SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
/x/ Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1996
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number 0-28316
Trico Marine Services, Inc.
(Exact name of registrant as specified in its charter)
Delaware 72-1252405
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
610 Palm Street 70364
Houma, Louisiana (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (504) 851-3833
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value per share
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. /x/
The aggregate market value of the voting stock held by non-
affiliates (affiliates being directors, executive officers and holders
of more than 5% of the Company's common stock) of the Registrant at
March 3, 1997 was approximately $301,595,000.
The number of shares of the Registrant's common stock, $0.01 par
value per share, outstanding at March 3, 1997 was 7,766,864.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its 1997 Annual
Meeting of stockholders have been incorporated by reference into Part
III of this Form 10-K.
<PAGE>
TRICO MARINE SERVICES, INC.
ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
PAGE
PART I...................................................................... 1
Items 1 and 2.Business and Properties.................................. 1
Item 3. Legal Proceedings.......................................... 7
Item 4. Submission of Matters To a Vote Of Security Holders........ 8
Item 4A. Executive Officers of The Registrant....................... 8
PART II..................................................................... 9
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters....................................... 9
Item 6. Selected Financial Data................................... 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11
Item 8. Financial Statements and Supplementary Data............... 16
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure....................... 31
Part III.................................................................... 31
Item 10. Directors and Executive Officers of the Registrant........ 31
Item 11. Executive Compensation.................................... 31
Item 12. Security Ownership of Certain Beneficial Owners
and Management............................................ 31
Item 13. Certain Relationships and Related Transactions.......... 31
Item. 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K............................................... 31
SIGNATURES.................................................................. 32
FINANCIAL STATEMENT SCHEDULE............................................... S-1
EXHIBIT INDEX.............................................................. E-1
<PAGE> 1
PART I
Items 1 and 2. Business and Properties
General
Trico Marine Services, Inc. ("Trico" or the "Company") provides a
broad range of marine support services to companies in the oil and gas
industry conducting offshore exploration, production and construction
operations. The Company is a leading operator of support vessels in the
Gulf of Mexico (the "Gulf") and conducts international operations
offshore Brazil. During 1996 Trico acquired 18 supply boats and, in
January 1997, acquired an additional five supply boats and one utility
boat. As a result, Trico is now the second largest owner of supply
boats operating in the Gulf and has a total fleet of 70 vessels,
including 39 supply boats, six lift boats, 15 crew boats and ten line
handling and untility boats. In January 1997, the Company also entered
into a definitive agreement to acquire two additional supply boats in
the second quarter of 1997. The Company believes that the increased
size of its supply boat fleet will enable it to take further advantage
of current levels of supply boat day rates and utilization in the Gulf.
The Company's average supply boat day rate during 1996 was $4,917, a
60.7% increase over the 1995 average rate of $3,060, while the average
utilization rate increased to 94% from 78%. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations." The Company's strategy is to enhance its position as a
leading supplier of marine support services in the Gulf by pursuing
additional opportunities to acquire vessel fleets or single vessels and
diversifying into other international markets where management believes
growth opportunities exist.
All of Trico's vessels are located in the Gulf with the exception
of the nine line handling boats that operate under long-term charters
offshore Brazil. The services provided by Trico's diversified fleet
include transportation of drilling materials, supplies and crews to
offshore facilities and support for the construction, installation,
maintenance and removal of those facilities. Trico has focused on
providing high quality, responsive service while maintaining a low cost
structure. The Company believes the quality of its fleet and the
strength of its experienced management team have allowed the Company to
develop and maintain long-term customer relationships.
The Industry
Marine support vessels are primarily used to transport personnel,
equipment and supplies to drilling rigs and to support the construction
and ongoing operation of offshore oil and gas production platforms. The
principal services provided are the transportation of equipment, fuel,
water and supplies to offshore facilities; transfer of personnel between
shore bases and offshore facilities; provision of work platforms and
cranes for offshore construction and towing services for drilling rigs
and platforms. The principal types of vessels operated by the Company
and its competitors can be summarized as follows:
Supply Boats. Supply boats are generally at least 150 feet in
length and serve drilling and production facilities and support offshore
construction and maintenance work. Supply boats are differentiated from
other types of vessels by cargo flexibility and capacity. In addition
to transporting deck cargo, such as pipe or drummed materials, supply
boats transport liquid mud, potable and drilling water, diesel fuel, dry
bulk cement and dry bulk mud. Accordingly, supply boats which have
large liquid mud and dry bulk cement capacities, as well as large areas
of open deck space, are generally in higher demand than vessels without
those capabilities. However, other characteristics such as
maneuverability, fuel efficiency, anchor handling ability and
firefighting capacity may also be in demand in certain circumstances.
The Company's supply boats range from 165 feet to 220 feet in length.
Crew Boats. Crew boats are generally at least 100 feet in length
and are chartered principally for the transportation of personnel and
light cargo, including food and supplies, to and among production
platforms, rigs and other offshore installations. These boats can be
chartered together with supply boats as support vessels for drilling or
construction operations, and also can be chartered on a stand-alone
basis to support the various requirements of offshore production
platforms. Crew boats are constructed from aluminum, and as a result
generally have useful lives beyond those of steel-hulled supply boats.
Crew boats also provide a cost-effective alternative to airborne
transportation services, and can operate reliably in virtually all types
of weather conditions. Generally, utilization and day rates for crew
boats are more stable than those of other types of vessels because crew
boats are typically used to provide services for production platforms
and construction projects, as well as for exploration and drilling
activities. The majority of the Company's crew boats are the larger
120-foot vessels.
<PAGE> 2
Lift Boats. Lift boats are self-propelled, self-elevating and
self-contained vessels that can efficiently assist offshore platform
construction and well servicing tasks that traditionally have required
the use of larger, more expensive, mobile offshore drilling units or
derrick barges. For example, lift boats can dismantle offshore rigs,
set production facilities and handle a variety of tasks for existing
platform upgrade work. These boats have also been used successfully as
the main work platform for applications such as diving and salvaging,
and have been used as an adjacent support platform for applications
ranging from crew accommodations to full workovers on existing
platforms. Historically, lift boats command higher day rates but
experience lower average utilization rates than other classes of marine
support vessels. Lift boats have different water depth capacities, with
leg lengths ranging from 65 to 200 feet. The Company's lift boats have
leg lengths ranging from 130 to 170 feet, enabling them to operate in
water depths where the majority of the offshore structures currently in
the Gulf are located.
Line Handling Boats. Line handling boats are generally outfitted
with special equipment to assist tankers while they are loading from
single buoy mooring systems. These vessels support oil off-loading
operations from production facilities to tankers and transport supplies
and materials to and between deepwater platforms.
There has been minimal new construction of offshore supply boats
since the early 1980s, resulting in substantial worldwide vessel
attrition over the past ten years as vessels have reached the end of
their useful lives. The number of offshore supply boats available for
service in the Gulf decreased from a peak of approximately 700 in 1985
to approximately 290 at the end of 1996. During the same period, the
number of companies operating supply boats of at least 150 feet in
length decreased from approximately 80 to 17. Recently, however,
several of the Company's competitors have begun to build new specialized
supply boats greater than 200 feet in length and, in some cases, have
remobilized vessels from overseas locations. Although vessels may be
remobilized to the Gulf or converted from alternative uses, management
believes that existing U.S. government regulations, mobilization costs
and overseas opportunities will limit the number of supply boats that
are capable of returning to the Gulf from overseas in the foreseeable
future. However, any new construction or redeployment of existing
vessels to the Company's markets could increase the levels of
competition within this vessel class.
While marine support vessels service existing oil and gas
production platforms as well as exploration and development activities,
incremental vessel demand depends primarily upon the level of drilling
activity, which in turn is related to both short-term and long-term
trends in oil and gas prices. As a result, utilization and day rates
generally correlate to oil and gas prices. The Company's operations are
concentrated in the Gulf, which is one of the largest natural gas
production areas in the United States. Natural gas currently accounts
for approximately 70% of all hydrocarbon production in the Gulf, and as
a result, activity in this region is highly dependent upon natural gas
prices.
Offshore exploration and production activity in Brazil is
concentrated in the deep water Campos Basin, located 60 to 100 miles
from the Brazilian coast. Over 50 fields have been discovered in this
Basin, including an estimated 600 producing offshore oil wells. A
number of fields in the Campos Basin are being produced using floating
production facilities. In addition, exploration activity has expanded
south to the Santos Basin and to the northeastern and northern
continental shelves. The Company believes that the establishment by the
Brazilian government of national requirements for self-sufficiency in
oil production should ensure that the high level of exploration and
production activity of Petrobras, the Brazilian national oil company,
will continue. The Brazilian government's intention to allow foreign
participation in such exploration and production should also result in
additional activity.
<PAGE> 3
The Company's Fleet
Set forth below is the Company's internal allocation of its
charter revenues and charter revenues less direct operating expenses
among vessel classes for each of the periods indicated.
Year ended December 31,
__________________________________________
Charter Revenues: 1996 % 1995 % 1994 %
______ ______ _______ ______ _______ ______
Supply boats $35,723 67% $13,868 52% $13,753 47%
Crew and line-handling boats 9,733 18% 7,735 29% 9,198 32%
Lift boats 7,986 15% 5,054 19% 5,944 21%
_______ ______ _______ ______ ________ ______
$53,442 100% $26,657 100% $28,895 100%
======= ====== ======= ====== ======== ======
Charter Revenues less direct
vessel operating expenses:
Supply boats $23,481 80% $ 6,599 68% $ 6,570 56%
Crew and line-handling boats 2,645 9% 1,945 20% 2,679 23%
Lift boats 3,166 11% 1,125 12% 2,481 21%
________ ______ _______ _____ _______ ______
$29,292 100% $ 9,669 100% $11,730 100%
======== ====== ======= ===== ======== ======
The following table sets forth information regarding the vessels
owned by the Company as of March 1, 1997:
Horse
Supply Boats: Length Power
_____________ ________ _________
Elkhorn River (1) 220' 3000
Stones River 220' 3000
Roe River 211' 4300
Cedar River 195' 2550
Oak River 195' 4000
York River 192' 2250
Big Horn River 191' 4000
Cane River 190' 2200
Hudson River 190' 2500
James River 190' 2200
Red River 187' 2250
Pearl River 187' 2250
Flint River 187' 2250
Buffalo River 185' 2400
Rain River 185' 2200
Elm River 185' 3000
Rush River 185' 3000
Leigh River 185' 2700
Miami River 181' 2200
Savannah River 181' 2200
Maple River 180' 2200
Carson River (1) 180' 2700
Charles River 180' 2200
East River 180' 2700
Diamond River (1) 180' 1950
Madison River (1) 180' 2700
Manatee River 180' 2200
Powder River 180' 2200
Salem River (1) 180' 1950
<PAGE> 4
Horse
Supply Boats: Length Power
_____________ ______ ______
Southern River 180' 3400
Sun River 180' 3500
Truckee River 180' 2200
Wolf River 180' 2200
White River 180' 3500
Ruby River 180' 2200
Big Blue River 180' 2200
Fall River 170' 2200
Llano River 170' 2200
Amite River 166' 1800
Horse
Crew Boats: Length Power
____________ ________ _______
Cimarron River 125' 2700
Battle River 120' 2700
Colorado River 120' 2700
Concord River 120' 2700
Firehole River 120' 2700
Fox River 120' 2293
Green River 120' 2293
Platte River 120' 2700
Ramzi River 120' 2700
Snake River 120' 2700
Whisky River 110' 2700
Cumberland River 110' 2700
Wabash River 105' 2025
Freedom River 105' 2025
American River 100' 2025
Leg
Lift Boats: Length
_____________ ________
Gulf Island I 170'
Gulf Island VIII 170'
Gulf Island VII 145'
Gulf Island IX 145'
Power V 135'
Gulf Island III 130'
Horse
Line Handling Boats (2): Length Power
_________________________ _______ ________
Silver River 125' 1500
Red Fox 116' 1200
Quinn River (1) 115' 1200
Alliance Trader 110' 1200
Alliance Tempest 110' 1200
Fernanda M 110' 1200
Jesse O 110' 1200
Amazon River 110' 1450
Parana River 110' 1450
Walker I (3) 105' 1350
<PAGE> 5
_________________
(1) Acquired by the Company in January 1997. The Elkhorn River, a
180-foot supply boat, is being refurbished and lengthened to 220
feet and will be equipped with added bulk capacity. The Company
expects the vessel to be available for service in the third
quarter of 1997.
(2) All line handling boats, except the Quinn River untility boat, are
located in Brazil and operate under long-term charters with
Petrobras.
(3) The Walker I is owned by the Company's 40%-owned, unconsolidated
Brazilian affiliate.
In 1996, the Company was the successful bidder for a contract to
build and operate an advanced "small water area twin hull" crew boat
(the "SWATH vessel") which will be used to transport up to 250
passengers to offshore platforms for Petrobras, the Brazilian national
oil company, under a five year contract. After successful model tank
tests, construction on the SWATH vessel began in October 1996 with
operations expected to commence in the first quarter of 1998.
All of the Company's lift boats are managed by Power Offshore,
Inc. ("Power Offshore"), a leading operator of lift boats in the Gulf,
pursuant to a management agreement that expires in March 1999. Power
Offshore receives a management fee of 10% of the lift boats' monthly
gross income and is eligible to receive an incentive fee based on a
percentage of the lift boats' net operating income. Total management
and incentive fees paid to Power Offshore cannot exceed 13% of the lift
boats' gross monthly income. The Company is also required to reimburse
Power Offshore for all operating expenses relating to the lift boats,
excluding marketing, general and administrative, and insurance expenses.
In addition, Power Offshore has a right of first refusal if the Company
intends to sell any of the lift boats that are managed by Power Offshore
to a third party.
The Company incurs routine drydock inspection, maintenance and
repair costs under U.S. Coast Guard Regulations and to maintain American
Bureau of Shipping ("ABS") certification for its vessels. In addition
to complying with these requirements, the Company has implemented its
own comprehensive vessel maintenance program which management believes
will help Trico to continue to provide its customers with well
maintained, reliable vessels. The Company incurred approximately $2.3
million in drydocking and marine inspection costs in 1996 and
approximately $2.1 million in 1995.
Properties
The Company leases a 2.0 acre site for its corporate offices and
operating base in Houma, Louisiana and a 1,400 square foot office in
Houston, Texas. In December 1996, the Company acquired for $1.5 million
a 62.5 acre docking and maintenance facility in Houma, Louisiana located
on the intercoastal waterway that provides direct access to the Gulf.
The Company will relocate its Houma operations to this facility in the
second quarter of 1997.
Customers, Charter Terms and Completion
The Company has entered into master service agreements with
approximately 140 of its customers, including a majority of the major
and independent oil companies operating in the Gulf. The majority of
the Company's charters in the Gulf are short-term contracts (60-90 days)
or spot contracts (less than 30 days) and all are cancelable upon short
notice. Because of frequent renewals, the stated duration of charters
frequently has little relationship to the actual time vessels are
chartered to a particular customer. Recently, several of the Company's
customers have expressed increased interest in longer term contracts
(over six months), and the Company has entered into several charters
ranging from six months to three years. All of the Company's vessels
that operate in Brazil do so pursuant to two to five year contracts.
Charters are obtained through competitive bidding or, with certain
customers, through negotiation. The percentage of revenues attributable
to an individual customer varies from time to time, depending upon the
level of exploration and development activities undertaken by a
particular customer, the availability and suitability of the Company's
vessels for the customer's projects, and other factors, many of which
are beyond the Company's control. For the fiscal year ended December
31, 1995, approximately 14% of the Company's total revenues were
received from Vastar Resources, Inc. and approximately 11% from Unocal
Corporation and for the fiscal year ended December 31, 1996,
approximately 10% of the Company's total revenues were received from
Vastar Resources, Inc.
<PAGE> 6
Competition
The Company's business is highly competitive. Competition in the
marine support services industry primarily involves factors such as (i)
price, service and reputation of vessel operators and crews and (ii)
availability and quality of vessels of the type and size needed by the
customer. In the Gulf, the Company competes with both large and small
companies. Although some of the Company's principal competitors are
larger and have greater financial resources, the Company believes that
its operating capabilities and reputation enable it to compete
effectively with other fleets in the markets in which the Company
operates. Certain of the Company's competitors are building new
specialized supply boats greater than 200 feet in length, crew boats
greater than 120 feet in length and lift boats with leg lengths in
excess of 200 feet. Continued new construction of these boats by the
Company's competitors and redeployment of existing vessels to the Gulf
could increase levels of competition within these vessel classes.
Regulation
The Company's operations are materially affected by federal, state
and local regulation, as well as certain international conventions and
private industry organizations. These regulations govern worker health
and safety and the manning, construction and operation of vessels. For
example, the Company is subject to the jurisdiction of the U.S. Coast
Guard, the National Transportation Safety Board, the U.S. Customs
Service and the Maritime Administration of the U.S. Department of
Transportation, as well as private industry organizations such as the
American Bureau of Shipping. These organizations establish safety
criteria and are authorized to investigate vessel accidents and
recommend improved safety standards.
The U.S. Coast Guard regulates and enforces various aspects of
marine offshore vessel operations, such as classification,
certification, routes, drydocking intervals, manning requirements,
tonnage requirements and restrictions, hull and shafting requirements
and vessel documentation. Coast Guard regulations require that each of
the Company's vessels be drydocked for inspection at least twice within
a five-year period. The Company believes it is in compliance in all
material respects with all U.S. Coast Guard Regulations.
Under the Merchant Marine Act of 1920, as amended, the privilege
of transporting merchandise or passengers in domestic waters extends
only to vessels that are owned by U.S. citizens and are built in and
registered under the laws of the U.S. A corporation is not considered a
U.S. citizen unless, among other things, no more than 25% of any class
of its voting securities are owned by non-U.S. citizens. If the Company
should fail to comply with these requirements, during the period of such
noncompliance it would not be permitted to continue operating its
vessels in coastwise trade.
The Company's operations are also subject to a variety of federal
and state statutes and regulations regarding the discharge of materials
into the environment or otherwise relating to environmental protection.
Included among these statutes are the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), the Outer
Continental Shelf Lands Act ("OCSLA") and the Oil Pollution Act of 1990
("OPA").
The Clean Water Act imposes strict controls on the discharge of
pollutants into the navigable waters of the U.S., and imposes potential
liability for the costs of remediating releases of petroleum and other
substances. The Clean Water Act provides for civil, criminal and
administrative penalties for any unauthorized discharge of oil and other
hazardous substances in reportable quantities and imposes substantial
potential liability for the costs of removal and remediation. Many
states have laws which are analogous to the Clean Water Act and also
require remediation of accidental releases of petroleum in reportable
quantities. The Company's vessels routinely transport diesel fuel to
offshore rigs and platforms, and also carry diesel fuel for their own
use. The Company's supply boats transport bulk chemical materials used
in drilling activities, and also transport liquid mud which contains oil
and oil by-products. All offshore companies operating in the U.S. are
required to have vessel response plans to deal with potential oil
spills.
<PAGE> 7
RCRA regulates the generation, transportation, storage and
disposal of onshore hazardous and non-hazardous wastes, and requires
states to develop programs to ensure the safe disposal of wastes. The
Company generates non-hazardous wastes and small quantities of hazardous
wastes in connection with routine operations, and management believes
that all of the wastes that the Company generates are handled in
compliance with RCRA and analogous state statutes.
CERCLA contains provisions dealing with remediation of releases of
hazardous substances into the environment and imposes strict, joint and
several liability for the costs of remediating environmental
contamination upon owners and operators of contaminated sites where the
release occurred and those companies who transport, dispose of or who
arrange for disposal of hazardous substances released at the sites.
Although the Company handles hazardous substances in the ordinary course
of business, the Company's management is not aware of any hazardous
substance contamination for which it may be liable.
OPA contains provisions specifying responsibility for removal
costs and damages resulting from discharges of oil into navigable waters
or onto the adjoining shorelines. Among other requirements, OPA
requires owners and operators of vessels over 300 gross tons to provide
the U.S. Coast Guard with evidence of financial responsibility to cover
the costs of cleaning up oil spills from such vessels. The Company
currently owns and operates 13 vessels over 300 gross tons, for which
satisfactory evidence of financial responsibility has been provided to
the U.S. Coast Guard.
The Company believes it is in compliance in all material respects
with all applicable environmental laws and regulations to which it is
subject. Moreover, operation of Company vessels in foreign territories,
such as the nine line handling vessels which are operating under long-
term charters offshore Brazil, are potentially subject to similar
regulatory controls concerning environmental protection. The Company
believes that compliance with any existing environmental requirements of
foreign governmental bodies will not materially affect the Company's
capital expenditures, earnings, cash flows or competitive position.
Insurance
The operation of the Company's vessels is subject to various
risks, such as catastrophic marine disaster, adverse weather conditions,
mechanical failure, collision and navigation errors, all of which
represent a threat to personnel safety and to Company vessels and cargo.
The Company maintains insurance coverage against certain of these risks,
which management considers to be customary in the industry. The Company
believes that its insurance coverage is adequate and the Company has not
experienced a loss in excess of its policy limits; however, there can be
no assurance that the Company will be able to maintain adequate
insurance at rates which management considers commercially reasonable,
nor can there be any assurance such coverage will be adequate to cover
all claims that may arise.
Employees
As of March 1, 1997, the Company had approximately 550 employees,
including approximately 510 operating personnel and approximately 40
corporate, administrative and management personnel. These employees are
not unionized or employed pursuant to any collective bargaining
agreement or any similar arrangement. The Company believes its
relationship with its employees is satisfactory.
Item 3. Legal Proceedings
The Company is involved in various legal and other proceedings
which are incidental to the conduct of its business. The Company
believes that none of these proceedings, if adversely determined, would
have a material adverse effect on its financial condition, results of
operations or cash flows.
<PAGE> 8
Item 4. Submission of Matters To a Vote Of Security Holders
None.
Item 4A. Executive Officers of The Registrant
The name, age and offices held by each of the executive officers
of the Company as of March 1, 1997 are as follows:
Name Age Position
_________ ________ ___________
Thomas E. Fairley 49 Chairman of the Board, President and
Chief Executive Officer
Ronald O. Palmer 50 Executive Vice President, Director
Victor M. Perez 44 Vice President, Chief Financial
Officer and Treasurer
Kenneth W. Bourgeois 49 Vice President and Controller
Michael D. Cain 48 Vice President, Marketing
Thomas E. Fairley, who co-founded the Company's predecessor with Mr.
Palmer in 1980, has been Chairman of the Board and President of the
Company since October 1993. From 1978 to 1980, Mr. Fairley served as
Vice President of Trans Marine International ("TMI"), an offshore marine
service company and wholly-owned subsidiary of GATX Leasing Corporation
("GATX Leasing"). From 1975 to 1978, Mr. Fairley served as General
Manager of International Logistics, Inc. ("ILI"), a company engaged in
the offshore marine industry. For more than five years prior to joining
ILI, Mr. Fairley held various positions with Petrol Marine Company, an
offshore marine service company.
Ronald O. Palmer has been a director of the Company since October
1993 and Executive Vice President since February 1995. Mr. Palmer
joined Mr. Fairley in founding the Company's predecessor in 1980 and
served as Vice President, Treasurer, and Chief Financial Officer until
February 1995. From 1974 to 1980, Mr. Palmer was employed by GATX
Leasing where he was responsible for the marketing of financial leases
for industrial and marine equipment in eight southwestern states and all
marine activity of TMI in the Gulf.
Victor M. Perez has served as Vice President, Chief Financial
Officer and Treasurer of the Company since February 1995. From 1990 to
1995, Mr. Perez served as Senior Vice President--Corporate Finance of
Offshore Pipelines, Inc. Mr. Perez was Vice President--Investments for
Graham Resources, Inc., from August 1987 to October 1990 and from
January 1976 to August 1987 served as a Vice President with InterFirst
Bank Dallas in its international and energy banking group.
Kenneth W. Bourgeois has served as the Company's Vice President and
Controller since October 1993. Mr. Bourgeois also served as Controller
of the Company's predecessor from December 1981 to October 1993. From
1972 to December 1981, Mr. Bourgeois worked for George Engine Company,
Inc., where he held the position of Assistant Controller and
subsequently, Director of Internal Auditing. From 1969 to 1972, Mr.
Bourgeois was employed by Price Waterhouse & Co. Mr. Bourgeois is a
Certified Public Accountant.
Michael D. Cain has served as the Company's Vice President--
Marketing since February 1993. From 1986 to 1993, Mr. Cain served as
Marketing Manager for the Company's predecessor. Prior to 1986, Mr.
Cain served in the same capacity for Seahorse, Inc., an offshore marine
services company.
<PAGE> 9
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Company's Common stock is listed for quotation on the Nasdaq
National Market under the symbol "TMAR". At March 3, 1997, the Company
had 21 holders of record of common Stock.
The following table sets forth the range of high and low closing
bid prices of the Company's Common Stock as reported by the Nasdaq
National Market for the quarters indicated since the Company's initial
public offering in May of 1996.
High Low
______ ______
1996
Second quarter (commencing May 16, 1996) $ 23 1/2 $ 19 3/4
Third quarter 30 1/2 21 1/4
Fourth quarter 50 29 1/2
1997
First quarter (through March 7, 1997) $ 55 3/8 $ 35 3/4
The Company has never paid cash dividends on its Common Stock.
The Company intends to retain any future earnings otherwise available
for cash dividends on its Common Stock for use in its operations and for
expansion and does not anticipate that any cash dividends will be paid
in the foreseeable future.
<PAGE> 10
Item 6. Selected Financial Data
The following table sets forth selected financial data for the
dates and periods indicated. The financial information for each of the
years ended December 31, 1996, 1995 and 1994 and the two month period
ended December 31, 1993 and as of December 31, 1996, 1995, 1994 and 1993
is derived from the Company's audited consolidated financial statements
and notes thereto. The financial information for the ten month period
ending October 28, 1993 and the year ended December 31, 1992 reflects
operating results for the vessels acquired by the Company from Chrysler
Capital Corporation ("Chrysler") in October 1993. This information
should be read in conjunction with the consolidated financial statements
and notes thereto included elsewhere in this report and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
Year ended December 31,
____________________________________________________________________
Two Ten
months months
ended ended
December 31, October 28,
1996 1995 1994 1993(1) 1993(1) 1992<F1>
________ _________ ________ ____________ ____________ ___________
(Financial data in thousands, except per share amounts)
<S> <S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues $ 53,484 $ 26,698 $ 29,034 $ 6,145 $ 26,871 $ 17,988
Direct operating expenses 29,894 21,972 21,476 3,553 19,974 16,164
Revenues less direct --- --- --- --- ___________ ___________
operating expenses $ 6,897 $ 1,824
Depreciation 4,478 2,740 2,786 502 =========== ===========
_________ _________ _________ ___________
Operating income $ 19,112 $ 1,986 $ 4,772 $ 2,090
========= ========= ========= ===========
Income (loss) before
extraordinary item 10,891 (1,299) 486 846
Extraordinary item net of
taxes (917) --- --- ---
__________ _________ _________ ___________
Net income (loss) $ 9,974 $ (1,299) $ 486 $ 846
========== ========= ========= ===========
Per Share Data:
Income (loss) before $ 1.76 $ (0.43) $ 0.16 $ 0.28
extraordinary item
Extraordinary item, net
of tax (0.15) --- --- ---
_________ __________ _________ ____________
Net income (loss) $ 1.61 $ (0.43) $ 0.16 $ 0.28
========= ========== ========= ============
Balance Sheet Data:
Working capital (deficit) $ 10,073 $ (844) $ 1,550 $ (2,704)
Property and equipment,
net $119,142 $ 39,264 $ 38,508 $ 45,191
Total assets 143,355 52,113 51,419 $ 55,207
Long term debt $ 21,000 $ 36,780 $ 35,452 $ 37,560
Stockholder's equity $103,980 $ 5,712 $ 7,002 $ 6,450
__________________________
(1) Reflects the historical results of operations of the Company for
the two months ended December 31, 1993 and the historical results
of operations for the vessels acquired from Chrysler on October
29, 1993, for the ten months ended October 28, 1993 and for the
year ended December 31, 1992. Accordingly, depreciation,
operating income and net income are not presented for such vessels
because such items would be based on Chrysler's historical cost
and borrowings and are not relevant to the ongoing results of the
Company.
</TABLE>
<PAGE> 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company's results of operations are affected primarily by day
rates and fleet utilization. While marine support vessels service
existing oil and gas production platforms as well as exploration and
development activities, incremental demand depends primarily upon the
level of drilling activity, which in turn is related to both short-term
and long-term trends in oil and gas prices. As a result, trends in oil
and gas prices may significantly affect utilization and day rates. The
Company's day rates and utilization rates are also affected by the size,
configuration and capabilities of the Company's fleet. In the case of
supply boats, the deck space and liquid mud and dry bulk cement capacity
are important attributes. For crew boats, size and speed are important
factors, and in the case of lift boats, longer leg length and greater
crane capacity add versatility and marketability.
During 1996 the Company acquired 18 supply boats for an aggregate
of $66.3 million. In May 1996, the Company acquired four supply boats
for $11.0 million with a portion of the proceeds of the initial public
offering. In September, October and December of 1996, the Company
acquired, in three separate transactions, a total of 13 supply boats
for $55.1 million. These acquisitions, coupled with the acquisition in
March 1996 of the Stones River, which was refurbished, upgraded and
placed into service in March 1997, have increased the Company's supply
boat fleet from 16 at the end of 1995 to 34 at the end of 1996.
Additionally, in January 1997, the Company acquired five supply boats
and one utility boat and executed a definitive agreement to purchase two
additional supply boats for a combined total of $36.2 million. The
Company anticipates closing the acquisition of the two additional
supply boats in the second quarter of 1997.
The Company's operating costs primarily are a function of fleet
size and utilization levels. The most significant direct operating
costs are wages paid to vessel crews, maintenance and repairs and marine
insurance. Generally, increases or decreases in vessel utilization only
affect that portion of the Company's direct operating costs that is
incurred when the vessels are active. As a result, direct operating
costs as a percentage of revenues may vary substantially due to changes
in day rates and utilization.
In addition to these variable costs, the Company incurs fixed
charges related to the depreciation of its fleet and costs for the
routine drydock inspection, maintenance and repair designed to ensure
compliance with U.S. Coast Guard regulations and to maintain ABS
certification for its vessels. Maintenance and repair expense and
marine inspection amortization charges are generally determined by the
aggregate number of drydockings and other repairs undertaken in a given
period. Costs incurred for drydock inspection and regulatory compliance
are capitalized and amortized over the period between such drydockings,
typically two to three years.
<PAGE> 12
Results of Operations
The table below sets forth by vessel class, the average day rates
and utilization for the Company's vessels and the average number of
vessels owned during the periods indicated. The six boats acquired by
the Company in January 1997 and the Stones River are not included in the
financial or operating data for the periods presented below.
Year ended December 31,
____________________________
1996 1995 1994
________ _________ _________
Average vessel day rates:
Supply boats . . . . . . . . . . . . $4,917 $3,060 $3,057
Lift boats . . . . . . . . . . . . 4,995 4,656 5,017
Crew/line handling boats (1)(2) . . 1,579 1,480 1,465
Average vessel utilization rate:
Supply boats . . . . . . . . . . . 94% 78% 77%
Lift boats . . . . . . . . . . . 67% 45% 57%
Crew/line handling boats (1)(2) . . 95% 85% 82%
Average number of vessels:
Supply boats . . . . . . . . . . . 21.2 16.0 16.0
Lift boats . . . . . . . . . . . 6.0 5.9 5.0
Crew/line handling boats(2) . . 23.3 16.8 22.3
__________
(1) Average utilization and day rates for all line handling vessels
reflect the contract rates for the Company's 40%-owned,
unconsolidated Brazilian affiliate.
(2) Includes one line-handling vessel owned by the Company's 40%-
owned, unconsolidated Brazilian affiliate.
Comparison of Year Ended 1996 to Year Ended 1995
Revenues for 1996 were $53.5 million, an increase of 100% compared
to $26.7 million in revenues for 1995. This increase was primarily due
to the expansion in the Company's vessel fleet, both in the Gulf and
offshore Brazil, the strong improvement in average day rates and
utilization for the Company's supply boats, and the increase in
utilization for the Company's lift boats.
In 1996, the Company added 26 vessels to its total fleet. In
March 1996, the Company acquired 8 line handling vessels, including one
vessel owned by the Company's 40%-owned affiliate, that currently
operate under long-term charters offshore Brazil. In May 1996 with the
proceeds from the Company's initial public offering, the Company
acquired four supply boats and in September, October and December 1996,
the Company acquired a total of 13 additional supply boats in three
separate transactions.
All classes of vessels in the Company's fleet reported higher
utilization during 1996 compared to 1995. The greatest increase in
utilization was experienced by the Company's supply boats and lift
boats. Supply boat utilization averaged 94% for 1996, up from 78% for
1995. Average supply boat day rates for 1996 increased 60.7% to $4,917
compared to $3,060 for 1995. These increases reflect strong market
conditions in the Gulf during 1996 and the substantial downtime incurred
in 1995 for the vessel upgrade program, during which three of the
Company's supply boats were lengthened from 165 feet to 180, one was
lengthened from 165 feet to 190 feet, and the boats' capacities for
liquid mud and bulk cargo were increased. Additionally, the Company
rebuilt and lengthened a crew boat which was placed in service late in
1995.
Utilization of the Company's lift boats increased to 67% for 1996,
from 45% during 1995. The lift boats experienced unusually low
utilization in 1995 due to drydocking related downtime and weak market
conditions which existed in the first half of 1995. The Company's lift
boats are operated by Power Offshore, a leading operator of lift boats
in the Gulf. Management and incentive fees payable to Power Offshore in
1996 totaled $979,000 as compared to $468,000 for 1995 due to the
increased revenue and operating income generated by the lift boats.
<PAGE> 13
Utilization of the crew boats and line handling vessels increased
to 95% for 1996, compared to 85% during the same period in 1995, due to
the improved market conditions in the Gulf for crew boats and the
additional eight line handling vessels acquired in March 1996, which
operate under long-term charters offshore Brazil.
During 1996, direct vessel operating expenses increased to $24.2
million from $17.0 million during 1995, due to the expanded vessel fleet
and increased labor, repair and maintenance costs. Due to the increase
in average vessel day rates, direct vessel operating expenses decreased
as a percentage of revenues from 63.6% during 1995 to 45.2% during 1996.
Depreciation expense increased to $4.5 million during 1996 from
$2.7 million for the 1995 period due to the expanded vessel fleet.
Amortization of marine inspection costs increased to $2.2 million during
1996 from $1.9 million for 1995 due to the amortization of increased
drydocking and marine inspection costs.
General and administrative expense increased to $3.3 million
during 1996 from $2.5 million during 1995 due to the additional
personnel needed in connection with the growth in the Company's vessel
fleet and the addition of operations in Brazil. General and
administrative expenses, as a percentage of revenues, decreased from
9.4% during 1995 to 6.1% in 1996 because the increase in revenues and
additions to the vessel fleet did not require proportionate increases in
administrative expenses.
Interest expense decreased to $2.3 million for 1996, from $3.9
million for 1995. The decrease in interest expense was due to a
reduction in the Company's average bank debt outstanding and lower
borrowing costs for the Company in 1996 as compared to 1995. As a
result of the Company's two public offerings of common stock completed
in May and November 1996, respectively, average bank debt outstanding
decreased to $18.5 million for 1996, compared to $26.6 million for 1995.
In 1995 the Company recorded gains on the sales of certain crew boats of
$247,000 versus gains of $50,000 in 1996.
In 1996, the Company had income tax expense of $5.8 million
compared to an income tax benefit of $670,000 in 1995.
As a result of the prepayment of all debt outstanding under the
Company's previous bank credit facility and its subordinated debt in the
second quarter of 1996, the Company recorded an extraordinary charge of
$917,000, net of taxes of $494,000, for the write-off of unamortized
debt issuance costs.
Comparison of Year Ended December 31, 1995 to Year Ended December 31,
1994
The Company's revenues declined 8.0% to $26.7 million in 1995,
compared to $29.0 million in 1994. This decrease was primarily due to a
reduction in the number of total days that the Company's vessels were
available for work due to the Company's capital upgrade program, lower
lift boat utilization and the reduction in the size of the fleet of crew
boats. Total available vessel days, which are the days vessels are
available for charter and not being drydocked, repaired or upgraded,
decreased 12.3% from a total of 14,530 in 1994 to 12,738 in 1995.
During 1995, four of the Company's supply boats were temporarily removed
from service, drydocked and lengthened from 165 feet to 180 feet or
greater as part of the Company's capital upgrade program. Available
vessel days were also reduced by the sale of several small crew boats
during 1994 and 1995 as part of the Company's strategy to focus on
larger, more profitable vessels.
The Company's lift boats experienced unusually low utilization
rates in 1995 due to weather-related downtime from an abnormally large
number of tropical storms and hurricanes which entered the Gulf during
the year. The reduction in the average day rates for the lift boats was
due to the acquisition of a sixth lift boat at the beginning of the
fiscal year which was smaller than other lift boats in the fleet,
thereby commanding a lower day rate. Management and incentive fees paid
to Power Offshore in 1995 decreased to $468,000 from $707,000 paid in
1994 as a result of the lower level of revenues and operating income for
the lift boats during the year.
Direct vessel operating expenses decreased 1.0% from $17.2 million
in 1994 to $17.0 million in 1995 (59.1% and 63.6% of revenues,
respectively). Generally, direct operating expenses do not change in
direct proportion to revenues because vessel day rates may increase or
decrease without corresponding changes in operating expenses. The
decrease in direct vessel operating expenses was due primarily to
decreases in management and incentive fees incurred in connection with
the lift boats and other operating expenses.
<PAGE> 14
Depreciation expense decreased slightly from $2.8 million in 1994
to $2.7 million in 1995, as the capital improvements made on the
Company's vessels and the acquisition of a lift boat at the beginning of
the year were offset by the sale of several vessels in 1994 and 1995.
Amortization of marine inspection costs increased 29.5% in 1995 to $1.9
million from $1.5 million in the prior year due to the increase in
drydocking and marine inspection costs for the year.
General and administrative expenses rose 22.0% from $2.1 million
in 1994 (7.1% of revenues) to $2.5 million (9.4% of revenues) in 1995
because of an increase in administrative and other shore-based personnel
in anticipation of higher activity levels, and personnel required to
support the Company's capital upgrade program and on-going operations.
Interest expense from the Company's bank debt was $2.7 million in
1995 as compared to $2.8 million in 1994, due to lower average bank debt
outstanding of $26.6 million in 1995, as compared to $30.1 million in
1994, and $278,000 in compensation received for the early termination of
an interest rate swap arrangement. While the Company repaid $5.3
million of outstanding indebtedness during the year, additional bank
borrowings of $4.5 million were used to partially fund the Company's
1995 capital upgrade program and the acquisition of a lift boat.
Interest expense on the 9% subordinated notes originally issued by the
Company in October 1993 increased from $1.0 million to $1.1 million. In
1995 the Company had $381,000 in amortization expense for deferred
financing costs, compared to $344,000 in 1994, from the 1993 vessel
acquisition financing.
The Company recorded a $670,000 income tax benefit in 1995, as
compared to a $226,000 income tax expense in 1994 due to the loss before
income taxes for the year.
Liquidity and Capital Resources
Since its initial public offering in May 1996, the Company's
strategy has been to enhance its position as a leading supplier of
marine support services in the Gulf by pursuing opportunities to acquire
vessel fleets or single vessels and by diversifying into international
markets where management believes growth opportunities exist. Proceeds
from the initial public offering improved the Company's financial
condition by enabling the Company to prepay all of its senior debt and
$6.1 million of subordinated debt and to establish a revolving line of
credit with the Company's commercial lenders, which, as amended,
currently provides a $65.0 million line of credit (the "Bank Credit
Facility") that can be used for additional vessel acquisitions, vessel
improvements and working capital. The Company also used proceeds of the
initial public offering to acquire four supply vessels. As part of the
Company's recapitalization completed through its initial public
offering, the Company was also able to convert into common stock the
$7.5 million in subordinated debt not repaid with proceeds of the
offering. In November 1996 the Company completed a second public
offering of common stock, the proceeds of which were used to repay debt
incurred under the Bank Credit Facility to fund a portion of the
purchase price of ten supply boats acquired in September and October
1996. During 1996, the Company acquired a total of 18 supply boats for
$66.3 million.
Funds during 1996 were provided by $48.4 million in net proceeds
from the initial public offering, $31.1 million from the secondary
equity offering, $6.2 million in borrowings prior to the initial public
offering under the Company's previous bank credit facility, $51.5
million in borrowings under the Bank Credit Facility and $15.0 million
in cash provided by operating activities. During the period, the
Company repaid $69.4 million of debt and made capital expenditures
totaling $79.5 million for vessel acquisitions, vessel upgrade projects
and vessel drydocking costs.
The Company's cash provided by operating activities increased by
$8.6 million in 1996 to $15.0 million, compared to $6.4 million for
1995. This increase was due primarily to net income of $10.0 million
compared to a net loss of $1.3 million for last year and a $1.4 million
non-cash extraordinary charge for the writeoff of deferred financing
costs in 1996. This increase was offset in part by an increase in
accounts receivable of $10.1 million.
<PAGE> 15
Capital expenditures in 1996 consisted primarily of $66.3 million
for the acquisition of 18 supply boats in the Gulf, and $4.5 million for
the Company's acquisition of line handling boats and a 40% interest in a
marine operating company in Brazil in March 1996. Other expenditures
consisted primarily of U.S. Coast Guard drydocking and marine inspection
costs of $2.3 million, a portion of the upgrade costs of the Stones
River, a portion of the initial construction costs of the SWATH vessel
and the acquisition of a larger docking and maintenance facility in
Houma, Louisiana to replace a rented facility. The Stones River is a
180-foot supply boat, acquired in March 1996, which was lengthened to
220 feet and outfitted with bulk capacity of 7,800 cubic feet and liquid
mud capacity of 2,300 barrels. This vessel, at an estimated total cost
of $4.5 million, began operations under a long-term charter in March
1997.
In July 1996, the Company entered into the Bank Credit Facility,
which was subsequently increased and now provides a revolving line of
credit up to $65.0 million, which matures in October 2002 and bears
interest at LIBOR plus 1 1/2% per annum (currently approximately 7%),
with a fee of 3/8% per annum on the undrawn portion. The Bank Credit
Facility is collateralized by a fleet mortgage covering a portion of the
Company's vessel fleet and related assets and requires the Company to
maintain certain financial ratios. As of December 31, 1996, the Company
had $21.0 million in outstanding borrowings under the Bank Credit
Facility which were used to fund vessel acquisitions and, in January
1997, borrowed an additional $22.0 million to fund a portion of the
purchase price of five supply boats and one utility vessel.
Capital expenditures in 1997, excluding vessel acquisitions, are
expected to be primarily for the construction or upgrade of vessels
pursuant to previously awarded contracts. In the first quarter of 1997,
the upgrade of the Stones River was completed and it began operations
under a long-term charter. In connection with the acquisition completed
in January 1997, the Company is upgrading one of the acquired vessels,
renamed the Elkhorn River, from 180 to 220 feet and adding a dynamic
positioning system. This vessel will begin a three-year charter
contract for a well stimulation company upon completion of its upgrade
in mid 1997. Additionally, the Company entered into a contract with a
Brazilian shipyard to acquire and complete construction of a 200-foot
supply boat to be used offshore Brazil. The Company also will continue
construction of the SWATH vessel which is expected to be placed into
operation in the first quarter of 1998. The Company plans to obtain
long-term financing for construction of the SWATH vessel through the
Maritime Administration's Title XI ship financing program, for which the
Company has a pending application.
As of March 1, 1997, the Company had $45.5 million of outstanding
borrowings under its $65.0 million Bank Credit Facility. The Company
believes its capital expenditures for 1997 will total approximately
$30.0 million, excluding vessel acquisitions, but including U.S. Coast
Guard drydocking costs and the Company's currently planned vessel
construction and upgrade projects. The Company believes that cash
generated from operations, funds available under the Bank Credit
Facility and funds expected to be raised under the Maritime
Administration's Title XI ship financing program for the SWATH
construction will be sufficient to fund the Company's currently planned
capital projects and working capital requirements. The Company's
strategy, however, is to acquire other vessel fleets or single vessels
as part of an effort to expand its presence in the Gulf and diversify
into selected international markets. To the extent the Company is
successful in identifying such acquisition opportunities, it most likely
will require additional debt or equity financing, depending on the size
of such acquisitions.
<PAGE> 16
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements Page
Report of Independent Accountants....................................17
Consolidated Balance Sheet as of December 31, 1996 and 1995..........18
Consolidated Statement of Operations for the Years Ended December
1996, 1995 and 1994.................................................19
Consolidated Statement of Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994.........................20
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994...............................21
Notes to Consolidated Financial Statements...........................22
<PAGE> 17
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Trico Marine Services, Inc.:
We have audited the accompanying consolidated balance sheet of Trico
Marine Services, Inc. and Subsidiaries (the "Company") as of December
31, 1996 and 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the three years
ended December 31, 1996. 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 audits
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Trico Marine Services, Inc. and Subsidiaries at December 31,
1996 and 1995, and the results of their operations and their cash flows
for the three years ended December 31, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
February 12, 1997
<PAGE> 18
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1996 and 1995
(Dollars in thousands)
ASSETS 1996 1995
Current assets:
Cash and cash equivalents $ 1,047 $ 1,117
Accounts receivable, net 17,409 7,417
Prepaid expenses and other current assets 591 156
________ _______
Total current assets 19,047 8,690
Property and equipment, at cost:
Land and buildings 1,565 -
Marine vessels 120,403 44,257
Construction-in-progress 7,135 346
Transportation and other 853 856
___________ _________
129,956 45,459
Less accumulated depreciation and amortization 10,814 6,195
__________ _________
Net property and equipment 119,142 39,264
__________ _________
Other assets 5,166 4,159
__________ _________
$143,355 $52,113
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,162 $ 3,656
Accrued expenses 3,812 2,878
Current portion of long-term debt - 3,000
__________ _________
Total current liabilities 8,974 9,534
__________ _________
Long-term debt 21,000 23,695
Subordinated debt and accrued interest thereon - 13,085
Deferred income taxes 9,401 87
_________ _________
Total liabilities 39,375 46,401
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 15,000,000
shares authorized, issued 7,836,996 and
3,123,358 shares, outstanding 7,764,964
and 3,051,326 shares at December 31, 1996
and 1995, respectively 78 31
Additional paid-in capital 93,896 5,649
Retained earnings 10,007 33
Treasury stock, at par value, 72,032 shares
at December 31,1996 and 1995, respectively (1) (1)
___________ ________
Total stockholders' equity 103,980 5,712
___________ ________
$143,355 $52,113
=========== =========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 19
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands, except share and per share amounts)
1996 1995 1994
Revenues:
Charter Fees $53,442 $26,657 $ 28,895
Other vessel income 42 41 139
________ _________ ________
Total revenues 53,484 26,698 29,034
________ __________ _________
Operating expenses:
Direct vessel operating expenses 24,150 16,988 17,165
General and administrative 3,277 2,509 2,057
Amortization of marine inspection costs 2,158 1,930 1,490
Other 309 545 764
_________ ____________ _________
Total operating expenses 29,894 21,972 21,476
Depreciation expense 4,478 2,740 2,786
__________ ___________ _________
Operating income 19,112 1,986 4,772
Interest expense 2,282 3,850 3,767
Amortization of deferred financing costs 263 381 344
Gain on sales of assets (59) (244) -
Other income, net (79) (32) (51)
__________ ___________ __________
Income (loss) before income taxes 16,705 (1,969) 712
Income tax expense (benefit) 5,814 (670) 226
__________ ___________ __________
Income (loss) before extraordinary item 10,891 (1,299) 486
Extraordinary item, net of taxes (917) - -
__________ ___________ __________
Net income (loss) $9,974 $(1,299) $ 486
========== =========== ==========
Weighted average common shares outstanding 6,190,451 3,050,521 3,010,285
============ =========== ==========
Primary and fully diluted earnings per share:
Income (loss) before extraordinary item 1.76 (0.43) 0.16
Extraordinary item, net of tax (0.15) - -
____________ ___________ __________
Net income (loss) per average common
share outstanding $1.61 $(0.43) $ 0.16
============ =========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 20
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
Treasury Stock
Common Stock Additional ___________________
________________ Paid-in Retained Par
Shares Dollars Capital Earnings Shares Value
_______ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 3,082,103 $ 31 $ 5,574 $ 846 72,032 $ (1)
Issuance of common stock 36,672 - 66 - - -
Net income - - - 486 - -
_________ _________ _________ _________ ________ _________
Balance, December 31, 1994 3,118,775 31 5,640 1,332 72,032 (1)
Issuance of common stock 4,583 - 9 - - -
Net loss - - - (1,299) - -
_________ _________ _________ _________ ________ _________
Balance, December 31, 1994 3,123,358 31 5,649 33 72,032 (1)
Issuance of common stock 4,142,500 41 79,497 - - -
Debt conversion 467,613 5 7,476 - - -
Stock options exercised 103,525 1 1,274 - - -
Net income - - - 9,974 - -
_________ _________ _________ _________ ________ _________
Balance, December 31, 1996 7,836,996 $ 78 $93,896 $10,007 72,032 $ (1)
========= ========= ========= ========= ======== ==========
Share amounts have been adjusted to reflect a 3.0253-for-1 common stock
split effective April 26, 1996.
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE> 21
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net income (loss) $9,974 $(1,299) $ 486
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization 6,899 5,051 4,620
Deferred income taxes 3,811 (670) 577
Interest on subordinated debt 461 1,117 1,009
Extraordinary item 1,411 - -
Gain on sales of assets (59) (244) -
Provision for doubtful accounts 130 240 240
Equity in loss of affiliate 18 - -
Change in operating assets and liabilities:
Accounts receivable (10,123) 91 (549)
Prepaid expenses and other current assets (435) 25 72
Accounts payable and accrued expenses 3,526 2,327 191
Other, net (661) (227) 20
____________ __________ ___________
Net cash provided by operating
activities 14,952 6,411 6,666
____________ ___________ ___________
Cash flows from investing activities:
Purchases of property and equipment (79,135) (5,343) (379)
Deferred marine inspection costs (2,292) (2,115) (1,792)
Proceeds from sales of assets 439 1,337 3,139
Investment in unconsolidated affiliate (1,293) - -
____________ __________ __________
Net cash provided by (used in)
investing activities (82,281) (6,121) 968
____________ __________ ___________
Cash flows from financing activities:
Proceeds from issuance of common stock 79,726 9 66
Proceeds from issuance of long-term debt
and subordinated debt 57,669 4,517 2,883
Repayment of long-term debt (63,364) (5,305) (9,000)
Deferred financing costs and other (707) (164) (8)
Payments of subordinated debt and accrued
interest thereon (6,065) - -
__________ __________ ___________
Net cash provided by (used in)
financing activities 67,259 (943) (6,059)
____________ ___________ ___________
Net increase (decrease) in cash and
cash equivalents (70) (653) 1,575
Cash and cash equivalents at beginning
of period 1,117 1,770 195
___________ ___________ ___________
Cash and cash equivalents at end of period $1,047 $1,117 $ 1,770
=========== =========== ===========
Supplemental information:
Income taxes paid $ 6 $ 2 $ 396
========== ========== ==========
Income taxes refunded $ - $ 330 $ 38
========== ========== ==========
Interest paid $4,737 $2,865 $ 2,079
========== ========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE> 22
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation:
______________________
Trico Marine Services, Inc. (the "Company") commenced operations
on October 29, 1993 at which time it acquired a wholly-owned
subsidiary of the Company, Trico Marine Assets, Inc. ("Trico
Assets"). Trico Assets purchased a fleet of 49 vessels including
forty supply and crew boats, five lift boats, and four other
vessels, including a tug and a barge from Marine Asset Management
Corporation, a wholly-owned subsidiary of Chrysler Capital
Corporation, pursuant to a Purchase Agreement dated as of October
29, 1993. Concurrently, the Company acquired 100% of the common
stock of Trico Marine Operators, Inc.
The Company is engaged in the ownership and operation of a
diversified fleet that, as of December 31, 1996, includes 34
supply boats, 6 lift boats, 15 crew boats, and 9 other specialty
service vessels, providing support services to the offshore oil
and gas industry primarily in the Gulf of Mexico and offshore
Brazil. The Company's financial position, results of operations
and cash flows are affected primarily by day rates and fleet
utilization in the Gulf of Mexico which primarily depend on the
level of drilling activity, which ultimately is dependent upon
both short-term and long-term trends in oil and natural gas
prices.
2. Summary of Significant Accounting Policies:
__________________________________________
Consolidation Policy
The consolidated financial statements of the Company include the
accounts of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The
Company's 40% interest in Walker Servicos Maritimos, Ltd.
("Walker") is accounted for using the equity method.
Cash and Cash Equivalents
All highly liquid debt instruments with original maturity dates of
less than three months when purchased are considered to be cash
equivalents.
Property and Equipment
Marine vessels, transportation and other equipment are stated at
cost. Depreciation for financial statement purposes is provided on
the straight-line method, assuming 10% salvage value for marine
vessels. Marine vessels are generally depreciated over a useful
life of fifteen years from the date of acquisition. Major
modifications which extend the useful life of marine vessels are
capitalized and amortized over the adjusted remaining useful life
of the vessel.
Maintenance and repair cost is charged to expense as incurred.
When marine vessels or equipment are sold or otherwise disposed
of, their cost and the accumulated depreciation are removed from
the accounts and any gain or loss is recognized. Marine vessel
spare parts are stated at average cost.
Drydocking expenditures in conjunction with marine inspections are
capitalized and amortized on a straight-line basis over the period
to be benefited (generally 24 to 36 months).
Income Taxes
The Company accounts for income taxes using the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Deferred income taxes are provided
at the currently enacted income tax rates for the difference
between the financial statement and income tax bases of assets and
liabilities.
<PAGE> 23
2. Summary of Significant Accounting Policies, continued:
_____________________________________________________
Revenue and Expense Recognition
Charter revenue is earned and recognized on a daily rate basis.
Operating costs are expensed as incurred.
Deferred Financing Costs
Deferred financing costs include costs associated with the
issuance of the Company's debt and are being amortized on the
effective interest method over the life of the related debt
agreement.
Goodwill
Goodwill, or cost in excess of net assets of companies acquired,
is amortized over 10 years by the straight-line method. The
Company continually evaluates the recoverability of this
intangible asset by assessing whether the amortization of the
goodwill balance over its remaining life can be recovered through
expected future cash flows.
Direct Vessel Operating Expenses
Direct vessel operating expenses principally include crew costs,
insurance, repairs and maintenance, management fees, and casualty
losses.
Earnings Per Share
The Company's earnings per share has been calculated using the
weighted average number of shares of common stock and dilutive
common stock equivalents outstanding during the year. Stock
options are considered to be common stock equivalents. Weighted
average options of 668,009 were included as common stock
equivalents for the year ended December 31, 1996. Common stock
equivalents during the years ended December 31, 1995 and 1994 had
no material dilutive effect on net income per average common
share.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Stock Split
On April 26, 1996, the Company's Board of Directors approved a
3.0253-for-1 split of the Company's common stock in the form of a
stock dividend. The financial statements have been restated to
reflect all effects of this stock split, including all share
amounts and per share data.
Reclassifications
Certain prior-period amounts have been reclassified to conform
with the presentation shown in the current year's financial
statements. These reclassifications had no effect on net income
(loss), total stockholders' equity or cash flows.
<PAGE> 24
3. Public Offerings of Common Stock:
________________________________
In May 1996, the Company completed an initial public offering of
3,292,500 shares of common stock, $.01 par value. The proceeds
received from the offering were $48,394,000, net of underwriting
discounts and other costs of $4,286,000. Of the proceeds, the
Company used $31,150,000 to repay senior debt, $6,065,000 to repay
subordinated debt and $11,000,000 to acquire four supply vessels.
The balance of the proceeds was used by the Company for additional
working capital.
In November 1996, the Company completed a second offering that
included the issuance of 850,000 shares of common stock, $.01 par
value, by the Company. The proceeds from the offering were
$31,144,000, net of underwriting discounts and other costs of
$2,006,000. The proceeds were used to repay $30,500,000 of the
Company's revolving line of credit, with the balance of the
proceeds used for working capital and other purposes.
4. Accounts Receivable:
____________________
The Company's accounts receivable, net consists of the following
at December 31, 1996 and 1995 (in thousands):
1996 1995
Trade receivables, net of allowance
for doubtful accounts of $610 and $480
in 1996 and 1995, respectively $16,172 $ 6,975
Insurance and other 1,237 442
________ ________
Accounts receivable, net $17,409 $ 7,417
======== ========
The Company, as agent, bills trade accounts receivables on behalf
of the vessels it operates under agreements with third parties. As
of December 31, 1996, the Company operated one utility vessel for
a third party. The Company's receivables are primarily due from
entities operating in the oil and gas industry in the Gulf of
Mexico and Brazil and are dollar denominated.
5. Other Assets:
_____________
The Company's other assets, net consists of the following at
December 31, 1996 and 1995 (in thousands):
1996 1995
Deferred marine inspection costs, net
of accumulated amortization of $3,335
and $1,459 in 1996 and 1995,respectively $ 2,667 $ 2,378
Deferred financing costs, net of accumulated
amortization of $28 and $785 in 1996 and
1995, respectively 205 1,104
Marine vessels spare parts 939 386
Goodwill, net of accumulated amortization
of $43 in 1996 664 -
Investment in and advances to unconsolidated
subsidiary 568 -
Other 123 291
_________ ________
Other assets, net $5,166 $4,159
========= ========
<PAGE> 25
6. Long-Term Debt and Subordinated Debt:
____________________________________
The Company's long-term debt and subordinated debt consist of the
following at December 31, 1996 and 1995 (in thousands):
1996 1995
Revolving loan, interest at a base interest
rate plus a margin, as defined, on
the date of borrowing (weighted average
rate of 7.089% and 10.25% at
December 31, 1996 and 1995, respectively)
payable at the end of the interest period
or quarterly, principal due October 8, 2002 $21,000 $ 800
Term loan A, interest at a base interest
rate plus 1.75% (10.25% at
December 31, 1995) - 21,195
Term loan B, interest at a base rate
plus 2.75% (11.25% at December 31,1995) - 4,700
________ _________
21,000 23,695
Less current maturities - (3,000)
_________ _________
23,695
9% Subordinated Notes and accrued interest
thereon, due March 31, 2001 - 13,085
_________ _________
$21,000 $36,780
========= =========
On October 29, 1993 the Company entered into a revolving credit
and term loan agreement with The First National Bank of Boston
(the "Credit Agreement"). Availability under the revolving loan
was based on the Company's accounts receivable and was limited to
$4 million during 1994 and was to be reduced by $1 million at both
December 31, 1995 and 1996. On December 30, 1994, the Company
amended its Credit Agreement ("First Amendment"). Availability
under the First Amendment was increased to $6 million, with a
reduction of $2 million effective June 29, 1995 at which time
the Company had the right to convert the revolving loan into its
Term Loan B. Principal repayments of the Term Loans A and B and
the revolving credit were also extended. The Company incurred a
commitment fee of 0.5% per annum on the unused amount.
Substantially all of the Company's assets served as collateral for
the Credit Agreement.
Effective June 28, 1995, the Company amended its Credit Agreement
("Second Amendment") to establish $5 million of availability under
the revolving credit loan and extend principal payments. Under
the Second Amendment, the Company had the right to convert $2
million of outstanding amounts under the revolving credit loan
into its Term Loan B. The Company converted $1.7 million of its
outstanding revolving credit loan into its Term Loan B in November
1995 and $300,000 of amounts outstanding under the revolving
credit loan were converted into its Term Loan B in January 1996.
Effective March 6, 1996, the Company amended its Credit Agreement
("Third Amendment") to provide for an increased total credit
facility, extend principal payments and restructure other portions
of the Credit Agreement. The Third Amendment contained a
revolving credit facility and term loan provisions. The $3
million revolving credit facility, which would have matured in
July 1997, bore interest at 1.75% above a base rate. The Third
Amendment contained $33,000,000 of term loans in three separate
tranches which all bore interest at 1.75% above a base rate.
Concurrent with the Third Amendment, the Company also amended its
Subordinated Notes agreement whereby the maturities of its 9%
Subordinated Notes and accrued interest thereon were extended to
March 31, 2001. Concurrent with the Company's initial public
offering in May 1996, the Company converted $7,482,000 of the 9%
Subordinated Notes into 467,613 shares of common stock.
The outstanding principal balance of the Credit Agreement of
$31,150,000 was repaid on May 21, 1996, together with a prepayment
fee of $75,000, from the proceeds of the Company's initial public
offering of common stock. The balance of $6,065,000 of the 9%
Subordinated Notes and accrued interest thereon was also retired
with proceeds from the initial public offering. As a result of
the prepayment of all of the Company's senior and subordinated
debt, the Company recorded an extraordinary charge of $917,000,
net of taxes of $494,000, for the write-off of the unamortized
balance of related debt issuance costs.
<PAGE> 26
6. Long-Term Debt and Subordinated Debt, continued:
_______________________________________________
Effective July 26, 1996, the Company executed a new $30,000,000
revolving credit agreement (the "Bank Credit Facility") with the
same group of lenders that provided the Company's previous Credit
Agreement which was prepaid on May 21, 1996 with proceeds from the
initial public offering. The Bank Credit Facility was increased
to $35,000,000 effective August 26, 1996 and to $50,000,000
effective October 8, 1996. The Bank Credit Facility bears
interest at LIBOR plus 1-1/2% per annum with a commitment fee of
3/8% per annum on the undrawn portion. The Bank Credit Facility
also provides for interest payments only until October 8, 1998
when all outstanding amounts under the Bank Credit Facility will
be converted into a term loan. Upon conversion, principal and
interest payments will be due quarterly beginning December 31,
1998 until maturity on October 8, 2002. The Bank Credit Facility
is collateralized by certain of the Company's vessels and related
assets. The Bank Credit Facility contains certain covenants which
require the Company to maintain certain debt coverage ratios and
net worth levels, limit capital expenditures and prohibit equity
distributions.
In order to minimize floating interest rate risk, the Company
entered into the following agreements. During 1993, the Company
purchased an interest rate swap on a notional amount of $10
million. Under the swap, the Company received a floating interest
rate based on the Company's Term Loan A interest rate and paid a
fixed rate of 8.25% with quarterly interest settlements. The
agreement was terminated in January 1995 and the Company received
$278,000 as compensation for the early termination of its interest
rate swap which was amortized into interest expense over the
remaining original life of the swap. Concurrent with the
termination of the above swap, the Company paid $125,000, which
has been amortized to interest expense over the two year life of
the agreement, to enter into an interest rate corridor agreement
on a notional amount of $15 million.
7. Income Taxes:
____________
The components of income tax expense (benefit) of the Company for
the periods ended December 31, 1996, 1995 and 1994, are as follows
(in thousands):
1996 1995 1994
Current income taxes:
U.S. federal income taxes $ 1,505 $ - $ (317)
State income taxes 4 - (34)
Deferred income taxes:
U.S. federal income taxes 3,713 (667) 572
State income taxes 98 (3) 5
__________ __________ _________
$ 5,320 $ (670) $ 226
========== ========== =========
<PAGE> 27
7. Income Taxes, continued:
_______________________
The Company's deferred income taxes at December 31, 1996 and 1995
represent the tax effect of the following temporary differences
between the financial reporting and income tax accounting bases of
its assets and liabilities (in thousands):
1996 1995
Accumulated depreciation and amortization $15,108 $7,811
P&I insurance reserves (680) (474)
Alternative minimum tax credit carryforwards (451) (29)
Net operating loss carryforward (5,199) (7,300)
Other (257) 79
__________ __________
Deferred income tax liability, net $ 8,521 $ 87
========== ==========
Reconciling items which represent the difference between income
taxes computed at the Federal statutory tax rate and the provision
for income taxes are primarily the result of state income taxes.
A tax benefit for the exercise of stock options in the amount of
$1,088,000 that was not included in income for financial reporting
purposes was credited directly to additional paid-in capital.
The net operating loss carryforwards for Federal and state tax
purposes are approximately $14.8 million and $1.4 million
respectively and begin to expire in 2009. The Company had an
initial public offering in May 1996, which is considered a change
of control for federal income tax purposes. This will limit the
utilization of net operating loss carryforwards to a set level as
provided by regulations.
8. Common Stock Option Plans:
_________________________
Pursuant to the Company's 1993 Stock Option Plan, the Company is
authorized to grant incentive and nonqualified stock options to
selected officers and other key employees of the Company. The
Compensation Committee of the Board of Directors has the
discretionary authority, subject to certain plan specifications,
to determine the amounts and other terms of such stock options.
Options to purchase 576,244 shares of the Company's common stock
were granted to officers and key members of management of the
Company on October 29, 1993 at $1.82 per share, the original
purchase price of the common stock, and accordingly, no expense
was recognized. Options to purchase 151,265 shares of the
Company's common stock were granted to an officer of the Company
on February 22, 1995 at the October 29, 1993 original cost of the
common stock, which was determined by the Board of Directors to be
the fair market value of the Company's stock at that time, and
accordingly, no expense was recognized. In April 1996, the
Company modified its 1993 Stock Option Plan to include a provision
for the 140,459 options not already containing a provision to
become exercisable at the consummation of an "Initial Public
Offering" to become exercisable upon such a transaction.
Pursuant to the Company's 1996 Incentive Compensation Plan,
options to purchase 104,875 shares of the Company's common stock
have been granted to officers, key members of management and
certain long-term employees at exercise prices equal to the fair
value of the Company's stock at that time, which ranged from
$16.00 to $21.88 per share. Options to purchase 103,000 shares
vested and became exercisable upon the attainment of certain
performance goals during the year. Of the remaining options, 468
vested and were exercisable at the date of grant with 469 options
vesting and becoming exercisable in each of the next three years.
All options expire no later than ten years from the date of grant.
As of December 31, 1996, 1995 and 1994, 727,452, 90,039 and
45,020, respectively of the option shares were exercisable;
options for 103,525 shares were exercised in 1996. None were
exercised in 1995 or 1994.
<PAGE> 28
8. Common Stock Option Plans, continued:
____________________________________
The Company applies APB Opinion 25 and related interpretations in
accounting for its Stock Option Plans. In 1995, the Financial
Accounting Standards Board issued SFAS No. 123 "Accounting for
Stock-Based Compensation" ("SFAS 123") which, if fully adopted by
the Company, would change the methods the Company applied in
recognizing the cost of the Stock Option Plans. Adoption of the
cost recognition provisions of SFAS 123 is optional and the
Company has decided not to elect these provisions of SFAS 123.
However, pro forma disclosures as if the Company adopted the cost
recognition provisions of SFAS 123 in 1995 are required by SFAS
123 and are presented below:
As Reported Pro Forma As Reported Pro Forma
12/31/96 12/31/96 12/31/95 12/31/95
SFAS 123 Charge $ - $ 628 $ - $ 8
APB 25 Charge $ - $ - $ - $ -
Net income (loss) $ 9,974 $9,560 $(1,299) $(1,304)
Net income (loss) per $ 1.61 $ 1.54 $ (0.43) $ (0.43)
average common share
9. Other Related Party Transactions:
_________________________________
Pursuant to an agreement effective October 29, 1993, Berkshire
Partners was entitled to receive $16,666 each month for five years
for providing certain management and other consulting services
(the "Berkshire Agreement"). The Berkshire Agreement was
automatically renewable on an annual basis after the initial five
year period upon agreement of the parties. The Berkshire
Agreement was terminated upon the successful completion of the
Company's initial public offering in May 1996.
During December 1994, the Company appointed two independent
directors. These two directors purchased 36,672 shares of the
Company's common stock at the original cost of the common stock
which was determined by the Board of Directors to be the fair
market value of the Company's stock at that time. The two
directors also each purchased approximately $67,000 of the
Company's 9% Subordinated Notes.
During February 1995, an officer of the Company purchased 4,583
shares of the Company's common stock at the original cost of the
common stock and approximately $17,000 of the Company's 9%
Subordinated Notes.
10. Profit Sharing Plan:
___________________
The Company has a defined contribution profit sharing plan that
covers substantially all employees who qualify as to age and
length of service. As of January 1, 1995, the Company included
401(k) provisions in this plan. In 1996 and 1995, the Company's
contributions to the plan were based on one quarter of the first
five percent of participant contributions plus a discretionary
amount. In 1994, the Company's contribution was discretionary.
The Company expensed contributions to the plan for the years
ended December 31, 1996, 1995 and 1994 of $113,000, $66,000 and
$60,000, respectively.
11. Commitment and Contingencies:
____________________________
Effective October 29, 1993, Trico Assets entered into an agreement
with an unrelated company to provide management and operating
services for certain lift boats. The agreement provides for
management and incentive fees to be paid to the unrelated company
based on percentages of gross monthly income and net operating
income, respectively. Management fees of $979,000, $468,000 and
$707,000 were included in direct vessel operating expenses for the
years ended December 31, 1996, 1995 and 1994, respectively.
Pursuant to the agreement, the operator has been granted a right
of first refusal on any sale of the lift boats.
<PAGE> 29
11. Commitment and Contingencies, continued:
_______________________________________
In the ordinary course of business, the Company is involved in
certain personal injury, pollution and property damage claims and
related threatened or pending legal proceedings. Management,
after review with legal counsel and insurance representatives, is
of the opinion these claims and legal proceedings will be settled
within the limits of the Company's insurance coverages. At
December 31, 1996 and 1995, the Company has accrued a liability in
the amount of $1,963,000 and $1,570,000, respectively, based upon
the insurance deductibles that management believes it may be
responsible for paying in connection with these matters. The
amounts the Company will ultimately be responsible for paying in
connection with these matters could differ materially in the near
term from amounts accrued.
On August 15, 1996, the Company entered into a five year contract
with Petroleo Brasileiro S.A. ("Petrobras"), to build and operate
an advanced "small water area twin hull" crew boat (the "SWATH
vessel") which will be used to transport personnel to offshore
platforms. On October 7, 1996, the Company entered into an
agreement with a shipyard to construct the SWATH vessel. In
addition, the Company is refurbishing and upgrading two additional
supply vessels. The total cost of the three vessels, including
equipment provided by the Company, is expected to be approximately
$20,900,000. The Company expects the supply vessels to be
completed and operations to commence in the first and third
quarters of 1997. The Company expects the SWATH vessel to
commence operations in the first quarter of 1998.
12. Fair Value of Financial Instruments:
___________________________________
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments."
The estimated fair value amounts have been determined by the
Company using available market information and valuation
methodologies described below. However, considerable judgment is
required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein may not
be indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions
or valuation methodologies may have a material effect on the
estimated fair value amounts.
The carrying amounts of cash and cash equivalents approximate fair
value due to the short-term nature of these instruments. The
carrying amount of the revolving credit loan approximates fair
value because it bears interest rates currently available to the
Company for debt with similar terms and remaining maturities. At
December 31, 1995, it was not practicable to estimate the fair
value of the subordinated debt and accrued interest thereon since
quoted prices are not readily available and valuation techniques
would not be practicable due to the subordination and uncertainty
regarding timing of repayment.
13. Vessel Acquisitions:
____________________
On March 15, 1996, the Company acquired seven line handling
vessels and a 40% interest in Walker, a marine operating company
located in Brazil, for a combined price of $4,200,000. Walker
owns an eighth line handling vessel and operates it and the seven
other acquired vessels under long-term contracts with a customer
located in Brazil. The acquisition has been accounted for by the
purchase method of accounting. Of the purchase price, $3,565,000
has been allocated to the acquired vessels based upon their
relative fair value, $270,000 has been allocated to the Company's
investment in the stock of Walker with the remaining $365,000
allocated to goodwill. In addition to the purchase price above,
$300,000 of contingent purchase price was paid on August 27, 1996
based upon the attainment by the Company of a certain contract to
provide offshore marine services in Brazil. This amount has been
recorded as additional goodwill.
<PAGE> 30
13. Vessel Acquisitions, continued:
______________________________
On May 22, 1996, the Company acquired for $11,000,000 all of the
outstanding capital stock of HOS Marine Partners, Inc. ("HOS"), a
special purpose company whose sole assets consist of four supply
vessels. In addition to the purchase price, the Company
recognized, in accordance with Statement of Financial Accounting
Standards No. 109, a deferred income tax liability of $5,780,000
for the deferred tax consequences of the differences between the
assigned values and the tax bases of the assets owned by HOS. The
acquisition was accounted for using the purchase method of
accounting and the results of operations from the date of
acquisition are included on the accompanying consolidated
financial statements.
On September 30, 1996, the Company acquired from subsidiaries of
OMI Corp. three supply vessels for $11,600,000. The Company
borrowed $10,000,000 under the Bank Credit Facility to fund a
portion of the purchase.
On October 10, 1996, the Company acquired from Kim Susan, Inc. and
affiliated companies seven supply vessels for approximately
$32,000,000. The Company borrowed $30,500,000 under the Bank
Credit Facility to fund a portion of the purchase.
In December 1996, the Company purchased three supply vessels from
a subsidiary of SEACOR Holdings, Inc. for $11,450,000 in cash.
The acquisition was funded with borrowings under the Bank Credit
Facility and cash generated from operations.
14. Quarterly Financial Data (Unaudited):
____________________________________
First Second Third Fourth
Year ended December 31, 1996
(Dollars in thousands, except
per share amounts)
Revenues $ 8,384 $ 11,111 $ 13,390 $ 20,599
Operating income 1,678 3,165 5,000 9,269
Income before extraordinary item 364 1,618 3,218 5,691
Extraordinary item - (917) - -
Net income 364 701 3,218 5,691
Income per average common share
before extraordinary item 0.12 0.29 0.43 0.72
Extraordinary item, net of tax - (0.16) - -
Net income per average common share
outstanding 0.12 0.13 0.43 0.72
Year ended December 31, 1995
(Dollars in thousands, except per share amounts)
Revenues $ 6,360 $ 5,792 $ 6,763 $ 7,783
Operating income (loss) (38) (234) 818 1,440
Net income (loss) (671) (703) (129) 204
Net income (loss) per average common
share outstanding (0.22) (0.23) (0.04) 0.07
15. Subsequent Events:
__________________
In January 1997, the Company entered into agreements with two
companies to acquire seven supply vessels and one utility vessel
for $36,200,000. The first transaction for the acquisition of
five of the supply vessels and the utility vessel was completed on
January 31, 1997, with the Company borrowing $22,000,000 under the
Bank Credit Facility to fund a portion of the purchase price. The
Company expects the acquisition of the other two supply vessels to
be completed in the second quarter of 1997. The Company will
borrow under its Bank Credit Facility to fund a portion of the
purchase price.
Effective February 7, 1997, the Company increased its Bank Credit
Facility to $65,000,000.
<PAGE> 31
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the Company's directors and officers called
for by this item will be included in the Company's definitive Proxy
Statement prepared in connection with the 1997 Annual Meeting of
stockholders and is incorporated herein by reference.
Item 11. Executive Compensation
Information concerning the compensation of the Company's
executives called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 1997 Annual
Meeting of stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information concerning security ownership of certain beneficial
owners and management called for by this item will be included in the
Company's definitive Proxy Statement prepared in connection with the
1997 Annual Meeting of stockholders and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related
transactions called for by this item will be included in the Company's
definitive Proxy Statement prepared in connection with the 1997 Annual
Meeting of stockholders and is incorporated herein by reference.
Item. 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K
(a) The following financial statements, schedules and exhibits are
filed as part of this Report:
(1) Financial Statements. Reference is made to Item 8 hereof.
(2) Financial Statement Schedule for the years ended December
31, 1996, 1995 and 1994.
Report of Independent Accountants on Financial
Statement Schedule
Schedule II -- Valuation and Qualifying Accounts
(3) Exhibits. See Index to Exhibits on page E-1. The Company
will furnish to any eligible stockholder, upon written request of such
stockholder, a copy of any exhibit listed upon the payment of a
reasonable fee equal to the Company's expenses in furnishing such
exhibit.
(b) Reports on Form 8-K:
The Company filed current reports on Form 8-K under Items 2 and 7
on each of December 11, 1996, October 22, 1996 and October 10, 1996.
There were no financial statements filed with any of these current
reports on Form 8-K.
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
TRICO MARINE SERVICES, INC.
(Registrant)
By: /s/ Thomas E. Fairley
______________________________
Thomas E. Fairley
Chairman of the Board, President
and Chief Executive Officer
Date: March 11, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
_________ ______ _____
/s/ Thomas E. Fairley Chairman of the Board, President March 11, 1997
_______________________ and Chief Executive Officer
Thomas E. Fairley (Principal Executive Officer)
/s/ Ronald O. Palmer Executive Vice President, Director March 11, 1997
_______________________
Ronald O. Palmer
/s/ Victor M. Perez Vice President, Chief Financial March 11, 1997
_____________________ Officer and Treasurer
Victor M. Perez (Principal Financial Officer)
/s/ Kenneth W. Bourgeois Vice President and Controller March 11, 1997
________________________ (Principal Accounting Officer)
Kenneth W. Bourgeois
/s/ Garth H. Greimann Director March 11, 1997
________________________
Garth H. Greimann
/s/ H.K. Acord Director March 11, 1997
_______________________
H. K. Acord
/s/ Benjamin F. Bailar Director March 11, 1997
________________________
Benjamin F. Bailar
/s/ Edward C. Hutcheson, Jr. Director March 11, 1997
___________________________
Edward C. Hutcheson, Jr.
<PAGE> S-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Trico Marine Services, Inc.
Our report on the consolidated financial statements of Trico Marine
Services, Inc. and Subsidiaries is included in Item 8 of this Form 10-K.
In connection with our audits of such financial statements, we have also
audited the related financial statement schedule listed in Item 14(a) of
this Form 10-K. This financial statement schedule is the responsibility
of the Company's management.
In our opinion, this financial schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
New Orleans, Louisiana
February 12, 1997
<PAGE> S-2
Schedule II
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
for the years ended December 31, 1996, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
___________________________________________________________________________________
Column A Column B Column C Column C Column D Column E
Balance Charged
at to costs Charged Balance at
beginning and to other end of
Description of period expenses accounts Deductions period
___________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
1996
Deducted in balance
sheet from
accounts
receivable:
Allowance for
doubtful
accounts - trade $480 $130 - - $610
=============================================================
1995
Deducted in balance
sheet from
accounts
receivable:
Allowance for
doubtful
accounts - trade $240 $240 - - $480
============================================================
1994
Deducted in balance
sheet from
accounts
receivable:
Allowance for
doubtful
accounts - trade $ - $240 - - $240
===========================================================
Allowance for
doubtful accounts -
billed as agent $514 - - $514(1) $ -
(1)Allowance for doubtful accounts - billed as agent is for receivables
billed as agent for third parties. Amount is due to the purchase of
Trico Marine Operators, Inc., a wholly-owned subsidiary. Deduction
of amount was borne by the previous owners of the vessels.
</TABLE>
<PAGE> E-1
TRICO MARINE SERVICES, INC.
EXHIBIT INDEX
EXHIBIT SEQUENTIALLY
NUMBER NUMBERED PAGES
- ------- --------------
3.1 Certificate of Incorporation of the Company. (1)
3.2 Bylaws of the Company. (2)
4 Specimen Common Stock Certificate. (2)
10.1 Form of Indemnity Agreement by and between the Company
and each of the Company's directors. (2)
10.2 Revolving Credit Agreement among Trico Marine Operators, Inc.
Trico Marine Assets, Inc., Trico Marine Services, Inc. and
The First National Bank of Boston, Hibernia National Bank,
and First National Bank of Commerce as Banks and The First
National Bank of Boston, as Agent dated as of July 26, 1996
("Revolving Credit Agreement"). (3)
10.3 Amendment No. 1 dated as of August 26, 1996 to the Revolving
Credit Agreement. (4)
10.4 Amendment No. 2 dated as of September 25, 1996 to the
Revolving Credit Agreement. (4)
10.5 Amendment No. 3 dated as of October 8, 1996 to the Revolving
Credit Agreement. (4)
10.6 Amendment No. 4 dated to the Registrant's Credit Agreement
dated February 7, 1997. (5)
10.7 Sale and Purchase Agreement by and between Ensco Offshore
Company and Trico Marine Assets, Inc. dated October 11, 1996
relating to Houma, Louisiana docking and maintenance
facility. (6)
10.8 Vessel Purchase Agreement dated as of August 1, 1996 among
Trico Marine Assets, Inc. and Kim Susan, Inc., K&B Boat
Rentals, Fagan Boat Services, Inc. (4)
10.9 Management and Operating Agreement dated as of October 28,
1993 by and among Power Offshore Services, Inc., Trico
Marine Operators, Inc. and Trico Marine Assets, Inc. As
amended. (2)
10.10 The Company's 1996 Incentive Compensation Plan. (2)
10.11 The Company's 1993 Stock Option Plan. (2)
10.12 Form of Stock Option Agreement under the 1993 Stock Option
Plan. (2)
10.13 Form of Option Agreement under the 1996 Incentive
Compensation Plan. (2)
10.14 Form of Noncompetition, Nondisclosure and Severance
Agreements between the Company and each of its Executive
Officers. (2)
10.15 Agreement by and among the Company and purchasers of its 9%
Subordinated Notes and Common Stock dated as of March 25,
1996 regarding the recapitalization of the Company. (2)
10.16 Vessel Purchase Agreement dated as of January 6, 1997 by and
between Trico Marine Assets, Inc. and Laborde Marine, L.L.C. (5)
11.1 Computation of Earnings Per Share
21.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule
____________
(1) Incorporated by reference to the Company's Registration Statement
on Form 8-A filed with the Commission on April 25, 1996.
(2) Incorporated by reference to the Company's Registration Statement
on Form S-1 (Registration Statement No. 333-2990).
(3) Incorporated by referenced to the Company's quarterly report on
Form 10-Q for the quarter ended June 30, 1996.
(4) Incorporated by reference to the Company's current report on Form
8-K dated October 10, 1996.
(5) Incorporated by reference to the Company's current report on Form
8-K dated February 13, 1997.
(6) Incorporated by reference to the Company's Registration Statement
on Form S-1 (Registration Statement No. 333-14871).
TRICO MARINE SERVICES, INC.
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except share and per share amounts)
Years Ended
December 31,
____________________
1996 1995
__________ _________
Net income (loss) before
extraordinary item 10,891 (1,299)
Extraordinary item, net of taxes (917) -
__________ _________
Net income (loss) 9,974 (1,299)
========== =========
Computation of weighted average
name of shares outstanding:
Issued: 7,764,964
Weighted average shares outstanding 5,522,442 3,050,521
Add: Incremental shares applicable
to stock options based on the
Treasury Stock method using
average market price 668,009 -
____________ ___________
Weighted average common shares
and equivalents outstanding 6,190,451 3,050,521
============ ============
Earnings per common share and
equivalent outstanding:
Income (loss) before
extraordinary item $ 1.76 $ (0.43)
Extraordinary item (0.15) -
_____________ ____________
Net income (loss) $ 1.61 $ (0.43)
============= =============
Exhibit 21.1
Subsidiaries of
Trico Marine Services, Inc.
Company State of Organization
____________ ______________________
Trico Marine Operators, Inc. Louisiana
Trico Marine Assets, Inc. Delaware
Hos Marine Partners, Inc. Delaware
Trico Marine International, Ltd. Cayman Islands
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of Trico Marine Services, Inc. and Subsidiaries on Form S-8 (SEC File No.
333-07149) of our report dated February 12, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Trico
Marine Services, Inc. and Subsidiaries as of December 31, 1996 and 1995, and
for the years ended December 31, 1996, 1995 and 1994, which report is
included in this Annual Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
New Orleans, Louisiana
March 17, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,047
<SECURITIES> 0
<RECEIVABLES> 18,019
<ALLOWANCES> 610
<INVENTORY> 0
<CURRENT-ASSETS> 19,047
<PP&E> 129,956
<DEPRECIATION> 10,814
<TOTAL-ASSETS> 143,355
<CURRENT-LIABILITIES> 8,974
<BONDS> 21,000
0
0
<COMMON> 78
<OTHER-SE> 103,902
<TOTAL-LIABILITY-AND-EQUITY> 143,355
<SALES> 53,484
<TOTAL-REVENUES> 53,484
<CGS> 34,372
<TOTAL-COSTS> 34,372
<OTHER-EXPENSES> 263
<LOSS-PROVISION> 130
<INTEREST-EXPENSE> 2,282
<INCOME-PRETAX> 16,705
<INCOME-TAX> 5,814
<INCOME-CONTINUING> 10,891
<DISCONTINUED> 0
<EXTRAORDINARY> 917
<CHANGES> 0
<NET-INCOME> 9,974
<EPS-PRIMARY> 1.61
<EPS-DILUTED> 1.61
</TABLE>
