SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
---------------
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-12289
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SEACOR SMIT INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3542736
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
11200 Westheimer, Suite 850, Houston Texas 77042
- --------------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
(713) 782-5990
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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 [ ]
The total number of shares of Common Stock, par value $.01 per share,
outstanding as of August 10, 1999 was 12,062,124. The Registrant has no other
class of Common Stock outstanding.
792438 v3
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SEACOR SMIT INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998.............................................1
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1999 and 1998...............................2
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1999 and 1998.................................3
Notes to Condensed Consolidated Financial Statements.................................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.........................................9
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.....................................21
Item 6. Exhibits and Reports on Form 8-K........................................................21
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------------------- ----------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents, including restricted cash
of $14,239 in 1998 $ 154,759 $ 175,267
Marketable securities 40,064 40,325
Trade and other receivables, net of allowance for
Doubtful accounts of $1,870 and $1,956, respectively 71,921 86,621
Inventories 1,648 1,561
Prepaid expenses and other 2,224 7,959
----------------------- ----------------------
Total current assets 270,616 311,733
----------------------- ----------------------
Investments in, at Equity, and Receivables from 50%
or Less Owned Companies 76,919 55,478
Available-for-Sale Securities 97,393 154,378
Property and Equipment 825,145 736,583
Less-Accumulated depreciation (124,079) (111,722)
----------------------- ----------------------
Net property and equipment 701,066 624,861
----------------------- ----------------------
Restricted Cash 39,287 69,234
Other Assets 32,112 42,291
----------------------- ----------------------
$ 1,217,393 $ 1,257,975
======================= ======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 2,091 $ 2,122
Accounts payable and accrued expenses 28,351 45,842
Other current liabilities 16,161 23,754
----------------------- ----------------------
Total current liabilities 46,603 71,718
----------------------- ----------------------
Long-term Debt 467,712 472,799
Deferred Income Taxes 84,891 86,124
Deferred Gain and Other Liabilities 45,774 51,623
Minority Interest in Subsidiaries 33,126 32,929
Stockholders' Equity:
Common stock, $.01 par value, 14,215,458 and
14,146,457 issued, respectively 142 141
Additional paid-in capital 275,087 272,012
Retained earnings 356,842 337,086
Less 2,065,634 and 1,472,134 treasury shares, respectively (89,167) (65,656)
Less unamortized restricted stock compensation (1,885) (972)
Accumulated other comprehensive income (1,732) 171
----------------------- ----------------------
Total stockholders' equity 539,287 542,782
----------------------- ----------------------
$ 1,217,393 $ 1,257,975
======================= ======================
</TABLE>
1
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SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -----------------------------------
1999 1998 1999 1998
--------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
Operating Revenue:
Marine $ 61,811 $ 89,611 $ 134,208 $ 180,770
Other 6,664 6,133 11,988 12,187
--------------- ---------------- ---------------- --------------
68,475 95,744 146,196 192,957
--------------- ---------------- ---------------- --------------
Costs and Expenses:
Operating expenses -
Marine 38,667 42,823 78,629 86,192
Other 2,509 2,128 4,242 4,635
Administrative and general 8,390 9,128 16,568 17,635
Depreciation and amortization 9,803 8,604 19,128 18,120
--------------- ---------------- ---------------- --------------
59,369 62,683 118,567 126,582
--------------- ---------------- ---------------- --------------
Operating Income 9,106 33,061 27,629 66,375
--------------- ---------------- ---------------- --------------
Other (Expense) Income:
Interest on debt (5,799) (6,185) (11,216) (10,668)
Interest income 5,474 6,096 11,445 11,784
Gain from equipment sales and retirements, net 661 17,863 955 30,582
Other (511) (20) (1,770) (74)
--------------- ---------------- ---------------- --------------
(175) 17,754 (586) 31,624
--------------- ---------------- ---------------- --------------
Income Before Income Taxes, Minority Interest,
Equity in Earnings of 50% or Less Owned Companies,
and Extraordinary Item 8,931 50,815 27,043 97,999
Income Tax Expense 3,081 17,390 9,330 34,022
--------------- ---------------- ---------------- --------------
Income Before Minority Interest, Equity in Earnings of
50% or Less Owned Companies, and Extraordinary Item 5,850 33,425 17,713 63,977
Minority Interest in (Income) Loss of Subsidiaries 93 (232) (275) (703)
Equity in Earnings of 50% or Less Owned Companies 274 2,857 2,058 7,046
--------------- ---------------- ---------------- --------------
Income Before Extraordinary Item 6,217 36,050 19,496 70,320
Extraordinary Item - Gain from Extinguishment of Debt,
net of tax - - 260 -
--------------- ---------------- ---------------- --------------
Net Income $ 6,217 $ 36,050 $ 19,756 $ 70,320
=============== ================ ================ ==============
Basic Earnings Per Common Share:
Income Before Extraordinary Item $ 0.51 $ 2.74 $ 1.59 $ 5.25
Extraordinary Item - - 0.02 -
--------------- ---------------- ---------------- --------------
Net Income $ 0.51 $ 2.74 $ 1.61 $ 5.25
=============== ================ ================ ==============
Diluted Earnings Per Common Share:
Income Before Extraordinary Item $ 0.51 $ 2.34 $ 1.51 $ 4.50
Extraordinary Item - - 0.02 -
--------------- ---------------- ---------------- --------------
Net Income $ 0.51 $ 2.34 $ 1.53 $ 4.50
=============== ================ ================ ==============
Weighted Average Common Shares:
Basic 12,096,407 13,175,389 12,227,393 13,406,818
Diluted 12,229,047 16,153,292 15,179,897 16,394,089
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
ANS SHOULD BE READ IN CONJUNCTION HEREWITH.
2
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SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
-------------------- -------------------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 18,865 $ 40,891
-------------------- -------------------
Cash Flows from Investing Activities:
Purchase of property and equipment (102,978) (111,834)
Proceeds from property and equipment sales 15,123 120,203
Purchase of available-for-sale securities (7,400) (63,769)
Proceeds from maturity of held-to-maturity securities - 33,032
Proceeds from sale of available-for-sale securities 62,051 25,000
Investments in and advances to 50% or less owned companies (7,419) (12,437)
Principal payments on notes due from 50% or less owned companies 2,159 995
Principal payments received under sale-type leases 124 126
Net decrease (increase) in restricted cash 29,947 (143,467)
Dividends received from 50% or less owned companies 700 120
Cash settlement from commodity price hedging arrangements 2,443 -
Purchase of a telecommunications business, net of cash acquired (4,959) -
-------------------- -------------------
Net cash used in investing activities (10,209) (152,031)
-------------------- -------------------
Cash Flows from Financing Activities:
Payments of long-term debt (3,639) -
Payments of capital lease obligations (783) (744)
Payments of stockholders' loans (240) (223)
Proceeds from issuance of long-term debt - 110,000
Proceeds from exercise of stock options - 757
Common stock acquired for treasury (23,511) (38,432)
Other - 5
-------------------- -------------------
Net cash provided (used) in financing activities (28,173) 71,363
-------------------- -------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (991) (655)
-------------------- -------------------
Net Decrease in Cash and Cash Equivalents (20,508) (40,432)
Cash and Cash Equivalents, Beginning of Period 175,267 175,381
-------------------- -------------------
Cash and Cash Equivalents, End of Period $ 154,759 $ 134,949
==================== ===================
</TABLE>
3
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SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION --
The condensed consolidated financial information for the three and six-month
periods ended June 30, 1999 and 1998 has been prepared by the Company and was
not audited by its independent public accountants. In the opinion of management,
all adjustments have been made to present fairly the financial position, results
of operations, and cash flows of the Company at June 30, 1999 and for all
reported periods. Results of operations for the interim periods presented are
not necessarily indicative of the operating results for the full year or any
future periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
related notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998.
Unless the context otherwise indicates, any references in this Quarterly Report
on Form 10-Q to the "Company" refer to SEACOR SMIT Inc. and its consolidated
subsidiaries, and any references in this Quarterly Report on Form 10-Q to
"SEACOR" refer to SEACOR SMIT Inc.
Certain reclassifications of prior year information have been made to conform
with the current year presentation.
2. RESTRICTED CASH --
At June 30, 1999, the Company's restricted cash balances were held in joint
depository construction reserve fund accounts (the "CRF Accounts") with the
Maritime Administration and are intended for use in defraying costs to construct
offshore marine vessels. Should these restricted funds not be committed for
expenditure within three years, they will be released for the Company's general
use. At June 30, 1999, the Company had paid $14,272,000 for the construction of
offshore marine vessels from unrestricted cash balances, and subject to prior
written approval from the Maritime Administration, such amounts will be
reimbursed from the CRF Accounts, (see also Note 10).
3. RECENT ACCOUNTING PRONOUNCEMENTS --
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair market
value. SFAS 133 requires that changes in the derivative's fair market value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS 133 is
effective for fiscal years beginning after June 15, 2000. A company may also
implement SFAS 133 as of the beginning of any fiscal quarter after issuance
(that is, fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 must
be applied to derivative instruments and certain derivative instruments embedded
in hybrid contracts that were issued, acquired, or substantially modified after
December 31, 1997. The Company has not yet quantified the impact of adopting
SFAS 133 on its financial statements and has not determined the timing or method
of its adoption of SFAS 133.
4. COMPREHENSIVE INCOME --
For the three-month periods ended June 30, 1999 and 1998, total comprehensive
income was $5,188,000 and $36,157,000, respectively. For the six-month periods
ended June 30, 1999 and 1998, total comprehensive income was $17,853,000 and
$70,145,000, respectively. Other comprehensive gains and losses in 1999 and 1998
included losses from foreign currency translation adjustments and unrealized
holding gains and losses on available-for-sale securities.
4
<PAGE>
5. EARNINGS PER SHARE --
Basic earnings per share were computed based on the weighted average number of
common shares issued and outstanding during the relevant periods. Diluted
earnings per share were computed based on the weighted average number of common
shares issued and outstanding plus all potentially dilutive common shares that
would have been outstanding in the relevant periods assuming the vesting of
restricted stock grants and the issuance of common shares for stock options and
convertible subordinated notes through the application of the treasury stock and
if-converted methods. The assumed conversion of certain stock options,
restricted stock grants, and convertible notes into 2,847,494 shares of the
Company's common stock and the add-back to income of interest charges of the
convertible notes, totaling $1,693,000, were excluded from the computation of
diluted earnings per share in the second quarter of 1999 as the effect was
antidilutive. The computation of diluted earnings per share for the six-month
period ended June 30, 1999 excludes the assumed conversion of certain stock
options and restricted stock grants into 31,067 shares of the Company's common
stock as the effect was antidilutive.
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------------- ---------------------------------------
Per Per
Income Shares Share Income Shares Share
-------------- --------------- -------- -------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
1999
- ----
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item $ 6,217,000 12,096,407 $ 0.51 $ 19,496,000 12,227,393 $ 1.59
======== ========
EFFECT OF DILUTIVE SECURITIES, NET OF TAX:
Options and Restricted Stock - 132,640 - 122,960
Convertible Securities - - 3,386,000 2,829,544
-------------- --------------- -------------- ---------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions $ 6,217,000 12,229,047 $ 0.51 $ 22,882,000 15,179,897 $ 1.51
============== =============== ======== ============== =============== ========
1998
- ----
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item $ 36,050,000 13,175,389 $ 2.74 $ 70,320,000 13,406,818 $ 5.25
======== ========
EFFECT OF DILUTIVE SECURITIES, NET OF TAX:
Options and Restricted Stock - 148,359 - 157,727
Convertible Securities 1,690,000 2,829,544 3,380,000 2,829,544
-------------- --------------- -------------- ---------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions $ 37,740,000 16,153,292 $ 2.34 $ 73,700,000 16,394,089 $ 4.50
============== =============== ======== ============== =============== ========
</TABLE>
6. SEGMENT DATA --
The Company aggregates its business activities into three primary operating
segments: marine, environmental, and drilling. These operating segments
represent strategic business units that offer different services. The marine
service segment charters support vessels to owners and operators of offshore
drilling rigs and production platforms. The environmental service segment
provides contractual oil spill response and other related training and
consulting services. The drilling service segment conducts its business affairs
through Chiles Offshore LLC and its wholly owned subsidiaries (collectively
referred to as "Chiles"). The Company owns a 55.4% membership interest in Chiles
Offshore LLC, a development stage company formed for the purpose of
constructing, owning, and operating a fleet of state-of-the-art premium offshore
jackup drilling rigs ("Rig(s)"). The first Rig constructed for Chiles, the
Chiles Columbus, commenced operations in June 1999. The second Rig, the Chiles
Magellan, is under construction and is expected to commence operations in the
fourth quarter of 1999.
The Company evaluates the performance of each operating segment based upon the
operating profit of the segment and includes gains from the sale of equipment
and equity in the earnings of 50% or less owned companies but excludes minority
interest, interest income and expense, gains and losses from the sale of
marketable securities and commodity price hedging arrangements, corporate
expenses, and income taxes. Operating profit is defined as Operating Income as
reported in the Consolidated Statements of Operations net of corporate expenses
and certain other income and expense items. The accounting policies of the
operating segments have not changed from those previously described in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998. The table presented below sets forth operating revenues and profits by the
Company's various business segments, in thousands of dollars, and these results
may differ from separate financial statements of subsidiaries of the Company due
to certain elimination entries required in consolidation.
5
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<TABLE>
<CAPTION>
Marine Environmental Drilling Other Total
------------ ---------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED JUNE 30, 1999:
Operating Revenues -
External Customers $ 61,811 $ 5,198 $ 528 $ 938a $ 68,475
Intersegment - 38 - (38) -
------------ ---------------- ------------- --------------- -------------
Total $ 61,811 $ 5,236 $ 528 $ 900 $ 68,475
============ ================ ============= =============== =============
Operating Profit (Loss) $ 8,806 $ 1,140 $ (336) $ 58 $ 9,668
Gains (Losses) from Equipment Sales and Retirements, net 657 4 - - 661
Equity in Earnings of 50% or Less Owned Companies 540 136 - (495) 181
Minority Interest in (Income) Loss of Subsidiaries - - - 93 93
Interest Income - - - 5,474 5,474
Interest Expense - - - (5,799) (5,799)
Gains (Losses) from Commodity Price Hedging Arrangements - - - (293) (293)
Gains (Losses) from Sale of Marketable Securities - - - 226 226
Corporate Expenses - - - (1,006) (1,006)
Income Taxes - - - (2,988) (2,988)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 10,003 $ 1,280 $ (336) $ (4,730) $ 6,217
====================================================================================================================================
FOR THE THREE MONTHS ENDED JUNE 30, 1998:
Operating Revenues -
External Customers $ 89,611 $ 6,133 $ - $ - $ 95,744
Intersegment - - - - -
------------ ---------------- ------------- --------------- -------------
Total $ 89,611 $ 6,133 $ - $ - $ 95,744
============ ================ ============= =============== =============
Operating Profit (Loss) $ 33,640 $ 1,003 $ (296) $ - $ 34,347
Gains (Losses) from Equipment Sales and Retirements, net 17,999 (136) - - 17,863
Equity in Earnings of 50% or Less Owned Companies 2,745 161 - - 2,906
Minority Interest in (Income) Loss of Subsidiaries - - - (232) (232)
Interest Income - - - 6,096 6,096
Interest Expense - - - (6,185) (6,185)
Corporate Expenses - - - (1,306) (1,306)
Income Taxes - - - (17,439) (17,439)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 54,384 $ 1,028 $ (296) $ (19,066) $ 36,050
====================================================================================================================================
FOR THE SIX MONTHS ENDED JUNE 30, 1999:
Operating Revenues -
External Customers $ 134,208 $ 10,522 $ 528 $ 938a $ 146,196
Intersegment - 106 - (106) -
------------ ---------------- ------------- --------------- -------------
Total $ 134,208 $ 10,628 $ 528 $ 832 $ 146,196
============ ================ ============= =============== =============
Operating Profit (Loss) $ 26,949 $ 2,118 $ (541) $ 58 $ 28,584
Gains (Losses) from Equipment Sales and Retirements, net 954 1 - - 955
Equity in Earnings of 50% or Less Owned Companies 2,209 412 - (495) 2,126
Minority Interest in (Income) Loss of Subsidiaries - - - (275) (275)
Interest Income - - - 11,445 11,445
Interest Expense - - - (11,216) (11,216)
Gains (Losses) from Commodity Price Hedging Arrangements - - - 66 66
Gains (Losses) from Sale of Marketable Securities - - - (740) (740)
Corporate Expenses - - - (2,051) (2,051)
Income Taxes - - - (9,398) (9,398)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 30,112 $ 2,531 $ (541) $ (12,606) $ 19,496
====================================================================================================================================
FOR THE SIX MONTHS ENDED JUNE 30, 1998:
Operating Revenues -
External Customers $ 180,770 $ 12,187 $ - $ - $ 192,957
Intersegment - - - - -
------------ ---------------- ------------- --------------- -------------
Total $ 180,770 $ 12,187 $ - $ - $ 192,957
============ ================ ============= =============== =============
Operating Profit (Loss) $ 67,347 $ 1,787 $ (381)$ - $ 68,753
Gains (Losses) from Equipment Sales and Retirements, net 30,692 (110) - - 30,582
Equity in Earnings of 50% or Less Owned Companies 6,965 221 - - 7,186
Minority Interest in (Income) Loss of Subsidiaries - - - (703) (703)
Interest Income - - - 11,784 11,784
Interest Expense - - - (10,668) (10,668)
Corporate Expenses - - - (2,452) (2,452)
Income Taxes - - - (34,162) (34,162)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 105,004 $ 1,898 $ (381)$ (36,201) $ 70,320
====================================================================================================================================
</TABLE>
(a) Other external customers' operating revenues are attributable to a
recently acquired telecommunications business that serves the maritime
industry and which does not meet any of the quantitative thresholds for
determining reportable segments.
6
<PAGE>
7. INVESTMENTS IN, AT EQUITY, AND RECEIVABLES FROM 50% OR LESS OWNED COMPANIES
Due to an ability to significantly influence the operating activities of Globe
Wireless, LLC ("Globe"), the Company began accounting for its investment in
Globe under the equity method during the second quarter of 1999. At June 30,
1999, the Company's equity interest in and loans to Globe aggregated
$20,125,000. At December 31, 1998, the Company's equity investment, recorded at
cost, and loans to Globe, were reported in the Condensed Consolidated Balance
Sheet as Other Assets.
8. FINANCIAL INSTRUMENTS --
Beginning in the second quarter of 1999, the Company entered into swap
agreements with a major financial institution with respect to notional amounts
equal to a portion of the $110,000,000 outstanding principal amount of the
Chiles 10.0% Senior Notes Due 2008 (the "Chiles 10% Notes"). Pursuant to each
such agreement, such financial institution has agreed to pay to the Company an
amount equal to interest paid by Chiles on the notional amount of Chiles 10%
Notes subject to such agreement, and the Company has agreed to pay to such
financial institution an amount equal to interest at the rate of 6.94% per annum
on the agreed upon price of such notional amount of Chiles 10% Notes as set
forth in the applicable swap agreement.
Upon termination of each swap agreement, the financial institution has agreed to
pay to the Company the amount, if any, by which the fair market value of the
notional amount of Chiles 10% Notes subject to the swap agreement on such date
exceeds the agreed upon price of such notional amount as set forth in such swap
agreement, and the Company has agreed to pay to such financial institution the
amount, if any, by which the agreed upon price of such notional amount exceeds
the fair market value of such notional amount on such date. Each swap agreement
terminates upon the earliest to occur of the redemption in full or maturity of
the Chiles 10% Notes, at any time at the election of the Company or, at the
election of the financial institution, on April 30, 2004. As of June 30, 1999,
the notional amount of Chiles 10% Notes subject to such swap agreements was
$4,000,000 and the market value of such swaps as of such date was approximately
$115,000. Subsequent to June 30, 1999, the Company entered into swap agreements
with respect to an additional $62,600,000 notional amount of Chiles 10% Notes.
9. LOSSES ON FOREIGN CURRENCY TRANSACTIONS --
Certain subsidiaries of SEACOR have entered into transactions denominated in
currencies other than their functional currency, the U.S. dollar. The Company
has not entered into hedging contracts with respect to these foreign currency
risks and its operating results are positively or negatively affected as these
foreign currencies strengthen or weaken against the U.S. dollar. Foreign
currency transaction adjustments resulting in pre-tax losses of $441,000 and
$1,088,000 in the three and six-month periods ended June 30, 1999, respectively,
have been charged to Other Expense in the Condensed Consolidated Statements of
Operations.
10. VESSEL DISPOSITIONS --
In the six-month period ended June 30, 1999, the Company sold 11 offshore marine
vessels, and net pre-tax gains primarily from those sales and the disposition of
other equipment totaled $955,000. Of the vessels sold, 5 were leased-back by the
Company, and 2 were acquired by equity investees. Proceeds from the sale of
certain of these vessels were deposited into CRF Accounts for purposes of
acquiring newly constructed U.S.-flag vessels and qualifying for the temporary
deferral of related taxable gains. Certain pre-tax gains realized from the sale
of vessels subsequently leased-back, totaling $6,569,000, have been deferred in
the Condensed Consolidated Balance Sheet and will be amortized to income over
the applicable lease life.
11. COMMITMENTS AND CONTINGENCIES --
As of June 30, 1999, the Company was committed to the construction of eight
offshore marine vessels for an approximate aggregate cost of $80,596,000 of
which $51,281,000 has been expended, and Chiles has a commitment to build a Rig
for an approximate aggregate cost of $91,700,000 of which $69,000,000 has been
expended. The offshore marine vessel construction projects are expected to be
completed within the next twelve months, and the Rig is expected to be completed
in the fourth quarter of 1999.
12. DRILLING SERVICE SEGMENT --
From July 1, 1999 through the scheduled delivery date of the Chiles Magellan
early in the fourth quarter of 1999, Chiles expects to incur approximately
7
<PAGE>
$22,700,000 of purchase commitments and current accounts payable to complete
construction and outfitting of the Rigs, excluding net capitalized interest.
Chiles expects to rely on cash on hand (approximately $800,000 at June 30,
1999), operating cash flow (generated by the Chiles Columbus) and drawings under
a $25,000,000 revolving credit facility (the "Chiles Bank Facility) with two
banks maturing December 31, 2004 (which, subject to the conditions of such
facility described below, had $25,000,000 of credit available on June 30, 1999
and, following subsequent borrowings of $10,000,000, currently has $15,000,000
of credit available) to cover expenses associated with completing and outfitting
the Chiles Magellan.
Operating cash flow alone may not be sufficient for Chiles to complete
construction of the Chiles Magellan, cover general and administrative expenses
and to meet its full November 1, 1999 interest payment obligation in the amount
of $5,500,000 on the Chiles 10% Notes. All proceeds from Chiles' equity
financing and the issuance of the Chiles 10% Notes have been exhausted;
therefore Chiles' management is exploring with its equity owners, including
SEACOR's subsidiary, SEACOR Offshore Rigs Inc., the possibility of additional
equity contributions or participation in or assistance with a debt
restructuring. These discussions are ongoing and there currently are no
commitments from any party to contribute any additional equity or participate in
or assist with any debt restructuring.
Chiles' ability to draw on the Chiles Bank Facility is subject to satisfaction
of customary conditions precedent, including that there shall have occurred no
material adverse change in Chiles or its business, assets, properties or
prospects since the date of execution of the Chiles Bank Facility.
If Chiles is unable to satisfy fully the next scheduled interest payment
obligation under the Chiles 10% Notes, subject to a 30-day grace period, it
would be in default under the indenture governing the Chiles 10% Notes, which
could lead to an acceleration of all outstanding obligations thereunder. This,
in turn, could lead to an acceleration of the indebtedness under the Chiles Bank
Facility (subject to any applicable cure periods). If such conditions arise and
the banks accelerated the outstanding indebtedness under the Chiles Bank
Facility and exercised their remedies under the mortgages securing that
indebtedness, the Rigs could be sold at foreclosure and all proceeds of such
sale would first be applied to satisfy the indebtedness to the banks and related
foreclosure expenses. The remaining proceeds would be available for application
to the indebtedness outstanding under the Chiles 10% Notes. This would have a
material and adverse effect on the Company's investment in Chiles. The Company
currently owns an equity interest in Chiles and a portion of the Chiles 10%
Notes, and has entered into swap agreements under which it bears the economic
risk of the notional amounts of Chiles 10% Notes covered by such agreements.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
When included in this Quarterly Report on Form 10-Q or in documents incorporated
herein by reference, the words "expects," "intends," "anticipates," "believes,"
"estimates," and analogous expressions are intended to identify forward-looking
statements. Such statements inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. Such risks and uncertainties include, among others, general economic
and business conditions, industry fleet capacity, changes in foreign and
domestic oil and gas exploration and production activity, competition, changes
in foreign political, social and economic conditions, regulatory initiatives and
compliance with governmental regulations, customer preferences and various other
matters, many of which are beyond the Company's control. These forward-looking
statements speak only as of the date of this Quarterly Report on Form 10-Q. The
Company expressly disclaims any obligation or undertaking to release publicly
any updates or any change in the Company's expectations with regard thereto or
any change in events, conditions or circumstances on which any statement is
based.
OFFSHORE MARINE SERVICES
The Company provides marine transportation and related services largely
dedicated to supporting offshore oil and gas exploration and production through
the operation, domestically and internationally, of offshore support vessels.
The Company's vessels deliver cargo and personnel to offshore installations, tow
and handle the anchors of drilling rigs and other marine equipment, support
offshore construction and maintenance work, and provide standby safety support.
The Company's vessels also are used for special projects, such as well
stimulation, freight hauling, line handling, seismic data gathering, salvage,
and oil spill emergencies.
Operating revenues are affected primarily by the number of vessels owned,
average rates per day worked and utilization of the Company's fleet, and the
number of vessels bareboat and time chartered-in.
Opportunities to buy and sell vessels are actively monitored by the Company to
maximize overall fleet utility and flexibility. The size of the Company's fleet
has grown substantially since 1994 due to the acquisition and construction of
vessels and the investment in joint venture companies that own and operate
vessels. The Company has also sold many vessels from its fleet, particularly
those that are less marketable. Since 1997, proceeds from the sale of certain
vessels have been deposited into restricted cash accounts for purposes of
acquiring newly constructed U.S.-flag vessels and qualifying for the Company's
temporary deferral of taxable gains realized from the sale of those vessels.
Rates per day worked and utilization of the Company's fleet are a function of
demand for and availability of marine vessels, which are closely aligned with
the level of exploration and development of offshore areas. The level of
exploration and development of offshore areas is affected by both short-term and
long-term trends in oil and gas prices which, in turn, are related to the demand
for petroleum products and the current availability of oil and gas resources.
The table below sets forth rates per day worked and utilization data for the
Company during the periods indicated.
9
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
RATES PER DAY WORKED ($): (1) (2)
Supply and Towing Supply........................... 5,712 6,810 5,916 6,908
Anchor Handling Towing Supply...................... 11,142 11,641 11,978 11,848
Crew............................................... 2,505 2,713 2,541 2,704
Standby Safety..................................... 5,826 6,534 6,236 6,490
Utility and Line Handling.......................... 1,681 1,898 1,742 1,868
Geophysical, Freight, and Other.................... 5,880 4,872 5,338 4,623
Overall Fleet.................................. 3,881 4,199 4,100 4,210
OVERALL UTILIZATION (%): (1)
Supply and Towing Supply........................... 66.6 91.5 72.4 91.3
Anchor Handling Towing Supply...................... 68.8 86.5 74.8 85.9
Crew............................................... 81.2 97.2 78.1 97.1
Standby Safety..................................... 83.4 99.7 80.8 99.1
Utility and Line Handling.......................... 65.1 96.8 68.7 96.0
Geophysical, Freight, and Other.................... 50.0 100.0 61.1 100.0
Overall Fleet.................................. 71.6 95.0 73.5 94.6
</TABLE>
- --------------------------
(1) Rates per day worked is the ratio of total charter revenue to
the total number of vessel days worked. Rates per day worked and
overall utilization figures exclude owned vessels that are
bareboat chartered-out, vessels owned by corporations that
participate in pooling arrangements with the Company, joint
venture vessels, and managed/operated vessels and include
vessels bareboat and time chartered-in by the Company.
(2) Certain of the Company's vessels earn revenue in foreign
currencies, which have been converted to U.S. dollars for
reporting purposes at the weighted average exchange rates of
those foreign currencies for the periods indicated.
From time-to-time, the Company bareboat or time charters-in vessels. A bareboat
charter is a vessel lease under which the lessee ("charterer") is responsible
for all crewing, insurance, and other operating expenses, as well as the payment
of bareboat charter hire to the providing entity. A time charter is a lease
under which the entity providing the vessel is responsible for all crewing,
insurance, and other operating expenses and the charterer only pays a time
charter hire fee to the providing entity. Operating revenues for vessels owned
and bareboat or time chartered-in are incurred at similar rates. However,
operating expenses associated with vessels bareboat and time chartered-in
include charter hire expenses that, in turn, are included in vessel expenses,
but exclude depreciation expense. As of June 30, 1999 and 1998, the Company
operated 29 and 23 vessels, respectively, under bareboat and time charter-in
agreements. As of June 30, 1999, 23 of the vessels chartered-in resulted from
sale and leaseback transactions.
The Company also bareboat charters-out vessels. Operating revenues for these
vessels are lower than for vessels owned and operated or bareboat chartered-in
by the Company because vessel expenses, normally recovered through charter
revenue, are the burden of the charterer. Operating expenses include
depreciation expense if the vessels chartered-out are owned. At June 30, 1999
and 1998, the Company had 14 and 5 vessels, respectively, bareboat
chartered-out.
The table below sets forth the Company's marine fleet structure at the dates
indicated:
<TABLE>
<CAPTION>
AT JUNE 30,
--------------------------------------
FLEET STRUCTURE 1999 1998
- ----------------------------------------------------- ----------------- -----------------
<S> <C> <C>
Owned.............................................. 220 226
Bareboat and Time Chartered-In..................... 29 23
Managed............................................ 3 3
Joint Venture Vessels (1).......................... 37 34
Pool Vessels (2)................................... 9 12
----------------- -----------------
Overall Fleet.................................. 298 298
================= =================
</TABLE>
- ---------------------------
(1) A joint venture between Transportacion Maritima Mexicana S.A. de
C.V. ("TMM") and the Company (the "TMM Joint Venture") owned or
chartered-in, excluding those provided by the Company, 14 and 15
vessels in 1999 and 1998, respectively. 1999 and 1998 included
17 and 18 vessels, respectively, owned by corporations in which
the Company acquired an equity interest pursuant to a
transaction with Smit Internationale N.V. ("Smit") in December
1996 (the "Smit Joint Ventures"). 1999 also included 6 vessels
operated by other joint venture businesses.
(2) 1999 and 1998 included five vessels owned by Toisa Ltd. which
participate in a pool with Company owned North Sea standby
safety vessels. Additionally, 1999 and 1998 included four and
seven standby safety vessels, respectively, in which the Company
shares net operating profits after certain adjustments with
Toisa and owners of the vessels (the "Saint Fleet Pool").
10
<PAGE>
Vessel operating expenses are primarily a function of fleet size and utilization
levels. The most significant vessel operating expense items are wages paid to
marine personnel, maintenance and repairs, and marine insurance. In addition to
variable vessel operating expenses, the offshore marine business segment incurs
fixed charges related to the depreciation of property and equipment.
Depreciation is a significant operating expense, and the amount related to
vessels is the most significant component.
A portion of the Company's revenues and expenses are paid in foreign currencies.
For financial statement reporting purposes, these amounts are translated into
U.S. dollars at the weighted average exchange rates during the relevant period.
The foregoing applies primarily to the Company's North Sea operations. Overall,
the percentage of the Company's offshore marine operating revenues derived from
foreign operations, whether in U.S. dollars or foreign currencies, approximated
44% and 38% for the six-month periods ended June 30, 1999 and 1998,
respectively.
The Company's foreign offshore marine operations are subject to various risks
inherent in conducting business in foreign nations. These risks include, among
others, political instability, potential vessel seizure, nationalization of
assets, currency restrictions and exchange rate fluctuations, import-export
quotas, and other forms of public and governmental regulation, all of which are
beyond the control of the Company. Although, historically, the Company's
operations have not been affected materially by such conditions or events, it is
not possible to predict whether any such conditions or events might develop in
the future. The occurrence of any one or more of such conditions or events could
have a material adverse effect on the Company's financial condition and results
of operations.
Regulatory drydockings, which are a substantial component of marine maintenance
and repair costs, are expensed when incurred. Under applicable maritime
regulations, vessels must be drydocked twice in a five-year period for
inspection and routine maintenance and repair. The Company follows an asset
management strategy pursuant to which it defers required drydocking of selected
vessels and voluntarily removes them from operation during periods of weak
market conditions and low rates per day worked. Should the Company undertake a
large number of drydockings in a particular fiscal quarter or put through survey
a disproportionate number of older vessels, which typically have higher
drydocking costs, comparative results may be affected. For the six-month periods
ended June 30, 1999 and 1998, drydocking costs totaled $3.0 million and $7.1
million, respectively. During those same periods, the Company completed the
drydocking of 40 and 54 vessels, respectively.
Operating results are also affected by the Company's participation in (i) a
joint venture arrangement with Vector Offshore Limited, a U.K. corporation,
which owns a 9% equity interest in the Company's subsidiary (the "Veesea Joint
Venture") that operates 11 standby safety vessels in the North Sea, (ii) the
SEAVEC and Saint Fleet Pools, which coordinate the marketing of 20 standby
safety vessels in the North Sea, of which 11 are owned by the Veesea Joint
Venture, (iii) the TMM Joint Venture, which operates 22 vessels offshore Mexico,
(iv) the Smit Joint Ventures, which operate 17 vessels in the Far East, Latin
America, the Middle East, and the Mediterranean, and (v) other joint venture
arrangements.
ENVIRONMENTAL SERVICES
The Company's environmental service business provides contractual oil spill
response and other related training and consulting services. The Company's
clients include tank vessel owner/operators, refiners and terminal operators,
exploration and production facility operators, and pipeline operators. The
Company charges a retainer fee to its customers for ensuring by contract the
availability (at predetermined rates) of its response services and equipment.
Retainer services include employing a staff to supervise response to an oil
spill emergency and maintaining specialized equipment, including marine
equipment, in a ready state for emergency and spill response as contemplated by
response plans filed by the Company's customers in accordance with OPA 90 and
various state regulations. The Company maintains relationships with numerous
environmental sub-contractors to assist with response operations, equipment
maintenance, and provide trained personnel for deploying equipment in a spill
response.
Pursuant to retainer agreements entered into with the Company, certain vessel
owners pay in advance to the Company an annual retainer fee based upon the
number and size of vessels in each such owner's fleet and in some circumstances
pay the Company additional fees based upon the level of each vessel owner's
voyage activity in the U.S. The Company recognizes the greater of revenue earned
by voyage activity or the portion of the retainer earned in each accounting
period. Certain vessel and facility owners pay a fixed fee or a fee based on
volume of petroleum product transported for the Company's retainer services and
such fee is recognized ratably throughout the year. The Company's retainer
11
<PAGE>
agreements with vessel owners generally range from one to three years while
retainer arrangements with facility owners are as long as seven years.
Spill response revenue is dependent on the magnitude of any one spill response
and the number of spill responses within a given fiscal period. Consequently,
spill response revenue can vary greatly between comparable periods and the
revenue from any one period is not indicative of a trend or of anticipated
results in future periods. Costs of oil spill response activities relate
primarily to (i) payments to sub-contractors for labor, equipment, and
materials, (ii) direct charges to the Company for equipment and materials, (iii)
participation interests of others in gross profits from oil spill response, and
(iv) training and exercises related to spill response preparedness.
The Company charges consulting fees to customers for customized training
programs, its planning of and participation in customer oil spill response drill
programs and response exercises, and other special projects.
The principal components of the Company's operating costs are salaries and
related benefits for operating personnel, payments to sub-contractors, equipment
maintenance, and depreciation. These expenses are primarily a function of
regulatory requirements and the level of retainer business. Operating results
are also affected by the Company's participation in the Clean Pacific Alliance
("CPA"), a joint venture with Crowley Marine Services that operates on the West
Coast of the United States.
DRILLING SERVICES
The Company's drilling service business is conducted through Chiles Offshore LLC
and its wholly owned subsidiaries (collectively referred to as "Chiles").
Chiles, a 55.4% majority owned subsidiary, is a development stage company formed
in August 1997 for the purpose of constructing, owning, and operating a fleet of
state-of-the-art premium offshore jackup drilling rigs.
Chiles completed construction of its first such rig, the Chiles Columbus in June
1999, and construction of the Chiles Magellan (the "Rig(s)") is underway at a
shipyard in Brownsville, Texas. The Chiles Magellan is scheduled for delivery in
the fourth quarter of 1999. The Company is currently engaged in rig-related
design, engineering, procurement, and construction activities for the Chiles
Magellan and has commenced commercial operations of the Chiles Columbus.
Chiles has operated as a development stage company since inception by devoting
substantially all of its efforts to designing, engineering and contracting with
shipyards and vendors for the Rigs, raising capital, employing personnel, and
securing contracts for the Rigs. Chiles started to generate operating revenues
in June 1999; however, there are can be no assurance that Chiles will generate
sufficient operating revenues and cash flow to successfully complete the
transition from a development stage company to successful operations. Chiles may
not currently have sufficient liquidity to complete construction of the Chiles
Magellan, cover general and administrative expenses and to meet its full
November 1, 1999 interest payment obligation under the $110.0 million aggregate
principal amount of the Chiles 10% Senior Notes due 2008 (the "Chiles 10%
Notes"). See "Liquidity and Capital Resources -Chiles' Liquidity Needs" below.
Additional risks associated with Chiles' operations include, but are not limited
to, oil and gas prices, capital expenditure plans of oil and gas operators,
access to capital, completion of construction of the Chiles Magellan, and
competition. As a result of these and other factors and related and unrelated
uncertainties, there can be no assurance of the future success of Chiles.
The management of Chiles is currently pursuing a business strategy that includes
obtaining drilling contracts with oil and gas operators, employing rig
personnel, completing the construction of the Chiles Magellan, including the
purchase of drilling equipment, overseeing the construction of the Chiles
Magellan and installation of drilling equipment, and operating the Chiles
Columbus. While pursuing this business strategy, Chiles will continue to
experience cash flow deficits until construction of the Chiles Magellan is
completed and the Rig is placed in service and the Rigs are operating at revenue
rates greater than operating and financing costs.
In June 1999, the Chiles Columbus was placed in service with a customer under a
contract that calls for the drilling of one well in the U.S. Gulf of Mexico,
which is expected to be completed in August 1999. This customer also has the
option to use the Chiles Columbus to drill one or two additional wells. In
connection with this contract, the Chiles Columbus was modified to extend its
legs from 477 feet to 511 feet in length. In June 1999, Chiles entered into a
Letter of Intent (the "LOI") for the use of the Chiles Magellan in the U.S. Gulf
12
<PAGE>
of Mexico. Chiles is presently negotiating terms of the drilling contract
outlined in the LOI. Under the terms of the LOI, Chiles agreed to extend the
legs of the Chiles Magellan to 544 feet in length and modify its spud cans. The
LOI calls for the drilling of one well, estimated to be completed in 120 days,
to begin, at Chiles' option, between December 1, 1999 and April 30, 2000.
Pursuant to the LOI, the customer will have the option to use the Chiles
Magellan, under certain circumstances, for additional wells in the same area for
a specified period of time after conclusion of the first well. Chiles estimates
the cost of leg and spud can modifications to the Rigs, in the aggregate, will
be approximately $5.5 million, exclusive of financing costs. Under the terms of
the LOI for the Chiles Magellan, the client has agreed to fund $1.5 million of
the modification costs, subject to the successful completion of such
modifications and certain other conditions. In addition, a vendor has agreed to
provide one-year payment terms, with interest, for $2.1 million of such
modifications.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth operating revenue and operating profit by the
Company's various business segments for the periods indicated, in thousands of
dollars.
<TABLE>
<CAPTION>
Marine Environmental Drilling Other Total
------------ ---------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE THREE MONTHS ENDED JUNE 30, 1999:
Operating Revenues -
External Customers $ 61,811 $ 5,198 $ 528 $ 938a $ 68,475
Intersegment - 38 - (38) -
------------ ---------------- ------------- --------------- -------------
Total $ 61,811 $ 5,236 $ 528 $ 900 $ 68,475
============ ================ ============= =============== =============
Operating Profit (Loss) $ 8,806 $ 1,140 $ (336) $ 58 $ 9,668
Gains (Losses) from Equipment Sales and Retirements, net 657 4 - - 661
Equity in Earnings of 50% or Less Owned Companies 540 136 - (495) 181
Minority Interest in (Income) Loss of Subsidiaries - - - 93 93
Net Interest Income (Expense) - - - (325) (325)
Gains (Losses) from Commodity Price Hedging Arrangements - - - (293) (293)
Gains (Losses) from Sale of Marketable Securities - - - 226 226
Corporate Expenses - - - (1,006) (1,006)
Income Taxes - - - (2,988) (2,988)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 10,003 $ 1,280 $ (336) $ (4,730) $ 6,217
====================================================================================================================================
FOR THE THREE MONTHS ENDED JUNE 30, 1998:
Operating Revenues -
External Customers $ 89,611 $ 6,133 $ - $ - $ 95,744
Intersegment - - - - -
------------ ---------------- ------------- --------------- -------------
Total $ 89,611 $ 6,133 $ - $ - $ 95,744
============ ================ ============= =============== =============
Operating Profit (Loss) $ 33,640 $ 1,003 $ (296) $ - $ 34,347
Gains (Losses) from Equipment Sales and Retirements, net 17,999 (136) - - 17,863
Equity in Earnings of 50% or Less Owned Companies 2,745 161 - - 2,906
Minority Interest in (Income) Loss of Subsidiaries - - - (232) (232)
Net Interest Income (Expense) - - - (89) (89)
Corporate Expenses - - - (1,306) (1,306)
Income Taxes - - - (17,439) (17,439)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 54,384 $ 1,028 $ (296) $ (19,066) $ 36,050
====================================================================================================================================
FOR THE SIX MONTHS ENDED JUNE 30, 1999:
Operating Revenues -
External Customers $ 134,208 $ 10,522 $ 528 $ 938a $ 146,196
Intersegment - 106 - (106) -
------------ ---------------- ------------- --------------- -------------
Total $ 134,208 $ 10,628 $ 528 $ 832 $ 146,196
============ ================ ============= =============== =============
Operating Profit (Loss) $ 26,949 $ 2,118 $ (541) $ 58 $ 28,584
Gains (Losses) from Equipment Sales and Retirements, net 954 1 - - 955
Equity in Earnings of 50% or Less Owned Companies 2,209 412 - (495) 2,126
Minority Interest in (Income) Loss of Subsidiaries - - - (275) (275)
Net Interest Income (Expense) - - - 229 229
Gains (Losses) from Commodity Price Hedging Arrangements - - - 66 66
Gains (Losses) from Sale of Marketable Securities - - - (740) (740)
Corporate Expenses - - - (2,051) (2,051)
Income Taxes - - - (9,398) (9,398)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 30,112 $ 2,531 $ (541) $ (12,606) $ 19,496
====================================================================================================================================
FOR THE SIX MONTHS ENDED JUNE 30, 1998:
Operating Revenues -
External Customers $ 180,770 $ 12,187 $ - $ - $ 192,957
Intersegment - - - - -
------------ ---------------- ------------- --------------- -------------
Total $ 180,770 $ 12,187 $ - $ - $ 192,957
============ ================ ============= =============== =============
Operating Profit (Loss) $ 67,347 $ 1,787 $ (381) $ - $ 68,753
Gains (Losses) from Equipment Sales and Retirements, net 30,692 (110) - - 30,582
Equity in Earnings of 50% or Less Owned Companies 6,965 221 - - 7,186
Minority Interest in (Income) Loss of Subsidiaries - - - (703) (703)
Net Interest Income (Expense) - - - 1,116 1,116
Corporate Expenses - - - (2,452) (2,452)
Income Taxes - - - (34,162) (34,162)
------------ ---------------- ------------- --------------- -------------
Income before Extraordinary Item $ 105,004 $ 1,898 $ (381) $ (36,201) $ 70,320
====================================================================================================================================
</TABLE>
(a) Other external customers' operating revenues are attributable to a
recently acquired telecommunications business that serves the maritime
industry and which does not meet any of the quantitative thresholds for
determining reportable segments.
14
<PAGE>
OFFSHORE MARINE SERVICES
OPERATING REVENUES. The Company's offshore marine business segment's operating
revenues decreased $27.8 million or 31.0% and $46.6 million or 25.8% in the
three and six-month periods ended June 30, 1999, respectively, compared to the
three and six-month periods ended June 30, 1998, due primarily to lower
utilization and day rates and the sale of vessels. A prolonged decline in oil
and gas prices has resulted in reduced drilling and production support
activities. The adverse effect of these factors was partially offset by an
increase in operating revenues resulting from the entry into service of vessels
both constructed for and chartered-in by the Company.
Utilization of the Company's worldwide fleet declined to 71.6% and 73.5% in the
three and six-month periods ended June 30, 1999, respectively, and resulted in a
$20.9 million and $34.8 million reduction in operating revenues between
comparable three and six-month periods, respectively. $13.8 million and $25.5
million of the decline between comparable three and six-month periods,
respectively, resulted primarily from reduced demand for the Company's fleet of
supply/towing supply, utility, crew, and anchor handling towing supply vessels
operating domestically. $6.6 million and $9.0 million of the decline between
comparable three and six-month periods, respectively, resulted primarily from
reduced demand for the Company's anchor handling towing supply vessels in West
Africa and the Far East, supply/towing supply and utility vessels in West
Africa, and standby safety vessels in the North Sea.
Lower utilization also resulted due to the relocation of vessels between
operating regions.
A decline in day rates earned by the Company's fleet of vessels between
comparable three and six-month periods ending June 30, 1999 and 1998 has
resulted in a decline of operating revenues of $9.1 million and $15.7 million,
respectively. $4.1 million and $6.9 million of the decline between comparable
three and six-month periods, respectively, resulted primarily from lower day
rates earned by supply/towing supply, crew, and utility vessels operating
domestically. $2.3 million and $2.7 million of the decline between comparable
three and six-month periods, respectively, resulted primarily from lower day
rates earned by anchor handling towing supply, supply/towing supply, utility and
crew vessels working in West Africa, standby safety vessels working in the North
Sea, and anchor handling towing supply and supply/towing supply vessels working
in other foreign regions. Vessels relocated between various operating regions
during the past year also experienced day rate declines resulting in a $2.7
million and $6.1 million reduction in operating revenues between comparable
three and six-month periods, respectively.
During 1998 and the first six months of 1999, the Company sold and ceased
operation of 30 vessels and constructed 16 vessels. The sale of 10 crew, 8
utility, 6 supply/towing supply, and 6 anchor handling towing supply vessels
resulted in a $6.7 million and $15.0 million decline in operating revenues
between comparable three and six-month periods, respectively. The entry into
operation of vessels constructed for the Company, including 5 anchor handling
towing supply, 5 crew, 4 supply, and 2 utility, increased revenues by $8.4
million and $18.1 million between comparable three and six-month periods,
respectively. Operating revenues also rose $1.6 million and $3.1 million between
comparable three and six-month periods, respectively, due to the Company's
operation in the Far East of additional chartered-in vessels.
OPERATING PROFIT. The Company's offshore marine business segment's operating
profit declined $24.8 million or 73.8% and $40.4 million or 60.0% in the three
and six-month periods ended June 30, 1999, respectively, compared to the three
and six-month periods ended June 30, 1998, due primarily to those factors
adversely affecting operating revenues outlined above. Operating profits were
also adversely affected between comparable three and six-month periods, due to
an increase of $0.3 million and $1.0 million, respectively, in foreign currency
transaction losses resulting primarily from the revaluation of Dutch Guilder
cash deposits during periods of a strengthening U.S. dollar. At June 30, 1999,
weak demand and low rates per day worked resulted in the Company removing 47
vessels from service, of which 28 require drydocking prior to re-entering
operations. Of these vessels, 22 utility, 11 supply/towing supply, 9 crew, and 1
project operated in the U.S. Gulf of Mexico, and 3 utility and 1 supply/towing
supply operated in foreign regions. Performance based compensation expense for
administrative personnel also declined in response to declining profits.
GAINS (LOSSES) FROM EQUIPMENT SALES AND RETIREMENTS, NET. Net gains from
equipment sales and retirements decreased $17.3 million and $29.7 million in the
three and six-month periods ended June 30, 1999, respectively, compared to the
three and six-month periods ended June 30, 1998, due to fewer and less valuable
vessel sales. In the three and six-month periods ending June 30, 1999, the
Company sold 9 and 11 vessels, respectively; whereas, in comparable periods for
15
<PAGE>
1998, the Company sold 14 and 26 vessels, respectively. Of the vessels sold in
1999 and 1998, 5 and 11, respectively, were bareboat chartered in pursuant to
sale and leaseback transactions, and certain of the gains realized from those
sales were deferred and are being credited to income as reductions in rental
expense over the life of the respective bareboat charters.
EQUITY IN EARNINGS OF 50% OR LESS OWNED COMPANIES. Equity earnings declined $2.2
million and $4.8 million in the three and six-month periods ended June 30, 1999,
respectively, compared to the three and six-month periods ended June 30, 1998.
The decrease was due primarily to reduced profits of the SMIT and TMM Joint
Ventures and the sale of the Company's equity interest in a joint venture that
provides marine and underwater services to offshore terminal and oilfield
operations. Declines in oil and gas prices that have resulted in reduced
drilling and production activities have adversely affected the operating profits
of the SMIT and TMM Joint Ventures. Operating profits of the SMIT Joint Venture
were also adversely affected by a decline in gains realized from the sale of
vessels.
ENVIRONMENTAL SERVICES
OPERATING REVENUE. The environmental business segment's operating revenue
decreased $0.9 million or 14.6% and $1.6 million or 12.8% in the three and
six-month periods ended June 30, 1999, respectively, compared to the three and
six-month periods ended June 30, 1998. The decrease was due primarily to a
decline in the number and severity of oil spills managed by the Company and
reduced retainer revenues that resulted from the loss of a large customer.
OPERATING PROFIT. The environmental business segment's operating profit
increased $0.1 million or 13.7% and $0.3 million or 18.5% in the three and
six-month periods ended June 30, 1999, respectively, compared to the three and
six-month periods ended June 30, 1998. Declines in operating revenues were
offset by the Company's reduction in operating and general and administrative
expenses. EQUITY IN EARNINGS OF 50% OR LESS OWNED COMPANIES. Equity earnings
increased in the six-month period ended June 30, 1999 compared to the six-month
period ended June 30, 1998 due to an increase in the oil spill response
activities of CPA.
DRILLING SERVICES
The Chiles Columbus was placed in service during June 1999. Prior to such time,
and since inception, Chiles has engaged in no operations other than managing
construction of the Rigs and related matters. With the delivery and
commissioning of the Chiles Columbus in June 1999, Chiles generated operating
revenues of $0.5 million for the month of June. Chiles has incurred operating
losses since its inception in 1997.
Chiles is currently facing significant liquidity needs. See "Liquidity and
Capital Resources - Chiles' Liquidity Needs" below.
OTHER
EQUITY IN EARNINGS OF 50% OR LESS OWNED COMPANIES. Equity earnings in the three
and six-month periods ending June 30, 1999 resulted from the Company's
recognition of its share of the operating losses of Globe Wireless, LLC
("Globe"). Due to an ability to significantly influence the operating activities
of Globe, the Company began accounting for its investment in Globe under the
equity method during the second quarter of 1999. Prior to this time, the Company
carried its investment in Globe at cost.
NET INTEREST INCOME (EXPENSE). In the comparable three-month periods ending June
30, 1999 and 1998, the Company incurred net interest expense that increased $0.2
million; whereas, in the comparable six-month periods ending June 30, 1999 and
1998, the Company realized net interest income that decreased $0.9 million. In
the comparable three and six-month periods, interest expense rose due to the
sale in April 1998 of $110.0 million aggregate principal amount of the Chiles
10.0% Senior Notes due 2008 (the "Chiles 10.0% Notes"); whereas, interest income
declined due to lower invested cash balances that resulted from the use of cash
to construct Rigs and vessels and acquire the Company's common stock for
treasury. The effect on net interest of increased borrowings and lower invested
cash balances was partially offset by a $3.1 million or 69.4% and $6.3 million
or 107.8% increase between comparable three and six-month periods, respectively,
in capitalized interest costs associated with Rig and vessel construction. The
amount of capitalized interest has declined between comparable quarters ended
June 30, 1999 and 1998, and this decline is expected to continue in future
16
<PAGE>
periods as the Company completes various construction projects.
GAINS (LOSSES) FROM COMMODITY PRICE HEDGING ARRANGEMENTS. In the three and
six-month periods ended June 30, 1999, the Company realized losses of $0.3
million and gains of $0.1 million, respectively, from commodity price hedging
arrangements. There were no commodity price hedging arrangements during
comparable periods of 1998.
GAINS (LOSSES) FROM SALE OF MARKETABLE SECURITIES. In the three and six-month
periods ended June 30, 1999, the Company realized gains of $0.2 million and
losses of $0.7 million, respectively, from the sale of marketable securities.
Losses in the six-month period resulted primarily from the sale of interest
bearing securities during periods of rising interest rates. No gains or losses
were realized from the sale of marketable securities during comparable periods
of 1998.
CORPORATE EXPENSES. In the comparable three and six-month periods ending June
30, 1999 and 1998, corporate expenses declined $0.3 million and $0.4 million,
respectively. Performance based compensation expense declined in response to
declining profits.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL. The Company's ongoing liquidity requirements arise primarily from its
need to service debt, fund working capital, acquire, construct, or improve
equipment and make other investments. Management believes that cash flow from
operations will provide sufficient working capital to fund the Company's
operating needs. The Company may, from time-to-time, issue shares of its common
stock, preferred stock, debt or a combination thereof, or sell vessels to
finance the acquisition of equipment and businesses or make improvements to
existing equipment. The Company's cash flow levels and operating revenues are
determined primarily by the size of the Company's offshore marine fleet, rates
per day worked and overall utilization of the Company's offshore marine vessels,
and retainer, spill response, and consulting activities of the Company's
environmental service business. The offshore marine service business is directly
affected by the volatility of oil and gas prices, the level of offshore
production and exploration activity, and other factors beyond the Company's
control.
OFFSHORE MARKET DEVELOPMENTS. A prolonged decline in oil and gas prices has
resulted in reduced drilling and production support activities both domestically
and internationally. As a result, revenue earned by the Company's offshore
marine services fleet has declined, and at June 30, 1999, the Company had 47
offshore marine vessels out of service. The decline in product prices in the oil
and gas industry has also resulted in significantly reduced day rates and
utilization of jackup rigs, particularly in the U.S. Gulf of Mexico shallow
water market, and excess supply in the current jackup market.
It is difficult to determine when a recovery in the oil and gas industry will
begin or at what stage in the economic cycle a recovery would be. Weak oil and
gas prices, economic problems in countries outside the United States, and a
number of other factors beyond the Company's control could further curtail
spending by oil and gas companies. Therefore, the Company cannot predict
whether, or to what extent, market conditions will improve or deteriorate
further. Should the trends and levels of activity experienced in the second
quarter of 1999 continue, it will have an adverse effect on the Company's
results of operations and cash flows, and if such conditions deteriorated
severely and if they then persisted for an extended period of time, they may
have an adverse effect on the Company's financial position.
CHILES' LIQUIDITY NEEDS. From July 1, 1999 through the scheduled delivery date
of the Chiles Magellan early in the fourth quarter of 1999, Chiles expects to
incur approximately $22.7 million of purchase commitments and current accounts
payable to complete construction and outfitting of the Rigs, excluding net
capitalized interest. Chiles expects to rely on cash on hand (approximately $0.8
million at June 30, 1999), operating cash flow (generated by the Chiles
Columbus) and drawings under a $25.0 million revolving credit facility (the
"Chiles Bank Facility") with two banks maturing December 31, 2004 (which,
subject to the conditions of such facility described below, had $25.0 million of
credit available on June 30, 1999 and, following subsequent borrowings of $10.0
million, currently has $15.0 million of credit available) to cover expenses
associated with completing and outfitting the Chiles Magellan.
Operating cash flow alone may not be sufficient for Chiles to complete
construction of the Chiles Magellan, cover general and administrative expenses
and to meet its full November 1, 1999 interest payment obligation in the amount
17
<PAGE>
of $5.5 million on the Chiles 10% Notes. All proceeds from Chiles' equity
financing and the issuance of the Chiles 10% Notes have been exhausted;
therefore Chiles' management is exploring with its equity owners, including
SEACOR's subsidiary, SEACOR Offshore Rigs Inc., the possibility of additional
equity contributions or participation in or assistance with a debt
restructuring. These discussions are ongoing and there currently are no
commitments from any party to contribute any additional equity or participate in
or assist with any debt restructuring.
Chiles' ability to draw on the Chiles Bank Facility is subject to satisfaction
of customary conditions precedent, including that there shall have occurred no
material adverse change in Chiles or its business, assets, properties or
prospects since the date of execution of the Chiles Bank Facility.
If Chiles is unable to satisfy fully the next scheduled interest payment
obligation under the Chiles 10% Notes, subject to a 30-day grace period, it
would be in default under the indenture governing the Chiles 10% Notes, which
could lead to an acceleration of all outstanding obligations thereunder. This,
in turn, could lead to an acceleration of the indebtedness under the Chiles Bank
Facility (subject to any applicable cure periods). If such conditions arise and
the banks accelerated the outstanding indebtedness under the Chiles Bank
Facility and exercised their remedies under the mortgages securing that
indebtedness, the Rigs could be sold at foreclosure and all proceeds of such
sale would first be applied to satisfy the indebtedness to the banks and related
foreclosure expenses. The remaining proceeds would be available for application
to the indebtedness outstanding under the Chiles 10% Notes. This would have a
material and adverse effect on the Company's investment in Chiles. The Company
currently owns an equity interest in Chiles and a portion of the Chiles 10%
Notes, and has entered into swap agreements under which it bears the economic
risk of the notional amounts of Chiles 10% Notes covered by such agreements. For
additional information concerning the Company's investment in Chiles, see
"Drilling Services," "Liquidity and Capital Resources - Stock and Debt
Repurchase Program," and "Liquidity and Capital Resources - Certain Credit
Facilities and Financial Instruments" under Management's Discussion and Analysis
of Financial Condition and Results of Operations.
CASH AND MARKETABLE SECURITIES. Since December 31, 1998, the Company's cash and
investments in marketable securities declined by $107.7 million to $331.5
million that included $154.8 million of unrestricted cash and cash equivalents,
$137.4 million of marketable securities, and $39.3 million of restricted cash.
At June 30, 1999, the Company had paid $14.3 million in offshore marine vessel
construction costs from unrestricted cash balances, and subject to prior written
approval from the Maritime Administration, such amounts will be reimbursed from
its restricted cash accounts. See discussion below regarding Cash Generation and
Deployment.
CAPITAL STRUCTURE. At June 30, 1999, the Company's capital structure was
comprised of $469.8 million in long-term debt (including current portion) and
$539.3 million in stockholders' equity. Since year end, long-term debt declined
due primarily to the Company's early retirement of certain indebtedness.
Stockholders' equity also decreased since year end due to the repurchase of the
Company's common stock and a decline in accumulated other comprehensive income
that resulted from unrealized losses on available-for-sale securities and losses
from foreign currency translation adjustments. This decrease was partially
offset by an increase in retained earnings from net income. See discussion below
regarding the Company's Stock and Debt Repurchase Program.
CASH GENERATION AND DEPLOYMENT. Cash flow provided from operating activities
during the six-month period ended June 30, 1999 totaled $18.9 million and
declined significantly between comparable periods due primarily to lower
utilization of and day rates earned by the Company's offshore marine vessels.
Cash generated from investing activities in the six-month period ended June 30,
1999 primarily included $62.1 million from the sale of available-for-sale
securities, $29.9 million from restricted cash account reimbursements, and $15.1
million from the sale of offshore marine vessels. Uses of cash in the six-month
period ending June 30, 1999 primarily relate to the Company's investing and
financing activities to acquire $103.0 million of property and equipment and
$23.5 million of the Company's common stock, purchase $7.4 million of
available-for-sale securities, loan $5.8 million to Globe, purchase a
telecommunications business, net of cash acquired, for $5.0 million, and repay
$4.7 million of indebtedness.
CAPITAL EXPENDITURES. Expenditures for property and equipment during the
six-month period ended June 30, 1999 primarily related to the Company's
construction of offshore marine vessels and Chiles' construction of Rigs. At
June 30, 1999, the Company was committed to the construction of eight offshore
18
<PAGE>
marine vessels for an approximate aggregate cost of $80.6 million of which $51.3
million has been expended, and Chiles has a commitment to build a Rig for an
approximate aggregate cost of $91.7 million of which $69.0 million has been
expended. The offshore marine vessel construction projects are expected to be
completed over the next twelve months, and the Rig is expected to be completed
in fourth quarter of 1999.
STOCK AND DEBT REPURCHASE PROGRAM. In the six-month period ended June 30, 1999,
SEACOR acquired 593,500 shares of its common stock, $2.5 million principal
amount of its 7.2% Senior Notes due 2009 ("7.2% Notes"), and $1.5 million
principal amount of the Chiles 10.0% Notes for an aggregate cost of $27.1
million. Since June 30, 1999, SEACOR acquired 87,700 shares of its common stock,
$3.0 million principal amount of its 5-3/8% Convertible Subordinated Notes due
November 15, 2006 (the "5-3/8% Notes") and $9.5 million principal amount of the
Chiles 10% Notes (which constitutes SEACOR's total current holdings of such
notes) for an aggregate cost of $15.6 million. The Board of Directors of SEACOR
had previously authorized the repurchase of these securities, and authority to
purchase $16.2 million of additional shares of SEACOR's common stock, its 7.2%
Notes, its 5-3/8% Notes, and the Chiles 10.0% Notes remained available as of the
date of this report. In addition, SEACOR has entered into swap agreements with
respect to the Chiles 10% Notes. See "Certain Credit Facilities and Financial
Instruments" below.
CERTAIN CREDIT FACILITIES AND FINANCIAL INSTRUMENTS. Under the terms of an
unsecured reducing revolving credit facility (the "Credit Facility") with Den
norske Bank ASA that was established in November 1998, the Company may borrow up
to $100.0 million aggregate principal amount of unsecured reducing revolving
credit loans maturing November 17, 2004. At June 30, 1999, the Company had
$100.0 million available for future borrowings under the Credit Facility. The
Credit Facility requires the Company, on a consolidated basis, to maintain a
minimum ratio of indebtedness to vessel value, as defined, a minimum cash and
cash equivalent level, a specified interest coverage ratio, specified debt to
capitalization ratios, and a minimum net worth. The Credit Facility limits the
amount of secured indebtedness which the Company and its subsidiaries may incur,
provides for a negative pledge with respect to certain activities of the
Company's vessel owning/operating subsidiaries, and restricts the payment of
dividends.
In connection with the delivery of the Chiles Columbus, borrowings under the
Chiles Bank Facility became available, subject to satisfaction of customary
conditions precedent, including that there shall have occurred no material
adverse change with respect to Chiles or its business, assets, properties,
conditions (financial or otherwise), or prospects since the date of execution of
the Chiles Bank Facility. At June 30, 1999, there were no borrowings under the
Chiles Bank Facility. All obligations with respect to the Chiles Bank Facility
are limited exclusively to Chiles and are nonrecourse to SEACOR. As of August 9,
1999, Chiles had drawn down a total of $10.0 million under the Chiles Bank
Facility. See "Chiles' Liquidity Needs" above.
Beginning in the second quarter of 1999, the Company entered into swap
agreements with a major financial institution with respect to notional amounts
equal to a portion of the outstanding principal amount of the Chiles 10% Notes.
Pursuant to each such agreement, such financial institution has agreed to pay to
the Company an amount equal to interest paid by Chiles on the notional amount of
Chiles 10% Notes subject to such agreement, and the Company has agreed to pay to
such financial institution an amount equal to interest at the rate of 6.94% per
annum on the agreed upon price of such notional amount of Chiles 10% Notes as
set forth in the applicable swap agreement.
Upon termination of each swap agreement, the financial institution has agreed to
pay to the Company the amount, if any, by which the fair market value of the
notional amount of Chiles 10% Notes subject to the swap agreement on such date
exceeds the agreed upon price of such notional amount as set forth in such swap
agreement, and the Company has agreed to pay to such financial institution the
amount, if any, by which the agreed upon price of such notional amount exceeds
the fair market value of such notional amount on such date. Each swap agreement
terminates upon the earliest to occur of the redemption in full or maturity of
the Chiles 10% Notes, at any time at the election of the Company or, at the
election of the financial institution, on April 30, 2004. As of June 30, 1999,
the notional amount of Chiles 10% Notes subject to such swap agreements was $4.0
million and the market value of such swaps as of such date was approximately
$115,000. Subsequent to June 30, 1999, the Company entered into swap agreements
with respect to an additional $62.6 million notional amount of Chiles 10% Notes.
DISCLOSURES ABOUT MARKET RISK. The rates that the Company is able to charge
customers for its fleet of offshore marine vessels and those that it expects to
charge for the Chiles Rigs and, consequently, the earnings and cash flows from
19
<PAGE>
such operations are in large part dependent upon natural gas and crude oil
prices. In an effort to achieve greater predictability with respect to such cash
flows and earnings and to mitigate the effects that the volatility of the price
of natural gas and crude oil will have on its operations, the Company has in the
past and may in the future hedge against the risks associated with movements in
natural gas and crude oil prices through the use of commodity futures, options,
swap agreements, and other hedge devices. The use of these hedging arrangements
is intended to limit the risk of a decline in market rates for offshore vessels
and the Rigs, which typically follow a decline in natural gas and crude oil
prices. These arrangements, however, may also mitigate the favorable effect on
earnings and cash flows of increased rates, which typically follow an increase
in natural gas and crude oil prices.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair market
value. SFAS 133 requires that changes in the derivative's fair market value be
recognized currently in earnings unless specific hedge accounting criteria are
met. Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement, and
requires that a company must formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. SFAS 133 is
effective for fiscal years beginning after June 15, 2000. A company may also
implement SFAS 133 as of the beginning of any fiscal quarter after issuance
(that is, fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 must
be applied to derivative instruments and certain derivative instruments embedded
in hybrid contracts that were issued, acquired, or substantially modified after
December 31, 1997. The Company has not yet quantified the impact of adopting
SFAS 133 on its financial statements and has not determined the timing or method
of its adoption of SFAS 133.
YEAR 2000
The Year 2000 ("Y2K") issue is the result of computerized systems being written
to store and process the year portion of dates using two digits rather than four
and that date sensitive systems may fail or produce erroneous results on or
before January 1, 2000 because the year 2000 will be interpreted incorrectly.
The Company has been pursuing a strategy to ensure that all of its significant
computer systems will be able to process dates from and after January 1, 2000
without critical failure. Computerized systems are integral to the Company's
operations, particularly for accounting and office product software applications
used throughout its many offices and, to a lesser extent, for communication,
navigational, and other systems aboard certain of the Company's vessels.
Most of the Company's computerized accounting and office product software
applications are licensed through commercial third party software developers
with whom the Company has maintenance contracts. Where necessary, these software
developers have already modified and released newer versions of their product
that are Y2K compliant. The Company has implemented or is in the process of
testing and evaluating these newer Y2K compliant versions. In connection with
the acquisition of accounting applications in prior years unconnected with its
Y2K planning, the Company has already upgraded materially all of its computer
hardware to systems that are Y2K compliant. The Company expects to complete the
implementation of both Y2K compliant accounting and office product software and
related hardware during the second half of 1999. Substantially all Y2K compliant
software upgrades have been provided under the terms of the Company's
maintenance contracts without additional cost. The Company has also
substantially completed inventorying and preparing a risk analysis of other
date-aware systems in its operations that include vessels. As of June 30, 1999,
the Company had expended $0.2 million of an estimated total $0.5 million in
costs necessary to modify its information technology infrastructure to be Y2K
compliant.
The Company's computer systems are not widely integrated with the systems of its
suppliers and customers. A potential Y2K risk attributable to third parties
would be from a temporary disruption in certain materials and services provided
by third parties. Major suppliers have been contacted regarding Y2K compliance,
and the Company has added Y2K compliance requirements to all of its purchasing
contracts.
20
<PAGE>
At present, the Company has not developed a contingency plan to address all
areas of risk associated with Y2K compliance but expects to develop a plan, if
needed, beginning in the third quarter of 1999. The Company is committed to
ensuring that it is fully Y2K ready and believes that, when completed, its plans
will adequately address the above-mentioned risks.
21
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The 1999 Annual Meeting of Stockholders of SEACOR SMIT Inc.
("SEACOR") was held on May 18, 1999 (the "Annual Meeting").
(b) At the Annual Meeting, Messrs. Charles Fabrikant, Granville E.
Conway, Michael E. Gellert, Stephen Stamas, Richard M.
Fairbanks III, Pierre de Demandolx, Antoon Kienhuis, and
Andrew Morse were elected as directors to serve until the 2000
Annual Meeting of Stockholders of SEACOR or until their
respective successors are earlier elected and qualified.
(c) At the Annual Meeting, SEACOR's stockholders ratified the
appointment of Arthur Andersen LLP to serve as SEACOR's
independent auditors for the fiscal year ending December 31,
1999. Messrs. Charles Fabrikant, Granville E. Conway, Michael
E. Gellert, Stephen Stamas, Richard M. Fairbanks III, Pierre
de Demandolx, Antoon Kienhuis, and Andrew Morse were elected.
10,027,704 shares were voted in favor of the election of
Charles Fabrikant with 16,620 shares withheld. 10,027,704
shares were voted in favor of the election of Granville E.
Conway with 16,620 shares withheld. 10,027,704 shares were
voted in favor of the election of Michael E. Gellert with
16,620 shares withheld. 10,027,704 shares were voted in favor
of the election of Stephen Stamas with 16,620 shares withheld.
10,027,704 shares were voted in favor of the election of
Richard M. Fairbanks III with 16,620 shares withheld.
10,027,704 shares were voted in favor of the election of
Pierre de Demandolx with 16,620 shares withheld. 10,027,704
shares were voted in favor of the election of Antoon Kienhuis
with 16,620 shares withheld. 10,027,704 shares were voted in
favor of the election of Andrew Morse with 16,620 shares
withheld. There were no shares voted against the election of
any of the directors. 10,042,324 shares were voted in favor of
the appointment of Arthur Andersen LLP with 400 shares voted
against such appointment and 1,000 withheld.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits:
27.1 Financial Data Schedule.
B. Reports on Form 8-K:
None.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEACOR SMIT INC.
(Registrant)
DATE: AUGUST 13, 1999 By: /s/ Charles Fabrikant
-----------------------------------
Charles Fabrikant, Chairman of the
Board, President and Chief
Executive Officer
(Principal Executive Officer)
DATE: AUGUST 13, 1999 By: /s/ Randall Blank
-----------------------------------
Randall Blank, Executive Vice
President, Chief Financial Officer
and Secretary
(Principal Financial Officer)
23
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE ACCOMPANYING FORM 10-Q AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 154,759
<SECURITIES> 40,064
<RECEIVABLES> 73,791
<ALLOWANCES> 1,870
<INVENTORY> 1,648
<CURRENT-ASSETS> 270,616
<PP&E> 825,145
<DEPRECIATION> 124,079
<TOTAL-ASSETS> 1,217,393
<CURRENT-LIABILITIES> 46,603
<BONDS> 467,712
0
0
<COMMON> 142
<OTHER-SE> 539,145
<TOTAL-LIABILITY-AND-EQUITY> 1,217,393
<SALES> 0
<TOTAL-REVENUES> 68,475
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 41,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,799
<INCOME-PRETAX> 8,931
<INCOME-TAX> 3,081
<INCOME-CONTINUING> 5,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,217
<EPS-BASIC> 0.51
<EPS-DILUTED> 0.51
</TABLE>
