<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1997.
REGISTRATION NO. 333-39597
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------
TRICO MARINE SERVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 250 NORTH AMERICAN COURT 72-1252405
(STATE OR OTHER HOUMA, LOUISIANA 70363 (I.R.S. EMPLOYER
JURISDICTION OF (504) 851-3833 IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
VICTOR M. PEREZ
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
TRICO MARINE SERVICES, INC.
2401 FOUNTAINVIEW DRIVE, SUITE 920
HOUSTON, TEXAS 77057
(713) 780-9926
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WILLIAM B. MASTERS T. MARK KELLY
JONES, WALKER, WAECHTER, VINSON & ELKINS L.L.P.
POITEVENT, CARRERE & DENEGRE, L.L.P. 2300 FIRST CITY TOWER
201 ST. CHARLES AVENUE 1001 FANNIN STREET
NEW ORLEANS, LOUISIANA 70170-5100 HOUSTON, TEXAS 77002
PHONE: (504) 582-8000 PHONE: (713) 758-2222
FAX: (504) 582-8012 FAX: (713) 758-2346
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
----------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
----------------
THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SECTION 8(C) OF THE SECURITIES ACT OF 1933, MAY
DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 21, 1997
4,000,000 SHARES
TRICO MARINE SERVICES, INC.
COMMON STOCK
[Logo of Trico appears here] ($.01 PAR VALUE)
The shares of Common Stock, $.01 par value per share (the "Common Stock"), of
Trico Marine Services, Inc. ("Trico" or the "Company") offered hereby (the
"Offering") are being issued and sold by the Company. The Common Stock is
traded on the Nasdaq National Market under the symbol "TMAR." On November 20,
1997, the last reported sale price of the Common Stock was $31.125 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share......................... $ $ $
- ------------------------------------------------------------------------------
Total(3).......................... $ $ $
- ------------------------------------------------------------------------------
</TABLE>
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(1) See "Underwriting" for indemnification arrangements.
(2) Before deducting estimated offering expenses of approximately $600,000
payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 600,000 shares of Common Stock solely to cover over-
allotments. If this option is exercised in full, total Price to Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$ , $ and $ , respectively. See "Underwriting."
The shares of Common Stock offered hereby are being offered by the several
Underwriters named herein, subject to prior sale and acceptance by the
Underwriters and subject to their right to reject any order in whole or in
part. It is expected that the Common Stock will be available for delivery on or
about November , 1997 at the offices of Schroder & Co. Inc., New York, New
York.
SCHRODER & CO. INC.
BEAR, STEARNS & CO. INC.
JEFFERIES & COMPANY, INC.
RAYMOND JAMES & ASSOCIATES, INC.
JOHNSON RICE & COMPANY L.L.C.
November , 1997
<PAGE>
[PHOTO APPEARS HERE]
Built in 1996, Saevik's Northern Gambler is a 250-foot, 7,200 horsepower
platform supply vessel working in the North Sea.
[PHOTO APPEARS HERE]
The Stones River supply boat was launched in February 1997 following a
major upgrade that lengthened the vessel from 180 to 220 feet.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK
ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
<PAGE>
SUMMARY
This summary is qualified in its entirety by the more detailed information
and the consolidated financial statements and notes thereto appearing elsewhere
herein or incorporated by reference in this Prospectus. Unless the context
indicates otherwise, any reference in this Prospectus to "Trico" or the
"Company" refers to Trico Marine Services, Inc., together with its consolidated
subsidiaries. Unless otherwise indicated, all information in this Prospectus
assumes that the Underwriters' over-allotment option is not exercised. For
convenience, this Prospectus contains translations of certain amounts in
Norwegian krone into United States dollars. The translation from Norwegian
krone to United States dollars is performed at an exchange rate of NOK
7.1265=U.S.$1, the noon buying rate in New York City for cable transfers in
Norwegian krone as certified for customs purposes by the Federal Reserve Bank
of New York (the "Noon Buying Rate") in effect on October 24, 1997. No
representation is made that the Norweigan krone amounts have been, or could be
converted into US Dollars at that or any other rate of exchange. As used
herein, "US GAAP" means U.S. generally accepted accounting principles, and "NOR
GAAP" means Norwegian generally accepted accounting principles.
THE COMPANY
GENERAL
Trico is a leading provider of marine support vessels and related services to
the oil and gas industry in the U.S. Gulf of Mexico (the "Gulf") and offshore
Brazil. The Company is the second largest owner and operator of supply boats in
the Gulf and has a total fleet of 82 vessels, including 53 supply boats, 14
crew boats, six lift boats and nine line handling boats. 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 Company has pursued an aggressive strategy of growth through selected
acquisitions which, together with increased day rates from its existing
vessels, has enabled the Company to significantly increase total revenues and
achieve strong operating results. Since its initial public offering in May
1996, Trico has completed the acquisition of 37 supply boats at an aggregate
cost of $171.5 million. The Company believes that the increased size of its
vessel fleet will enable it to take further advantage of the strong worldwide
demand for marine support vessels and the resulting high utilization levels and
increased vessel day rates. The Company's average supply boat day rate
increased to approximately $7,590 during the third quarter of 1997 from $5,018
during the comparable period in 1996.
RECENT DEVELOPMENTS
The Company has reached an agreement to acquire Saevik Supply ASA, a
publicly-traded Norwegian company ("Saevik Supply"). Saevik Supply is a leading
provider of marine support and transportation services to companies engaged in
offshore exploration and production of oil and gas in the North Sea and
operates the third largest fleet of platform supply vessels ("PSVs") in the
North Sea. Saevik Supply's current fleet consists of six large anchor handling,
towing and supply vessels ("AHTSs") and ten owned and one managed PSVs. During
the nine months ended September 30, 1997, Saevik Supply reported total revenues
of $60.6 million and net income of $27.1 million. See "Business--Saevik
Supply."
3
<PAGE>
On October 7, 1997, the Company presented an offer to the board of directors
of Saevik Supply to purchase all of the outstanding shares of Saevik Supply for
approximately $290 million (the "Acquisition"). Saevik Supply's founder and
chief executive officer, Per Saevik, and another shareholder represented on
Saevik Supply's board of directors, owning in the aggregate approximately 19%
of the outstanding shares of Saevik Supply, have irrevocably agreed to tender
their shares and accept Trico's offer. The Acquisition was recommended by
Saevik Supply's board of directors to its shareholders, and Trico commenced a
public bid on October 27, 1997 under the rules of the Oslo Stock Exchange to
purchase all of Saevik Supply's outstanding shares. The public bid, unless
extended, will expire on November 25, 1997. See "The Acquisition."
The Company plans to fund the Acquisition with the proceeds of the Offering,
the proceeds from the Company's recent offering of $100.0 million of 8 1/2%
Senior Notes due 2005 and advances under the Company's revolving credit
facility (the "Revolving Credit Facility"). The Company has obtained a
commitment from its commercial lender to increase the Revolving Credit Facility
to $150.0 million and to provide a $200.0 million term loan in addition to the
Revolving Credit Facility (together with the Revolving Credit Facility, the
"Credit Facility") that can be used to fund the Acquisition. See "Use of
Proceeds."
BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading provider
of marine support vessels and related services. In order to achieve this
objective, the Company intends to continue to implement the following
strategies.
EXPAND INTO INTERNATIONAL MARKETS. The Company intends to continue to
selectively expand its presence in the North Sea, Latin America and other
selected international market areas that management believes present long-term
opportunities for the Company's vessels. Current worldwide demand for marine
support vessels is strong, and the Company believes that increased offshore
exploration and development activities in these international markets may
result in increases in demand for marine equipment and higher day rates in
those markets in the future.
MAINTAIN STRONG PRESENCE IN THE GULF OF MEXICO. Trico intends to maintain its
strong presence in the Gulf, which has been enhanced through a series of
acquisitions during the last 18 months. Levels of oil and gas exploration and
development have increased during the last two years as a result of several
factors, including improvements in exploration and production technologies that
have increased drilling success rates in the region, led to increased deep
water drilling and development and improved the economics of developing smaller
oil and gas fields. Based on current industry conditions, the Company believes
that the Gulf will continue to remain active in the foreseeable future.
PARTICIPATE IN INDUSTRY CONSOLIDATION. Trico intends to pursue further
consolidation opportunities in the marine services industry in the Gulf and
selected international markets. Over the past several years there has been
substantial consolidation in the supply boat fleet in the Gulf. The number of
supply boats available for service in the Gulf decreased from a peak of
approximately 700 in 1985 to approximately 300 at the end of October 1997,
approximately 75% of which are owned by five publicly-traded companies,
including Trico. The Company has been a major participant in the consolidation
in the Gulf through its acquisition of 37 supply boats since its initial public
offering in May 1996. The Company believes that its acquisition of Saevik
Supply and other recent acquisitions by U.S. based marine service providers
will lead to further consolidation in the North Sea and other international
market areas. Most international market areas are still relatively fragmented
with more than 20 major participants and numerous small regional competitors.
Further consolidation, including acquisitions by the Company, may impact future
day rates in the international market areas in which the Company participates.
4
<PAGE>
UPGRADE FLEET CAPABILITIES; NEW CONSTRUCTION. The Company may construct new
vessels that are suitable for deep water (220 feet in length or longer) or
upgrade existing vessels depending on specific contract opportunities and
industry conditions. The Company is currently constructing a 230-foot supply
vessel expected to be delivered in early 1998 that has been committed to a
three year charter to an oil and gas company active in the Gulf. Saevik Supply
is constructing one 270 foot PSV that is scheduled to be delivered in the first
quarter of 1998. Saevik Supply also recently commenced construction of a 275
foot, technologically advanced ATHS, with 23,800 horsepower that is scheduled
to be delivered no later than May 1999. Saevik Supply also has options with the
shipbuilder to construct two similar ATHSs for delivery during 2000.
The Company is incorporated under the laws of Delaware. Its principal office
is located at 250 North American Court, Houma, Louisiana, 70363, and its
telephone number is (504) 851-3833.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company........................... 4,000,000 shares(1)
Common Stock outstanding after the
Offering.......................... 19,683,566 shares(2)
Use of Proceeds.................... The Company intends to use the net proceeds
of the Offering to fund a portion of the
Acquisition. See "Use of Proceeds."
Nasdaq National Market Symbol...... TMAR
</TABLE>
- --------
(1) Assumes no exercise of the over-allotment option granted by the Company to
the Underwriters.
(2) Based on the number of shares outstanding as of October 31, 1997. Excludes
an aggregate of 1,494,080 shares of Common Stock issuable as of such date
upon exercise of outstanding options granted under the Company's stock
option plans.
5
<PAGE>
SUMMARY HISTORICAL FINANCIAL AND OPERATING DATA
The following table sets forth summary historical financial and operating
data for the Company as of the dates and for the periods indicated. The summary
financial data should be read in conjunction with "Selected Consolidated
Financial and Operating Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
notes thereto included elsewhere or incorporated by reference into this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- -----------------
1994 1995 1996 1996 1997(1)
------- ------- ------- ------- --------
(FINANCIAL DATA IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.................. $29,034 $26,698 $53,484 $32,885 $ 83,879
Direct operating expenses:
Direct vessel operating
expenses....................... 17,165 16,988 24,150 16,314 28,388
General and administrative...... 2,057 2,509 3,277 2,224 4,157
Amortization of marine
inspection costs............... 1,490 1,930 2,158 1,432 2,093
Other........................... 764 545 309 211 204
Depreciation and amortization... 2,786 2,740 4,478 2,861 7,995
------- ------- ------- ------- --------
Operating income................ 4,772 1,986 19,112 9,843 41,042
Interest expense................ 3,767 3,850 2,282 1,710 3,677
Amortization of deferred
financing costs................ 344 381 263 217 144
Gain on sales of assets......... -- (244) (59) (7) (255)
Other income, net............... (51) (32) (79) (65) (134)
Income tax expense (benefit).... 226 (670) 5,814 2,788 13,164
Extraordinary item, net of
taxes.......................... -- -- (917) (917) --
------- ------- ------- ------- --------
Net income (loss)............... $ 486 $(1,299) $ 9,974 $ 4,283 $ 24,446
======= ======= ======= ======= ========
Income (loss) per share before
extraordinary item(2).......... $ 0.08 $ (0.21) $ 0.88 $ 0.46 $ 1.45
Extraordinary item per
share(2)....................... -- -- (0.07) (0.08) --
------- ------- ------- ------- --------
Net income (loss) per share(2).. $ 0.08 $ (0.21) $ 0.81 $ 0.38 $ 1.45
======= ======= ======= ======= ========
Weighted average common
shares(2)...................... 6,020 6,101 12,381 11,171 16,889
======= ======= ======= ======= ========
STATEMENT OF CASH FLOWS DATA:
Net cash provided by (used in)
operating activities........... $ 6,666 $ 6,411 $14,952 $ 7,359 $ 41,082
Net cash provided by (used in)
investing activities........... 968 (6,121) (82,281) (31,707) (127,683)
Net cash provided by (used in)
financing activities........... (6,059) ( 943) 67,259 25,008 89,062
OTHER FINANCIAL DATA:
EBITDA(3)....................... $ 9,048 $ 6,656 $25,748 $14,136 $ 51,130
Capital expenditures:
Acquisitions.................. -- 1,475 71,031 26,062 99,626
Vessel construction/major
upgrades..................... 30 3,474 7,232 2,827 19,281
Maintenance and other......... 2,141 2,509 3,164 1,594 9,527
TRICO OPERATING DATA:
Supply boats:
Average number of vessels..... 16.0 16.0 21.2 18.2 40.7
Average vessel utilization
rate(4)....................... 77% 78% 94% 93% 85%
Average vessel day rate(5).... $ 3,057 $ 3,060 $ 4,917 $ 4,302 $ 7,130
Lift boats:
Average number of vessels..... 5.0 5.9 6.0 6.0 6.0
Average vessel utilization
rate(4)...................... 57% 45% 67% 66% 71%
Average vessel day rate(5).... $ 5,017 $ 4,656 $ 4,995 $ 4,805 $ 5,705
Crew/line handling boats:(6)
Average number of vessels..... 22.3 16.8 23.3 22.8 24.0
Average vessel utilization
rate(4)...................... 82% 85% 95% 95% 97%
Average vessel day rate (5)... $ 1,465 $ 1,480 $ 1,579 $ 1,547 $ 1,937
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER
30, 1997
---------
ACTUAL
---------
<S> <C>
BALANCE SHEET DATA:
Working capital, including current maturities of long-term debt..... $ 12,925
Property and equipment, net......................................... 230,038
Total assets........................................................ 277,757
Long-term debt...................................................... 114,000
Stockholders' equity................................................ 128,753
</TABLE>
- --------
(1) Does not give pro forma effect to any of the acquisitions completed by the
Company in 1997, including its acquisition of 11 supply vessels in July
1997.
(2) Share and per share amounts have been adjusted to reflect a 100% stock
dividend effective June 9, 1997.
(3) As used herein, EBITDA is operating income plus depreciation and
amortization and amortization of marine inspection costs. EBITDA is
frequently used by security analysts and is presented here to provide
additional information about the Company's operations. EBITDA is not a US
GAAP financial indicator and should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flows as a better measure of the Company's liquidity.
(4) Average utilization rates are average rates for all vessels based on a 365-
day years. Vessels are considered utilized when they are being operated or
mobilized/demobilized under contracts with customers. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(5) Average day rates are the average of revenue per day per vessel under
contract.
(6) Average utilization and day rates for all line handling vessels reflect the
contract rates for the Company's unconsolidated Brazilian operating
company.
7
<PAGE>
SUMMARY UNAUDITED COMBINED PRO FORMA FINANCIAL DATA
The following summary unaudited pro forma financial data illustrate the
estimated effects of the Acquisition. The unaudited condensed pro forma
combined balance sheet data is based on the unaudited September 30, 1997
condensed consolidated balance sheets of both the Company and Saevik Supply and
assume the Acquisition occurred on that date. The unaudited condensed pro forma
combined statement of operations data is based on the condensed consolidated
statements of operations of the Company and Saevik Supply and the statements of
revenues less direct operating expenses for the 12 vessels acquired by Saevik
Supply from Viking Supply Ships AS in January 1997 (the "Viking Vessels") for
the year ended December 31, 1996, and the unaudited nine month period ended
September 30, 1997 and assume the Acquisition occurred at January 1, 1996. The
unaudited condensed pro forma combined financial statements of the Company have
been prepared applying US GAAP, under which the Acquisition will be accounted
for as a "purchase." The summary unaudited pro forma financial data should be
read in conjunction with the unaudited condensed pro forma combined financial
statements and notes thereto, together with the historical financial
statements, including notes thereto, and other financial information of the
Company, Saevik Supply and the Viking Vessels included elsewhere in this
Prospectus. The summary unaudited pro forma financial information of the
Company does not purport to represent what the financial position or results of
operations of the Company would actually have been if the acquisition had in
fact occurred on the dates indicated or to project the financial position or
results of operations for any future date or period.
<TABLE>
<CAPTION>
PRO FORMA
---------------------------
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------- -------------
(IN THOUSANDS EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C>
INCOME STATEMENT DATA:
Total revenues................................... $ 103,160 $ 147,815
Operating expenses (excluding amortization of
marine inspection costs)........................ 50,742 51,868
Depreciation and amortization expense............ 20,542 20,043
Amortization of marine inspection costs.......... 4,491 2,528
Operating income................................. 27,385 73,376
Interest expense................................. 18,712 19,629
Other (income) expense........................... (158) (1,209)
---------- ----------
Income before income tax expense and minority
interest........................................ 8,831 54,956
Income tax expense............................... 3,609 17,370
---------- ----------
Income before minority interest.................. 5,222 37,586
Minority interest................................ 108 --
---------- ----------
Net income....................................... $ 5,330 $ 37,586
========== ==========
Net income per share............................. $ .33 $ 1.80
========== ==========
Weighted average common shares and equivalents
outstanding..................................... 16,380,902 20,888,569
OTHER FINANCIAL DATA:
EBITDA(1)........................................ $ 52,418 $ 95,947
<CAPTION>
SEPTEMBER 30,
1997
PRO FORMA(2)
-------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. 41,124
Property and equipment, net...................... 490,039
Total assets..................................... 698,834
Long-term debt................................... 396,449
Stockholders' equity............................. 247,653
</TABLE>
- -------
(1) As used herein, EBITDA is operating income plus depreciation and
amortization and amortization of marine inspection costs. EBITDA is
frequently used by security analysts and is presented here to provide
additional information about the Company's operations. EBITDA is not a US
GAAP financial indicator and should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flows as a better measure of the Company's liquidity.
(2) As adjusted to give effect to the Offering, (at an assumed offering price
of $31.125 per share), the Company's private placement of $100 million
aggregate principal amount of its 8 1/2% Senior Notes due 2005 and the
incurrence of long-term debt under the Credit Facility as described under
"Use of Proceeds." If the size of the Offering is increased, the Company
will use the net proceeds thereof to fund the Acquisition and reduce
borrowings under the Credit Facility.
8
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus.
THE ACQUISITION
The Company intends to use the net proceeds from this Offering to finance a
portion of the Acquisition. The Acquisition involves a number of risks that
could adversely affect the Company's operating results, including (i) the
diversion of management's attention; (ii) the integration of the operations
and personnel of Saevik Supply; (iii) exposure to risk of currency
fluctuations; (iv) the assumption of potential liabilities, disclosed or
undisclosed, associated with Saevik Supply's business; (v) the increase in the
overall indebtedness of the Company as a result of the Acquisition; and (vi)
the inability to retain key members of Saevik's current management following
the Acquisition. In addition, the Acquisition is subject to various
conditions, including the receipt by the Company of 90% of the outstanding
shares of Saevik Supply in the public bid. If such conditions are not
satisfied or waived by the Company, the Company will not complete the
Acquisition. There can be no assurance that the operations of Saevik Supply
will be successfully integrated or that such operations will ultimately have a
positive impact on the Company, its financial condition or results of
operations. See "The Acquisition" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
If the Company receives at least 90% of the outstanding shares pursuant to
its public bid, pursuant to Norwegian law, the Company will have the
compulsory right to purchase the remaining 10% of the outstanding shares.
Similarly, holders of such shares will have the right to have their shares
redeemed by the Company. If the Company and such holders cannot agree on a
price for those shares, the price will be determined by a Norwegian court. If
the Company receives less than 90% of the outstanding shares but more than
66 2/3%, the Company will have the option to waive the 90% acceptance condition
and purchase those shares which have been tendered. If the Company acquires
more than 66 2/3% of the outstanding shares of Saevik Supply, the Company will
be required to make a mandatory offer to purchase all of the remaining shares
at a price no less than the Company's offer price. If the Company acquires
66 2/3% or more of the outstanding shares but does not acquire all of the
remaining outstanding shares of Saevik Supply through the mandatory offer or
otherwise, the Company will have control of Saevik Supply but its flexibility
in managing Saevik Supply may be reduced. For example, any dividend paid by
Saevik Supply would be paid on all of its shares, including those held by any
public stockholders of Saevik Supply. In addition, although the Company
intends to take the necessary steps to delist the shares of Saevik Supply, the
decision to delist Saevik Supply is subject to the approval of the Oslo Stock
Exchange, and, if such approval is not granted, the shares may continue to be
listed, subjecting Saevik Supply to additional regulation. There can be no
assurance that the Company will waive the 90% acceptance condition or, if
waived, as to when the Company will be able to acquire the remaining
outstanding shares of Saevik Supply. All pro forma information included herein
assumes the acquisition of 100% of the outstanding shares of Saevik Supply
pursuant to the Company's public bid. See "The Acquisition."
DEPENDENCE ON OIL AND GAS INDUSTRY; MARKET VOLATILITY
The Company's operations depend on activity in offshore oil and gas
exploration, development and production. The level of exploration and
development activity has traditionally been volatile as a result of
fluctuations in oil and gas prices and their uncertainty in the future. A
significant or prolonged reduction in oil or natural gas prices in the future
would likely depress offshore drilling and development activity and reduce the
demand for the Company's marine support services. A
9
<PAGE>
substantial reduction of activity in the Gulf and other areas where the
Company operates could have a material adverse effect on the Company's
financial condition and results of operations.
Charter rates for marine support vessels also depend on the supply of
vessels. Excess vessel capacity in the industry can result primarily from the
construction of new vessels and the mobilization of vessels between market
areas. The addition of new capacity to the worldwide offshore marine fleet
could increase competition in those markets where the Company operates, which,
in turn, could have a material adverse effect on the Company's financial
condition and results of operations.
MANAGEMENT OF GROWTH
The Company has rapidly expanded its operations through acquisitions in the
past two years. The Acquisition will significantly increase the geographic
scope of the Company's operations and its overall size. The Company's growth
has placed, and is expected to continue to place, substantial demands on the
Company's managerial, operational, financial and other resources. Management
of this growth will require the Company to continue to invest in its
operations, including its financial and management information systems, and to
increase its efforts to retain, motivate and effectively manage its employees,
all of which may increase the Company's operating expenses. Any failure by the
Company to achieve and manage this growth as planned could have a material
adverse effect on the Company's business, financial condition and results of
operations.
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, (ii) the availability of
vessels of the type and size needed by the customer and (iii) the quality of
equipment. Certain of the Company's competitors have significantly greater
financial resources than the Company and more experience operating in
international areas. See "Business--Competition."
OPERATING RISKS AND INSURANCE
Marine support vessels are subject to operating risks such as catastrophic
marine disaster, adverse weather conditions, mechanical failure, collisions,
oil and hazardous substance spills and navigation errors. The occurrence of
any of these events may result in damage to or loss of Company vessels and
such vessels' tow or cargo or other property and injury to passengers and
personnel. Such occurrences may also result in a significant increase in
operating costs or liability to third parties. See "--Government Regulation."
The Company maintains insurance coverage against certain of these risks, which
management considers to be customary in the industry. There can be no
assurance, however, that the Company's existing insurance coverage can be
renewed at commercially reasonable rates or that such coverage will be
adequate to cover future claims that may arise. See "Business--Insurance."
GOVERNMENT REGULATION
The Company's operations are materially affected by federal, state and local
regulation, as well as certain international conventions, private industry
organizations and laws and regulations in jurisdictions where the Company's
vessels operate and are registered. These regulations govern worker health and
safety and the manning, construction and operation of vessels. These
organizations establish safety criteria and are authorized to investigate
vessel accidents and recommend approved safety standards. The failure to
comply with the requirements of any of these laws or the rules or regulations
of these agencies and organizations could have a material adverse effect on
the Company. See "Business--Government Regulation."
10
<PAGE>
The Company's operations also are subject to federal, state and local laws
and regulations and laws and regulations in jurisdictions where the Company's
vessels operate and are registered, which control the discharge of pollutants
into the environment and which otherwise relate to environmental protection.
Substantial costs may be incurred in complying with such laws and regulations,
and noncompliance can subject the Company to substantial liabilities. There
can be no assurance that such costs and liabilities will not be incurred. The
Company's operations in the Gulf are subject to the Outer Continental Shelf
Lands Act, and regulations promulgated thereunder, which regulate the
activities of offshore service vessels, require vessel owners and operators to
demonstrate financial and operational responsibility and provide for certain
limitations on the liability of vessel owners and operators. The Company's
operations in the Gulf are also subject to the Federal Water Pollution Control
Act of 1972, as amended, which imposes strict controls against the discharge
of oil and other pollutants into surface waters within its jurisdiction. Any
hazardous substances transported by the Company are subject to regulation
under the Resource Conservation and Recovery Act and the Hazardous Materials
Transportation Act. Numerous other environmental laws and regulations also
apply to the operations of the Company, and such laws and regulations are
subject to frequent change. The Company's insurance policies provide coverage
for accidental occurrence of seepage and pollution or clean-up and containment
of the foregoing.
Among the more significant of the conventions applicable to the operations
of Saevik Supply are: (i) the International Convention for the Prevention of
Pollution of the Sea, 1973, 1979 Protocol, (ii) the International Convention
on the Safety of Life at Sea, 1974, 1978 and 1981/1983 Protocol, and (iii) the
International Convention on Standards of Training, Certification and
Watchkeeping for Seafarers.
Any violation of such laws or regulations could result in significant
liability to the Company, and any amendment to such laws or regulations that
mandates more stringent compliance standards would likely cause an increase in
the Company's vessel maintenance expenses. See "Business--Environmental
Regulations."
SEASONALITY
The Company's marine operations are seasonal and depend, in part, on weather
conditions. Historically, the Company has enjoyed its highest utilization
rates during the second and third quarters, as mild weather provides favorable
conditions for offshore exploration, development and construction in the Gulf.
Adverse weather conditions during the winter months generally curtail offshore
development operations and can particularly impact lift boat utilization
rates. Activity in the North Sea is also subject to delays during periods of
adverse weather, but is not affected by seasonality to the extent activity in
the Gulf is. Accordingly, the results of any one quarter are not necessarily
indicative of annual results or continuing trends. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
AGE OF FLEET
Because of overcapacity within the marine support services industry on a
worldwide basis, there has been no significant construction of supply boats
since 1983. As of November 1, 1997, the average age of the Company's vessels
(based on the date of construction) was approximately 17 years. The average
age of Saevik Supply's fleet is approximately 10 years. Management believes
that after a vessel has been in service for approximately 30 years, repair,
vessel certification and maintenance costs may become no longer economically
justifiable. There can be no assurance that the Company will be able to
maintain its fleet by extending the economic life of existing vessels through
major refurbishment or by acquiring new or used vessels. See "Business--The
Company's Fleet."
INTERNATIONAL OPERATIONS
The Acquisition will substantially increase the percentage of the Company's
operations conducted in currencies other than the United States dollar.
Changes in the value of foreign
11
<PAGE>
currencies relative to the United States dollar could adversely affect the
Company's results of operations and financial position, and transaction gains
and losses could contribute to fluctuations in the Company's results of
operations. There can be no assurance that fluctuations in foreign currency
rates will not have a material adverse effect on the Company's results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Currency Fluctuations."
The Company's existing and planned international operations are subject to a
number of risks inherent with any business operating in foreign countries.
These risks include, among others, political instability, inflation, potential
vessel seizure, nationalization of assets, exchange rate fluctuations, foreign
exchange restrictions which limit the repatriation of investments and earnings
therefrom, changes in taxation, import-export quotas and other forms of public
and governmental regulation, all of which are beyond the control of the
Company. Although it is impossible to predict the nature and the likelihood of
any events of these types, if such an event should occur, it could have a
material adverse effect on the Company's financial condition and results of
operations.
LIMITATIONS ON FOREIGN OWNERSHIP OF COMPANY STOCK
Under the Merchant Marine Act of 1920, as amended, if persons other than
U.S. citizens own in the aggregate in excess of 25% of the Company's
outstanding stock, the Company's U.S. flagged vessels would lose the privilege
of engaging in the transportation of merchandise in the U.S. coastwise trade.
To assure the Company's continued ability to engage in U.S. coastwise trade,
the Company's certificate of incorporation contains provisions designed to
assure that not more than 24% of the outstanding shares of Common Stock are
owned by persons who are not U.S. citizens. The certificate of incorporation
provides that any transfer or purported transfer of shares of Common Stock
that would result in the ownership by persons who are not U.S. citizens of
more than 24% of the then outstanding shares of Common Stock will not become
effective against the Company, and the Company has the power to deny voting
and dividend rights with respect to such shares. See "Business--Government
Regulation" and "Description of Capital Stock--Certain Charter and By-Law
Provisions."
DEPENDENCE ON KEY PERSONNEL
The Company depends on the continued services of Thomas E. Fairley, its
President and Chief Executive Officer, Ronald O. Palmer, the Chairman of the
Board, Victor M. Perez, its Chief Financial Officer, and other key management
personnel. The loss of any of these persons could adversely affect the
Company's operations. See "Management."
DIVIDENDS
The Company presently intends to retain any earnings to meet its working
capital requirements and finance the expansion of its business operations.
Therefore, the Company does not plan to pay cash dividends to its stockholders
in the foreseeable future. See "Dividend Policy."
FORWARD-LOOKING STATEMENTS
This Prospectus includes and incorporates by reference "forward-looking
statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. All statements other than statements of
historical fact included or incorporated by reference in this Prospectus,
including without limitation the statements under the captions "Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" and elsewhere herein regarding the
Company's financial position and liquidity, its strategic alternatives, future
capital needs, the Acquisition, exploration, development and capital
12
<PAGE>
expenditures of the oil and gas industry, business strategies, and other plans
and objectives of management of the Company for future operations and
activities, are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions,
expected future developments and other factors it believes are appropriate
under the circumstances. Such statements are subject to risks and
uncertainties, including the risk factors discussed above, general economic
and business conditions, the business opportunities that may be presented to
and pursued by the Company, changes in law or regulations and other factors,
many of which are beyond the control of the Company. Although Trico believes
that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct. Prospective investors are therefore cautioned that any such
statements are not guarantees of future performance and the actual results or
developments may differ materially from those projected in the forward-looking
statements. Important factors that could cause actual results to differ
materially from the Company's expectations are disclosed in this Prospectus.
13
<PAGE>
THE ACQUISITION
On October 7, 1997, the Company presented an offer to the board of directors
of Saevik Supply to purchase, subject to specified conditions, all of the
outstanding shares of Saevik Supply (the "Saevik Shares") for 165 NOK per
share, or approximately $290 million (at then prevailing exchange rates)
through a public bid conducted in accordance with the rules of the Oslo Stock
Exchange. Trico's offer was accepted by the board of directors of Saevik
Supply on October 7, 1997 with the condition that Saevik Supply's principal
office continue to be located in Fosnavag, Norway, and that the branch offices
in Kristiansand, Norway and Aberdeen, Scotland remain in operation. In
addition, the board of directors of Saevik Supply agreed not to solicit an
offer or merger proposal by any third party with respect to Saevik Supply or
the Saevik Shares and to notify Trico if any third party approached the board
of directors about an offer or merger proposal and to recommend Trico's bid to
the stockholders of Saevik Supply. Prior to making its decision to commence
its public bid, Trico received the irrevocable agreement of Per Saevik, the
Company's founder and chief executive officer, and Ulstein Industrier AS, who
together own 19.18% of the outstanding Saevik Shares, to tender their shares
in the public bid, and conducted its due diligence investigation of Saevik
Supply.
Trico commenced its public bid on October 27, 1997, and the public bid will
be open for acceptance until November 25, 1997, unless extended in the event
that shareholders owning less than 90% of the Saevik Shares have tendered
their Saevik Shares by November 25, 1997. Trico has agreed not to extend the
public bid by more than ten business days.
The Acquisition is conditioned on the Company acquiring through its public
bid or otherwise more than 90% of the Saevik Shares. The Company may waive
this requirement and acquire Saevik Shares tendered in the public bid as long
as Trico obtains at least 66 2/3% of the Saevik Shares. The Company also has
the right to withdraw the public bid in the event that Saevik Supply
undertakes any transactions prior to settlement of the public bid that are not
within its normal business operations or if the board of directors of Saevik
Supply does not adhere to the conditions of the public bid specified above.
See "Risk Factors--The Acquisition."
Following the Acquisition, Trico intends to continue to manage the Saevik
Supply fleet utilizing the present operational management of Saevik Supply.
The Company has received confirmation from the operational management of
Saevik Supply that they intend to continue in their present positions after
the completion of the Acquisition.
There are no authorizations, permissions or approvals from any governmental
or regulatory entities required to complete the Acquisition that have not been
obtained.
If the Company acquires less than all of the Saevik Shares in the public
bid, the Company intends to take the steps necessary under Norwegian law to
acquire the remaining Saevik Shares. Under Norwegian law, the Company will be
required to make a mandatory bid to acquire for cash the remaining Saevik
Shares. The Company intends to take the steps necessary to ensure that the
price paid for shares in any such mandatory offer does not exceed the price
initially paid in the public bid. Under Norwegian law, a parent company that
owns more than 90% of the shares of a Norwegian subsidiary also has the
compulsory right to purchase the remaining subsidiary shares and the holders
of such remaining subsidiary shares have the right to require that their
subsidiary shares be redeemed. In the absence of an amicable agreement by the
parties as to the value of such shares, Norwegian law would require that the
amount be determined in court.
14
<PAGE>
USE OF PROCEEDS
The estimated net proceeds to the Company from the Offering (at an assumed
offering price of $31.125 per share), will be approximately $118.9 million.
The net proceeds from the Offering, together with the other funding described
below, will be used to fund the Acquisition.
The Company will apply the net proceeds of the Offering, the net proceeds of
the Company's recent private placement of its 8 1/2% Senior Notes due 2005 and
borrowings under the Credit Facility as follows (amounts in millions):
<TABLE>
<CAPTION>
SOURCES USES
- ----------------------------------- -------------------------------------------
<S> <C> <C> <C>
The Offering................ $118.9 The Acquisition..................... $290.0
8 1/2% Senior Notes due $ 5.5
2005....................... $ 98.7 Transaction Expenses................ ------
Credit Facility............. $ 77.9 $295.5
------
$295.5
</TABLE>
If the size of the Offering is increased or the Underwriters' over-allotment
option is exercised, the Company will use the net proceeds thereof to fund the
Acquisition and reduce borrowings under the Credit Facility. Any remaining
proceeds will be used for working capital and general corporate purposes.
If the Company's public bid for the Saevik Shares of Saevik Supply results
in less than 100% of the Saevik Shares being purchased initially, the Company
will follow the steps described under "The Acquisition" to acquire the
remaining shares in Saevik Supply. See "Risk Factors--The Acquisition."
The Company expects to close the Acquisition upon termination of its public
bid on November 25, 1997; however, the Company's bid is subject to the
conditions described under "The Acquisition." If these conditions are not
satisfied or waived by the Company, the Company will not close the Acquisition
and will use the net proceeds of this Offering to fund future acquisitions of
marine vessels or other companies engaged in the provision of marine support
vessels and related services. The Company does not currently have any
contracts, understandings or arrangements with respect to any material
acquisitions other than those described herein.
In the event that the Offering is not completed prior to the closing of the
Acquisition, the Company will borrow additional funds under the Credit
Facility to fund the Acquisition. The Company will repay any additional
indebtedness incurred with the net proceeds of the Offering upon its
completion.
15
<PAGE>
CAPITALIZATION
The following table sets forth (i) the consolidated unaudited capitalization
of the Company as of September 30, 1997, (ii) on a pro forma basis giving
effect to the Acquisition as if it occurred on September 30, 1997 and (iii) as
adjusted to give effect to the Offering (at an assumed offering price of
$31.125 per share), the Company's private placement of $100 million aggregate
principal amount of its 8 1/2% Senior Notes due 2005 and incurrence of the
long-term debt under the Credit Facility as described in "Use of Proceeds."
This table should be read in conjunction with the Company's pro forma combined
financial statements, consolidated financial statements and respective notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------------
PRO FORMA
ACTUAL AS ADJUSTED(1)
-------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt, including current maturities:
8 1/2% Senior Notes due 2005........................ $110,000 $210,000
Credit Facility..................................... 4,000 186,449
-------- --------
Total long-term debt.............................. 114,000 396,449
-------- --------
Stockholders' equity:
Preferred stock, $.01 par value per share; 5,000,000
shares authorized; no shares outstanding........... -- --
Common Stock, $.01 par value per share; 40,000,000
shares authorized; 15,755,598 and 19,755,598 issued
and 15,683,566 and 19,683,566 outstanding,
respectively(2).................................... 158 198
Additional paid-in capital.......................... 94,143 213,003
Retained earnings................................... 34,453 34,453
Treasury stock (72,032 shares)...................... (1) (1)
-------- --------
Total stockholders' equity........................ 128,753 247,653
-------- --------
Total capitalization.............................. $242,753 $644,102
======== ========
</TABLE>
- --------
(1) Assumes that (i) the Underwriters' over-allotment option will not be
exercised and (ii) that the size of the Offering is not increased. See
"Use of Proceeds."
(2) Excludes an aggregate of 1,494,080 shares of Common Stock issuable as of
September 30, 1997 upon exercise of outstanding options granted under the
Company's stock option plans.
16
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is traded on the Nasdaq National Market under the symbol
"TMAR." The following table sets forth the high and low closing sales prices
per share of the Common Stock, as reported by the Nasdaq National Market for
each fiscal quarter since trading in the Common Stock began on May 16, 1996
(adjusted to give retroactive effect for the two-for-one stock split effected
June 9, 1997).
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year 1996
Second Quarter (commencing May 16, 1996)............... $11.750 $ 9.875
Third Quarter.......................................... 15.250 10.625
Fourth Quarter......................................... 25.000 14.750
Fiscal Year 1997
First Quarter.......................................... $28.125 $17.375
Second Quarter......................................... 24.375 15.250
Third Quarter.......................................... 37.000 21.500
Fourth Quarter (through November 20, 1997)............. 43.813 28.250
</TABLE>
On November 20, 1997, the last reported sales price of the Common Stock on
the Nasdaq National Market was $31.125 per share.
The Company presently intends to retain its earnings to meet its working
capital requirements and finance the expansion of its business operations.
Therefore, the Company does not plan to pay cash dividends to its stockholders
in the foreseeable future. In addition, the Credit Facility contains provisions
that prohibit the Company from paying dividends on its Common Stock. The
Company is also a holding company which conducts its business through its
subsidiaries. As a result, the Company's cash flow and ability to make dividend
payments primarily depend on the earnings and cash flow of its subsidiaries and
on dividends and other payments therefrom. Any future determination to pay cash
dividends will be made by the Board of Directors in light of the Company's
earnings, financial position, capital requirements, credit agreements and such
other factors as the Board of Directors deems relevant at that time. See "Risk
Factors--Dividends."
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table sets forth selected consolidated financial and operating
data for the dates and periods indicated. The financial information for the
two month period ended December 31, 1993, for each of the years ended December
31, 1994, 1995 and 1996 and as of December 31, 1993, 1994, 1995 and 1996 is
derived from the Company's audited consolidated financial statements and notes
thereto. The selected consolidated financial data as of September 30, 1996 and
1997 and for the nine month periods then ended are derived from the unaudited
consolidated statements of the Company for such periods. In the opinion of
management, the unaudited financial statements of the Company reflect all
adjustments (consisting of only normal recurring adjustments) necessary for
fair presentation of the financial condition and results of operations for
these periods. This information should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The financial information for the year
ended December 31, 1992 and for the ten month period ending October 28, 1993
reflects operating results for the vessels acquired by the Company from
Chrysler Capital Corporation ("Chrysler") in October 1993.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
TEN MONTHS TWO MONTHS NINE MONTHS
ENDED ENDED ENDED
OCTOBER 28, DECEMBER 31, SEPTEMBER 30,
1992(1) 1993(1) 1993(1) 1994 1995 1996 1996 1997(2)
------- ----------- ------------ ------- ------- ------- ------- -------
(FINANCIAL DATA IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues.......... $17,988 $26,871 $6,145 $29,034 $26,698 $53,484 $32,885 $83,879
Direct operating
expenses:
Direct vessel operating
expenses.............. 13,360 16,511 3,042 17,165 16,988 24,150 16,314 28,388
General and
administrative........ 1,338 1,412 256 2,057 2,509 3,277 2,224 4,157
Amortization of marine
inspection costs...... 1,099 1,176 222 1,490 1,930 2,158 1,432 2,093
Other.................. 367 875 33 764 545 309 211 204
------- -------
Revenues less direct
operating expenses.... $ 1,824 $ 6,897 -- -- -- -- -- --
======= =======
Depreciation and
amortization........... 502 2,786 2,740 4,478 2,861 7,995
------ ------- ------- ------- ------- -------
Operating income........ 2,090 4,772 1,986 19,112 9,843 41,042
Interest expense........ 620 3,767 3,850 2,282 1,710 3,677
Amortization of deferred
financing costs........ 60 344 381 263 217 144
Gain on sale of assets.. -- -- (244) (59) (7) (255)
Other income, net....... -- (51) (32) (79) (65) (134)
Income tax expense
(benefit).............. 564 226 (670) 5,814 2,788 13,164
Extraordinary item, net
of taxes............... -- -- -- (917) (917) --
------ ------- ------- ------- ------- -------
Net income (loss)....... $ 846 $ 486 $(1,299) $ 9,974 $ 4,283 $24,446
====== ======= ======= ======= ======= =======
Income (loss) per share
before extraordinary
item(3)................ $ 0.14 $ 0.08 $ (0.21) $ 0.88 $ 0.46 $ 1.45
Extraordinary item per
share(3)............... -- -- -- (0.07) (0.08) --
------ ------- ------- ------- ------- -------
Net income (loss) per
share(3)............... $ 0.14 $ 0.08 $ (0.21) $ 0.81 $ 0.38 $ 1.45
====== ======= ======= ======= ======= =======
Weighted average common
shares(3).............. 6,040 6,020 6,101 12,381 11,171 16,889
====== ======= ======= ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(4)............... $2,814 $ 9,048 $ 6,656 $25,748 $14,136 $51,130
Capital expenditures:
Vessel acquisitions.... -- -- 1,475 71,031 26,062 99,626
Vessel
construction/major
upgrades.............. -- 30 3,474 7,232 2,827 19,281
Maintenance and other.. 17 2,141 2,509 3,164 1,594 9,527
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
1993(1)
-----------------------------
TWO MONTHS NINE MONTHS
TEN MONTHS ENDED YEAR ENDED ENDED
ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
OCTOBER 28, 1993 1993 1994 1995 1996 1996 1997
---------------- ------------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Supply boats:
Average number of
vessels............... 16.0 16.0 16.0 16.0 21.2 18.2 40.7
Average vessel
utilization rate(5)... 85% 90% 77% 78% 94% 93% 85%
Average vessel day
rate(6)............... $2,833 $3,253 $3,057 $3,060 $4,917 $4,302 $7,130
Lift boats:
Average number of
vessels............... 5.0 5.0 5.0 5.9 6.0 6.0 6.0
Average vessel
utilization rate(5)... 70% 57% 57% 45% 67% 66% 71%
Average vessel day
rate(6)............... $4,735 $4,970 $5,017 $4,656 $4,995 $4,805 $5,705
Crew/line handling
boats:(7)
Average number of
vessels............... 24.0 23.0 22.3 16.8 23.3 22.8 24.0
Average vessel
utilization rate(5)... 93% 91% 82% 85% 95% 95% 97%
Average vessel day
rate(6)............... $1,401 $1,500 $1,465 $1,480 $1,579 $1,547 $1,937
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
SEPTEMBER 30,
1993 1994 1995 1996 1997
-------- ------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit),
including current
maturities of long-term
debt...................... $ (2,704) $ 1,550 $ (844) $ 10,073 $ 12,925
Property and equipment,
net....................... 45,191 38,508 39,264 119,142 230,038
Total assets............... 55,207 51,419 52,113 143,355 277,757
Long-term debt............. 37,560 35,452 36,780 21,000 114,000
Stockholders' equity....... 6,450 7,002 5,712 103,980 128,753
</TABLE>
- --------
(1) Reflects the historical results of operations of the Company for the two
months endedDecember 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 the year ended December 31, 1992. Accordingly,
interest expense, other income, net, income tax expense, depreciation and
amortization 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. See Note 1 to the
Company's consolidated financial statements.
(2) Does not give pro forma effect to any of the acquisitions completed by the
Company in 1997, including its acquisition of 11 supply vessels in July
1997.
(3) Share and per share amounts have been adjusted to reflect a 2-for-1 Common
Stock split effective June 9, 1997.
(4) As used herein, EBITDA is operating income plus depreciation and
amortization and amortization of marine inspection costs. EBITDA is
frequently used by security analysts and is presented here to provide
additional information about the Company's operations. EBITDA is not a US
GAAP financial indicator and should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flows as a better measure of the Company's liquidity.
(5) Average utilization rates are average rates for all vessels based on a
365-day year. Vessels are considered utilized when they are being operated
or being mobilized/demobilized under contracts with customers. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(6) Average day rates are the average of revenue per day per vessel under
contract.
(7) Average utilization and day rates for all line handling vessels reflect
the contract rates for the Company's unconsolidated Brazilian operating
company.
19
<PAGE>
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. Demand for the Company vessels is primarily impacted by the
level of offshore oil and gas drilling activity, which can be influenced by a
number of factors, including oil and gas prices and drilling budgets of
exploration and production companies, and, to a lesser extent, the market for
the maintenance, repair and salvage of existing platforms. 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.
Since its initial public offering in May 1996, the Company has completed the
acquisition of 37 supply boats at an aggregate cost of $171.5 million. The
Company believes that the increased size of its vessel fleet will enable it to
take further advantage of the strong worldwide demand for marine equipment and
the resulting high utilization levels and increased vessel day rates. The
Company's average supply boat day rate increased to approximately $7,590
during the third quarter of 1997 from $5,018 during the comparable 1996
period.
On October 7, 1997, the Company presented an offer to the board of directors
of Saevik Supply to purchase all of the outstanding shares of Saevik Supply
for approximately $290 million. The offer was recommended by Saevik Supply's
board of directors to its shareholders, and Trico commenced a public bid on
October 27, 1997 under the rules of the Oslo Stock Exchange to purchase all of
Saevik Supply's outstanding shares. The public bid, unless extended, will
expire on November 25, 1997. During the nine months ended September 30, 1997,
Saevik Supply reported total revenue of $60.6 million and net income of $27.1
million. See "The Saevik Supply Acquisition."
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 American Bureau of Shipping ("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.
20
<PAGE>
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.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER ENDED
31, SEPTEMBER 30,
---------------------- --------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Average vessel day rates:
Supply boats.......................... $3,057 $3,060 $4,917 $4,302 $7,130
Lift boats............................ 5,017 4,656 4,995 4,805 5,705
Crew/line handling boats(1)(2)........ 1,465 1,480 1,579 1,547 1,937
Average vessel utilization rate:
Supply boats.......................... 77% 78% 94% 93% 85%
Lift boats............................ 57% 45% 67% 66% 71%
Crew/line handling boats(1)(2)........ 82% 85% 95% 95% 97%
Average number of vessels:
Supply boats.......................... 16.0 16.0 21.2 18.2 40.7
Lift boats............................ 5.0 5.9 6.0 6.0 6.0
Crew/line handling boats(2)........... 22.3 16.8 23.3 22.8 24.0
</TABLE>
- --------
(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.
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.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------- ------------------------
1994 % 1995 % 1996 % 1996 % 1997 %
------- --- ------- --- ------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Charter Revenues:
Supply boats........... $13,753 47% $13,868 52% $35,723 67% $20,028 61% $67,495 80%
Crew and line-handling
boats................. 9,198 32% 7,735 29% 9,733 18% 5,690 17% 8,981 11%
Lift boats............. 5,944 21% 5,054 19% 7,986 15% 7,136 22% 7,399 9%
------- --- ------- --- ------- --- ------- --- ------- ---
$28,895 100% $26,657 100% $53,442 100% $32,854 100% $83,875 100%
======= === ======= === ======= === ======= === ======= ===
Charter Revenues less
direct operating
expenses:
Supply boats........... $ 6,570 56% $ 6,599 68% $23,481 80% $12,532 76% $48,741 88%
Crew and line-handling
boats................. 2,679 23% 1,945 20% 2,645 9% 2,257 14% 3,754 7%
Lift boats............. 2,481 21% 1,125 12% 3,166 11% 1,751 10% 2,992 5%
------- --- ------- --- ------- --- ------- --- ------- ---
$11,730 100% $ 9,669 100% $29,292 100% $16,540 100% $55,487 100%
======= === ======= === ======= === ======= === ======= ===
</TABLE>
Comparison of Nine Months Ended September 30, 1997 to the Nine Months Ended
September 30, 1996
Revenues for the nine months ended September 30, 1997 were $83.9 million, an
increase of 155.3%, compared to $32.9 million in revenues for the first nine
months of 1996. This increase was principally due to the growth in the
Company's supply boat fleet in the Gulf and the improved average vessel day
rates for the Company's vessels.
Average supply boat day rates rose 65.7% to $7,130 for the first nine months
of 1997, compared to $4,302 for the comparable 1996 period; average lift boat
day rates increased 18.7% to $5,705,
21
<PAGE>
compared to $4,805 for the year-ago period; and average day rates for the
Company's crew boats and line handling vessels increased 25.2% to $1,937, as
compared to $1,547 during the first nine months of 1996. The increase in
vessel day rates was primarily the result of strong market conditions in the
Gulf for marine support vessels and, with respect to the liftboats, improved
market conditions in the Gulf for offshore platform repair and maintenance and
well-servicing activities.
While the Company's supply boats experienced strong demand and effectively
full utilization during the periods, utilization for the supply boat fleet
decreased for the nine month period due to a large number of scheduled vessel
drydockings in 1997 compared to the year-ago period. Utilization for the
Company's lift boats was 71% during the first nine months of 1997, compared to
66% for the year-ago period. Utilization for the crew boats and line handling
vessels increased to 97% for the first nine months of 1997, compared to 95%
for the comparable 1996 period due to strong demand for crew boats in the Gulf
and the long-term contracts for the line handling vessels in Brazil.
During the first nine months of 1997, direct vessel operating expenses
increased to $28.4 million (33.8% of revenues), compared to $16.3 million
(49.6% of revenues) for the first nine months of 1996, due to the expanded
vessel fleet and increased labor, repair and maintenance costs. Direct vessel
operating expenses decreased as a percentage of revenues due to the increase
in average vessel day rates during the first nine months of 1997.
Depreciation and amortization expense increased to $8.0 million for the
first nine months of 1997, up from $2.9 million for the year-ago period due to
the expanded vessel fleet. Amortization of marine inspection costs increased
to $2.1 million for the first nine months of 1997, from $1.4 million in the
comparable 1996 period, due to the amortization of increased drydocking and
marine inspection costs associated with the Company's larger vessel fleet.
General and administrative expenses increased to $4.2 million (5.0% of
revenues) in the first nine months of 1997, from $2.2 million (6.8% of
revenues) for the 1996 period, due to additions of personnel in connection
with the growth in the Company's vessel fleet. General and administrative
expenses, as a percentage of revenues, decreased in the first nine months of
1997 as the increase in revenues and additions to the vessel fleet did not
require proportionate increases in administrative expenses.
Interest expense increased to $3.7 million during the first nine months of
1997 compared to $1.7 million for the comparable 1996 period. This increase
was due primarily to increased interest expense in the 1997 period as a result
of the issuance by the Company in July 1997 of $110.0 million principal amount
of the Company's 8 1/2 Senior Notes due 2005 (the "Senior Notes"), and a
decrease in interest expense in the 1996 period due to the repayment of all
borrowings under the Company's Revolving Credit Facility in May 1996 with
proceeds from the Company's initial public offering. Proceeds from the Senior
Notes were used to purchase 11 supply boats and to repay outstanding
indebtedness under the Company's Revolving Credit Facility.
In the first nine months of 1997, the Company had income tax expense of
$13.2 million, compared to income tax expense of $2.8 million in the 1996
period. As a result of the repayment of all outstanding amounts under the
Company's Revolving 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 in
the first nine months of 1996.
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,
22
<PAGE>
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.
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
23
<PAGE>
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 compared to 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, due to higher reported net income in
the period.
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.
Depreciation and amortization 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
24
<PAGE>
$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. In this period, the
Company acquired 37 supply boats at an aggregate cost of $171.5 million.
Additionally, as part of its strategy, the Company is in the process of
upgrading, two supply boats by lengthening them from 180 to 220 feet, and
constructing two vessels for the Brazilian market.
During the first nine months of 1997, funds were provided by $142.9 million
in net proceeds from the issuance of the Company's 8 1/2 Senior Notes due 2005
(the "Notes") and borrowings under the Company's revolving credit facility,
$41.1 million in funds from operating activities and $1.1 million from the
sale of assets. During the period, the Company repaid $50.5 million of debt
and made capital expenditures totaling $128.4 million.
Capital expenditures for the nine months of 1997 consisted principally of
$98.5 million for the acquisition of 18 supply vessels and one utility vessel
for use in the Gulf, and $8.9 million of U.S. Coast Guard drydocking costs.
Other capital expenditures totaling $21.0 million consisted primarily of
vessel upgrade or construction projects on four vessels, two of which are
intended for use in the Gulf market and two intended for use in the Brazilian
market. The Stones River, a 180-foot supply boat that the Company acquired in
1996, was rebuilt and lengthened to 220 feet, and began a three-year charter
in March 1997. In January 1997, the Company acquired and began upgrading the
Elkhorn River by lengthening it from 180 to 220 feet and adding a dynamic
positioning system. This vessel will be placed in service in the fourth
quarter of 1997. During the period, the Company continued construction in
Brazil of a 200-foot supply boat, which, once completed, will commence a two
year charter with Petrobras in the fourth quarter of 1997. The Company also
continued construction of the SWATH vessel during the quarter, which is
expected to be placed into operation in the first quarter of 1998 under a five
year charter with Petrobras. The Company has received a commitment from the
Maritime Administration's Title XI ship financing program to provide long-term
financing for approximately $9.6 million of the SWATH vessel's cost.
On July 21, 1997, the Company issued $110.0 million principal amount of the
Senior Notes. The Senior Notes are unsecured and are guaranteed by Trico
Marine Assets, Inc. and Trico Marine Operators, Inc., the Company's principal
subsidiaries (the "Subsidiary Guarantors"). Interest is payable semi-annually
on February 1 and August 1 of each year commencing February 1, 1998. Except in
certain circumstances, the Senior Notes may not be prepaid until August 1,
2001 at which time they may be redeemed, at the option of the Company, in
whole or in part, at a redemption price equal to 104.25% plus accrued and
unpaid interest, with the redemption price declining ratably on August 1 of
each of the succeeding three years. The Senior Notes contain certain covenants
that, among other things, limit the ability of the Company to incur additional
indebtedness, pay dividends or make other distributions, create certain liens,
sell assets, or enter into certain mergers or acquisitions.
25
<PAGE>
Net proceeds received from the issuance of the Senior Notes were $106.4
million and were used to acquire 11 supply boats for $62.0 million and to
repay $44.4 million of amounts outstanding under the Revolving Credit
Facility. As part of this acquisition, the Company agreed to purchase an
additional supply boat once the seller completed lengthening the vessel from
205 to 225 feet. On October 29, 1997, the vessel upgrade was completed by the
seller and the Company took possession of the vessel. The vessel, renamed the
Kings River, will be placed in service by the Company in December 1997. The
Company borrowed $4.5 million under the Revolving Credit Facility to fund a
portion of the vessel's $7.0 million purchase price.
The Revolving Credit Facility provides a revolving commitment of up to $65.0
million, and as of October 31, 1997, the Company had $8.5 million of
outstanding borrowings under the Revolving Credit Facility. In July 1997, the
Revolving Credit Facility was amended to, among other things, extend the
maturity of the revolving portion to July 31, 1999 and extend its final
maturity to July 31, 2003. The Revolving Credit Facility bears interest at
LIBOR plus a margin that depends on the Company's debt coverage ratio
(currently approximately 7.1% per annum) with a fee of 3/8% per annum on the
undrawn portion, is collateralized by mortgages on certain of the Company's
vessels, requires the Company to maintain certain financial ratios, limits the
ability of the Company to incur additional indebtedness, pay dividends or make
certain other distributions, create certain liens, sell assets or enter into
certain mergers or acquisitions. Although the Revolving Credit Facility does
impose some limitations on the ability of the Company's subsidiaries to make
distributions to the Company, it expressly permits distributions to the
Company by the Subsidiary Guarantors for scheduled principal and interest
payments on the Senior Notes.
On October 7, 1997, the Company made an offer to purchase all of the
outstanding shares of Saevik Supply. Saevik Supply provides marine support
services to the oil and gas industry operating 17 vessels in the Norwegian and
United Kingdom sectors of the North Sea. The offer was made for 165 Norwegian
kroner per share, or approximately $23.35 per share, based on exchange rates
in effect on the day of the offer. The total purchase price is expected to be
approximately $290 million for all shares. The Acquisition is expected to
close in December 1997.
The Company expects to finance the Acquisition with proceeds from the
Offering, the private placement of an additional $100 million principal amount
of the Senior Notes, and advances under the Revolving Credit Facility, which
will be increased to provide a $150.0 million revolving line of credit. The
Company has also obtained a commitment from its commercial lender to provide
an additional $200.0 million term loan that can be used to fund the
Acquisition.
Excluding the Acquisition, the Company's capital expenditures for the
balance of the year will consist of the remaining expenditures to upgrade two
supply vessels for the Gulf, the Kings River and the Elkhorn River, completion
of the construction of a 200-foot supply vessel for Brazil and continued
construction of the SWATH vessel for Brazil, which is expected to be placed in
service in the first quarter of 1998. Additionally, the Company has exercised
options to acquire two 230-foot supply vessels, which are currently under
construction, from a shipyard on the U.S. Gulf Coast at an estimated cost of
approximately $18.0 million. The first vessel, which is expected to be
completed by June 1998, has been committed to a three year charter to an oil
and gas company active in the Gulf. The second vessel, expected to be
delivered in the first quarter of 1999, is expected to be committed to the
international market.
Saevik Supply is constructing a 270-foot PSV that is scheduled for delivery
in the first quarter of 1998 and is committed to a three year charter for a
North Sea oil and gas operator. Saevik Supply also recently signed a contract
to build a 275-foot, technologically advanced AHTS with 23,800
26
<PAGE>
horsepower that is scheduled to be delivered no later than May 1999.
Expenditures for these vessels are expected to total $32.5 million in 1998.
The Company believes that cash generated from operations together with the
proceeds of the Offering, the private placement of an additional $100.0
million of the Notes and borrowing available under the Credit Facility will be
sufficient to fund the Acquisition and the Company's other currently planned
capital projects and working capital requirements. The Company's strategy,
however, is to make other acquisitions as part of an effort to expand its
presence in the Gulf and 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 acquisition.
CURRENCY FLUCTUATIONS
As a result of the Acquisition, the Company will be exposed to currency
fluctuations and exchange risks. All charter contracts and indebtedness of
Saevik Supply are denominated in either Norwegian krone or British pound. The
Company is unable to predict the effect of fluctuations in the Norwegian krone
or British pound, but a significant decline in their value relative to the
U.S. dollar could have a material adverse effect on the Company's results of
operations and financial condition. See "Risk Factors--International
Operations."
27
<PAGE>
BUSINESS
GENERAL
Trico is a leading provider of marine support vessels and related services
to the oil and gas industry in the Gulf and offshore Brazil. The Company is
the second largest owner and operator of supply boats in the Gulf and has a
total fleet of 82 vessels, including 53 supply boats, 14 crew boats, six lift
boats and nine line handling boats. The services provided by Trico's
diversified fleet include transportation of drilling materials, supplies and
crews to offshore exploration and production facilities and support for the
construction, installation, maintenance and removal of offshore 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 Company has pursued an aggressive strategy of growth through
acquisitions which, together with increased day rates from its existing
vessels, has enabled the Company to significantly increase total revenues and
achieve strong operating results. Since its initial public offering in May
1996, Trico has completed the acquisition of 37 supply boats at an aggregate
cost of $171.5 million. The Company believes that the increased size of its
vessel fleet will enable it to take further advantage of the strong worldwide
demand for marine equipment and the resulting high utilization levels and
increased vessel day rates. The Company's average supply boat day rate
increased to approximately $7,590 during the third quarter of 1997 from $5,018
during the comparable period in 1996.
RECENT DEVELOPMENTS
The Company has reached an agreement to acquire Saevik Supply, a publicly-
traded Norwegian company. Saevik Supply is a leading provider of marine
support and transportation services to companies engaged in offshore
exploration and production of oil and gas in the North Sea and operates the
third largest fleet of PSVs in the North Sea. Saevik Supply's current fleet
consists of six large AHTSs and ten owned and one managed PSVs. During the
nine months ended September 30, 1997, Saevik Supply reported total revenues of
$60.6 million and net income of $27.1 million. See "--Saevik Supply."
On October 7, 1997, the Company presented an offer to the board of directors
of Saevik Supply to purchase all of the outstanding shares of Saevik Supply
for approximately $290 million. Saevik Supply's founder and chief executive
officer, Per Saevik, and another shareholder represented on Saevik Supply's
board of directors, who together own approximately 19% of the outstanding
shares of Saevik Supply, have irrevocably agreed to tender their shares and
accept Trico's offer. The Acquisition was recommended by Saevik Supply's board
of directors to its shareholders, and Trico commenced a public bid on October
27, 1997 under the rules of the Oslo Stock Exchange to purchase all of Saevik
Supply's outstanding common stock. The public bid, unless extended, will
expire on November 25, 1997. See "The Acquisition."
BUSINESS STRATEGY
The Company's objective is to strengthen its position as a leading provider
of marine support vessels and related services. In order to achieve this
objective, the Company intends to continue to implement the following
strategies.
Expand into International Markets. The Company intends to continue to
selectively expand its presence in the North Sea, Latin America and other
selected international market areas that management believes present long-term
opportunities for the Company's vessels. Current worldwide demand for marine
support vessels is strong, and the Company believes increased offshore
exploration and development activities in certain international markets may
result in increases in demand for marine equipment and higher day rates in
those markets in the future.
28
<PAGE>
Maintain Strong Presence in the Gulf of Mexico. Trico intends to maintain
its strong presence in the Gulf, which has been enhanced through a series of
acquisitions during the last 18 months. Levels of oil and gas exploration and
development have increased during the last two years as a result of several
factors, including improvements in exploration and production technologies
that have increased drilling success rates in the region, led to increased
deep water drilling and development and improved the economics of developing
smaller oil and gas fields. Based on current industry conditions, the Company
believes that the Gulf will continue to remain active in the foreseeable
future.
Participate in Industry Consolidation. Trico intends to pursue further
consolidation opportunities in the marine services industry in the Gulf and
selective international markets. Over the past several years there has been
substantial consolidation in the supply boat fleet in the Gulf. The number of
supply boats available for service in the Gulf decreased from a peak of
approximately 700 in 1985 to approximately 300 at the end of October 1997,
approximately 75% of which are owned by five publicly-traded companies,
including Trico. The Company has been a major participant in this
consolidation through its acquisition of 37 supply boats since its initial
public offering in May 1996. The Company believes that its acquisition of
Saevik Supply and other recent acquisitions by U.S. based marine service
providers will lead to further consolidation in the North Sea and other
international market areas. Most international market areas are still
relatively fragmented with more than 20 major participants and numerous small
regional competitors. Further consolidation, including acquisitions by the
Company, may impact future day rates in the international market areas in
which the Company participates.
Upgrade Fleet Capabilities; New Construction. The Company may construct
vessels that are suitable for deep water (220 feet in length or longer) or
upgrade existing vessels depending on specific contract opportunities and
industry conditions. The Company is currently constructing a 230 foot supply
vessel expected to be delivered in early 1998 that has been committed to a
three year charter to an oil and gas company active in the Gulf. Saevik Supply
is constructing one 270 foot PSV that is scheduled to be delivered in the
first quarter of 1998. Saevik Supply also recently commenced construction of a
275 foot, technologically advanced AHTS, with 23,800 horsepower that is
scheduled to be delivered no later than May 1999. Saevik also has options with
the shipbuilder to construct two similar AHTSs for delivery during 2000.
THE INDUSTRY
Marine support vessels are primarily used to transport personnel, equipment
and supplies to drilling rigs, to support the construction and ongoing
operation of offshore oil and gas production platforms and as work platforms
for offshore construction and platform maintenance. 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; and towing services for drilling rigs and platforms. The principal
types of vessels operated by the Company, Saevik Supply and their 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, larger supply boats which have greater liquid mud and dry
bulk cement capacities, as well as larger areas of open deck space than
smaller supply boats, 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.
29
<PAGE>
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.
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.
Platform Supply Vessels. PSVs serve drilling and production facilities and
support offshore construction and maintenance work. They are differentiated
from other offshore support vessels by their cargo handling capabilities,
particularly their large capacity and versatility. Utilizing space on and
below deck, they are used to transport supplies such as fuel, water,
drilling fluids, equipment and provisions. PSVs range in size from 150 feet
to 275 feet and are particularly suited for supporting large concentrations
of offshore production locations because of their large deck space and
below deck capacities. Saevik Supply operates 11 PSVs in the North Sea (ten
of which are owned by Saevik Supply) that function primarily in this
classification but also are capable of providing construction support
services.
Anchor Handling, Towing and Supply Vessels. AHTSs are used to set anchors
for drilling rigs and tow mobile drilling rigs and equipment from one
location to another. In addition, these vessels typically can be used in
limited supply roles when they are not performing anchor handling and
towing services. They are characterized by large horsepower (up to 18,000
brake horsepower ("BHP") for the most powerful North Sea Class AHTS
vessels), shorter after decks and special equipment such as towing winches.
Saevik Supply owns and operates six AHTS vessels in the North Sea which
range in horsepower from 11,100 BHP to 15,600 BHP.
Gulf of Mexico. The demand for marine equipment and related services in the
Gulf has increased significantly during the past two years. The Company's
average supply boat day rate, which management believes reflects industry-wide
day rates, has increased to $7,590 for the third quarter of 1997 compared to
$3,101 in the third quarter of 1995. This increased demand is due in part to
the reduction in the number of vessels serving the Gulf and overall industry
consolidation. The number
30
<PAGE>
of offshore supply boats available for service in the Gulf decreased from a
peak of approximately 700 in 1985 to approximately 300 at the end of October
1997. 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 announced plans
to build a total of approximately 60 new supply boats. Several of these
vessels are new supply boats greater than 220 feet in length, which are
specially designed for the deep water market. Several competitors have also
remobilized vessels from overseas locations into the Gulf.
Although the ongoing transportation, maintenance and repair requirements of
offshore production platforms create a baseline demand for marine support
vessels, incremental demand is primarily impacted by the level of offshore oil
and gas drilling activity. The level of drilling activity is influenced by a
number of factors, including oil and gas prices and drilling budgets of
exploration and production companies. As a result, utilization and day rates
generally correlate to oil and gas prices and drilling activity. 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. The Company believes that the positive trends impacting
the demand for marine services will continue due to (i) recent increases in
capital expenditure budgets of many oil and gas companies for offshore
drilling and development activity, (ii) technological advancements that have
increased drilling success rates, (iii) the high level of seismic activity and
bidding for leases in the Gulf and (iv) the increased focus on deepwater
exploration and production projects, particularly in the Gulf.
Brazil. 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 currently 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 current 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 exploration and production should also result in
additional activity.
North Sea. The number of vessels in the North Sea has decreased
significantly from the mid-1980s, from a peak of approximately 290 in 1986 to
approximately 205 in 1997. This reduction, together with increased activity,
has led to increases in the day rates for AHTSs and PSVs of comparable size to
those operated by Saevik Supply of 50% since September 1996. Although there
has been an increase in newbuilding activity with an estimated 46 new vessels
intended for the North Sea market currently under construction, drilling
activity continued to increase during 1996 and 1997, as a number of
semisubmersible and jack-up drilling rigs were relocated to the North Sea. In
addition, the Company believes that there are numerous long-term field
development and pipeline construction projects underway in the North Sea
market that indicate that the demand for construction support vessels will be
strong for the foreseeable future. The Company further believes that the
Acquisition and other recent acquisitions by U.S. based marine service
providers will lead to further consolidation in the North Sea market. The
North Sea market is relatively fragmented in comparison to the Gulf. Further
consolidation, including acquistions by the Company should have an impact on
future day rates in the North Sea.
SAEVIK SUPPLY
General. Saevik Supply provides marine support and transportation services
to companies engaged in offshore exploration and production of oil and gas in
the North Sea. Saevik Supply was organized in October 1996 to consolidate
ownership of three PSVs. In November 1996, Saevik Supply agreed to purchase
six AHTSs and six PSVs and the stock of related shipping management companies
from Viking Supply Ships AS ("Viking Supply"). The purchases from Viking
Supply were
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<PAGE>
effective January 15, 1997. Subsequent to the purchase of the 12 supply
vessels from Viking Supply, Saevik Supply purchased an additional PSV, and
entered into an agreement for the construction of an additional PSV with a UT
745 design, which is scheduled for delivery in the first quarter of 1998.
Saevik Supply also recently commenced construction of a technologically
advanced AHTS, with 23,800 horsepower that is scheduled to be delivered no
later than May 1999. Saevik Supply also has options with the shipbuilder to
construct two similar AHTSs for delivery during 2000.
The North Sea. The North Sea market area consists of offshore Norway,
Denmark, the Netherlands, Germany, Great Britain and Ireland, and the area
west of the Shetlands. Historically, it has been the most demanding of all
exploration frontiers due to harsh weather, erratic sea conditions,
significant water depth and long sailing distances. Exploration and production
operators in the North Sea market are typically large and well capitalized
entities (such as major oil companies and state owned oil companies), in large
part because of the significant financial commitment required in this market.
In comparison to the Gulf, projects in the region tend to be fewer in number,
but larger in scope, with longer planning horizons. Consequently, vessel
demand in the North Sea is generally more steady and less susceptible to
abrupt swings than vessel demand in other regions. Although not as seasonal as
the Gulf, activity in the North Sea generally is at its highest level during
the months from April to August and at their lowest levels during November to
February.
The North Sea market area can be broadly divided into three areas:
exploration, production platform support and field development or
construction. Support of the volatile exploration segment of the market
represents the primary demand for AHTS vessels. While PSVs also support the
exploration segment, they additionally support the production and field
construction segments, which generally are not affected by frequent short-term
swings in demand. However, because AHTS vessels are capable of performing in a
supply role during periods of weakness in the exploration segment, AHTS
vessels can put downward pressure on PSV demand.
Fleet. Saevik Supply has a fleet consisting of six AHTSs and eleven PSVs,
one of which is under management by Saevik Supply. The average age of the
Saevik Supply fleet is approximately 10 years. The following table sets forth
certain information about Saevik Supply's existing fleet.
<TABLE>
<CAPTION>
NAME LENGTH HORSEPOWER DESIGN CHARTERER
---- ------ ---------- ------------ -------------
<S> <C> <C> <C> <C>
AHTSS
Northern Commander................. 2378 13,200 UT-716 Statoil
Northern Challenger................ 2188 15,612 ME 303 MK II Norsk Hydro
Northern Corona.................... 2188 15,612 ME 303 MK II **
Northern Crusader.................. 2188 15,612 ME 303 MK II Statoil
Northern Chaser.................... 2178 15,612 ME 303 MK II **
Northern Comrade................... 1968 11,140 UT-704 MK II EMC/Statoil
PSVS
Northern Gambler................... 2538 7,200 UT-745 **
Northern Clipper................... 2518 9,600 UT-745 Norsk Hydro
Northern Viking.................... 2108 4,200 UT-706 Statoil
Northern Supporter................. 2038 5,450 UT-755 Statoil
Northern Genesis................... 2028 5,700 ME 202 Danop
Northern Queen..................... 2028 5,700 ME 202 Team
Northern Sea....................... 1948 4,200 SS E2 Deminex/Lasmo
Northern Seeker.................... 1948 4,200 SS E2 PGS
Northern Mariner................... 1828 4,785 ME 204 British Gas
Northern Princess.................. 1768 4,050 TRIM S-52 Statoil
Gro Viking*........................ 6,400 UT-727 Statoil
UT-745 (under construction)........ 2708 10,800 UT-745 ASCo
</TABLE>
- --------
* Under management by Saevik Supply
** These vessels are actively marketed by Saevik Supply on the spot market
pursuant to short-term charters.
32
<PAGE>
Customers and Charter Terms. The principal customers of Saevik Supply are
major integrated oil companies and large independent oil and natural gas
exploration and production companies working in the North Sea, as well as
foreign government owned or controlled organizations and companies that
provide logistic, construction and other services to such oil companies and
foreign government organizations. The charters with these customers are
industry standard time charters. Current charters for its vessels include
periods ranging from just a few days or months to more than one year. The loss
of a major customer could have a material adverse effect on the financial
condition and results of operations of Saevik Supply until a replacement is
obtained.
Saevik Supply currently has six vessels on long-term contracts. Two of these
six vessels are on long-term charters to Statoil and Norsk Hydro, which run to
2000 and 2001, respectively, with options. Either charterer can, however,
terminate its contract during the period upon payment of agreed compensation.
The remaining vessels are chartered on a short-term basis.
Employees. As of October 15, 1997 Saevik Supply had a total of approximately
27 employees in its three offices, which are in Fosnavag and Kristiansand,
Norway, and in Aberdeen, Scotland. It participates in collective bargaining
arrangements with approximately 360 employees working on its North Sea
vessels, 235 Norwegian and 125 citizens of the United Kingdom. The Norwegian
seamen are covered by three union contracts that are between the Norwegian
Employer Association for Ship and Offshore Vessels and (i) masters and mates
on offshore vessels, (ii) able-bodied seamen, electricians, and cooks, and
(iii) engineers, respectively. The U.K. seamen are covered by two union
contracts between Guernsey Ship Management Limited acting on behalf of Saevik
Supply and two separate unions, respectively. Saevik Supply has no other
collective bargaining agreements. Saevik Supply considers the relations with
its employees to be satisfactory. To date, the operations of Saevik Supply
have not been interrupted by strikes or work stoppages.
Properties. The principal executive offices of Saevik Supply are located in
Fosnavag, Norway, while operations and chartering are located in Kristiansand,
Norway, and Aberdeen, Scotland. All office facilities are under lease. The
lessor of the office in Fosnavag is Havgapet AS, the shares of which are owned
by Per Saevik and members of his family. Saevik Supply considers such lease to
be at market rates.
THE COMPANY'S FLEET
Existing Fleet. The following table sets forth information regarding the
vessels owned by the Company as of the date hereof:
<TABLE>
<CAPTION>
HORSE
SUPPLY BOATS: LENGTH POWER
------------- ------ -----
<S> <C> <C>
Kings River........................................................ 225' 5750
Elkhorn River (1).................................................. 220' 3000
Stones River....................................................... 220' 3000
Roe River.......................................................... 211' 4300
Sandy River........................................................ 205' 3000
Trinity River...................................................... 205' 3000
Oak River.......................................................... 195' 4000
Cedar River........................................................ 195' 2550
York River......................................................... 192' 2250
Big Horn River..................................................... 191' 4000
Eagle River........................................................ 190' 3900
Willow River....................................................... 190' 3900
Thunder River...................................................... 190' 3000
Hudson River....................................................... 190' 2500
James River........................................................ 190' 2200
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
HORSE
SUPPLY BOATS: LENGTH POWER
------------- ------ -----
<S> <C> <C>
Cane River......................................................... 190' 2200
Red River.......................................................... 187' 2250
Pearl River........................................................ 187' 2250
Flint River........................................................ 187' 2250
Buffalo River...................................................... 185' 2400
Elm River.......................................................... 185' 3000
Rush River......................................................... 185' 3000
Leigh River........................................................ 185' 2700
Rain River......................................................... 185' 2200
Miami River ....................................................... 181' 2200
Savannah River..................................................... 181' 2200
Sun River.......................................................... 180' 3500
White River........................................................ 180' 3500
Southern River..................................................... 180' 3400
Suwannee River..................................................... 180' 3200
Pecos River........................................................ 180' 3200
Bass River......................................................... 180' 3000
Cannon River....................................................... 180' 3000
Hope River......................................................... 180' 3000
Pond River......................................................... 180' 3000
Rapid River........................................................ 180' 3000
Carson River....................................................... 180' 2700
East River......................................................... 180' 2700
Madison River...................................................... 180' 2700
Maple River........................................................ 180' 2200
Charles River...................................................... 180' 2200
Manatee River...................................................... 180' 2200
Powder River....................................................... 180' 2200
Truckee River...................................................... 180' 2200
Wolf River......................................................... 180' 2200
Ruby River......................................................... 180' 2200
Big Blue River..................................................... 180' 2200
Diamond River...................................................... 180' 1950
Salem River........................................................ 180' 1950
Spring River....................................................... 180' 1200
Fall River......................................................... 170' 2200
Llano River........................................................ 170' 2200
Amite River........................................................ 166' 1800
<CAPTION>
HORSE
CREW BOATS: LENGTH POWER
----------- ------ -----
<S> <C> <C>
Cimarron River..................................................... 125' 2700
Battle River....................................................... 120' 2700
Colorado River..................................................... 120' 2700
Concord River...................................................... 120' 2700
Firehole River..................................................... 120' 2700
Platte River....................................................... 120' 2700
Ramzi River........................................................ 120' 2700
Snake River........................................................ 120' 2700
Fox River.......................................................... 120' 2293
Green River........................................................ 120' 2293
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
HORSE
CREW BOATS: LENGTH POWER
----------- ------ -----
<S> <C> <C>
Whisky River..................................................... 110' 2700
Cumberland River................................................. 110' 2700
Wabash River..................................................... 105' 2025
Freedom River.................................................... 105' 2025
<CAPTION>
LEG
LIFT BOATS LENGTH
---------- ------
<S> <C> <C>
Gulf Island I.................................................... 170'
Gulf Island VIII................................................. 170'
Gulf Island VII.................................................. 145'
Gulf Island IX................................................... 145'
Power V.......................................................... 135'
Gulf Island III.................................................. 130'
<CAPTION>
HORSE
LINE HANDLING BOATS(2): LENGTH POWER
----------------------- ------ -----
<S> <C> <C>
Silver River..................................................... 125' 1500
Red Fox.......................................................... 116' 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
</TABLE>
- --------
(1) 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 before the end of
the fourth quarter of 1997.
(2) All line handling boats 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 the SWATH vessel which will be used to transport up to 250 passengers
to offshore platforms for Petrobras under a five year contract at
approximately $9,000 per day. 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 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 $8.9 million
and $2.3 million in
35
<PAGE>
drydocking and marine inspection costs in the first three quarters of 1997 and
for the year ended December 31, 1996, respectively, and approximately $2.1
million in 1995.
OPERATIONS BASE
The Company supports its operations in the Gulf from a 62.5 acre docking and
maintenance facility in Houma, Louisiana located on the intracoastal waterway
that provides direct access to the Gulf.
CUSTOMERS AND CHARTER TERMS
The Company has entered into master service agreements with substantially
all 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 in Brazil operate 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 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 year ended December 31, 1996, approximately 10%
of the Company's total revenues were received from Vastar Resources, Inc.
During the first nine months of 1997, no customer accounted for more than 10%
of the Company's revenues.
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. Although some
of the Company's principal competitors are larger and have greater financial
resources and international experience than the Company, 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 vessels for use in the
Gulf, North Sea and other areas in which the Company operates. Continued new
construction of these vessels could further increase levels of competition
within these markets.
REGULATION
The Company's operations are materially affected by federal, state and local
regulation, as well as certain international conventions, private industry
organizations and laws and regulations in jurisdictions where the Company's
vessels operate and are registered. 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.
36
<PAGE>
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.
RCRA regulates the generation, transportation, storage, treatment 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.
OSCLA provides the federal government with broad discretion in regulating
the release of offshore resources of oil and gas production. Because the
Company's operations rely on offshore oil and gas exploration and production,
if the government were to exercise its authority under OSCLA to
37
<PAGE>
restrict the availability of offshore oil and gas leases, such an action would
have a material adverse effect on the Company's financial condition and the
results of operations.
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 has provided satisfactory evidence of
financial responsibility to the U.S. Coast Guard for all of its vessels over
300 tons.
Among the more significant of the conventions applicable to the operations
of Saevik Supply are: (i) the International Convention for the Prevention of
Pollution of the Sea, 1973, 1979 Protocol, (ii) the International Convention
on the Safety of Life at Sea, 1974, 1978 and 1981/1983 Protocol, and (iii) the
International Convention on Standards of Training, Certification and
Watchkeeping for Seafarers.
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 October 31, 1997, the Company had approximately 710 employees,
including approximately 650 operating personnel and approximately 60
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.
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.
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<PAGE>
MANAGEMENT
The following sets forth certain information as of October 31, 1997 with
respect to the Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas E. Fairley........... 49 President, Chief Executive Officer and Director
Ronald O. Palmer............ 50 Chairman of the Board
Victor M. Perez............. 44 Vice President, Chief Financial Officer and
Treasurer
Kenneth W. Bourgeois........ 50 Vice President and Controller
Michael D. Cain............. 48 Vice President, Marketing
Charles E. Tizzard.......... 46 Vice President, Administration
Garth H. Greimann........... 42 Director
H. K. Acord................. 64 Director
Edward C. Hutcheson, Jr..... 52 Director
Benjamin F. Bailar.......... 63 Director
</TABLE>
Thomas E. Fairley, who co-founded the Company's predecessor with Mr. Palmer
in 1980, has been President and a director 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. Mr. Fairley is also a
director of Gulf Island Fabrication, Inc.
Ronald O. Palmer has been a director of the Company since October 1993 and
Chairman of the Board since May 1997. Mr. Palmer has also served as Executive
Vice President from February 1995 to May 1997. 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.
Charles E. Tizzard has served as the Company Vice-President--Administration
since June 1997. From October 1994 to June 1997, Mr. Tizzard served as Manager
of Administration and Planning for
39
<PAGE>
the Company. From 1987 to October 1994, Mr. Tizzard served as Vice President
and General Manager of Chrysler Capital's Marine Asset Management subsidiary,
and from 1979 to 1987 he served as District Operations Manager for Chrysler
Capital.
Garth H. Greimann has been a director of the Company since 1993. Mr.
Greimann has been a managing director of Berkshire Partners LLC ("Berkshire")
and its predecessor since 1994 and was a Vice President of Berkshire's
predecessor from 1989 through 1993. Mr. Greimann also serves as a director of
the Profit Recovery Group International.
H. K. Acord has been a director of the Company since January 1997. Mr.
Accord is an oil and gas consultant. From 1993 to 1996, Mr. Acord served as
Executive Vice President, Exploration and Production Division of Mobil Oil
Corporation ("Mobil"). From 1989 to 1993, he served as a Vice President,
International Producing Operations for Mobil.
Edward C. Hutcheson, Jr., has been a director of the Company since 1994. Mr.
Hutcheson co-founded Castle Tower Corporation ("Castle Tower") (owner and
manager of wireless communi-cations towers) in 1994, and was the Chief
Executive Officer and the Chairman of the Board of Directors from inception to
October 1996. Since January 1997, Mr. Hutcheson has been associated with the
corporate finance group of Harris, Webb & Garrison, an investment banking firm
based in Houston, and during 1994 he was involved in private investment
activities leading to the creation of Castle Tower. From 1990 to 1993, he was
the President, Chief Operating Officer and a director of Baroid Corporation, a
company engaged in the petroleum services business. Mr. Hutcheson also serves
on the Board of Directors of Titanium Metals Corporation, Pinnacle Management
& Trust Co. and Castle Tower.
Benjamin F. Bailar has been a director of the Company since 1994. Dean
Bailar served as Dean of the Jones Graduate School of Administration at Rice
University from 1987 to June 1997. He also serves as a Director of U.S. Can
Corporation, Dana Corporation and Smith International, Inc.
40
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 40,000,000 shares of
Common Stock and 5,000,000 shares of preferred stock, $.01 par value per
share, issuable in series (the "Preferred Stock"). As of October 31, 1997,
15,683,566 shares of Common Stock were outstanding and no shares of Preferred
Stock were outstanding. The following description of the capital stock of the
Company is qualified in its entirety by reference to the Company's Certificate
of Incorporation (the "Certificate") and Bylaws, copies of which are
incorporated by reference as exhibits to the registration statement of which
this Prospectus forms a part.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share of Common
Stock held of record on all matters on which stockholders are entitled to
vote; stockholders may not cumulate votes for the election of directors.
Subject to any preferences accorded to the holders of the Preferred Stock, if
and when issued by the Board of Directors, holders of Common Stock are
entitled to dividends at such times and in such amounts as the Board of
Directors may determine. The Company has never paid cash dividends on its
Common Stock and does not intend to pay dividends for the foreseeable future.
In addition, the Company's credit arrangements contain provisions which
prohibit the Company from paying dividends on its Common Stock. See "Risk
Factors--Dividends." Upon the dissolution, liquidation or winding up of the
Company, after payment of debts, expenses and the liquidation preference plus
any accrued dividends on any outstanding shares of Preferred Stock, the
holders of Common Stock will be entitled to receive all remaining assets of
the Company ratably in proportion to the number of shares held by them.
Holders of Common Stock have no preemptive, subscription or conversion rights
and are not subject to further calls or assessments, or rights of redemption
by the Company. The outstanding shares of Common Stock are, and the shares of
Common Stock being sold in the Offering will be, validly issued, fully paid
and nonassessable.
PREFERRED STOCK
The Company's Board of Directors has the authority, without approval of the
stockholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares and rights, preferences and limitations of each
series. Among the specific matters that may be determined by the Board of
Directors are the dividend rights, the redemption price, if any, the terms of
a sinking fund, if any, the amount payable in the event of any voluntary
liquidation, dissolution or winding up of the affairs of the Company,
conversion rights, if any, and voting powers, if any.
One of the effects of the existence of authorized but unissued Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors to
make more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of the Company's management. If, in the
exercise of its fiduciary obligations, the Board of Directors were to
determine that a takeover proposal was not in the Company's best interest,
such shares could be issued by the Board of Directors without stockholder
approval in one or more transactions that might prevent or make more difficult
or costly the completion of the takeover transaction by diluting the voting or
other rights of the proposed acquiror or insurgent stockholder group, by
creating a substantial voting block in institutional or other hands that might
undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise. In this regard, the Company's Certificate grants the Board of
Directors broad power to establish the rights and preferences of the
authorized and unissued Preferred Stock, one or more series of which could be
issued entitling holders (i) to vote separately as a class on any proposed
merger or consolidation, (ii) to cast a proportionately larger vote together
with the Common Stock on any such transaction or for all purposes, (iii) to
elect directors having terms of office or voting rights greater than those of
other
41
<PAGE>
directors, (iv) to convert Preferred Stock into a greater number of shares of
Common Stock or other securities, (v) to demand redemption at a specified
price under prescribed circumstances related to a change of control or (vi) to
exercise other rights designated to impede a takeover. The issuance of shares
of Preferred Stock pursuant to the Board of Directors' authority described
above may adversely effect the rights of holders of the Common Stock.
In addition, certain other charter provisions that are described below may
have the effect either alone, in combination with each other, or with the
existence of authorized but unissued capital stock, of making more difficult
or discouraging an acquisition of the Company deemed undesirable by the Board
of Directors.
CERTAIN CHARTER AND BYLAW PROVISIONS
Classified Board of Directors. The Company's Certificate and Bylaws divide
the members of the Board of Directors into three classes of directors with
each class to be as nearly equal in number of directors as possible, serving
staggered three-year terms. See "Management--Executive Officers and
Directors."
Size of the Board of Directors; Removal of Directors; Filing of Vacancies on
the Board of Directors. The Company's Certificate and Bylaws provide that the
number of directors shall be fixed from time to time by the Board of
Directors, but shall not be fewer than the number required by Delaware law.
Under the Company's Certificate, a vote of 80% of the outstanding shares of
capital stock entitled to vote generally in an election of directors (the
"Voting Stock") is required to remove a director, and a director may only be
so removed for cause involving fraud or a violation of the duty of loyalty as
determined by a final judgment of a court of competent jurisdiction. The
Company's Certificate and Bylaws also provide that a newly created
directorship resulting from an increase in the number of directors may be
filled by the Board of Directors and any vacancies on the Board of Directors
resulting from death, resignation, removal or other cause may be filled only
by the affirmative vote of both (a) a majority of the remaining directors then
in office and (b) a majority of all Continuing Directors (as defined below),
voting as a separate group. In addition, these provisions specify that any
director elected to fill a vacancy on the Board of Directors will serve for
the remainder of the full term of the class of directors in which the new
directorship was created or in which the vacancy occurred.
Stockholder Action by Unanimous Consent. Under Delaware law, unless a
corporation's certificate of incorporation specifies otherwise, most action
that could be taken by its stockholders at an annual or special meeting may be
taken, instead, without a meeting and without notice to or a vote of other
stockholders, if a consent in writing is signed by holders of outstanding
stock having voting power that would be sufficient to take such action at a
meeting at which all outstanding shares were present and voted. The Company's
Certificate provides that stockholder action may be taken only at an annual or
special meeting of stockholders or by unanimous written consent. As a result,
stockholders may not act upon any matter except at a duly called meeting or by
unanimous written consent.
Amendment of the Bylaws. Under Delaware law, the power to adopt, amend or
repeal bylaws is conferred upon the stockholders; however, a corporation may
in its certificate of incorporation also confer upon the board of directors
the power to adopt, amend or repeal its bylaws. The Company's Certificate and
Bylaws grant the Board of Directors the power to adopt, amend and repeal the
Bylaws at any regular or special meeting of the Board of Directors but only
upon the affirmative vote of both (i) a majority of the directors then in
office and (ii) a majority of the Continuing Directors, voting as a separate
group. The Company's stockholders may adopt, amend or repeal the Bylaws but
only at any regular or special meeting of stockholders by an affirmative vote
of 80% of the Voting Stock.
42
<PAGE>
Advance Notice of Stockholder Nominations and Stockholder Business. The
Company's Bylaws permit stockholders to nominate a person for election as a
director or bring other matters before a stockholders' meeting only if such
stockholder has been, for at least one year, the beneficial owner of at least
1% of Voting Stock and only if written notice of such intent to nominate or
bring business before a meeting is given as described below.
The notice from a stockholder intending to nominate a person for election as
a director or to propose other matters at a stockholders' meeting must be
furnished to the Company's Secretary not more than 270 days and not less than
60 days in advance of the first anniversary of the preceding year's annual
stockholders' meeting, subject to certain exceptions applicable principally to
special meetings. In addition, the notice must contain information, including
the name, age and address of the stockholder proposing such action and any
persons acting in concert with such stockholder, the number of shares of
Voting Stock held by the stockholder and the dates such stock was acquired,
and a representation by such stockholder that he or she is a holder of record
of the Company's capital stock and intends to appear at the meeting in person
and make the nomination or bring up the specified matter.
In the case of nominations for directors, the notice must also include (i)
the name, age, address and principal occupation of each nominee, (ii) a
description of all arrangements between the nominating stockholder and each
nominee, (iii) other information required to be included in a proxy statement
pursuant to the proxy rules of the Securities and Exchange Commission and (iv)
the consent of each nominee to serve as a director of the Company if elected
and an affidavit of each such nominee certifying that such nominee meets the
qualifications necessary to serve as a director of the Company. In the case of
other proposed business, the notice must set forth a brief description of the
business, the reasons for conducting such business at the meeting and any
material interest of the stockholder therein. The Chairman of the
stockholders' meeting will have the power to disregard any nomination or other
matter that fails to comply with these procedures. In addition, the Company's
Secretary may require any stockholders submitting a notice of intent to make a
nomination or bring up other business to furnish such documentary information
as may be necessary to determine that such stockholder has been for at least
one year the beneficial owner of at least 1% of the Voting Stock.
With respect to any proposal by a stockholder to bring before a meeting any
matter other than the nomination of directors, the Company's Bylaws provide
that the Company may disregard proposals that (i) are substantially
duplicative of a prior-received proposal to be voted upon at an upcoming
meeting, (ii) deal with substantially the same subject matter as a prior
proposal that was voted upon within the preceding five years and that failed
to receive affirmative votes in excess of certain specified levels, which
range, depending on the circumstances, between 3% and 10% or (iii) in the
judgment of the Board of Directors, are not proper subjects for action by
stockholders under Delaware law.
Amendment of Certain Provisions of the Certificate of Incorporation. Under
Delaware law, unless the certificate of incorporation specifies otherwise, a
corporation's certificate of incorporation may be amended by the affirmative
vote of the majority of the stockholders. The Company's Certificate requires
the affirmative vote of 80% of the Voting Stock to amend, alter or repeal
certain provisions of the Certificate regarding (i) stockholder unanimous
written consents, (ii) the classification, filling of vacancies and removal of
members of the Board of Directors, (iii) the limitation of liability of
directors, (iv) business combinations and (v) amendments to the Certificate
and the Bylaws.
Special Meetings of the Stockholders. The Company's Bylaws permit the
stockholders to call special meetings of the stockholders only upon the
written request to the Company's Secretary of the beneficial owners of at
least 25% of the outstanding Voting Stock. This provision requires the request
to set forth a brief description of the action proposed to be taken at such
special meeting
43
<PAGE>
and the reasons for the action, the name and address of each beneficial owner
composing the group making the request, any material interest that each such
person making the request may have in the matter, the number of shares of
Voting Stock of which each such person is the beneficial owner and the dates
upon which each person acquired his or her stock, a representation that at
least one such beneficial owner or a representative thereof intends to appear
in person at such meeting to propose the action specified in the request and,
if the proposed action includes a proposal to amend the Company's Certificate
or Bylaws, the language of the proposed amendment. The Secretary may require
any person or persons submitting a request to furnish documentary support of
the claim that the person or persons as a group beneficially owns at least 25%
of the outstanding Voting Stock. The Secretary may also refuse to call a
special meeting unless the request is made in compliance with the foregoing
procedures.
Business Combinations. Delaware law provides that a merger, sale of
substantially all of the assets or dissolution of a company requires the
approval of the holders of a majority of the outstanding capital stock.
Pursuant to the Company's Certificate, if one of these transactions or certain
issuances, reclassifications or other transactions affecting the Company's
capital stock involves an Interested Stockholder (as defined below), the
transaction must be approved (i) by a majority of both the directors then in
office and a majority of the Continuing Directors (as defined below), voting
as a separate group and (ii) by the affirmative vote of (A) the holders of 80%
of the Voting Stock, voting together as a single class, and (B) 75% of the
Voting Stock other than Voting Stock beneficially owned by the Interested
Stockholder. An Interested Stockholder is any person who (i) is a beneficial
owner of 10% of the Voting Stock or (ii) is an affiliate of the Company and,
at any time within two years prior to the date in question, was a beneficial
owner of 10% or more of the then outstanding Voting Stock, other than the
Company or its subsidiaries, or any person owning any shares of the capital
stock of the Company as of the date of filing of the Company's Certificate and
any person whose beneficial ownership of any capital of the Company arises
solely as a result of a trusteeship or a custodial relationship with any
employee stock ownership or other employee benefit plan of the Company. A
Continuing Director is any member of the Board of Directors who is not an
Interested Stockholder or an affiliate thereof and (i) was a director prior to
the time the Interested Stockholder became an Interested Stockholder or (ii)
was recommended or elected by a majority of the Continuing Directors at a
meeting at which a quorum consisting of a majority of the Continuing Directors
was present. In the absence of an Interested Stockholder, the Continuing
Directors shall mean all the directors then in office.
This additional voting requirement does not apply if the transaction has
been approved by a majority of the Continuing Directors, or if all of the
following conditions have been met: (i) the aggregate amount of consideration
received per share by the holders meet certain "fair price" criteria, (ii)
prior to the consummation of the transaction (a) there has been no failure to
declare or pay dividends on any outstanding Preferred Stock or Common Stock,
(b) the Interested Stockholder has not received the benefits (except
proportionately as a stockholder) of any loans, advances or other financial
assistance or tax advantages provided by the Company, and (c) the Interested
Stockholder has not caused any material change in the Company's equity capital
structure and (iii) the Interested Stockholder has not become the beneficial
owner of any additional shares of Voting Stock except as part of the
transaction that resulted in such Interested Stockholder becoming an
Interested Stockholder or as a result of a pro rata stock dividend.
The Company is also subject to Section 203 of the Delaware General
Corporation Law, which prohibits Delaware corporations from engaging in a wide
range of specified transactions with any interested stockholder, defined to
include, among others, any person other than such corporation and any of its
majority-owned subsidiaries who own 15% or more of any class or series of
stock entitled to vote generally in the election of directors, unless, among
other exceptions, the transaction is approved by (i) the Board of Directors
prior to the date the interested stockholder obtained such
44
<PAGE>
status or (ii) the holders of two-thirds of the outstanding shares of each
class or series of stock entitled to vote generally in the election of
directors, not including those shares owned by the interested stockholder.
The provisions described above may tend to deter any potential unfriendly
offers or other efforts to obtain control of the Company that are not approved
by the Board of Directors and thereby deprive the stockholders of
opportunities to sell shares of Common Stock at prices higher than the
prevailing market price. On the other hand, these provisions will tend to
assure continuity of management and corporate policies and to induce any
person seeking control of the Company or a business combination with the
Company to negotiate on terms acceptable to the then elected Board of
Directors.
Limitations on Foreign Ownership of Company Stock. The Company's Certificate
contains provisions designed to assure that not more than 24% of its
outstanding shares of Common Stock are owned by persons who are not U.S.
citizens. The Certificate provides that any transfer or purported transfer of
shares of Common Stock that would result in the ownership by persons who are
not U.S. citizens of more than 24% of the then outstanding shares of Common
Stock will not become effective against the Company and the Company has the
power to deny voting and dividend rights with respect to such shares and, at
its option, to redeem such shares.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Company has agreed to sell to each of the Underwriters named below (the
"Underwriters"), and each of the Underwriters for whom Schroder & Co. Inc.,
Bear, Stearns & Co. Inc., Jefferies & Company, Inc., Raymond James &
Associates, Inc. and Johnson Rice & Company L.L.C. are acting as
Representatives (the "Representatives"), has severally agreed to purchase from
the Company, the number of shares of Common Stock set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ -----------
<S> <C>
Schroder & Co. Inc..................................................
Bear, Stearns & Co. Inc.............................................
Jefferies & Company, Inc............................................
Raymond James & Associates, Inc.....................................
Johnson Rice & Company L.L.C........................................
-----------
Total.............................................................
===========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all shares
of Common Stock offered hereby if any such shares are purchased. In the event
of a default of any Underwriter, the Underwriting Agreement provides that, in
certain circumstances, purchase commitments of the non-defaulting Underwriters
may be increased or the Underwriting Agreement may be terminated. The Company
has been advised by the Representatives that the several Underwriters propose
initially to offer such shares of Common Stock at the public offering price
set forth on the cover page of this Prospectus, and to certain dealers at such
price less a concession not in excess of $ per share. The Underwriters may
allow, and such dealers may reallow, a concession not in excess of $ per
share to other dealers. After the initial offering, the public offering price
and such concessions may be changed.
The Company has granted to the Underwriters an option, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the public offering price less the
underwriting discount set forth on the cover page of this Prospectus. The
underwriters may exercise such option to cover over-allotments in the sale of
the shares of Common Stock that the Underwriters have agreed to purchase. To
the extent that the Underwriters exercise such option, each Underwriter will
have a firm commitment, subject to certain conditions, to purchase a number of
option shares proportionate to such Underwriter's initial commitment.
The Company has agreed not to offer, sell, or contract to sell, or otherwise
dispose of, or announce the offering of, any shares of Common Stock or any
securities convertible into, or exchangeable for, shares of Common Stock,
except the shares of Common Stock offered hereby for a period of 90 days from
the date of this Prospectus, without the written consent of Schroder & Co.
Inc., (provided that the Company may issue and sell Common Stock and options
to buy Common Stock pursuant to its existing stock incentive plans and Common
Stock sold pursuant to the exercise of the option granted to the Underwriters
to cover over-allotments).
Certain of the underwriters have from time to time provided investment
banking and financial advisory services to the Company, and such firms may in
the future provide similar services to the Company, for which they have
received or are expected to receive customary fees.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.
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<PAGE>
Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters
and certain selling group members to bid for and purchase the Common Stock. As
an exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock. In addition, in connection with
the Offering, certain Underwriters (and selling group members) may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market in accordance with Rule 103 of Regulation M.
If the Underwriters create a short position in the Common Stock in
connection with the Offering, by selling more shares of Common Stock than are
set forth on the cover page of this Prospectus, the Representatives may reduce
that short position by purchasing Common Stock in the open market. The
Representatives may also elect to reduce any short position by exercising all
or part of the over-allotment option described above.
The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim that
amount of selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.
Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transaction
described above may have on the price of the Common Stock. In addition,
neither the Company nor any of the Underwriters makes any representation that
the Representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice.
NOTICE TO ONTARIO RESIDENTS
The distribution of the shares of Common Stock in the Province of Ontario,
Canada is being made only on a private placement basis and is exempt from the
requirement that the Company prepare and file a prospectus with the relevant
Canadian securities regulatory authorities. Accordingly, any resale of the
shares of Common Stock must be made in accordance with applicable securities
laws, which may require resales to be made in accordance with exemptions from
registration and prospectus requirements. Purchasers are advised to seek legal
advice prior to any resale of the shares of Common Stock.
Each Ontario purchaser who receives a purchase confirmation regarding the
purchase of shares of Common Stock will be deemed to represent to the Company
and to the dealer from whom such confirmation is received that such purchaser
is entitled under applicable Ontario securities laws to purchase such shares
of Common Stock without the benefit of a prospectus qualified under such
securities law.
Ontario purchasers of shares of Common Stock should consult their own legal
and tax advisors with respect to the tax consequences of an investment in the
shares of Common Stock in their particular circumstances and with respect to
the eligibility of the shares of Common Stock for investment by the purchaser
under relevant Canadian legislation.
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<PAGE>
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or recision or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the Company's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada
upon the Company or such persons. All or a substantial portion of the assets
of the Company and such persons may be located outside of Canada and, as a
result, it may not be possible to satisfy a judgment against the Company or
such persons in Canada or to enforce a judgment obtained in Canadian courts
against the Company or persons outside of Canada.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New
Orleans, Louisiana. Vinson & Elkins L.L.P., Houston, Texas, will pass upon
certain legal matters for the Underwriters.
EXPERTS
The Company's consolidated financial statements as of December 31, 1996 and
1995 and for the three years in the period ended December 31, 1996, included
in this Prospectus and the Registration Statement of which this Prospectus
forms a part, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Saevik Supply as of December 31,
1996 and for the year ended December 31, 1996, included in this Prospectus and
the Registration Statement of which this Prospectus forms a part, have been
audited by KPMG as Gerd Leira, independent accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
The statements of assets acquired and liabilities assumed and revenue less
direct operating expenses of the Viking Vessels for the years ended December
31, 1994, 1995 and 1996 included in this Prospectus and the Registration
Statement of which this Prospectus forms a part, have been audited by Deloitte
& Touche as Roar Skuland, independent accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed a Registration Statement on Form S-3 (the
"Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), pertaining to the Common Stock covered by this Prospectus. This
Prospectus omits certain information and exhibits included in the Registration
Statement, copies of which may be obtained upon payment of a fee prescribed by
the Commission or may be examined free of charge at the principal office of
the Commission in Washington, D.C.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements
48
<PAGE>
and other information with the Commission. The Registration Statement, as well
as such reports, proxy statements and other information filed with the
Commission by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, DC 20549, and at the regional offices of the
Commission at the following locations: New York Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048 and Chicago Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60621-2511. Copies of such
material may be obtained from the Public Reference Section of the Commission
at 450 Fifth Street, N.W., Washington, DC 20549, at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically
with the Commission (http://www.sec.gov). The Company's Common Stock is traded
on the Nasdaq National Market. Reports, proxy statements and other information
may also be inspected at the offices of the National Association of Securities
Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
49
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are by reference incorporated in and
made a part of this Prospectus: (i) the Company's Annual Report on Form 10-K
for the year ended December 31, 1996; (ii) the Company's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September
30, 1997; (iii) the Company's Current Reports on Form 8-K dated February 15,
1997, August 1, 1997 and November 14, 1997; and (iv) the description of the
Company's capital stock set forth in its Registration Statement under the
Exchange Act on Form 8-A filed with the Commission on April 26, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the Offering shall be deemed to be incorporated by reference in
this Prospectus and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, upon the written or oral request of such
person, a copy of any and all of the documents which have been or may be
incorporated by reference in this Prospectus, except that exhibits to such
documents will not be provided unless they are specifically incorporated by
reference into such documents. Requests for copies of any such document should
be directed to Trico Marine Services, Inc., Attention: Corporate Secretary,
2401 Fountainview, Suite 920, Houston, Texas 77057 (telephone: (713) 780-
9926).
50
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Pro Forma Consolidated Financial Statements:
Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 1997. F-2
Unaudited Pro Forma Statement of Operations for the nine months ended
September 30, 1997..................................................... F-3
Unaudited Pro Forma Consolidated Statement of Operations for the year
ended December 31, 1996................................................ F-4
Notes to Unaudited Pro Forma Consolidated Financial Statements.......... F-5
Consolidated Financial Statements:
Trico Marine Services, Inc. and Subsidiaries
Report of Independent Accountants....................................... F-8
Consolidated Balance Sheets as of December 31, 1995 and 1996............ F-9
Consolidated Statement of Operations for the years ended December 31,
1994, 1995 and 1996.................................................... F-10
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1994, 1995 and 1996....................................... F-11
Consolidated Statement of Cash Flows for the years ended December 31,
1994, 1995 and 1996.................................................... F-12
Notes to Consolidated Financial Statements.............................. F-13
Consolidated Financial Statements (Unaudited):
Trico Marine Services, Inc. and Subsidiaries
Consolidated Balance Sheet as of September 30, 1997..................... F-23
Consolidated Statement of Operations for the nine months ended September
30, 1996 and 1997...................................................... F-24
Consolidated Statement of Cash Flows for the nine months ended September
30, 1996 and 1997...................................................... F-25
Notes to Consolidated Financial Statements.............................. F-26
Consolidated Financial Statement:
Saevik Supply ASA and Subsidiaries
Report of Independent Accountants....................................... F-29
Consolidated Balance Sheet as of December 31, 1996...................... F-30
Consolidated Statement of Earnings for the year ended December 31, 1996. F-31
Consolidated Statement of Cash Flows for the year ended December 31,
1996................................................................... F-32
Notes to the Accounts for 1996.......................................... F-33
Consolidated Financial Statements (Unaudited):
Saevik Supply ASA and Subsidiaries
Consolidated Balance Sheet as of September 30, 1997..................... F-46
Consolidated Statement of Earnings for the nine months ended September
30, 1997............................................................... F-47
Consolidated Statement of Cash Flows for the nine months ended September
30, 1997............................................................... F-48
Notes to the Accounts for 1997.......................................... F-49
Viking Vessels:
Report of Independent Accountants....................................... F-53
Statement of Assets Acquired and Liabilities Assumed as of December 31,
1996................................................................... F-54
Statement of Revenues less Direct Operating Expenses for the years ended
December 31, 1994, 1995 and 1996....................................... F-55
Notes to Financial Statements........................................... F-56
</TABLE>
51
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements as of
September 30, 1997 and for the nine month period ended September 30, 1997 and
for the year ended December 31, 1996 illustrate the effect of the acquisition
of Saevik Supply ASA (Saevik Supply), including its acquisition of the Viking
Vessels by Saevik Supply and the related financing transactions, as described
in Note 1 to the unaudited pro forma financial statements. The unaudited pro
forma consolidated balance sheet as of September 30, 1997 has been prepared
assuming that such transactions were consummated as of September 30, 1997. The
unaudited pro forma consolidated statements of operations for the nine month
period ended September 30, 1997 and the year ended December 31, 1996 have been
prepared assuming that such transactions were consummated as of January 1,
1996.
The historical results of operations for the Company have been derived from
the Company's consolidated financial statements. The historical results of
Saevik Supply have been derived from Saevik Supply's consolidated financial
statements as adjusted for generally accepted accounting principles in the
United States ("US GAAP") and have been translated into U.S. dollars in
accordance with U.S. GAAP. The historical statements of assets acquired and
liabilities assumed and revenues less direct operating expenses of the Viking
Vessels (defined below) have been derived from a carve out of the financial
information from Viking Supply Ships AS, a Norwegian shipping concern, that
relates to the fleet of twelve vessels acquired by Saevik Supply from Viking
Supply Ships AS (the "Viking Vessels") on January 15, 1997 as adjusted for US
GAAP and have been translated into U.S. dollars in accordance with US GAAP.
The unaudited pro forma financial statements and the notes thereto should be
read in conjunction with the historical consolidated financial statements of
the Company and Saevik Supply and the statements of assets acquired and
liabilities assumed and revenues less direct operating expenses for Viking
Vessels included herein.
The pro forma adjustments and the resulting unaudited pro forma financial
statements are based upon available information and certain assumptions and
estimates as described in the Notes to the Unaudited Pro Forma Financial
Statements. A final determination of the required purchase accounting
adjustments, including the allocation of the purchase price to the assets
acquired and liabilities assumed based on their respective fair values, has
not yet been made. Accordingly, the purchase accounting adjustments reflected
in the pro forma information are preliminary and have been made solely for the
purposes of developing such information.
F-1
<PAGE>
TRICO MARINE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SAEVIK
TRICO SUPPLY PRO FORMA
ASSETS HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
------ ---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents..... $ 3,508 $ 18,935 $ 98,700 (B) $ 22,443
118,900 (C)
77,900 (D)
(295,500)(E)
Accounts receivable, net...... 26,087 16,605 42,692
Prepaid expenses and other
current...................... 837 -- 837
-------- -------- --------
Total current assets........ 30,432 35,540 65,972
-------- -------- --------
Property and equipment, net..... 230,038 187,082 72,919 (E) 490,039
Goodwill and other intangibles.. -- -- 122,542 (E) 122,542
Other assets.................... 17,287 1,694 1,300 (B) 20,281
-------- -------- --------
Total assets................ $277,757 $224,316 $698,834
======== ======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
- ------------------------------------
<S> <C> <C> <C> <C>
Current liabilities:
Accounts payable and accrued
expenses..................... $ 17,507 $ 7,341 $ 24,848
-------- -------- --------
Total current liabilities... 17,507 7,341 24,848
-------- -------- --------
Long-term debt.................. 114,000 104,549 100,000 (B) 396,449
77,900 (D)
Deferred income taxes........... 17,497 11,759 29,256
Other liabilities............... -- 628 628
-------- -------- --------
Total liabilities........... 149,004 124,277 451,181
Stockholders' equity:
Common stock.................. 158 19,090 40 (C) 198
(19,090)(E)
Additional paid-in capital.... 94,143 43,315 118,860 (C) 213,003
(43,315)(E)
Retained earnings............. 34,453 43,829 (43,829)(E) 34,453
Treasury Stock................ (1) -- (1)
Translation adjustment........ -- (6,195) 6,195 (E)
-------- -------- --------
Total stockholders' equity.. 128,753 100,039 247,653
-------- -------- --------
Total liabilities and stock-
holders' equity............ $277,757 $224,316 $698,834
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
F-2
<PAGE>
TRICO MARINE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING SEPTEMBER 30, 1997
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SAEVIK
TRICO SUPPLY PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues................... $ 83,879 $61,156 2,780 (A) $ 147,815
----------- ------- -----------
Operating expenses......... 34,842 18,605 949 (A) 54,396
Depreciation and
amortization expense...... 7,995 7,185 305 (A) 20,043
2,298 (F)
2,260 (G)
----------- ------- -----------
Operating income........... 41,042 35,366 73,376
----------- ------- -----------
Other (income) expenses:
Interest expense......... 3,677 5,118 10,834 (H) 19,629
Other (income) expense... (245) (964) (1,209)
----------- ------- -----------
Total other (income)
expense............... 3,432 4,154 18,420
Income before income tax
expense................... 37,610 31,212 54,956
Income tax expense......... 13,164 8,089 (3,883)(J) 17,370
----------- ------- -----------
Net income................. $ 24,446 $23,123 $ 37,586
=========== ======= ===========
Weighted average common
shares and equivalents
outstanding............... 16,888,569 4,000,000 (L) 20,888,569
=========== ===========
Primary and fully diluted
earnings per share:
Net income per share..... $ 1.45 $ 1.80
=========== ===========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
F-3
<PAGE>
TRICO MARINE SERVICES, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING DECEMBER 31, 1996
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SAEVIK VIKING
TRICO SUPPLY VESSELS PRO FORMA
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS TOTAL
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues................ $ 53,484 $8,669 $41,007 $ 103,160
----------- ------ ------- -----------
Operating expenses...... 29,894 3,760 20,347 1,232 (I) 55,233
Depreciation and
amortization expense... 4,478 1,527 7,545 3,064 (F) 20,542
3,928 (G)
----------- ------ ------- -----------
Operating income........ 19,112 3,382 13,115 27,385
----------- ------ ------- -----------
Other (income) expenses:
Interest expense...... 2,282 1,985 -- 14,445 (H) 18,712
Other (income)
expense.............. 125 (283) -- (158)
----------- ------ ------- -----------
Total other (income)
expense............ 2,407 1,702 -- 18,554
Income before income tax
expense and minority
interest............... 16,705 1,680 13,115 8,831
Income tax expense...... 5,814 901 -- (6,778)(J) 3,609
3,672 (K)
----------- ------ ------- -----------
Income before minority
interest............... 10,891 779 13,115 5,222
Minority interest....... -- 108 -- 108
----------- ------ ------- -----------
Net income.............. $ 10,891 $ 887 $13,115 $ 5,330
=========== ====== ======= ===========
Weighted average common
shares and equivalents
outstanding............ 12,380,902 4,000,000 (L) 16,380,902
=========== ===========
Primary and fully
diluted earnings per
share:
Net income per share.. $ 0.88 $ 0.33
=========== ===========
</TABLE>
The accompanying notes are an integral part of the pro forma financial
statements.
F-4
<PAGE>
TRICO MARINE SERVICES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND:
The Company has reached an agreement to acquire Saevik Supply ASA, a
publicly traded Norwegian company ("Saevik Supply"). Saevik Supply provides
marine support and transportation services to companies engaged in offshore
exploration and production of oil and gas in the North Sea.
On October 7, 1997, the Company presented an offer to the board of directors
of Saevik Supply to purchase all of the outstanding shares of Saevik Supply
for approximately $290.0 million (the "Acquisition"). Saevik Supply's founder
and chief executive officer, Per Saevik, and another shareholder represented
on Saevik Supply's board of directors, owning in the aggregate approximately
19% of the outstanding shares of Saevik Supply, have irrevocably agreed to
tender their shares and accept the Company's offer. The Acquisition was
recommended by Saevik Supply's board of directors to its shareholders, and the
Company commenced a public bid on October 27, 1997 under the rules of the Oslo
Stock Exchange to purchase all of Saevik Supply's outstanding shares. The
public bid, unless extended, will expire on November 25, 1997.
On January 15, 1997, Saevik Supply completed the purchase of twelve vessels
and an associated management company from Viking Supply Ships AS. These
vessels represented only a portion of the Viking Supply Ships AS fleet at that
time.
The Company plans to fund the Acquisition with the proceeds from this
Offering, the proceeds from the Company's recent offering of $100.0 million of
8 1/2% Senior Notes due 2005 and advances under the Company's $150.0 million
revolving credit facility (the "Credit Facility").
2. BASIS OF PRESENTATION:
The accompanying unaudited pro forma balance sheet has been prepared
assuming that 100% of the outstanding shares of Saevik Supply are tendered and
the Acquisition (including the acquisition of the Viking Vessels by Saevik
Supply) and the related financing transactions were consummated as of
September 30, 1997. The accompanying unaudited pro forma statements of
operations for the nine month period ended September 30, 1997 and the year
ended December 31, 1996 have been prepared assuming that such transactions
were consummated as of January 1, 1996.
Net earnings per share have been computed based on the weighted average
number of common shares and common share equivalents outstanding on a pro
forma basis during the nine month period ended September 30, 1997 and the year
ended December 31, 1996. The number of shares used in the calculation of the
pro forma per share data for the nine month period ended September 30, 1997
and the year ended December 31, 1996 is based on the weighted average number
of shares outstanding during the period assuming that this Offering was
consummated as of January 1, 1996.
3. MANAGEMENT ASSUMPTIONS:
The unaudited pro forma financial statements reflect the following pro forma
adjustments related to the Acquisition and the related financing transactions:
(A) Actual operating results for the Saevik Supply predecessor entity, the
Viking Vessels, are included in the Saevik Supply statement of operations for
the nine month period ended September 30, 1997 beginning January 15, 1997, the
date of the acquisition of the Viking Vessels by Saevik Supply. The pro forma
adjustments represent an estimate of the operating results of the Viking
Vessels for the two week period ended January 14, 1997 has been made based on
the actual operating results of the Viking Vessels for the period January 15,
1997 through March 31, 1997.
F-5
<PAGE>
TRICO MARINE SERVICES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(B) Receipt of net proceeds of $98.7 million from the Company's recent
offering of $100.0 million of 8 1/2% Senior Notes due 2005, net of transaction
costs.
(C) Receipt of aggregate proceeds of $118.9 million from the Offering less
registration expenses of $5.6 million utilizing an estimated offering price of
$31.125 per share.
(D) Receipt of aggregate proceeds of $77.9 million from the additional
borrowings under the Company's Credit Facility.
(E) Acquisition of Saevik Supply for aggregate consideration of $290.0
million plus $5.5 million in transaction expenses. Based on preliminary
determination of the fair values of assets and liabilities acquired,
approximately $260.0 million of the total purchase cost has been allocated to
property and equipment, representing a $72.9 million step up from historical
cost. Additional adjustments to reflect the acquisition include elimination of
the historical capital accounts of Saevik Supply and recording of $122.5
million of goodwill.
(F) Increase in depreciation and amortization due to amortization of
goodwill with an estimated life of 40 years.
(G) Increase in depreciation and amortization based on preliminary estimated
appraised value of property and equipment acquired and application of the
Company's depreciation policies to such assets. The pro forma adjustment to
depreciation expense was based upon an average remaining useful life of 20
years for the Saevik Supply assets.
(H) Increase in interest expense is due to issuance of $100.0 million of
8 1/2% Senior Notes due 2005, $77.9 million of advances under the Credit
Facility with an average rate of 7 1/2% and the associated amortization of
deferred debt issuance costs. The pro forma adjustment to interest expense
relating to these financing transactions is composed of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Interest on 8 1/2% Senior Notes due
2005................................ $ 6,375 $ 8,500
Interest on advances under the Credit
Facility............................ 4,365 5,820
Amortization of deferred debt issu-
ance costs.......................... 94 125
------- -------
$10,834 $14,445
======= =======
</TABLE>
(I) The Viking Vessels statement of revenue less direct operating expenses
included in the unaudited pro forma statements for the year ended December 31,
1996 are not intended to be a complete presentation of the results of the
operations for the Viking Vessels. The statement includes the historic results
of the vessels acquired by Saevik Supply from Viking Supply Ships AS, a
Norwegian shipping concern, on January 15, 1997. Historical audited financial
statements were never prepared separately for the individual vessels or the
fleet of the Viking Vessels as they represented only a portion of the overall
Viking Supply Ships AS fleet at the time of their acquisition by Saevik.
Separate financial information of the Viking Vessels such as a portion of
selling, general and administrative expense were not prepared historically and
are not available on a vessel by vessel basis or for the fleet of the Viking
Vessels. Accordingly, an estimate of selling general and administrative
expenses has been made for purposes of preparing the unaudited pro forma
financial information for the year ended December 31, 1996. The estimate is
based on Saevik Supply's actual selling, general and administrative expenses
attributable to the Viking Vessels during the nine month period ended
September 30, 1997, annualized.
F-6
<PAGE>
TRICO MARINE SERVICES, INC.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(J) Income tax effects of the pro forma adjustments included herein, based
on a Norwegian income tax rate of 28%, entirely deferred under the Norwegian
Shipping Tax Act.
(K) Income tax effect of Viking Vessels revenues less direct operating
expenses for the year ended December 31, 1996, based on a Norwegian income tax
rate of 28%, entirely deferred under the Norwegian Shipping Tax Act.
(L) Estimated increase in weighted average common shares and common stock
equivalents outstanding due to issuance of 4,000,000 shares of Common Stock in
connection with this Offering.
F-7
<PAGE>
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 as of 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 except
for the third paragraph
of Note 15 to which the
date is June 9, 1997
F-8
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1995 1996
------ ------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,117 $ 1,047
Accounts receivable, net.................................. 7,417 17,409
Prepaid expenses and other current assets................. 156 591
------- --------
Total current assets.................................... 8,690 19,047
------- --------
Property and equipment, at cost:
Land and buildings........................................ -- 1,565
Marine vessels............................................ 44,257 120,403
Construction-in-progress.................................. 346 7,135
Transportation and other.................................. 856 853
------- --------
45,459 129,956
Less accumulated depreciation and amortization.............. 6,195 10,814
------- --------
Net property and equipment.............................. 39,264 119,142
------- --------
Other assets................................................ 4,159 5,166
------- --------
$52,113 $143,355
======= ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable.......................................... $ 3,656 $ 5,162
Accrued expenses.......................................... 2,878 3,812
Current portion of long-term debt......................... 3,000 --
------- --------
Total current liabilities............................... 9,534 8,974
------- --------
Long-term debt.............................................. 23,695 21,000
Subordinated debt and accrued interest thereon.............. 13,085 --
Deferred income taxes....................................... 87 9,401
------- --------
Total liabilities....................................... 46,401 39,375
------- --------
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value, 40,000,000 shares
authorized, issued 6,174,684 and 15,601,960 shares,
outstanding 6,102,652 and 15,529,928 shares at December
31, 1995 and 1996, respectively.......................... 62 156
Additional paid-in capital................................ 5,618 93,818
Retained earnings......................................... 33 10,007
Treasury stock, at par value, 72,032 shares at December
31, 1995 and 1996, respectively.......................... (1) (1)
------- --------
Total stockholders' equity.............................. 5,712 103,980
------- --------
$52,113 $143,355
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ----------
<S> <C> <C> <C>
Revenues:
Charter Fees............................... $ 28,895 $ 26,657 $ 53,442
Other vessel income........................ 139 41 42
--------- --------- ----------
Total revenues........................... 29,034 26,698 53,484
--------- --------- ----------
Operating expenses:
Direct vessel operating expenses........... 17,165 16,988 24,150
General and administrative................. 2,057 2,509 3,277
Amortization of marine inspection costs.... 1,490 1,930 2,158
Other...................................... 764 545 309
--------- --------- ----------
Total operating expenses................. 21,476 21,972 29,894
Depreciation expense......................... 2,786 2,740 4,478
--------- --------- ----------
Operating income............................. 4,772 1,986 19,112
Interest expense............................. 3,767 3,850 2,282
Amortization of deferred financing costs..... 344 381 263
Gain on sales of assets...................... -- (244) (59)
Other income, net............................ (51) (32) (79)
--------- --------- ----------
Income (loss) before income taxes............ 712 (1,969) 16,705
Income tax expense (benefit)................. 226 (670) 5,814
--------- --------- ----------
Income (loss) before extraordinary item...... 486 (1,299) 10,891
Extraordinary item, net of taxes............. -- -- (917)
--------- --------- ----------
Net income (loss)............................ $ 486 $ (1,299) $ 9,974
========= ========= ==========
Primary and fully diluted earnings per share:
Income (loss) before extraordinary item.... 0.08 (0.21) 0.88
Extraordinary item, net of tax............. -- -- (0.07)
--------- --------- ----------
Net income (loss) per average common share
outstanding................................. $ 0.08 $ (0.21) $ 0.81
========= ========= ==========
Weighted average common shares outstanding... 6,020,570 6,101,042 12,380,902
========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------ PAID-IN RETAINED ----------------
SHARES DOLLARS CAPITAL EARNINGS SHARES PAR VALUE
---------- ------- ---------- -------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1994................... 6,092,174 $ 61 $ 5,544 $ 846 72,032 $(1)
Issuance of Common
Stock................ 73,344 -- 66 -- -- --
Net income............ -- -- -- 486 -- --
---------- ---- ------- ------- ------ ---
Balance, December 31,
1994................... 6,165,518 61 5,610 1,332 72,032 (1)
Issuance of Common
Stock................ 9,166 -- 9 -- -- --
Net loss.............. -- -- -- (1,299) -- --
---------- ---- ------- ------- ------ ---
Balance, December 31,
1995................... 6,174,684 61 5,619 33 72,032 (1)
Issuance of Common
Stock................ 8,285,000 83 79,455 -- -- --
Debt conversion....... 935,226 10 7,471 -- -- --
Stock options
exercised............ 207,050 2 1,273 -- -- --
Net income............ -- -- -- 9,974 -- --
---------- ---- ------- ------- ------ ---
Balance, December 31,
1996................... 15,601,960 $156 $93,818 $10,007 72,032 $(1)
========== ==== ======= ======= ====== ===
</TABLE>
Share amounts have been adjusted to reflect a 3.0253-for-1 Common Stock split
effective April 26, 1996 and a 100% stock dividend effective June 9, 1997.
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Net income (loss).................................. $ 486 $(1,299) $ 9,974
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 4,620 5,051 6,899
Deferred income taxes............................ 577 (670) 3,811
Interest accrued on subordinated debt............ 1,009 1,117 461
Extraordinary item............................... -- -- 1,411
Gain on sales of assets.......................... -- (244) (59)
Provision for doubtful accounts.................. 240 240 130
Equity in loss of affiliate...................... -- -- 18
Change in operating assets and liabilities:
Accounts receivable.............................. (549) 91 (10,123)
Prepaid expenses and other current assets........ 72 25 (435)
Accounts payable and accrued expenses............ 191 2,327 3,526
Other, net......................................... 20 (227) (661)
------- ------- -------
Net cash provided by operating activities...... 6,666 6,411 14,952
------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment.............. (379) (5,343) (79,135)
Deferred marine inspection costs................. (1,792) (2,115) (2,292)
Proceeds from sales of assets.................... 3,139 1,337 439
Investment in unconsolidated affiliate........... -- -- (1,293)
------- ------- -------
Net cash provided by (used in) investing
activities.................................... 968 (6,121) (82,281)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of Common Stock........... 66 9 79,726
Proceeds from issuance of long-term debt and
subordinated debt............................... 2,883 4,517 57,669
Repayment of long-term debt...................... (9,000) (5,305) (63,364)
Deferred financing costs and other............... (8) (164) (707)
Payments of subordinated debt and accrued
interest thereon................................ -- -- (6,065)
------- ------- -------
Net cash provided by (used in) financing
activities.................................... (6,059) (943) 67,259
------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 1,575 (653) (70)
Cash and cash equivalents at beginning of period... 195 1,770 1,117
------- ------- -------
Cash and cash equivalents at end of period......... $ 1,770 $ 1,117 $ 1,047
======= ======= =======
Supplemental information:
Income taxes paid................................ $ 396 $ 2 $ 6
======= ======= =======
Income taxes refunded............................ $ 38 $ 330 $ --
======= ======= =======
Interest paid.................................... $ 2,079 $ 2,865 $ 4,737
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-12
<PAGE>
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 until the
next inspection (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
F-13
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
provided at the currently enacted income tax rates for the difference between
the financial statement and income tax bases of assets and liabilities.
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 1,336,018 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. Additionally, see Note
15.
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.
F-14
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. PUBLIC OFFERINGS OF COMMON STOCK:
In May 1996, the Company completed an initial public offering of 6,585,000
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 1,700,000 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, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ -------
<S> <C> <C>
Trade receivables, net of allowance for doubtful accounts of
$480 and $610 in 1995 and 1996, respectively................... $6,975 $16,172
Insurance and other............................................. 442 1,237
------ -------
Accounts receivable, net...................................... $7,417 $17,409
====== =======
</TABLE>
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,
1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Deferred marine inspection costs, net of accumulated amortization
of $1,459 and $3,335 in 1995 and 1996, respectively............. $2,378 $2,667
Deferred financing costs, net of accumulated amortization of $785
and $28 in 1995 and 1996, respectively.......................... 1,104 205
Marine vessels spare parts....................................... 386 939
Goodwill, net of accumulated amortization of $43 in 1996......... -- 664
Investment in and advances to unconsolidated subsidiary.......... -- 568
Other............................................................ 291 123
------ ------
Other assets, net.............................................. $4,159 $5,166
====== ======
</TABLE>
F-15
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. LONG-TERM DEBT AND SUBORDINATED DEBT:
The Company's long-term debt and subordinated debt consist of the following
at December 31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Revolving loan, interest at a base interest rate plus a
margin, as defined, on the date of borrowing (weighted
average rate of 10.25% and 7.089% at December 31, 1995 and
1996, respectively) payable at the end of the interest period
or quarterly, principal due October 8, 2002.................. $ 800 $21,000
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 --
------- -------
26,695 21,000
Less current maturities....................................... (3,000) --
------- -------
23,695
9% Subordinated Notes and accrued interest thereon, due March
31, 2001..................................................... 13,085 --
------- -------
$36,780 $21,000
======= =======
</TABLE>
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
F-16
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Company converted $7,482,000 of the 9% Subordinated Notes into 935,226 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.
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, 1994, 1995 and 1996, are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- ------
<S> <C> <C> <C>
Current income taxes:
U.S. federal income taxes............................... $(317) $ -- $1,505
State income taxes...................................... (34) -- 4
Deferred income taxes:
U.S. federal income taxes............................... 572 (667) 3,713
State income taxes...................................... 5 (3) 98
----- ----- ------
$ 226 $(670) $5,320
===== ===== ======
</TABLE>
F-17
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's deferred income taxes at December 31, 1995 and 1996 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):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accumulated depreciation and amortization............... $ 7,811 $15,988
P&I insurance reserves.................................. (474) (680)
Alternative minimum tax credit carryforwards............ (29) (451)
Net operating loss carryforward......................... (7,300) (5,199)
Other................................................... 79 (257)
------- -------
Deferred income tax liability, net.................... $ 87 $ 9,401
======= =======
</TABLE>
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 1,152,488 shares of the Company's Common Stock were
granted to officers and key members of management of the Company on October
29, 1993 at $0.91 per share, the original purchase price of the Common Stock,
and accordingly, no expense was recognized. Options to purchase 302,530 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 280,918 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 209,750 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 $8.00 to $10.94 per share. Options to purchase 206,000
shares vested and became exercisable upon the attainment of certain
performance goals during the year. Of the remaining options, 936 vested and
were exercisable at the date of grant with 938 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.
F-18
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1996, 1995 and 1994, 1,454,904, 180,078 and 90,040,
respectively of the option shares were exercisable; options for 207,050 shares
were exercised in 1996. None were exercised in 1995 or 1994.
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:
<TABLE>
<CAPTION>
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
12/31/96 12/31/96 12/31/95 12/31/95
-------- -------- -------- --------
<S> <C> <C> <C> <C>
SFAS 123 Charge............................ $ -- $ 628 $ -- $ 8
APB 25 Charge.............................. $ -- $ -- $ -- $ --
Net income (loss).......................... $9,974 $9,560 $(1,299) $(1,304)
Net income (loss) per average common share. $ 0.81 $ 0.77 $ (0.21) $ (0.21)
</TABLE>
The fair value of each stock option granted in 1996 when the Company was
public is estimated on the date of grant using the Black-Scholes option-
pricing model with the following weighted-average assumptions: dividend yield
of 0.0%; risk-free interest rates are 6.51% and 6.69%; the expected lives of
options are 5 and 6 years; and volatility of 43.91% for all grants.
The fair value of each stock option granted in 1995 when the Company was not
public is estimated on the date of grant using the minimum value method of
option pricing with the following assumptions: dividend yield of 0.0%; risk-
free interest rate of 7.20%; and the expected lives of 5 years. In determining
the "minimum value" SFAS 123 does not require the volatility of the Company's
common stock underlying the options to be calculated or considered because the
Company was not publicly-traded when the options were granted.
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 73,344 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 9,166 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.
F-19
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-20
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-21
<PAGE>
14. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 FIRST SECOND THIRD FOURTH
---------------------------- ------ ------- ------- -------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
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.......................... 0.06 0.14 0.21 0.36
Extraordinary item, net of tax............... -- (0.08) -- --
Net income per average common share
outstanding................................. 0.06 0.06 0.21 0.36
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------
<S> <C> <C> <C> <C>
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................................. (0.11) (0.12) (0.02) 0.03
</TABLE>
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.
Effective June 9, 1997, the Board approved a 100% stock dividend. The
financial statements have been restated to reflect all effects of this
dividend, including all share amounts and per share amounts.
F-22
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1997
------ -------------
<S> <C>
Current assets:
Cash and cash equivalents...................................... $ 3,508
Accounts receivable, net....................................... 26,087
Prepaid expenses and other current assets...................... 837
--------
Total current assets......................................... 30,432
--------
Property and equipment, at cost:
Land and buildings............................................. 2,262
Marine vessels................................................. 225,085
Construction-in-progress....................................... 19,604
Transportation and other....................................... 1,652
--------
248,603
Less accumulated depreciation and amortization................... 18,565
--------
Net property and equipment..................................... 230,038
--------
Other assets, net................................................ 17, 287
--------
$277,757
========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
Current liabilities:
Accounts payable............................................... $ 8,243
Accrued expenses............................................... 9,264
--------
Total current liabilities.................................... 17,507
--------
Long-term debt................................................... 114,000
Deferred income taxes, net....................................... 17,497
--------
Total liabilities............................................ 149,004
--------
Commitments and contingencies
Stockholders' equity:
Common Stock, $.01 par value, 40,000,000 shares authorized,
issued 15,755,598 shares, outstanding 15,683,566 shares....... 158
Additional paid-in capital..................................... 94,143
Retained earnings.............................................. 34,453
Treasury stock, at par value, 72,032 shares.................... (1)
--------
Total stockholders' equity................................... 128,753
--------
$277,757
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Charter hire................. $ 13,379 $ 34,094 $ 32,854 $ 83,875
Other vessel income.......... 11 -- 31 4
---------- ---------- ---------- ----------
Total revenues............. 13,390 34,094 32,885 83,879
---------- ---------- ---------- ----------
Operating expenses:
Direct labor and other
operating expenses.......... 5,931 11,168 16,314 28,388
General and administrative... 839 1,425 2,224 4,157
Amortization of marine
inspection costs............ 535 819 1,432 2,093
Other........................ 42 67 211 204
---------- ---------- ---------- ----------
Total operating expenses... 7,347 13,479 20,181 34,842
Depreciation expense........... 1,043 3,319 2,861 7,995
---------- ---------- ---------- ----------
Operating income............... 5,000 17,296 9,843 41,042
Interest expense............... 50 2,163 1,710 3,677
Amortization of deferred
financing costs............... 30 109 217 144
Gain on sale of assets......... ---- (2) (7) (255)
Other income, net.............. (31) (54) (65) (134)
---------- ---------- ---------- ----------
Income before income taxes and
extraordinary items........... 4,951 15,080 7,988 37,610
Income tax expense............. 1,733 5,279 2,788 13,164
---------- ---------- ---------- ----------
Income before extraordinary
items......................... 3,218 9,801 5,200 24,446
Extraordinary items............ -- -- (917) --
---------- ---------- ---------- ----------
Net income..................... $ 3,218 $ 9,801 $ 4,283 $ 24,446
========== ========== ========== ==========
Weighted average common shares
and equivalents outstanding... 15,039,660 16,946,275 11,171,074 16,888,569
========== ========== ========== ==========
Earnings per common share
outstanding:
Income before extraordinary
items....................... $ 0.21 $ 0.58 $ 0.46 $ 1.45
Extraordinary items.......... -- -- (0.08) --
---------- ---------- ---------- ----------
Net income................. $ 0.21 $ 0.58 $ 0.38 $ 1.45
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1996 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income.............................................. $ 4,283 $ 24,446
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization......................... 4,556 10,232
Extraordinary charge.................................. 1,411 --
Deferred income taxes................................. 2,294 8,096
Interest on subordinated debt......................... 461 --
Amortization of senior note discount expense.......... -- 14
Gain on sale of assets, net........................... (7) (255)
Provision for doubtful accounts....................... 100 90
Equity in loss of affiliate........................... -- 120
Changes in operating assets and liabilities:
Accounts receivable................................... (3,329) (9,204)
Prepaid expenses and other current assets............. (530) (246)
Accounts payable and accrued expenses................. (756) 8,534
Other, net.............................................. (1,124) (745)
-------- ---------
Net cash provided by operating activities........... 7,359 41,082
-------- ---------
Cash flows from investing activities:
Purchases of property and equipment..................... (29,183) (119,545)
Deferred marine inspection costs expenses............... (1,300) (8,889)
Proceeds from sales of assets........................... 27 1,121
Investment in unconsolidated affiliate.................. (1,251) (370)
-------- ---------
Net cash used in investing activities................. (31,707) (127,683)
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of Common Stock, net of
registration expenses.................................. 48,394 327
Proceeds from issuance of long-term debt................ 16,169 142,928
Repayment of long-term and subordinated debt............ (38,929) (50,500)
Deferred financing costs and other...................... (626) (3,693)
-------- ---------
Net cash provided by financing activities............. 25,008 89,062
-------- ---------
Net increase in cash...................................... 660 2,461
Cash and cash equivalents at beginning of period.......... 1,117 1,047
-------- ---------
Cash and cash equivalents at end of period................ $ 1,777 $ 3,508
======== =========
Supplemental information:
Income taxes paid....................................... $ 2 $ 2,453
======== =========
Interest paid........................................... $ 4,445 $ 2,002
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-25
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENT PRESENTATION:
The consolidated financial statements for the Company included herein are
unaudited but reflect, in management's opinion, all adjustments, consisting
only of normal recurring adjustments, that are necessary for a fair
presentation of the nature of the Company's business. The results of
operations for the nine months ended September 30, 1997 are not necessarily
indicative of the results that may be expected for the full fiscal year or any
future periods. The financial statements included herein should be read in
conjunction with the financial statements and notes thereto included in the
Company's consolidated financial statements for the year ended December 31,
1996.
Certain prior period amounts have been reclassified to conform with the
presentation shown in the interim consolidated financial statements. These
reclassifications had no effect on net income, total stockholders' equity or
cash flows.
2. BANK CREDIT AGREEMENTS:
Effective February 7, 1997, the Company increased its agreement with its
bank lenders (the "Bank Credit Facility") to $65,000,000. On July 16, 1997 the
Company extended the maturity date of the Bank Credit Facility to July 31,
2003, extended the revolving portion of the Bank Credit Facility to July 31,
1999 and amended certain covenants, including restrictions on additional
indebtedness, which permitted the issuance of $110,000,000 of 8 1/2% Senior
Notes due August 1, 2005 (See Note 5).
3. ACQUISITIONS:
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 second transaction for two supply vessels was completed with the
acquisition of the first vessel on June 25, 1997 and the second vessel on July
3, 1997. The Company borrowed $8,000,000 under its Bank Credit Facility to
fund a portion of the purchase price of the two vessels.
In June 1997 the Company entered into an agreement to acquire 12 supply
vessels for $69,000,000. Eleven of the vessels were acquired for a total of
$62,000,000 on July 21, 1997. The purchase was funded with a portion of the
proceeds of the Company's $110,000,000 of 8 1/2% Senior Notes issued July 21,
1997. The Company acquired the twelfth vessel on October 29, 1997, with the
Company borrowing $4.5 million under the Bank Credit Facility to fund a
portion of the purchase.
4. AUTHORIZED SHARES AND STOCK SPLIT:
On May 22, 1997, the Company's stockholders approved an amendment to the
Company's Certificate of Incorporation to increase the number of shares of
Common Stock which the Company is authorized to issue from 15 million to 40
million (the "Amendment"). A two-for-one split of the Company's common stock
in the form of a 100% stock dividend that was previously declared by the
Company's Board of Directors subject to approval of the Amendment by the
Company's stockholders, was paid on June 9, 1997. The financial statements
have been restated to reflect all effects of this stock split, including all
share amounts and per share data.
F-26
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
5. SENIOR NOTES:
On July 21, 1997 the Company issued $110,000,000 of 8 1/2% Senior Notes due
2005 (the "Notes"). The Notes are unsecured and are guaranteed by the
Company's principal subsidiaries, Trico Marine Assets, Inc. and Trico Marine
Operators, Inc. Interest is payable semi-annually on February 1 and August 1
of each year commencing February 1, 1998. Except in certain circumstances, the
Notes may not be prepaid until August 1, 2001 at which time they may be
redeemed, at the option of the Company, in whole or in part, at a redemption
price equal to 104.25% plus accrued and unpaid interest, with the redemption
price declining ratably on August 1 of each of the succeeding three years. No
sinking fund payments are required on the Notes until their final maturity.
The Notes contain certain covenants that, among other things, limit the
ability of the Company to incur additional indebtedness, pay dividends or make
other distributions, create certain liens, sell assets, or enter into certain
mergers or acquisitions. The proceeds received from the Notes were
$106,419,000, net of underwriting discounts of $3,581,000. Of the proceeds,
the Company used $62,000,000 to purchase 11 supply boats and $44,419,000 to
repay amounts outstanding under the Bank Credit Facility.
Separate financial statements of Trico Marine Assets, Inc. and Trico Marine
Operators, Inc. (the "Subsidiary Guarantors") are not included in this report
because (a) the Company is a holding company with no assets or operations
other than its investments in its subsidiaries, (b) the Subsidiary Guarantors
constitute all of the Company's direct and indirect subsidiaries (other than
insignificant subsidiaries), (c) the aggregate assets, liabilities, earnings
and equity of the Subsidiary Guarantors are substantially equivalent to the
assets, liabilities, earnings and equity of the Company on a consolidated
basis, (d) the Subsidiary Guarantors have jointly and severally guaranteed the
Company's obligations under the notes on a full and unconditional basis
(subject to a standard fraudulent conveyance savings clause) and (e)
management has determined that separate financial statements and disclosures
concerning the Subsidiary Guarantors are not material to investors.
6. NEW ACCOUNTING STANDARDS:
In February 1997, the Financial Accounting Standards Board issued two
Statements of Financial Accounting Standards, Statement No. 128 "Earnings Per
Share" and Statement No. 129 "Disclosure of Information About Capital
Structure," both effective for financial statements issued for periods ending
after December 15, 1997. In June 1997, the Financial Accounting Standards
Board issued two Statements of Financial Accounting Standards, Statement No.
130 "Reporting Comprehensive Income" and Statement No. 131 "Disclosures about
Segments of an Enterprise and Related Information," both effective for fiscal
years beginning after December 15, 1997. Management believes adoption of these
statements will have a financial statement disclosure impact only and will not
have a material effect on the Company's financial position, operations or cash
flows.
7. SUBSEQUENT EVENTS:
On October 7, 1997, the Company made an offer to purchase all of the
outstanding shares of Saevik Supply ASA of Norway ("Saevik"). Saevik provides
marine support services to the oil and gas industry operating 17 vessels in
the Norwegian and United Kingdom sectors of the North
F-27
<PAGE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
Sea. The offer was made for 165 Norwegian Kroner per share, or approximately
$23.35 per share, based on exchange rates in effect on the day of the offer.
The total purchase price is expected to be approximately $289 million for all
shares.
Saevik's Board of Directors has recommended that shareholders accept the
offer and formal offering documents were sent to Saevik's shareholders on
October 27, 1997. Trico has already received irrevocable and binding
commitments from holders of 19.18% of the shares to sell at the offer price.
Closing of the transaction is expected to occur in December 1997.
F-28
<PAGE>
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
Saevik Supply ASA
We have audited the accompanying consolidated balance sheet of Saevik Supply
ASA and subsidiaries as of December 31, 1996 and the related consolidated
statements of earnings and cash flows for the year ended December 31, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Norway, such standards are substantially equivalent to auditing
standards generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Saevik
Supply ASA and subsidiaries, as of December 31, 1996 and the results of its
operations and its cash flows for the year ended December 31,1996, in
conformity with generally accepted accounting principles in Norway.
Accounting principles generally accepted in Norway vary in certain
significant respects from accounting principles generally accepted in the
United States. Application of accounting principles generally accepted in the
United States would have affected results of operations for the year ended
December 31, 1996 and stockholders' equity as of December 31, 1996 to the
extent summarised in Note 21 to the consolidated financial statements.
Aalesund, March 6, 1997
KPMG as
Gerd Leira
State Authorised Public Accountant (Norway)
F-29
<PAGE>
SAEVIK SUPPLY ASA
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
DECEMBER 31, DECEMBER 31,
ASSETS NOTE 1996 1996
------ ----- ------------ ------------
(US $
SEE NOTE 2)
<S> <C> <C> <C>
Bank deposits................................... 11 293,698,968 41,212,232
Trade debtors................................... 7 8,855,925 1,242,675
Other short term receivables.................... 7 4,552,572 638,823
----------- ----------
Total current assets.......................... 307,107,465 43,093,730
----------- ----------
Other long term receivables..................... 14 314,035 44,066
----------- ----------
Long term receivables........................... 314,035 44,066
----------- ----------
Ships........................................... 9, 19 307,355,100 43,128,477
Furniture and equipment......................... 9 185,700 26,058
----------- ----------
Operating assets................................ 307,540,800 43,154,535
----------- ----------
Total fixed assets............................ 307,854,835 43,198,601
----------- ----------
Total assets.................................. 614,962,300 86,292,331
=========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1996
------------------------------------ ------------
<S> <C> <C> <C>
Suppliers....................................... 4,754,703 667,186
VAT, withheld taxes etc. due.................... 1,362,844 191,236
Other short term liabilities.................... 12 3,557,586 499,205
----------- ----------
Total short term liabilities.................. 9,675,133 1,357,627
----------- ----------
Mortgage loan................................... 13 270,834,210 38,003,818
Other long term liabilities..................... 14 191,874 26,925
Deferred taxes.................................. 5 6,153,702 863,496
----------- ----------
Total long term liabilities................... 277,179,786 38,894,239
----------- ----------
Minority interests.............................. 6 17,459,670 2,449,964
----------- ----------
Share capital................................... 15 77,821,490 10,920,015
Other shareholders' equity...................... 15 232,826,221 32,670,486
----------- ----------
Total shareholders' equity.................... 310,647,711 43,590,501
----------- ----------
Total liabilities and shareholders' equity.... 614,962,300 86,292,331
=========== ==========
Mortgages etc. ................................. 18 307,540,800 43,154,535
----------- ----------
Guarantees etc. ................................ 18 5,832,500 818,424
----------- ----------
</TABLE>
The accompanying notes are an integral part of the accounts.
F-30
<PAGE>
SAEVIK SUPPLY ASA
CONSOLIDATED STATEMENT OF EARNINGS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
NOTE 1996 1996
----- ------------ ------------
(U.S. $
SEE NOTE 2)
<S> <C> <C> <C>
Freight income................................. 3 55,783,396 7,827,600
Other income................................... 207,024 29,050
----------- ----------
Total operating income..................... 55,990,420 7,856,650
----------- ----------
Crew expenses.................................. 3, 19 14,205,933 1,993,395
Other operating expenses ships................. 3 10,399,579 1,459,283
Administration expenses........................ 17 2,318,697 325,362
----------- ----------
Total operating expenses................... 26,924,209 3,778,040
----------- ----------
Operating income before depreciation........... 29,066,211 4,078,610
----------- ----------
Depreciation................................... 3, 19 15,838,047 2,222,416
----------- ----------
Operating income............................... 13,228,164 1,856,194
----------- ----------
Finance income................................. 4 1,829,917 256,776
Finance expenses............................... 4 13,215,272 1,854,384
----------- ----------
Net finance items.............................. 4 (11,385,355) (1,597,608)
----------- ----------
Income before taxes............................ 1,842,809 258,586
----------- ----------
Taxes.......................................... 723,446 101,515
----------- ----------
Income for the year............................ 2,566,255 360,101
----------- ----------
Minority interests............................. 6 694,955 97,517
----------- ----------
Income for the year for the group.............. 3,261,210 457,618
----------- ----------
Transfers and year end provisions:
Transferred to legal reserve................. 871,211 122,250
Transferred to/from general reserve.......... 2,389,999 335,368
----------- ----------
Total...................................... 3,261,210 457,618
=========== ==========
</TABLE>
The accompanying notes are an integral part of the accounts.
F-31
<PAGE>
SAEVIK SUPPLY ASA
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
1996 1996
------------ ------------
(US $
SEE NOTE 2)
<S> <C> <C>
Cash flow from operating activities
Net cash flow from operating activities *......... 17,680,856 2,481,001
Changes in debtors and suppliers.................. 855,240 120,008
Changes in other accruals......................... 27,264,797 3,825,833
------------ -----------
Net cash flow from operating activities......... 45,800,893 6,426,842
Cash flow from investing activities
Investments in fixed assets....................... (150,478,904) (21,115,401)
------------ -----------
Net cash flow from investing activities......... (150,478,904) (21,115,401)
Cash flow from financing activities
Increase in debt (long and short term)............ 98,589,605 13,834,225
Repayment of existing loans....................... (10,933,088) (1,534,146)
Increase in equity................................ 303,803,484 42,630,111
------------ -----------
Net cash flow from financing activities......... 391,460,001 54,930,190
Net change in cash and cash equivalents............. 286,781,990 40,241,631
Cash and cash equivalents at 01.01. ................ 6,916,978 970,600
------------ -----------
Cash and cash equivalents at 12.31. ............ 293,698,968 41,212,231
------------ -----------
This figure is as follows:
Result before taxes............................... 1,842,809 258,585
Ordinary depreciation............................. 15,838,047 2,222,416
------------ -----------
*Net cash flow from operating activities........ 17,680,856 2,481,001
</TABLE>
F-32
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996
NOTE 1. COMPANY BACKGROUND
The establishment of the company
Saevik Supply AS was founded October 25, 1996. The founder and sole
shareholder was Per Saevik. The company was founded immediately before, and as
a preliminary part of, the planned division in Saevik Supply Management AS and
the following recapitalization of Saevik Supply AS.
On November 6, 1996 the decision was made to demerge Saevik Supply
Management AS, in order to transfer the company's supply-ship activities to
Saevik Supply AS. The transfer, was recorded at the book values and the
related tax bases of Saevik Supply Management AS' investments, direct and
indirect, in three ship-owning companies, plus other assets and liabilities
related to the operations. In Saevik Supply AS the transaction was discussed
during an extraordinary general meeting the same day. The share capital was
resolved to be increased to NOK 14.185.210 ($1,990,488) by transferring funds
from the legal reserve and the general reserve.
The issue of shares
At an extraordinary general meeting November 7, 1996, shares were issued
towards a limited number of investors according to an agreement, thereby
increasing the share capital by NOK 60 mill. ($8.4 mill.) to NOK
74,185,210 ($10,409,768).
The shares, with nominal value NOK 10 ($1.40),- per share, were issued at
NOK 50 ($7.02), per share, leading to a cash infusion of NOK 300 mill. ($42.1
mill.)
At the same extraordinary general meeting the decision was made to convert
Saevik Supply AS into an ordinary limited liability company.
The authorisation of the board of directors
During the extraordinary general meeting November 7, 1996, the board of
directors of Saevik Supply was authorised to issue up to 1.5 mill. new shares,
at terms further specified, to allow Saevik Supply to become sole owner,
directly or indirectly, of the three ships in which the company was given
shares upon the demerger of Saevik Supply Management AS. According to the
authorisation, the company took over a 34.28% share of Northern Gambler KS
from Ulstein Industrier AS in December 1996 against the issue of 363,628
shares. To this end, decisions to carry out the necessary mergers in 1997 have
been made.
At an extraordinary general meeting January 20, 1997, the board of directors
was given the authorisation to issue an additional 1 mill. shares, of which
238,095 were issued in connection with the acquisition of M/S Sira Odin.
Contracts to buy ships
On November 1, 1996, the company entered into an agreement to buy 12 supply
ships from Viking Supply Ships AS, plus all shares in Viking Management AS,
the Viking group's company operating the supply ships.
The purchase price was set at NOK 950 ($133.3) mill. The payment for
operational equipment and working capital in Viking Management AS was added to
this amount. The agreement was implemented January 15. 1997, upon which date
all 12 ships were transferred.
Furthermore, on December 17, 1996, the company made an agreement with KS
Sira PV to buy M/S Sira Odin at NOK 40 mill. ($5.6 mill.). The purchase was
carried out and the ship transferred January 29, 1997.
F-33
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
2. ACCOUNTING PRINCIPLES
Consolidating principles
The consolidated accounts include the parent company Saevik Supply ASA and
all subsidiaries specified in note 8 and note 20.
Saevik Supply ASA is a continuation of the supply activities which were
demerged from Saevik Supply Management AS. The demerger has been accounted for
as entities "under common control" therefore the 1996 consolidated financial
statemens include the full year's results of operations for the demerged
supply activities.
In the consolidated accounts all internal profit and loss items, balance
sheet items and intercompany transactions have been eliminated.
Purchase prices for shares and investments in subsidiaries have been
eliminated against the subsidiary's shareholders' equity at the takeover date
or establishing date in consolidation.
Investments in limited partnerships
All investments in limited partnerships have been included in the company's
accounts according to the gross method. This means that Saevik Supply ASA's
investment in these companies' assets and liabilities and operations have been
included in the respective balance sheet and profit and loss accounts of
Saevik Supply ASA. The purchases of limited partnership investments in 1996
have been added to the ships' value. A list of limited partnership investments
is shown in note 8.
In the group accounts the investments taken over through a combining of
entities under common control have been included in the Financial Statements
for the full year of 1996. Investments accounted for as purchase acquisitions
are included from the date of purchase.
The minority's share of the results of operations and shareholders' equity
is shown separately. Balance sheet items and profit and loss items between the
respective limited partnerships/subsidiaries and Saevik Supply ASA have been
eliminated.
Depreciation on ships
Fully owned ships and investments in ships owned by limited partnerships
have been included in the balance sheet at cost less accumulated depreciation.
The straight line method has been applied for ordinary depreciation. Refer to
note 9.
Contracting grant
Contracting grants paid in 1996 have reduced the book basis of the ship to
which the contracting grant relates by the amount of the grant.
Pension expenses and pension commitments
Pensions and pension commitments are fully booked in the consolidated
balance sheet. The company will introduce the Norwegian Accounting Standard
for pensions in 1997. According to this accounting standard the company's
pension scheme must be treated as a defined benefit plan. The company has two
pension schemes which include a total of 51 persons. The implementation effect
of the new standard is taken account of in the balance sheet as of December
31, 1996. The resulting effect, if the standard had been fully implemented in
1996, would have resulted in a credit to income of NOK 161,596 ($22,675).
F-34
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
Maintenance expenses
The company has a continuing maintenance and classification program for
machines, equipment and hull. The company expenses and accrues in advance for
such periodic expenses on a regular basis.
Tax charged and deferred tax
The related limited partnerships which have been included according to the
gross method, are in the process of being changed to limited companies. This
change will be completed as soon as the creditor notification period for
dissolution of unlimited partnerships is over.
For tax purposes this change will be made with retroactive effect, such that
the related companies will be taxable under the new Shipping Tax Act for the
fiscal year 1996.
The parent company Saevik Supply ASA is not covered by the new shipping
taxation scheme, however its operating subidiaries are covered by the new
Shipping Tax Act.
In January 1997, the Norwegian Accounting Standards Board issued a statement
relating to the treatment of deferred tax when entering into the new Shipping
Tax Act. This statement allows for a present value calculation of deferred tax
obligations when entering into the scheme. The statement does not supply
practical regulations for the present value calculation of deferred tax.
The calculation must be based on an estimate of when untaxed equity will
become taxable.
The company's objectives over time are to:
. adapt to the particular and general regulations for taxation of ships
. be a supply ship company
. as a general rule, pay dividends on the year's results
It is expected, in spite of the company's current compliance with the new
shipping tax scheme, that the company over a period of 20 years will reverse
part of the temporary differences when assets are sold and dividends
repatriated to the Parent Company.
Based on the above, the company has estimated the present value of deferred
taxes assuming that the present day tax rate of 28% will be discounted by 8%
over 20 years. This will give an applied tax rate of approximately 6%.
We also refer to note 5.
Foreign Currency
These financial statements are presented in Norweigian krone (NOK) and in US
dollars ($), solely for the convenience of the reader, at the exchange rate of
NOK 7.1265=US$1, the noon buying rate in New York City for cable transfers in
Norwegian krone as certified for customs purposes by the Federal Reserve Bank
of New York on October 24, 1997 in accordance with Securities and Exchange
Commission Regulation S-X Rule 3-20. This presentation has not been translated
in accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation." No representation is made that the Norwegian
krone amounts have been, or could be converted into US dollars at that or any
other rate of exchange.
F-35
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
3. OPERATING RESULTS OF SHIPS
In 1996 the operating expenses and income for the two types of ships, anchor
handling ships (AHTS) and platform ships (PSV), were as follows:
<TABLE>
<CAPTION>
AHTS PSV TOTAL TOTAL
---------- ---------- ---------- -----------
(US $
SEE NOTE 2)
<S> <C> <C> <C> <C>
Freight income.................... 23,975,413 32,015,007 55,990,420 7,856,650
Crew expenses..................... 7,255,525 6,950,408 14,205,933 1,993,395
Other operating expenses ships.... 5,864,671 4,534,908 10,399,579 1,459,283
---------- ---------- ---------- ---------
Operating income ships before
depreciation..................... 10,855,217 20,529,691 31,384,908 4,403,972
---------- ---------- ---------- ---------
Ordinary depreciation ships....... 4,391,628 11,430,519 15,822,147 2,220,185
---------- ---------- ---------- ---------
Operating income ships............ 6,463,589 9,099,172 15,562,761 2,183,787
---------- ---------- ---------- ---------
</TABLE>
4. FINANCE ITEMS
<TABLE>
<CAPTION>
1996 1996
---------- -----------
(US $
SEE NOTE 2)
<S> <C> <C>
Interest income bank and securities................ 1,799,770 252,546
Other finance income............................... 30,147 4,230
---------- ---------
Total finance income............................. 1,829,917 256,776
---------- ---------
Interest expenses.................................. 12,568,410 1,763,616
Other finance expenses............................. 646,862 90,768
---------- ---------
Total finance expenses........................... 13,215,272 1,854,384
Net finance expenses............................. 11,385,355 1,597,608
---------- ---------
</TABLE>
5. TAX TREATMENT
The related limited partnerships which have been included according to the
gross method, are in the process of being changed to limited companies. This
change will be completed as soon as the creditors notification period for
dissolution of limited partnerships is over. For tax purposes, this change
will be made with retroactive effect such that the related companies will be
taxable under the new Shipping Tax Act. The parent company, Saevik Supply ASA
is not covered by the new shipping taxation. In January 1997, the Norwegian
Accounting Standards Board issued a statement relating to the treatment of
deferred taxes for entering into the new scheme. The statement does not
contain practical regulations for calculating present day value of deferred
taxes.
The calculation must be based on an estimate of when untaxed equity will
become taxable.
The company's objectives over time are to:
-- adapt to the particular and general regulations for taxation of ships
-- be a supply ship company
-- as a general rule, pay dividends on the year's result
It is expected, in spite of the company's current compliance with the new
shipping tax scheme, that the company over a period of 20 years will reverse
part of the temporary differences when assets are sold and dividends
repatriated to the Parent Company.
F-36
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
Based on the above the company has, estimated the present value of deferred
taxes, assuming that the present day tax rate of 28% will be discounted by 8%
over 20 years. This will give an applied tax rate of approximately 6%.
Deferred tax liability in the consolidated accounts amounts to 6% of the
account for untaxed income in subsidiaries which has arisen from the
transition to new Shipping Tax Act.
<TABLE>
<CAPTION>
12/31/96
-----------
(US $
SEE NOTE 2)
<S> <C> <C>
Account for untaxed income.............................. 102,561,700 14,391,595
6% deferred taxes....................................... 6,153,702 863,496
----------- ----------
Untaxed equity........................................ 96,407,998 13,528,099
----------- ----------
</TABLE>
6. MINORITY INTERESTS
The minority interests 12.31.96 were as follows:
<TABLE>
<S> <C>
46,10%................... Saevik Offshore KS
37,62%................... Northern Gambler KS
35,11%................... Gullbas AS
</TABLE>
7. TRADE DEBTORS
Trade debtors and other receivables have been valued at nominal value. The
company does not have any need to record a bad debt provision.
8. OTHER INVESTMENTS IN LIMITED PARTNERSHIPS (PARENT COMPANY)
<TABLE>
<CAPTION>
INCOME
% (LOSS) CURRENT SHORT TERM LONG TERM UNCALLED
COMPANY OWNERSHIP BEFORE TAX ASSETS SHIPS LIABILITIES LIABILITIES CAPITAL
------- --------- ---------- ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Saevik Offshore KS...... 43,91 13,025,413 2,933,870 60,237,660 2,620,081 45,464,265 11,557,991
KS AS Gullbas........... 63,90 3,088,442 4,476,829 30,234,525 1,131,205 22,627,494 14,184,623
Northern Gambler KS..... 34,28 (45,298) 3,609,769 49,445,300 1,119,262 34,575,463 10,969,600
----- ---------- ---------- ----------- --------- ----------- ----------
Total................. 16,068,557 11,020,468 139,917,485 4,870,548 102,667,222 36,712,214
===== ========== ========== =========== ========= =========== ==========
Total (US $ See Note
2)................... 2,254,761 1,546,408 19,633,409 683,441 14,406,401 5,151,507
===== ========== ========== =========== ========= =========== ==========
</TABLE>
The share in Northern Gambler KS has been included from the acquisition date
December 9, 1996.
9. SHIPS AND OTHER FIXED ASSETS (GROUP)
<TABLE>
<CAPTION>
DEPRECIATION PURCHASE ACCUMULATED BOOK VALUE ORDINARY
RATES COST 01.01. ADDITIONS REDUCTIONS DEPRECIATION PR. 12.31. DEPRECIATION
------------ ----------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Other operating assets.. 20-30% 711,691 80,657 0 606,648 185,700 15,900
Directly owned ships.... 6,77% 59,100,000 11,508,828 0 4,391,628 66,217,200 4,391,628
Investment in limited
partnership ships...... 8% 113,679,000 138,889,419 0 11,430,519 241,137,900 11,430,519
----- ----------- ----------- --- ---------- ----------- ----------
Total fixed assets..... 173,490,691 150,478,904 0 16,428,795 307,540,800 15,838,047
===== =========== =========== === ========== =========== ==========
Total fixed assets
(US $ See Note 2)..... 24,344,445 21,115,401 0 2,305,311 43,154,535 2,222,416
===== =========== =========== === ========== =========== ==========
</TABLE>
F-37
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
INVESTMENTS IN AND SALE OF FIXED ASSETS (NOK 1.000)
<TABLE>
<CAPTION>
1996
------------
INVEST. SALE
------- ----
<S> <C> <C>
Machines and furniture................... 81 0
Ships.................................... 150,398 0
------- ---
Total.................................. 150,479 0
======= ===
Total US $ in thousands See Note 2..... $21,115 0
======= ===
</TABLE>
January 1, 1997 a contract had been entered into with Viking Supply Ships
A.S. to purchase 12 supply ships for delivery on January 15, 1997. The
contract price was NOK 950 mill. ($133.3 mill.). A contract had also been
entered into with KS Sira PSV relating to the purchase of M/S Sira Odin, to be
delivered in January 1997. The contract price was NOK 40 mill. ($5.6 mill.).
10. LOANS AND SECURITY
The group companies have not given loans to or pledged security for any
persons as defined in the Companies' Act (S)12-10. Nor have the group
companies given loans or pledged security for employees' loans.
11. BANK DEPOSIT
Withheld employee taxes totalling NOK 603,532 ($84,688) are restricted funds
which are deposited on a separate bank account and are included in bank
deposits.
12. SHORT TERM LIABILITIES
Other short term liabilities include the following:
<TABLE>
<CAPTION>
1996 1996
--------- -----------
(US $
SEE NOTE 2)
<S> <C> <C>
Expenses accrued................ 2,250,711 $315,823
Interest accrued................ 1,306,875 183,382
--------- --------
Total......................... 3,557,586 $499,205
========= ========
</TABLE>
13. LONG TERM LOANS
Long term loans are as follows:
<TABLE>
<CAPTION>
1996 1996
----------- -----------
(US $
SEE NOTE 2)
<S> <C> <C>
Mortgage loan................. 270,834,210 $38,003,818
</TABLE>
Other long term liabilities consist entirely of pension commitments.
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Repayment plan mortgage
loan................... 24,333,000 24,333,000 25,333,000 26,333,333 44,033,000
US $ See Note 2......... $3,414,439 $3,414,439 $3,554,760 $3,695,128 $6,178,769
</TABLE>
The repayment plan takes into account that M/S Gullbas, M/S Northern Gambler
and M/S Northern Clipper with their related mortgages will be transferred 100%
to the fully owned subsidiary Saevik Shipping AS in the second quarter of
1997.
14. PENSIONS AND PENSION COMMITMENTS
Pensions and pension commitments are fully booked in the parent company. The
company will introduce the Norwegian Accounting Standard for pensions in 1997.
According to this accounting
F-38
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
standard the company's pension scheme must be treated as a defined benefit
plan. The company has two pension schemes which include a total of 51 persons.
The implementation effect of the standard is taken account of in the balance
sheet 12.31.1996.
Reconciliation of the funding status of the pension scheme December 31.
compared to balance sheet figures:
<TABLE>
<CAPTION>
SCHEME 1 SCHEME 2 TOTAL TOTAL
-------- -------- --------- -----------
(US $
SEE NOTE 2)
<S> <C> <C> <C> <C>
Estimated pension commitment......... 674,513 431,908 1,106,421 $155,254
Pension funds (at market value)...... 506,350 707,136 1,213,486 170,278
------- -------- --------- --------
Difference between pension
commitments and funds............... 168,163 (275,228) (107,065) (15,024)
Social security fees................. 23,711 (38,807) (15,096) (2,118)
------- -------- --------- --------
Under/(over) funding............... 191,874 (314,035) (122,161) $(17,142)
======= ======== ========= ========
</TABLE>
Overfunding is shown as an asset in the balance sheet.
FINANCIAL ASSUMPTIONS:
<TABLE>
<S> <C>
Discount rate....................................................... 7.0%
Estimated salary increase/pension increase.......................... 3.3%
Regulation of the basic National Insurance amount................... 3.3%
Expected return on funds............................................ 8.0%
Social security fees................................................ 14.1%
</TABLE>
The actuarial assumptions reflect the demographic factors of the employees
in the plan and reductions in the number of employees. The criteria most
commonly used in the insurance industry have been applied.
15. SHAREHOLDERS' EQUITY
The consolidated share capital consists of 7,782,149 shares of NOK
10 ($1.403) each.
<TABLE>
<CAPTION>
(US $
SEE NOTE 2)
<S> <C> <C>
Shareholders' equity 1.1.1996........................ (563,460) $ (79,065)
New capital (less share issue expenses).............. 303,803,484 42,630,111
Result of the year................................... 3,261,210 457,618
Consolidating effect of limited partnerships*........ 4,146,477 581,837
----------- -----------
Shareholders' equity 12.31.1996...................... 310,647,711 $43,590,501
=========== ===========
</TABLE>
- --------
(*) Relates to step by step acquisition of limited partnership. As the
company's holdings are more than 50 percent at December 31, 1996 the
balance sheet are consolidated 100 percent. In the Profit and Loss account
proportional consolidation method is used until the total holdings has
become more than 50%.
According to the intentions at the time the company was established,
1,500,000 shares will be issued in the second quarter of 1997 as a part of the
process in which the company, through its subsidiary Saevik Shipping AS, will
own 100% of M/S Gullbas, M/S Northern Clipper and M/S Northern Gambler.
16. REMUNERATION ON EMPLOYMENT TERMINATION
For the managing director there is a mutual termination period of 12 months
with full salary during the termination period. Additionally, the managing
director is entitled to full salary for a further 6 months if immediate
resignation is demanded.
F-39
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
17. RELATED PARTIES
Per Saevik owns 18.23% of the shares in Saevik Supply ASA 12.31.1996. A
rental contract has been entered into with Havgapet A/S for office premises,
totalling 128 m2 in Fosnavag. Havgapet A/S is owned by Per Saevik and his
close family. Annual rent is NOK 104,000 ($14,593). The rental terms are
considered to be market prices.
18. MORTGAGES AND GUARANTEES
<TABLE>
<CAPTION>
1996 1996
----------- -----------
(US $
SEE NOTE 2)
<S> <C> <C>
Book liabilities secured by mortgage............. 270,834,210 $38,003,818
----------- -----------
Book value of assets pledged as security
Ships.......................................... 307,355,100 43,128,477
Furniture and equipment........................ 185,700 26,058
----------- -----------
Total........................................ 307,540,800 $43,154,535
=========== ===========
</TABLE>
The parent company has a guarantee commitment of NOK 2,076,630 ($291,395)
for the general partner Northern Gambler AS' share of uncalled authorised
capital, and a guarantee commitment of NOK 2,632,500 ($369,396) for the
general partner Saevik Offshore AS' part of uncalled authorised capital in the
limited partnerships.
19. GOVERNMENT GRANTS
<TABLE>
<CAPTION>
1996 1996
---------- ----------
(US $
SEE NOTE
2)
<S> <C> <C>
Government grant to secure work for Norwegian
seamen........................................... 2,400,908 $ 336,899
Contracting grant for building ships
Booked as a reduction of capitalised value...... 12,975,000 1,820,669
---------- ----------
Total Government grants....................... 15,375,908 $2,157,568
========== ==========
</TABLE>
20. SHARES IN SUBSIDIARIES
<TABLE>
<CAPTION>
NUMBER
SHARE COMPANY'S OF NOMINAL BOOK
COMPANY CAPITAL OWNERSHIP % SHARES VALUE VALUE BOOK VALUE
------- ------- ----------- ------- ------- --------- -----------
(US $
SEE NOTE 2)
<S> <C> <C> <C> <C> <C> <C>
Gamle Gullbas AS..... 252,000 100 252 1,000 252,000 $ 35,361
Gullbas AS........... 330,000 65 214,252 1 845,565 118,651
Northern Gambler AS.. 100,000 65 65 1,000 223,631 31,380
Saevik Offshore AS... 50,000 100 50 1,000 106,665 14,967
Saevik Shipping AS... 50,000 100 50 1,000 50,000 7,016
------- --- ------- ----- --------- --------
Total.............. 1,477,861 $203,375
========= ========
</TABLE>
NOTE 21--PRINCIPAL DIFFERENCES BETWEEN NORWEGIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
Norwegian GAAP differs in certain respects from U.S. GAAP. Differences which
have a significant effect on the Company's consolidated net income and
shareholders' equity are set out below.
a) Capitalised interest
Interest costs associated with capital expenditures have been expensed under
Norwegian GAAP. Under U.S. GAAP, the Company is required to capitalise
interest incurred on assets under construction in the construction period.
F-40
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
b) Pensions
The Company has two defined benefit pension plans with retirement, death and
termination income benefits. The retirement income benefits are generally a
function of years of employment and final salary with the Company. The plans
are generally funded through payments to insurance companies.
December 31, 1996 Saevik ASA Group changed its accounting principle with
respect to pension costs under Norwegian GAAP. The implementation effect of
the Norwegian Accounting Standard for pensions was reflected in the December
31, 1996 balance sheet. The effect of the change resulted in a charge of NOK
122,158 ($17,141) against shareholders' equity.
Under U.S. GAAP, the determination of Pension expense for defined benefit
pension plans is made pursuant to Statement of Financial Accounting Standards
(SFAS No. 87) "Employers Accounting for Pensions". SFAS No. 87 is more
prescriptive than Norwegian GAAP in that it requires the use of a specific
actuarial method (the projected unit credit method).
Pension expense for 1996 under SFAS 87 would not be materially different
than pension expense recorded under Norwegian GAAP.
For U.S. GAAP purposes, all non-U.S. companies were required to adopt the
provisions of SFAS No. 87 on January 1, 1989 and the cumulative adjustment of
the effect of the transition to SFAS No. 87 is amortised on a prospective
basis over the average remaining service periods of the active employees. It
was not considered practical for the Company to compute its pension
liabilities as of January 1, 1989 as the company's most significant plan was
not established until January 1995. Accordingly, the transition to SFAS No. 87
was computed as of January 1, 1996 and an adjustment was made to record NOK
39,438 ($5,534) as an decrease in US GAAP shareholders' equity at that date
based on the ratio of the years elapsed from the effective date of the plan
and January 1, 1996 to the remaining service period of employees expected to
receive benefits.
c) Deferred taxes
The income tax effects of U.S. GAAP adjustments are recorded as deferred tax
expense, where appropriate.
Under Norwegian GAAP deferred taxes for companies that will be taxed under
the "Shipping Tax Act" are permitted to be calculated based upon the present
value of the tax effect on the earnings of the Company's subsidiaries. Under
U.S. GAAP deferred taxes are provided at the nominal tax rate for the earnings
of its domestic subsidiaries vs. the present value.
The result of applying the nominal tax rate of 28% to the temporary
differences attributable to the retained earnings of its subsidiaries is to
increase deferred taxes and reduce equity by NOK 25,964,049 ($3,643,310). The
1996 deferred income taxes calculated under SFAS 109 would have been
approximately NOK 10,335,881 ($1,450,344) higher.
The Saevik ASA Group has a net tax asset related to tax operating loss carry
forwards. Under Norwegian GAAP the benefit of deferred tax assets is not
recognised because there is no corresponding deferred tax liability which the
assets can be offset against. Under U.S. GAAP the benefit of the deferred tax
asset may be recognised if it is more likely than not that the asset will be
realised. The Company has determined that it is more likely that not it will
realise the benefit of this deferred tax asset through future taxable
earnings.
F-41
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
d) Provision for periodic overhauls
Under Norwegian GAAP, a provision for periodic overhauls on vessels,
machines, equipment and hull is accrued evenly over the anticipated period
between overhauls, generally 5 years for SPS Hull and 2.5 years for Bottom.
Under U.S. GAAP, the costs of such overhauls would be capitalised when
incurred and depreciated over the estimated future period benefited by such
costs.
e) Depreciation
Depreciation expense included in the 1996 Norwegian GAAP financial
statements reflects 12 years lifetime of the vessels which is more in line
with the tax depreciation period. For U.S.GAAP depreciation expense should be
recorded over the estimated economic life of the asset. The economic life of
the vessels is estimated from 25 to 30 years. The depreciation expense has
been adjusted to reflect the estimated economic life.
f) Classification differences
Certain balance sheet classification may differ between Norwegian and U.S.
GAAP.
First year's installment on long-term debt
Under Norwegian GAAP, the first year's installment on long-term debt is
included in long-term debt. The installments due in 1997 of NOK 99.3 ($13.9)
million would be classified as short-term debt, under U.S. GAAP.
Newbuilding contract
According to Norwegian GAAP, the entire construction contract value of the
vessel shall been recorded. Under U.S. GAAP only accrued expenses at the
period-end would be capitalised. There are no newbuilding contracts at
December 31, 1996.
Supplemental Cash Flow information
<TABLE>
<CAPTION>
NOK U.S.$
---------- ----------
<S> <C> <C>
Interest paid 1996.... 12,218,138 $1,714,465
Taxes paid 1996....... 0 0
</TABLE>
Proportional consolidation method
According to Norwegian GAAP the company has consolidated one limited
partnership, in which the company until 12.09.96 owned less than 50 percent,
in accordance with the proportional consolidation method. From the acquisition
date 12.09.96 the investment has been consolidated according to the gross
method.
Under U.S. GAAP the Company's ownership interest in this limited partnership
would be accounted for under the equity method. The effect on total assets,
shareholders' equity and net income of using the proportional consolidation
method versus the equity method would not be material as of and for the year
ended December 31, 1996.
F-42
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
Condensed Financial Information about Northern Gambler KS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, PROPORTIONAL DECEMBER 31, PROPORTIONAL
1996 CONSOLIDATION 1996 CONSOLIDATION
------------ ------------- ------------ -------------
(US $ (US $
SEE NOTE 2) SEE NOTE 2)
<S> <C> <C> <C> <C>
Income Statement
Total operating
income............... 14,375,596 6,115,604 $ 2,017,203 $ 858,150
Total operating
expenses............. (9,941,242) (4,730,842) (1,394,968) (663,838)
------------ ------------ ------------ ------------
Operating profit........ 4,434,354 1,384,762 622,235 194,312
Net finance items..... 9,930,838 (1,914,654) 1,393,508 (268,667)
------------ ------------ ------------ ------------
Income before taxes..... 14,365,192 (529,892) 2,015,743 (74,355)
Taxes................. (861,912) (861,912) 120,945 (120,945)
------------ ------------ ------------ ------------
Income for the year..... 13,503,280 (1,391,804) 1,894,798 (195,299)
------------ ------------ ------------ ------------
Balance Sheet December
31, 1996
Total current assets.. 10,530,248 10,530,248 1,477,618 1,477,618
Total fixed assets.... 142,100,000 142,100,000 19,939,662 19,939,662
------------ ------------ ------------ ------------
Total assets............ 152,630,248 152,630,248 21,417,280 21,417,280
Total short-term
liabilities.......... (3,265,057) (3,265,057) (458,157) (458,157)
Total long-term
liabilities.......... (100,861,912) (100,861,912) (14,153,078) (14,153,078)
------------ ------------ ------------ ------------
Total liabilities....... (104,126,969) (104,126,969) (14,611,235) (14,611,235)
Equity................ (48,503,279) (48,503,279) (6,806,045) (6,806,045)
------------ ------------ ------------ ------------
Total liabilities and
equity................. (152,630,248) (152,630,248) (21,417,280) $(21,417,280)
============ ============ ============ ============
</TABLE>
g) Earnings per share
Under Norwegian GAAP, earnings per share is computed using the weighted
average number of shares outstanding during the year. U.S. GAAP also includes
in the computation for earnings per share the dilutive effect of all
outstanding share options under the treasury stock method.
h) Accounting standards issued recently adopted and those not yet adopted
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121, "Accounting For The
Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of"
("SFAS No. 121"). This statement establishes accounting standards for the
impairment of long-lived assets and certain identifiable intangibles and
goodwill related to those assets to be held and used, and for long-lived
assets and certain intangibles to be disposed of. The Company adopted the
provisions of SFAS No. 121 in its 1996 Consolidated Financial Statements. The
Company's adoption of SFAS No. 121 did not have a material impact on its
results of operations or financial position.
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities
In June 1996, the FASB issued SFAS No. 125 "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No.
125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities based on consistent application of a financial
components approach that focuses on control. It distinguishes transfers of
financial assets that are sales from transfers that are secured borrowings. In
1996, the Company has adopted SFAS No. 125. The adoption has not had a
material effect on the Company's financial position or results of operation.
F-43
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
Earnings per share and capital structure
In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" and
SFAS No. 129 "Disclosure Of Information About Capital Structure".
SFAS No. 128 simplifies the earnings per share ("EPS") calculations required
by Accounting Principles Board ("APB") Opinion No. 15, and related
interpretations, by replacing the presentation of primary EPS with a
presentation of basic EPS. SFAS No. 128 requires dual presentation of basic
and diluted EPS by entities with complex capital structures. Basic EPS
includes no dilution and is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution of securities that
could share in the earnings of an entity, similar to the fully diluted EPS of
APB Opinion No. 15. SFAS No. 128 is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods; earlier
application is not permitted.
The adoption of this standard is not expected to have a material effect on
the results of operations or financial position as the company does not have a
complex capital structure.
SFAS No. 129 "Disclosures Of Information About Capital Structure" was issued
in February 1997 and is effective for financial statements for periods ending
after December 15, 1997. It contains no changes in disclosure requirements for
entities that were previously subject to the requirements of APB Opinion No.
10 "Omnibus Opinions--1966" and No. 15 "Earnings Per Share" and SFAS No. 47
"Disclosure of Long-Term Obligations".
The company has not yet identified the likely impact on the level of
disclosure provided.
Comprehensive Income
SFAS No. 130 "Reporting Comprehensive Income" was issued in June 1997 and is
effective for fiscal years beginning after December 15, 1997. Reclassification
of financial statements for earlier periods provided for comparative purposes
is required.
It requires that all items that are required to be recognised under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. It requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.
The Company has not yet identified the likely impact on the classification
of items included in shareholders' funds.
Segment Information
SFAS No. 131 "Disclosures About Segments Of An Enterprise and Related
Information" was issued in June 1997 and is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated.
It requires that companies disclose segment data based on how management
make decisions about allocating resources to segments and measuring their
performance. It also requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets
and reports revenues and its major customers.
F-44
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1996--(CONTINUED)
The Company has not yet identified the likely impact on the level of
disclosure currently provided in its financial statements.
i) Dividends
Under Norwegian law, dividends are payable out of annual earnings. The
dividend is subject to approval by the Annual General Meeting following the
fiscal year to which the dividend relates. Under Norwegian GAAP, dividends are
accrued in the year of the earnings to which they relate. Under U.S. GAAP,
dividends are recorded when declared. Accordingly under U.S. GAAP, dividends
are recorded in the year following the year they are recorded under Norwegian
GAAP.
There has been no dividends paid from the Company in 1996 or 1997.
The approximate effect on net income of significant differences between
Norwegian GAAP and U.S. GAAP is as follows:
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
REFERENCE YEAR ENDED YEAR ENDED
TO NOTE DECEMBER 31, DECEMBER
ABOVE 1996 31, 1996
--------- ------------ -----------
(US $
SEE NOTE 2)
<S> <C> <C> <C>
Net income in accordance with Norwegian
GAAP...................................... 3,261,210 $ 457,617
Adjustment for U.S. GAAP:
Capitalised interests.................... a 396,892 55,642
Pensions................................. b 161,596 22,675
Provision for periodic overhauls......... d 2,476,556 347,514
Depreciation............................. e 5,976,908 838,688
Deferred taxes on net operating losses... c 6,320,303 886,873
Deferred taxes on retained earnings of
shipping companies...................... c (10,335,881) (1,450,345)
Tax effect of U.S. GAAP adjustments...... (2,523,346) (354,079)
Approximate net income in accordance with
U.S. GAAP................................. 5,734,238 $ 804,585
</TABLE>
The approximate effect on shareholders' equity of significant differences
between Norwegian GAAP and U.S. GAAP is as follows:
SHAREHOLDERS EQUITY
<TABLE>
<CAPTION>
REFERENCE YEAR ENDED YEAR ENDED
TO NOTE DECEMBER DECEMBER 31,
ABOVE 31, 1996 1996
--------- ----------- ------------
(US $
SEE NOTE 2)
<S> <C> <C> <C>
Shareholders' equity in accordance with
Norwegian GAAP............................ 310,647,711 $43,590,502
Adjustment for U.S. GAAP:
Capitalised interest..................... a 1,207,289 169,408
Pensions................................. b 0
Provision for periodic overhauls......... d 2,476,556 347,514
Depreciation............................. e 5,976,908 838,688
Deferred taxes on net operating losses... c 7,130,285 1,000,513
Deferred taxes on retained earnings of
shipping companies...................... c (25,964,049) (3,643,310)
Tax effect of US GAAP adjustments........ (2,523,346) (354,079)
Approximate shareholders' equity in
accordance with US GAAP................. 298,951,354 $41,949,236
</TABLE>
F-45
<PAGE>
SAEVIK SUPPLY ASA
CONSOLIDATED BALANCE SHEET
UNAUDITED
<TABLE>
<CAPTION>
FOR THE NINE
FOR THE PERIODS ENDED MONTH PERIOD
--------------------------- ENDING
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
ASSETS 1996 1997 1997
------ ------------- ------------- -------------
(US $ IN
THOUSANDS
(NOK 1,000) (NOK 1,000) SEE NOTES)
<S> <C> <C> <C>
Bank deposits........................ 10,502 134,540 $ 18,879
Trade debtors........................ 11,117 91,613 12,855
Other short term receivables......... 2,946 26,373 3,701
------- --------- --------
Total current assets............... 24,565 252,526 35,435
------- --------- --------
Shares............................... 0 1,017 143
Long term receivables................ 5,255 1,276 179
Ships................................ 307,478 1,273,857 178,749
Shipbuilding contracts............... 0 462,729 64,931
Furniture and equipment.............. 202 2,054 288
------- --------- --------
Total fixed assets................. 312,935 1,740,933 244,290
------- --------- --------
Total assets....................... 337,500 1,993,459 $279,725
======= ========= ========
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1997
------------------------------------ ------------- -------------
<S> <C> <C> <C>
Bank overdraft....................... 1,459 0 $ 0
Suppliers............................ 7,730 2,441 343
VAT, withheld taxes etc. due......... 1,468 426 60
Other short term liabilities......... 4,139 49,291 6,916
------- --------- --------
Total short term liabilities....... 14,796 52,158 7,319
------- --------- --------
Mortgage loan........................ 281,089 744,237 104,432
Other long term liabilities.......... 0 418,066 58,665
Deferred taxes....................... 4,346 26,746 3,753
------- --------- --------
Total long term liabilities........ 285,435 1,189,049 166,850
------- --------- --------
Share capital........................ 85 123,031 17,264
Other shareholders' equity........... 37,184 629,221 88,292
------- --------- --------
Total shareholders' equity......... 37,269 752,252 105,556
------- --------- --------
Total liabilities and shareholders'
equity............................ 337,500 1,993,459 $279,725
======= ========= ========
</TABLE>
F-46
<PAGE>
SAEVIK SUPPLY ASA
CONSOLIDATED STATEMENT OF EARNINGS
UNAUDITED
<TABLE>
<CAPTION>
FOR THE PERIODS ENDED
---------------------------
SEPTEMBER 30, SEPTEMBER 30, AT SEPTEMBER 30,
1996 1997 1997
------------- ------------- ------------------
(US $ IN THOUSANDS
(NOK 1,000) (NOK 1,000) SEE NOTE 2)
<S> <C> <C> <C>
Freight income.................. 42,957 429,107 $60,213
Other income.................... 349 2,779 390
------- ------- -------
Total operating income........ 43,306 431,885 60,603
------- ------- -------
Crew expenses................... 10,793 80,335 11,273
Other operating expenses ships.. 6,609 41,256 5,788
Administration expenses......... 1,615 19,001 2,666
------- ------- -------
Total operating expenses...... 19,017 140,592 19,727
------- ------- -------
Operating income before
depreciation................... 24,289 291,293 40,876
------- ------- -------
Depreciation.................... 7,665 51,277 7,195
------- ------- -------
Operating income................ 16,624 240,015 33,681
------- ------- -------
Finance income.................. 97 6,805 955
Finance expenses................ 11,633 37,158 5,214
------- ------- -------
Net finance items............... (11,536) (30,353) (4,259)
------- ------- -------
Income before taxes............. 5,088 209,662 29,422
------- ------- -------
Taxes........................... (997) (16,636) (2,334)
------- ------- -------
Income for the period......... 4,091 193,027 $27,088
======= ======= =======
</TABLE>
F-47
<PAGE>
SAEVIK SUPPLY ASA
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
------------- -------------
(US $
(NOK 1,000) SEE NOTES)
------------- -------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net cash flow from operating activities*)......... 260,939 36,615
Changes in debtors and suppliers.................. (85,071) (11,937)
Changes in other accruals......................... 27,145 3,809
---------- --------
Net cash flow from operating activities......... 203,013 28,487
CASH FLOW FROM INVESTING ACTIVITIES:
Investments in shares............................. (1,017) (143)
Payment on shipbuilding contracts................. (44,663) (6,267)
Investments in fixed assets....................... (1,019,648) (143,078)
---------- --------
Net cash flow from investing activities......... (1,065,328) (149,488)
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in long term debt........................ 834,090 117,041
Repayment of existing loans....................... (362,052) (60,804)
Increase in equity................................ 231,118 32,431
---------- --------
Net cash flow from financing activities......... 703,156 98,668
NET CHANGE IN CASH AND CASH EQUIVALENTS............. (159,159) (22,333)
Cash and cash equivalents at 01.01................ 293,699 41,212
---------- --------
Cash and cash equivalents at 09.30................ 134,540 18,879
---------- --------
This figure is as follows:
Result before taxes............................... 209,662 29,420
Ordinary depreciation............................. 51,277 7,195
---------- --------
*)Net cash flow from operating activities....... 260,939 36,615
</TABLE>
F-48
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1997
UNAUDITED PRINCIPAL DIFFERENCES BETWEEN NORWEGIAN AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
Norwegian GAAP differs in certain respects from U.S. GAAP. Differences which
have a significant effect on the Company's consolidated net income and
shareholders' equity are set out below.
a) Capitalised interest
Interest costs associated with capital expenditures have been expensed under
Norwegian GAAP. Under U.S. GAAP, the Company is required to capitalise
interest incurred on assets under construction in the construction period.
b) Pensions
The Company has two defined benefit pension plans with retirement, death and
termination income benefits. The retirement income benefits are generally a
function of years of employment and final salary with the Company. The plans
are generally funded through payments to insurance companies.
December 31, 1996 Saevik ASA Group changed its accounting principle with
respect to pension costs under Norwegian GAAP. The implementation effect of
the Norwegian Accounting Standard for pensions was reflected in the December
31, 1996 balance sheet.
Under U.S. GAAP, the determination of Pension expense for defined benefit
pension plans is made pursuant to Statement of Financial Accounting Standards
(SFAS No. 87) "Employers Accounting for Pensions". SFAS No. 87 is more
prescriptive than Norwegian GAAP in that it requires the use of a specific
actuarial method (the projected unit credit method).
For U.S. GAAP purposes, all non-U.S. companies were required to adopt the
provisions of SFAS No. 87 on January 1, 1989 and the cumulative adjustment of
the effect of the transition to SFAS No. 87 is amortised on a prospective
basis over the average remaining service periods of the active employees. It
was not considered practical for the Company to compute its pension
liabilities as of January 1, 1989 as the company's most significant plan was
not established until January 1995. Accordingly, the transition to SFAS No. 87
was computed as of January 1, 1996 and an adjustment was made to record NOK
39,438 ($5,534) as a decrease in US GAAP shareholders' equity at that date
based on the ratio of the years elapsed from the effective date of the plan
and January 1, 1996 to the remaining service period of employees expected to
receive benefits. The estimated adjustment to the September 30, 1997 financial
statements to record pension expense in accordance with SFAS 87 is NOK
1,935,948.
c) Deferred taxes
The income tax effects of U.S. GAAP adjustments are recorded as deferred tax
expense, where appropriate.
Under Norwegian GAAP deferred taxes for companies that will be taxed under
the "Shipping Tax Act" are permitted to be calculated based upon the present
value of the tax effect on the earnings of the Company's subsidiaries. Under
U.S. GAAP deferred taxes are provided at the nominal tax rate for the earnings
of its domestic subsidiaries vs. the present value.
F-49
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1997--(CONTINUED)
The result of applying the nominal tax rate of 28% to the temporary
differences attributable to the retained earnings of its subsidiaries is to
increase deferred taxes and reduce equity by NOK 67,112,751. The 1996 deferred
income taxes calculated under SFAS 109 would have been approximately NOK
41,149,000 higher.
The Saevik ASA Group has a net tax asset related to tax operating loss carry
forwards. Under Norwegian GAAP the benefit of deferred tax assets is not
recognised because there is no corresponding deferred tax liability which the
assets can be offset against. Under U.S. GAAP the benefit of the deferred tax
asset may be recognised if it is more likely than not that the asset will be
realised. The Company has determined that it is more likely that not it will
realise the benefit of this deferred tax asset through future taxable
earnings.
d) Provision for periodic overhauls
Under Norwegian GAAP, a provision for periodic overhauls on vessels,
machines, equipment and hull is accrued evenly over the anticipated period
between overhauls, generally 5 years for SPS Hull and 2.5 years for Bottom.
Under U.S. GAAP, the costs of such overhauls would be capitalised when
incurred and depreciated over the estimated future period benefited by such
costs.
e) Depreciation
Depreciation expense included in the 1996 Norwegian GAAP financial
statements reflects 12 years lifetime of the vessels which is more in line
with the tax depreciation period. For U.S.GAAP depreciation expense should be
recorded over the estimated economic life of the asset. The economic life of
the vessels is estimated from 25 to 30 years. The depreciation expense has
been adjusted to reflect the estimated economic life.
f) Classification differences
Certain balance sheet classification may differ between Norwegian and U.S.
GAAP.
First year's installment on long-term debt
Under Norwegian GAAP, the first year's installment on long-term debt is
included in long-term debt. The installments due in 1997 of NOK 99.3 ($13.9)
million would be classified as short-term debt, under U.S. GAAP.
Newbuilding contract
According to Norwegian GAAP, the entire construction contract value of the
vessel shall been recorded. Under U.S. GAAP only accrued expenses at the
period-end would be capitalised. The September 30, 1997 balance sheet includes
an asset of NOK 462,729 and liability of NOK 418,066 related to such
contracts.
F-50
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1997--(CONTINUED)
UNAUDITED
The approximate effect on net income of significant differences between
Norwegian GAAP and U.S. GAAP is as follows:
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
REFERENCE PERIOD ENDED PERIOD ENDED
TO NOTE SEPTEMBER 30, SEPTEMBER 30,
ABOVE 1997 1997
--------- ------------- -------------
(US $
SEE NOTES)
<S> <C> <C> <C>
Net income in accordance with Norwegian
GAAP.................................... 193,027,000 $27,085,806
Adjustment for U.S. GAAP:
Capitalised interest................... a 1,014,479 142,353
Pensions............................... b 1,935,948 271,655
Provision for periodic overhauls....... d 7,269,000 1,019,996
Depreciation........................... e 539,201 75,661
Deferred taxes on net operating losses. c 3,167,360 444,448
Deferred taxes on retained earnings of
shipping companies.................... c (41,149,000) (5,774,083)
Tax effect of U.S. GAAP adjustments.... (2,504,286) (351,405)
Approximate net income in accordance
with U.S. GAAP........................ 163,299,702 $22,914,431
</TABLE>
The approximate effect on shareholders' equity of significant differences
between Norwegian GAAP and U.S. GAAP is as follows:
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
------------- -------------
<S> <C> <C> <C>
Shareholders' equity in accordance with Norwe-
gian GAAP..................................... 752,252,000 $105,557,006
Adjustment for U.S. GAAP:
Capitalised interest......................... a 2,221,768 311,761
Pensions..................................... b 1,935,948 271,655
Provision for periodic overhauls............. d 9,745,556 1,367,509
Depreciation................................. e 6,516,109 914,349
Deferred taxes on net operating losses....... c 10,297,645 1,444,979
Deferred taxes on retained earnings of
shipping companies.......................... c (67,112,751) (9,417,351)
Tax effect of US GAAP adjustments............ (5,027,632) (705,484)
Approximate shareholder's equity in
accordance with US GAAP..................... 710,828,643 $ 99,744,424
</TABLE>
Supplemental Cash Flow Information
<TABLE>
<CAPTION>
U.S.
NOK $
------ -----
(IN
THOUSANDS)
<S> <C> <C>
Interest paid...................................................... 24,562 3,447
Taxes paid......................................................... -- --
</TABLE>
Foreign currency
These financial statements are presented in Norwegian krone (NOK) and in US
dollars ($), solely for the convenience of the reader, at the exchange rate of
NOK 7.1265=US $1, the noon buying rate
F-51
<PAGE>
SAEVIK SUPPLY ASA
NOTES TO THE ACCOUNTS FOR 1997--(CONTINUED)
in New York City for cable transfers in Norwegian krone as certified for
customs purposes by the Federal Reserve Bank of New York on October 24, 1997
in accordance with Securities and Exchange Commission Regulation S-X Rule 3-
20. This presentation has not been translated in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation." No
representation is made that the Norwegian krone amounts have been, or could be
converted into US Dollars at that or any other rate of exchange.
Interim Financial Information.
The financial statements and related notes at September 30, 1997 and for the
nine months ended September 30, 1996 and 1997 are unaudited and prepared on
the same basis as the audited financial statements included herein. In the
opinion of management, such interim financial statements include all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the results for such periods. The results of operations for the
nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the full year or any other interim period.
F-52
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Trico Marine Services, Inc.
We have audited the accompanying statement of assets acquired and
liabilities assumed for the fleet of twelve vessels acquired by Saevik Supply
ASA from Viking Supply Ships AS (Viking Vessels) for the year ended December
31, 1996, and the statement of revenues less direct operating expenses for the
years ended December 31, 1996, 1995 and 1994 as more fully described in Note
1, 2, 3 and 4. These statements are the responsibility of Viking Vessels'
management. Our responsibility is to express an opinion on these statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements of assets acquired and liabilities assumed and
revenues less direct operating expenses of the Viking Vessels were prepared
for the purpose as described in Note 1 and are not intended to be a complete
presentation of the results of operations for the Viking Vessels.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets acquired and liabilities assumed of the Viking
Vessels at December 31, 1996 and the revenues less direct operating expenses
of the Viking Vessels for the years ended December 31, 1996, 1995 and 1994 in
conformity with generally accepted accounting principles.
Deloitte & Touche
Kristiansand, Norway, November 4, 1997
Roar Skuland
State Authorized Public Accountant Norway
F-53
<PAGE>
VIKING VESSELS
(VESSELS ACQUIRED BY SAEVIK SUPPLY FROM VIKING SUPPLY SHIPS AS)
STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, 1996
------ -------------------------
(US DOLLARS IN
(NOK IN THOUSANDS SEE
THOUSANDS) NOTE 1)
---------- --------------
<S> <C> <C>
Supply vessels........................................ 576,436 $80,886
------- -------
Total assets........................................ 576,436 $80,886
======= =======
<CAPTION>
LIABILITIES AND OWNERS' EQUITY
------------------------------
<S> <C> <C>
Liabilities:
Non interest bearing liabilities.................... 9,611 $ 1,349
------- -------
Total liabilities................................. 9,611 1,349
Owners' equity........................................ 566,825 79,537
------- -------
Total liabilities and owners' equity.............. 576,436 $80,886
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-54
<PAGE>
VIKING VESSELS
(VESSELS ACQUIRED BY SAEVIK SUPPLY FROM VIKING SUPPLY SHIPS AS)
STATEMENT OF REVENUES LESS DIRECT OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
(US DOLLARS IN
THOUSANDS SEE
NOK IN THOUSANDS NOTE 1)
----------------------- --------------
1994 1995 1996 1996
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Freight revenues........................ 199,077 215,494 264,836 $37,162
------- ------- ------- -------
Operating expenses:
Chartering expenses................... 8,897 8,072 9,929 1,393
Crew expenses......................... 64,372 64,227 70,585 9,904
Operating and maintenance of vessels.. 27,506 35,198 46,819 6,570
Administrative costs.................. 10,000 10,000 12,000 1,684
Depreciation.......................... 42,296 42,327 48,729 6,837
------- ------- ------- -------
Total operating expenses............ 153,071 159,824 188,062 26,388
------- ------- ------- -------
Revenues less direct operating expenses
(including depreciation)............... 46,006 55,670 76,774 $10,774
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE>
VIKING VESSELS
(VESSELS ACQUIRED BY SAEVIK SUPPLY FROM VIKING SUPPLY SHIPS AS)
NOTES TO STATEMENTS
1. BASIS OF PRESENTATION AND DESCRIPTION OF ACQUISITION:
The accompanying statement of assets acquired and liabilities assumed and
statement of revenues less direct operating expenses of the Viking Vessels
were prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission (for inclusion in the registration
statement on Form S-3 of Trico Marine Services Inc.) and are not intended to
be a complete presentation of the results of the operations for the Viking
Vessels. The Statements include the historic results of the vessels acquired
by Saevik Supply ASA (Saevik) from Viking Supply Ships AS, a Norwegian
shipping concern, on January 15, 1997.
Historical audited financial statements were never prepared separately for
the individual vessels or the fleet of Viking Vessels as they represented only
a portion of the overall Viking Supply Ships AS fleet at the time of their
acquisition by Saevik. Separate financial information of the Viking Vessels
such as interest expense, income tax expenses and selling, general and certain
administrative expense were not prepared historically and are not available on
a vessel by vessel basis or for the fleet of Viking Vessels and therefore have
not been presented in the financial statements. Additionally, access to
financial information required to present the statement of assets acquired and
liabilities assumed as of December 31, 1995 was not available.
These statements are presented in accordance with Norwegian generally
accepted accounting principles (NOR GAAP), except as noted above, and in
Norwegian krone (NOK) and include amounts in US dollars ($), as presented,
solely for the convenience of the reader, at the exchange rate of NOK
7.1265=US$1, the noon buying rate in New York City for cable transfers in
Norwegian krone as certified for customs purposes by the Federal Reserve Bank
of New York on October 24, 1997, in accordance with Securities and Exchange
Commission Regulation S-X Rule 3-20. This presentation has not been translated
in accordance with Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation." No representation is made that the Norwegian
krone amounts have been, or could be converted into US Dollars at that or any
other rate of exchange.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Supply Vessels
Marine vessels are stated at Viking Vessels' cost. Depreciation of financial
statement purposes is provided on the straight-line method. Marine vessels are
generally depreciated over a useful life of 21 years from the date delivered
from building yard as new built. Major modification which extend to the useful
life of the marine vessels are capitalized and amortized over the remaining
useful life of the vessel. Maintenance, docking and marine inspection costs
are charged to expense as incurred (see Note 4).
Revenue and Expense Recognition
Freight revenue is earned and recognized on a daily rate basis. Operating
costs are expensed as incurred.
Direct Vessel Operating Expenses
Direct vessel operating expenses principally include crew costs, insurance,
repairs and maintenance, and casualty losses as expensed or incurred.
F-56
<PAGE>
VIKING VESSELS
(VESSELS ACQUIRED BY SAEVIK SUPPLY FROM VIKING SUPPLY SHIPS AS)
NOTES TO STATEMENTS--(CONTINUED)
3. SUPPLY VESSELS:
The historical cost and associated accumulated depreciation of the supply
vessels as of December 31, 1996 is as follows:
<TABLE>
<CAPTION>
(US DOLLARS IN
NOK IN THOUSANDS SEE
THOUSANDS NOTE 1)
--------- --------------
<S> <C> <C>
Supply vessels, at cost.......................... 824,220 $115,655
Less accumulated depreciation.................... 247,784 34,769
------- --------
Net Book Value................................. 576,436 $ 80,886
======= ========
</TABLE>
The Statement of Revenues Less Direct Expenses for the years 1995 and 1994
include 10 vessels. The 1996 include two additional vessels acquired by Viking
Supply Ships AS in 1996.
4. RECONCILIATION OF REVENUES LESS DIRECT OPERATING EXPENSES AND OWNERS'
EQUITY TO U.S. GAAP:
The following is a summary of the approximate significant adjustments to
revenues less direct operating expenses for the years ended December 31, 1995
and 1996, and to owners' equity as of December 31, 1996, which would be
required if U.S. GAAP had been applied instead of Norwegian GAAP in the
accompanying financial statements:
<TABLE>
<CAPTION>
(US DOLLARS IN
NOK IN THOUSANDS SEE
THOUSANDS NOTE 1)
------------- --------------
1995 1996 1996
------ ------ --------------
<S> <C> <C> <C>
Revenues less direct operating expenses in
accordance with Norwegian GAAP................... 55,670 76,774 $10,773
U.S. GAAP adjustments--
Estimated net increase due to capitalization and
amortization (over 30 to 60 months) of
maintenance, docking and marine inspection
costs.......................................... 1,781 7,929 1,112
------ ------ -------
Approximate revenues less direct operating ex-
penses in accordance with U.S. GAAP.............. 57,451 84,703 $11,885
====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
(US DOLLARS IN
NOK IN THOUSANDS SEE
THOUSANDS NOTE 1)
--------- --------------
<S> <C> <C>
Owners' equity in accordance with Norwegian GAAP...... 566,825 $79,537
U.S. GAAP adjustments--
Capitalized maintenance, docking and marine
inspection costs less accumulated amortization..... 43,670 6,128
------- -------
Owners' equity in accordance with U.S. GAAP........... 610,495 $85,665
======= =======
</TABLE>
F-57
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 9
The Acquisition........................................................... 14
Use of Proceeds........................................................... 15
Capitalization............................................................ 16
Price Range of Common Stock and Dividend Policy........................... 17
Selected Consolidated Financial and Operating Data........................ 18
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 28
Management................................................................ 39
Description of Capital Stock.............................................. 41
Underwriting.............................................................. 46
Notice to Ontario Residents............................................... 47
Legal Matters............................................................. 48
Experts................................................................... 48
Available Information..................................................... 48
Incorporation of Certain Documents by Reference........................... 50
Index to Consolidated Financial Statements................................ 51
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4,000,000 SHARES
[Logo of Trico appears here]
TRICO MARINE SERVICES, INC.
COMMON STOCK
($0.01 PAR VALUE PER SHARE)
SCHRODER & CO. INC.
BEAR, STEARNS & CO. INC.
JEFFERIES & COMPANY, INC.
RAYMOND JAMES
& ASSOCIATES, INC.
JOHNSON RICE
& COMPANY L.L.C.
NOVEMBER , 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Estimated expenses payable in connection with the proposed sale of Common
Stock covered hereby are as follows:
<TABLE>
<S> <C>
SEC registration fee................................................ $ 69,697
Accounting fees..................................................... 200,000
Printing expenses................................................... 100,000
Legal fees and expenses............................................. 100,000
Miscellaneous expenses.............................................. 130,303
--------
Total............................................................. $600,000
========
</TABLE>
- --------
* All expenses except the SEC registration fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify its directors and officers in a variety of
circumstances, which may include liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). In addition, the Registrant's bylaws
provide for the indemnification of directors and officers against expenses and
liabilities incurred in connection with defending actions brought against them
for negligence or misconduct in their official capacities. The Registrant also
has indemnity agreements with each of its directors, which provide for
indemnification of such directors and maintains insurance permitted by the
Delaware General Corporation Law on behalf of directors and officers, which
may cover liabilities under the Securities Act. The Underwriting Agreement, a
form of which is filed as Exhibit 1.1 and incorporated herein by reference,
also provides indemnification to directors and officers of the Registrant
under certain conditions.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. as to the legality of the Company's Common Stock.*
23.1 Consent of Coopers & Lybrand L.L.P.*
23.2 Consent of KPMG as represented by Gerd Leira*
23.3 Consent of Deloitte & Touche as represented by Roar Skuland*
23.4 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. (included in Exhibit 5).*
24.1 Power of Attorney (included in Signature Page to the Registration
Statement).*
</TABLE>
- --------
* Previously Filed.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be an initial bona fide offering thereof.
(2) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of said securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 1 to be signed on its behalf by the undersigned in the City of
Houston, State of Texas, on November 21, 1997.
TRICO MARINE SERVICES, INC.
By: /s/ Ronald O. Palmer
-----------------------------------
Ronald O. Palmer,
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 was signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Thomas E. Fairley* Director, President and November 21, 1997
____________________________________ Chief Executive Officer
Thomas E. Fairley
/s/ Ronald O. Palmer Chairman of the Board November 21, 1997
____________________________________
Ronald O. Palmer
/s/ Victor M. Perez* Vice President, Chief November 21, 1997
____________________________________ Financial Officer and
Victor M. Perez Treasurer (Principal
Financial Officer)
/s/ Kenneth W. Bourgeois* Vice President and November 21, 1997
____________________________________ Controller (Principal
Kenneth W. Bourgeois Accounting Officer)
/s/ Benjamin F. Bailar* Director November 21, 1997
____________________________________
Benjamin F. Bailar
/s/ H. K. Acord* Director November 21, 1997
____________________________________
H. K. Acord
/s/ Garth H. Greimann* Director November 21, 1997
____________________________________
Garth H. Greimann
/s/ Edward C. Hutcheson, Jr.* Director November 21, 1997
____________________________________
Edward C. Hutcheson, Jr.
*By: /s/ Ronald O. Palmer November 21, 1997
____________________________________
Ronald O. Palmer
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
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
except for the third
paragraph of Note 15
to which the date is
June 9, 1997
S-1
<PAGE>
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 D COLUMN E COLUMN F
-------- --------- -------- -------- ---------- --------
BALANCE CHARGED BALANCE
AT TO COSTS CHARGED AT END
BEGINNING AND TO OTHER 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) $ --
==== ==== ==== ==== ====
</TABLE>
- --------
(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.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. as to the legality of the Company's Common Stock.*
23.1 Consent of Coopers & Lybrand L.L.P.*
23.2 Consent of KPMG as represented by Gerd Leira*
23.3 Consent of Deloitte & Touche as represented by Roar Skuland*
23.4 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. (included in Exhibit 5).*
24.1 Power of Attorney (included in Signature Page to the Registration
Statement).*
</TABLE>
- --------
* Previously Filed
E-1
