Quarter .50 .25 .94 .65
Third Quarter .50 .25 .75 .50
Fourth Quarter .37 .19 .75 .50
</TABLE>
HOLDERS
The number of stockholders of record as of February 21, 1996, were 5,113
for class A common stock and four for class B common stock.
DIVIDENDS
The Company's current borrowing agreements prohibit the payment of cash
dividends on common shares and the Company has never declared or paid cash
dividends. The Company has never had any redeemable preferred stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company incurred a loss in 1995. Revenue decreased by 8% as compared
to 1994. Although drilling activity in the Gulf of Mexico increased in
the latter part of 1995, a soft market throughout most of the year
demanded lower day rates for the service ships. There was also a
substantial decrease in commissions in the brokerage business.
FINANCIAL CONDITION
Seal Fleet satisfies its short-term working capital needs with funds
generated from operations. Capital expenditures have been kept at a
minimum for the past several years and there are no capital expenditures
scheduled for 1996.
The Company's current operations are as follows: two non-owned vessels
are under bare-boat charter, five vessels which belong to a related party
are under management agreements, and three vessels are company-owned.
Management continues with its plan to enter into more contracts but it
cannot ensure that it will acquire additional contracts or that it will
keep the ones now in existence beyond the current contract terms.
During 1990 a bank note was paid with funds borrowed from National Western
Life Insurance Company, ("NWLIC"), a related party. NWLIC required the
restriction of certain assets and certain transactions. First preferred
ship mortgages on the Company's three ships with a net book value of
$2,593,000 at December 31, 1995, spare parts inventories and accounts
<PAGE>
receivable pertaining to the three ships serve as collateral for the note.
In addition, the Company is obligated to pay fifty percent of cash flow
generated by two of the ships and such obligation is dependent upon the
assets attaining certain levels of cash flows. The note agreement also
requires the Company to maintain an interest bearing segregated Cash
Reserve Account for repairs and maintenance of two ships and restricts the
Company from declaring or paying any dividend other than dividends payable
in stock.
In 1992, the Company renegotiated the terms of the note with NWLIC. Two
percentage points of interest have been deferred until maturity and 10% is
payable monthly for the term of the note. The Company paid NWLIC $367,000
in principal and $277,000 in interest in 1995, and $332,000 in principal
and $278,000 in interest in 1994 on this note.
In early 1990, a wholly-owned subsidiary started a travel agency to
provide travel arrangements for the crew personnel on the ships. Travel
services are also provided for other related parties and for the general
public. The travel agency reported net losses of $63,000 and $18,000 in
1995 and 1994, respectively. Certain airlines have capped the amount of
commission they are willing to pay on certain flights. This has had an
adverse effect on the earnings of the travel agency.
RESULTS OF OPERATIONS
The Company incurred a net loss of $116,000 for 1995. Net sales decreased
for the year ended December 31, 1995 by over 8% as compared to December
31, 1994. A soft market in the industry throughout most of 1995 demanding
reduced day rates was the major cause for the decrease in revenues.
Although drilling activity in the Gulf of Mexico increased in the latter
part of 1995 causing increased day rates and increased utilization, it
came too late in the season to effect favorable results for year-end.
Because of the soft market there was also a substantial decrease in
brokerage commissions earned.
Total costs and expenses increased by less than 1% over the previous year.
Direct operating costs increased by approximately 9% due to general
repairs. Drydock amortization remained relatively unchanged. Drydock
amortization expense, whether an increase or a decrease, always reflects
prior year expenditures which were deferred and amortized over a period of
18 months to 4 years, depending on the expected time of benefit of these
major repairs. Combined selling, general and administrative expense, on
the other hand, decreased by approximately 9% as compared to the previous
year. The decrease is due to reduced commission expense in the travel
agency and in the brokerage business.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
SEAL FLEET, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Auditors 11
Consolidated Balance Sheets--
December 31, 1995 and 1994 12
Consolidated Statements of Operations--
Years ended December 31, 1995 and 1994 14
Consolidated Statements of Shareholders' Equity--
Years ended December 31, 1995 and 1994 15
Consolidated Statements of Cash Flows--
Years ended December 31, 1995 and 1994 16
Notes to Consolidated Financial Statements 17
Report of Independent Auditors
<PAGE>
Shareholders and Board of Directors
Seal Fleet, Inc.
We have audited the consolidated balance sheets of Seal Fleet, Inc. and
subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of operations, shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Seal
Fleet, Inc. and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the
years then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
Seal Fleet, Inc. will continue as a going concern. As more fully
described in Note A, the Company has historically incurred operating
losses and has a working capital deficiency at December 31, 1995. In
addition, the Company is currently in default on a substantial note
payable to a related party. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note A. The
financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of Seal Fleet, Inc. to continue as a going concern.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
February 21, 1996
<PAGE>
<TABLE>
SEAL FLEET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31
1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash includes $96 and $58 of time
deposits in 1995 and 1994--Note C $ 1,055 $ 561
Notes and accounts receivable:
Trade (net of allowance for doubt-
accounts of $70 and $64 in 1995
and 1994)--Note F 4,694 5,483
Related party--Note D 758 1,771
Other 133 84
Materials and supplies 66 113
Deferred drydocking costs--current 294 243
Prepaid expenses 112 31
TOTAL CURRENT ASSETS 7,112 8,286
PROPERTY AND EQUIPMENT
Ships 9,922 9,922
Furniture and equipment 223 214
Leasehold improvements 124 120
TOTAL PROPERTY AND EQUIPMENT 10,269 10,256
Less accumulated depreciation 7,533 7,016
PROPERTY AND EQUIPMENT--net 2,736 3,240
OTHER ASSETS
Deferred drydocking costs--non current 356 83
Assets held for resale--Note B 154 154
Other assets 36 42
TOTAL ASSETS $10,394 $11,805
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SEAL FLEET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<CAPTION>
December 31
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Notes payable to related party--Note D $ 6,655 $ 6,655
Current portion of long-term debt--Note C 905 367
Trade accounts payable and accrued expenses 3,815 4,848
Accrued interest payable to related party 877 772
TOTAL CURRENT LIABILITIES 12,252 12,642
LONG-TERM DEBT, LESS CURRENT PORTION--
NOTES C AND D:
To related party 1,763 2,668
TOTAL LIABILITIES 14,015 15,310
CONTINGENCIES--NOTE A
SHAREHOLDERS' EQUITY--NOTES C AND D
Class A common stock, $.10 par value;
3,700,000 shares authorized;
2,432,248 shares issued 243 243
Class B common stock, $.10 par value;
50,000 shares authorized, issued
and outstanding 5 5
Additional paid-in capital 4,456 4,456
Retained deficit (8,195) (8,079)
Less 447,621 shares of Class A common
stock held in treasury, at cost (130) (130)
TOTAL SHAREHOLDERS' EQUITY (3,621) (3,505)
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $10,394 $11,805
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SEAL FLEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
<CAPTION>
Year Ended December 31
1995 1994
REVENUES
<S> <C> <C>
Charter revenue--Note D and F $ 5,949 $ 6,443
Operating fees 324 332
Crewing fees 28 63
Travel agency commissions 242 295
TOTAL REVENUES 6,543 7,133
COSTS AND EXPENSES
Direct operating costs--Notes D and G 2,890 2,650
Selling, general and
administrative expenses--Note D 1,806 2,020
Selling, general and administrative
expenses for travel agency 301 307
Drydock amortization 336 349
Depreciation and amortization 547 543
TOTAL COSTS AND EXPENSES 5,880 5,869
INCOME FROM OPERATIONS 663 1,264
OTHER INCOME (EXPENSE)
Interest income 22 23
Interest expense (789) (852)
Other (12) 62
TOTAL OTHER INCOME (EXPENSE) (779) (767)
NET INCOME (LOSS) BEFORE PROVISION
FOR FEDERAL INCOME TAX (116) 497
Provision for federal income tax--Note E 19
NET INCOME (LOSS) $ (116) $ 478
NET INCOME (LOSS) PER COMMON SHARE $ (.06) $ .23
WEIGHTED AVERAGE SHARES OUTSTANDING 2,034,627 2,034,627
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SEAL FLEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<CAPTION>
Common stock Additional
Par Paid-in Retained Treasury
Shares Value Capital Deficit Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
Dec 31, 1993 2,482,248 $248 $4,456 $(8,557) $(130) $(3,983)
Net income 478 478
Balance at
Dec 31, 1994 2,482,248 248 4,456 (8,079) (130) (3,505)
Net loss (116) (116)
Balance at
Dec 31, 1995 2,482,248 $248 $4,456 $(8,195) $(130) $(3,621)
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
SEAL FLEET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
Year Ended December 31
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (116) $ 478
Adjustments to reconcile net income
(loss) to net cash provided (required)
by operating activities:
Depreciation and amortization 883 890
Loss on disposition of assets 2
Changes in assets and liabilities:
Trade accounts receivable 789 339
Accounts receivable from related party 1,023 (1,771)
Other receivables (52) (22)
Materials and supplies 47 29
Prepaid expenses (81) (5)
Trade accounts payable and accrued
expenses (1,033) 635
Accounts payable to related party (1,037)
Accrued interest payable to
related party 105 166
NET CASH PROVIDED (REQUIRED) BY OPERATING
ACTIVITIES 1,567 (298)
INVESTING ACTIVITIES
Decrease in notes receivable 3 3
Purchases of property and equipment ( 58) (32)
Proceeds from sale of furniture & equipment 13 1
Deferred drydocking additions (660) (22)
Increase in other assets (4) (3)
NET CASH REQUIRED BY INVESTING ACTIVITIES (706) (53)
FINANCING ACTIVITIES
Decrease in long-term debt (367) (332)
NET CASH REQUIRED BY FINANCING ACTIVITIES (367) (332)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 494 (683)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 561 1,244
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,055 $ 561
INTEREST PAID TO RELATED PARTIES $ 685 $ 686
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
SEAL FLEET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
NOTE A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following are the significant accounting policies followed by
Seal Fleet, Inc. ("Seal Fleet" or "the Company") in the preparation
of its consolidated financial statements.
Consolidation. The accompanying financial statements include the
accounts of Seal Fleet, Inc. and all of its subsidiaries.
All significant intercompany accounts and transactions are
eliminated in consolidation.
Statement of Cash Flows. The Company considers all highly liquid
investments with a maturity of three months or less when purchased to
be cash equivalents.
Concentration of Credit Risk. Financial instruments which subject
the Company to concentrations of credit risk consist principally of
cash and trade receivables. The cash in local banks exceeds the
insured limit of $100,000 from time to time. The terms of these
deposits are on demand to minimize risk. The Company has not
incurred losses related to these deposits.
The Company sells its services to U. S. Gulf Coast customers of
different economic characteristics operating in the Gulf Coast area
and in foreign waters. Accounts receivable are uncollateralized and
are from geophysical companies, major oil and gas and independent oil
and gas companies. The Company evaluates each customer's financial
condition on a continual basis.
The carrying value of the Company's financial instruments
approximates the fair value at December 31, 1995 and 1994.
Going Concern Status. The accompanying financial statements have
been prepared on a going concern basis which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company incurred a net loss of
$116,000 during 1995 and recognized net income of $478,000 during
1994. The Company has historically realized substantial losses. At
December 31, 1995, the Company's total liabilities exceeded its total
assets by $3,621,000. Further, the Company is currently in default
on a significant portion of notes payable to a related party (see
Note D).
These factors indicate that the Company may be unable to continue in
its present form as a going concern. Realization of the net book
<PAGE>
value of the ships and related inventory, deferred drydocking costs,
and equipment is dependent upon the Company's ability to
satisfactorily increase revenues to a level which will generate
sufficient operating income to recover the recorded costs of the
assets or to make a satisfactory disposition of the assets. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts,
including the net book value of the ships and related equipment, or
the amount and classification of liabilities that might be necessary
should the Company be unable to continue in existence.
Management continues to pursue additional contracts to manage ships
and to provide ship crewing for other companies. There is no
assurance, however, that any additional contracts will be
obtained, that debts can be satisfactorily serviced, or that any
other measures will be successfully undertaken to ensure the
Company's continued existence as a going concern and the realization
of book values of its assets.
Materials and Supplies. Materials and supplies are stated at the
lower of average cost or market.
Revenue Recognition. Charter revenues and operating fees include
gross amounts earned from the charter of company-owned and leased
boats. Direct operating costs and drydocking amortization directly
relate to the cost of operating these boats. Also included in
charter revenues are the commissions realized from the vessel
brokerage business.
Crewing fees represent net amounts earned for crewing vessels owned
by others. Expenses paid on behalf of the vessel owners in
connection with such operations were $56,000 and $315,000 in 1995 and
1994, respectively.
Travel agency commissions represent approximately 9% of ticket sales.
Of the total commissions earned, approximately 77% are from related
parties. Commissions are recognized at the time of sale.
Drydocking Costs. Drydocking costs are capitalized and amortized
over the period benefited, which is estimated to be from eighteen
months to four years. These costs are expensed as incurred for
federal income tax purposes.
Property and Equipment. Property and equipment are stated at cost.
For financial reporting purposes, the Company records
depreciation and amortization expense on the straight-line method
over the estimated useful lives of the related assets (ships and
related equipment--18-25 years; leasehold improvements--6-25 years;
furniture and equipment--3-8 years). For tax purposes, depreciation
and amortization expense are computed using straight-line and
<PAGE>
accelerated methods. The cost and accumulated depreciation and
amortization of assets sold or otherwise disposed of are removed from
the accounts and any gain or loss thereon is reflected in operations.
Income Taxes. The Company uses Statement of Financial Accounting
Standards No. 109 which requires the use of an asset and liability
approach for financial accounting and reporting for income taxes.
Deferred income taxes are provided for differences in timing of
reporting certain expenses for financial statement and tax purposes.
Deferred tax liabilities result primarily from (1) the use of
accelerated depreciation for tax reporting and straight-line
depreciation for financial statement reporting, and (2) deferral
of certain expenses for financial accounting purposes. Deferred tax
assets relate to net operating loss carryforwards and tax credits
remaining at December 31, 1995. If it is more likely than not that
some portion or all of a deferred tax asset will not be realized, a
valuation allowance is recognized (See Note E).
Net Income or Loss per Common Share. Net income or loss per common
share is based on the weighted average number of shares outstanding
(2,034,627 in 1995 and 1994).
Leases. Non-capitalized operating leases include those for office
space and automobiles. See Note D and H, respectively.
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 at the date of the financial
statements and the reported amount of revenues and expenses during
the reported period. Actual results could differ from those
estimates.
NOTE B. LAND
The Company owns a 516-acre tract of unimproved land in Brazoria
County, Texas. It is recorded at its estimated fair market value of
$154,000.
<PAGE>
NOTE C. LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following:
<CAPTION>
December 31
1995 1994
(Dollars in thousands)
<S> <C> <C>
Note payable to related party $ 2,168 $ 2,535
Unsecured debentures payable
to related party 500 500
Total debt including current portion 2,668 3,035
Less current portion of long-term debt (905) (367)
Long-term debt net of current portion $ 1,763 $ 2,668
</TABLE>
Note payable to National Western Life Insurance Company ("NWLIC"), a
related party, in the face amount of $3,450,000 was entered into in
May 1990 with a maturity date of May 2000 and interest of 12%. The
note is collateralized primarily by first preferred ship mortgages on
the Company's three ships.
In January 1992, the Company renegotiated the terms of the NWLIC note
which reduced the interest rate payable to 10% for the remaining term
of the note, and the other 2% per annum is deferred until maturity.
Future required principal payments by year are as follows:
1996 $ 905,000
1997 448,000
1998 495,000
1999 546,000
2000 274,000
Additionally, the Company may be obligated to pay fifty percent of
cash flow generated by a portion of the collateralized assets when
and if the assets attain certain levels of cash flows. The note
agreement also requires the Company to maintain an interest bearing
segregated cash reserve account for repairs and maintenance and
restricts the Company from declaring or paying any dividend other
than those payable in stock. The balances of the cash reserve
account were $52,000 and $227,000 at December 31, 1995 and 1994,
respectively. This note is collateralized by first preferred ship
mortgages of three ships with a net book value of $2,593,000 at
December 31, 1995, spare parts inventory and accounts receivable
pertaining to the three ships.
The unsecured debentures are due August 5, 1996, and interest is
payable quarterly at a rate of 8%.
<PAGE>
NOTE D. RELATED PARTY TRANSACTIONS
Three R Trusts ("Trusts") own approximately 9% of the class A common
stock and all of the class B common stock of the Company. The
Trusts, as the owner of the class B stock, have the right to elect
51% of the board of directors. The four children of Robert L. Moody,
Sr. are the beneficiaries of the Trusts. Mr. Moody owned no class A
common stock at December 31, 1995.
Transactions with the Trusts, Mr. Moody, and other related parties
were as follows:
Management income and receivables. The Company manages and
operates various ships owned by the Trusts. The Company earns fees
based on 6% of the ships' revenues. Fees earned on the Trusts'
ships totaled $325,000 and $249,000 during 1995 and 1994,
respectively.
Accounts receivable-payable. On behalf of the related parties, the
Company collects revenues and pays expenses for the management of
these ships. This activity resulted in a receivable from the Trusts
of $758,000 and $1,771,000 at December 31, 1995 and 1994,
respectively.
Rents and leases. The Company leases its office space from a
partnership in which Mr. Moody participates. Rent expense was
$20,000 in 1995 and 1994. This amount represents the minimum annual
rental under the lease. The lease expires in 1996, but favorable
renewal options are available. The Company also pays for repairs,
insurance and taxes.
The Company leased hunting grounds from Robert L. Moody, Jr., a
beneficiary of the Trusts. Lease expense was $13,000 in 1995 and
1994.
Consulting fee. Mr. Moody earned consulting fees from the Company
of $50,000 in 1995 and 1994.
Notes payable. The Company has a note payable to the Trusts, face
amount of $5,925,000, stated interest at 7%, collateralized by the
common stock of six subsidiaries of the Company. Principal payments
were due in two equal installments on December 27, 1990 and 1991.
The Company was unable to make the principal payments to the Three R
Trusts putting the Company in default. In 1993, the Company made a
principal payment of $100,000. The Trusts have not called the note
and orally have granted an indefinite extension. The entire balance
is classified as current at December 31, 1995 and 1994.
During each of the years 1986 through 1989 the Company paid one-half
of the interest due to the Trusts during the year and gave a
promissory note for the remainder totaling $208,000 per year. The
total of these notes is $830,000, and they were due on December 27,
1991. Total interest expense on these notes is $489,000 for the
years ended December 31, 1995 and 1994.
<PAGE>
Legal fees. Greer Herz and Adams received legal fees of $1,700 and
$1,000 in 1995 and 1994, respectively. Mr. Irwin M. Herz, Jr. is the
trustee of the Three R Trusts.
Cash deposits. The Company has $168,000 and $378,000 of cash on
deposit at Moody National Bank at December 31, 1995 and 1994,
respectively.
NOTE E. FEDERAL INCOME TAX
The Company files a consolidated federal income tax return.
At December 31, 1995 for federal income tax purposes, the Company
had investment tax and jobs credit carryforwards totaling $761,000
expiring in various years from 1996 to 2000, and unused net operating
loss carryforwards of $8,227,000 which expire in various years from
2000 to 2007.
<TABLE>
Deferred taxes as of December 31 consist of the following (in
thousands):
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax liabilities $(1,092) $(1,150)
Deferred tax assets 3,583 3,653
Deferred tax asset valuation allowance (2,491) (2,503)
Total $ -0- $ -0-
</TABLE>
Approximately $100,000 of the deferred tax liability and $24,000 of
the deferred tax asset are current at December 31, 1995. The Company
has recorded a valuation allowance to offset the deferred tax assets
which may not be realized. The valuation allowance decreased by
$12,000 in 1995 due primarily to the utilization of net operating
loss carryforwards and expiration of certain tax credits for the year
ended December 31, 1995.
The following reconciles the 1994 expected tax provision obtained by
applying statutory rates to the 1994 pretax income:
1994
Expected tax provision $ 169,000
Excess book depreciation 161,000
Deferred expenses 111,000
Non deductible expenses 17,000
Other 8,000
Tax benefit of NOL carryforwards (466,000)
Total $ -0-
The Company has no alternative minimum tax for December 31, 1995 but
was subject to alternative minimum tax of $19,000 at December 31,
1994.
<PAGE>
NOTE F. INDUSTRY AND MAJOR CUSTOMERS
The major business of the Company is operation of offshore
geophysical research and supply ships. Following is an analysis of
revenues derived from its non-related customers which accounted for
10% or more of revenue for the years ended December 31, 1995 and 1994
(dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
Revenues Percent Revenues Percent
<S> <C> <C> <C> <C>
Customer A $2,190 35 $2,324 33
Customer B 1,094 17 940 13
Customer C 604 10
Customer D 742 10
</TABLE>
NOTE G. SUPPLEMENTARY INCOME STATEMENT INFORMATION
Maintenance and repairs were $641,000 and $700,000 for the years
ended December 31, 1995 and 1994, respectively.
NOTE H. COMMITMENTS
The Company rents vehicles under non-cancelable leases which expire
through the year 2000. The total rentals charged to administrative
expense amounted to $77,000 and $70,000 in 1995 and 1994,
respectively.
Minimum lease payments for vehicle rental are as follows:
Year Minimum rentals
1996 $ 44,000
1997 22,000
1998 11,000
1999 7,000
2000 2,000
Total $ 86,000
<PAGE>
NOTE I. 401-K EMPLOYEE RETIREMENT PLAN
The Company adopted a 401-K Employee Retirement Plan ("Plan")
effective January 1, 1985. The Plan covers all eligible Company
employees and has been approved by the Internal Revenue Service.
Contributions can be made by an employee at a percentage of salary
but not to exceed the maximum allowed by the Internal Revenue
Service. The Company does not contribute to the Plan. It does,
however, pay administrative fees which are deemed to be immaterial.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There were no disagreements in the fiscal years ended December 31,
1995 and 1994 or in the interim periods subsequent to December 31,
1995.
PART III
Seal Fleet's definitive proxy statement dealing with the election of
directors that will be filed within 120 days of the end of the
Company's most recent year, is incorporated by reference in this Part
III, Items 9 through 12.
<PAGE>
PART IV
<TABLE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<CAPTION>
Exhibit Number Incorporated by Reference
and Description Form Date File No. Exhibit
<S> <C> <C> <C> <C>
(3) Articles and bylaws
3.1 Articles of
incorporation 10-K 12-31-80 0-5667 3(i)
3.2 Bylaws 10-K 12-31-80 0-5667 3(ii)
(4) Instruments defining
the rights of security
holders, including
indentures*
(10) Material contracts
10.1 Service Agreement
of Baffin Seal 10-K 12-31-80 0-5667 10.1
10.2 Service Agreement
with respect to
M/V Bengal Seal,
as amended 10-K 12-31-80 0-5667 10(iii)
10.3 Service Agreement
with respect to
M/V Ross Seal,
as amended 10-K 12-31-80 0-5667 10(iv)
10.4 Service Agreement
with respect to
M/V Indian Seal,
as amended 10-K 12-31-80 0-5667 10(vii)
10.4 Service Agreement
with respect to
M/V Baltic Seal 10-KSB 12-31-94 0-5667 10(ix)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Incorporated by Reference
and Description Form Date File No. Exhibit
<S> <C> <C> <C> <C>
10.5 Bonus Plan, as
amended 10-K 12-31-80 0-5667 10(viii)
(11) Statement re-computation
of per share earnings*
(12) Statement re-computation
of ratios*
(13) Annual report to
security holders*
(18) Letter RE: change in
accounting principles*
(19) Previously unfiled
documents*
(22) Subsidiaries of the
registrant
22.1 Subsidiaries of
Seal Fleet, Inc.
as of December 31,
1991. 10K 12-31-91 0-5667 22.1
(23) Published report
regarding matters
submitted to vote of
security holders*
(24) Consents of experts
& counsel*
(25) Power of Attorney*
(28) Additional exhibits*
*Not applicable
</TABLE>
<PAGE>
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Company
caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SEAL FLEET, INC.
Dated: March 26, 1996 By: John W. Bissell, President
In Accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Company and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
John W. Bissell Chairman, President March 26, 1996
Director
Chief Executive Officer
Trinidad C. Salinas Financial Vice President March 26, 1996
Treasurer and Assistant
Secretary (CFO)
Louis E. Pauls, Jr. Director March 26, 1996
Gerald J. Smith Director March 26, 1996
Ann McLeod Moody Director March 26, 1996
Harold C. MacDonald Director March 26, 1996
Robert L. Moody, Jr. Director March 26, 1996
(Signature not available) Director
Russell S. Moody
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM 12/31/95 10KSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS OF SEAL FLEET, INC.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,055
<SECURITIES> 0
<RECEIVABLES> 4,694
<ALLOWANCES> 0
<INVENTORY> 66
<CURRENT-ASSETS> 7,112
<PP&E> 10,269
<DEPRECIATION> 7,533
<TOTAL-ASSETS> 10,394
<CURRENT-LIABILITIES> 12,252
<BONDS> 0
0
0
<COMMON> 248
<OTHER-SE> (3,739)
<TOTAL-LIABILITY-AND-EQUITY> 10,394
<SALES> 6,543
<TOTAL-REVENUES> 6,543
<CGS> 0
<TOTAL-COSTS> 5,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 789
<INCOME-PRETAX> (116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (116)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (116)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
