SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period ________ to _______
Commission File Number 0-28316
TRICO MARINE SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 72-1252405
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 North American Court
Houma, LA 70363
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (504) 851-3833
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No
As of November 10, 1998 there were 20,376,416 shares outstanding of the
Registrant's Common Stock, par value $.01 per share
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
1998 1997
_____________ ____________
ASSETS
Current assets:
Cash and cash equivalents $ 24,435 $ 10,940
Accounts receivable, net 31,645 34,519
Prepaid expenses and other current assets 2,835 3,486
------------- ------------
Total current assets 58,915 48,945
------------- ------------
Property and equipment, at cost:
Land and buildings 3,223 2,429
Marine vessels 528,074 480,920
Construction-in-progress 67,731 42,256
Transportation and other 3,429 2,433
------------- ------------
602,457 528,038
Less accumulated depreciation and amortization 41,576 22,982
------------- ------------
Net property and equipment 560,881 505,056
------------- ------------
Goodwill, net 117,035 118,737
Other assets 40,931 26,043
------------- ------------
$ 777,762 $ 698,781
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 14,937 $ 12,701
Accounts payable 11,095 9,114
Accrued expenses 9,903 10,012
Accrued interest 5,912 5,514
Income taxes payable 20 3,773
------------- ------------
Total current liabilities 41,867 41,114
------------- ------------
Long-term debt 401,273 359,385
Deferred income taxes, net 45,884 32,561
Other non-current liabilities 2,614 4,221
------------- ------------
Total liabilities 491,638 437,281
------------- ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized
40,000,000 shares, issued 20,448,448 and
20,367,098 shares, outstanding 20,376,416
and 20,295,066 shares at September 30, 1998
and December 31, 1997, respectively 204 204
Additional paid-in capital 218,793 218,528
Retained earnings 69,501 45,306
Accumulated other comprehensive expense (2,373) (2,537)
Treasury stock, at par value, 72,032 shares (1) (1)
------------- ------------
Total stockholders' equity 286,124 261,500
------------- ------------
$ 777,762 $ 698,781
============= ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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,
-------------------- -----------------------
1998 1997 1998 1997
------- ------- ---------- --------
<S> <C> <C> <C> <C>
Revenues:
Charter hire $43,017 $34,094 $ 144,789 $ 83,875
Other vessel income 27 - 84 4
-------- -------- ----------- ---------
Total revenues 43,044 34,094 144,873 83,879
-------- -------- ----------- ---------
Operating expenses:
Direct vessel operating expenses and other 19,188 11,235 53,204 28,592
General and administrative 2,738 1,425 7,508 4,157
Amortization of marine inspection costs 2,452 819 6,182 2,093
-------- -------- ----------- ---------
Total operating expenses 24,378 13,479 66,894 34,842
-------- -------- ----------- ---------
Depreciation and amortization expense 7,642 3,319 21,986 7,995
-------- -------- ----------- ---------
Operating income 11,024 17,296 55,993 41,042
Interest expense 7,172 2,163 20,753 3,677
Amortization of deferred financing costs 459 109 1,314 144
Gain on sale of assets, net (301) (2) (909) (255)
Other income, net (99) (54) (840) (134)
-------- -------- ----------- ---------
Income before income taxes 3,793 15,080 35,675 37,610
-------- -------- ----------- ---------
Income tax expense 1,166 5,279 11,480 13,164
-------- -------- ----------- ---------
Net income $ 2,627 $ 9,801 $24,195 $24,446
======== ======== =========== =========
Basic earnings per common share:
Net income $ 0.13 $ 0.63 $ 1.19 $ 1.57
======== ======== =========== =========
Average common shares outstanding 20,357,612 15,646,534 20,331,300 15,583,348
=========== =========== =========== ==========
Diluted earnings per common share:
Net income $ 0.13 $ 0.58 $ 1.15 $ 1.45
======== ======== =========== =========
Average common shares outstanding 21,012,249 16,946,275 21,069,094 16,888,569
=========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------
1998 1997
------------ ---------------
<S> <C> <C>
Net income $ 24,195 $ 24,446
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 29,763 10,232
Deferred income taxes 13,176 8,096
Gain on sales of assets (909) (255)
Provision for doubtful accounts 90 90
Changes in operating assets and liabilities:
Accounts receivable 3,268 (9,204)
Prepaid expenses and other current assets 715 (246)
Accounts payable and accrued expenses (1,885) 8,534
Other, net (1,189) (611)
------------ ---------------
Net cash provided by operating activities 67,224 41,082
------------ ---------------
Cash flows from investing activities:
Purchases of property and equipment (80,581) (119,545)
Deferred marine inspection costs (22,247) (8,889)
Proceeds from sales of assets 6,874 1,121
Other (1,824) (370)
------------ ---------------
Net cash used in investing activities (97,778) (127,683)
------------ ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock 265 327
Proceeds from issuance of long-term debt 147,957 142,928
Repayment of long-term debt (103,326) (50,500)
Deferred financing costs and other (820) (3,693)
------------ ---------------
Net cash provided by financing activities 44,076 89,062
------------ ---------------
Effect of exchange rate changes on cash and cash equivalents (27) -
------------ ---------------
Net increase in cash and cash equivalents 13,495 2,461
Cash and cash equivalents at beginning of period 10,940 1,047
------------ ---------------
Cash and cash equivalents at end of period $ 24,435 $ 3,508
============ ================
Supplemental information:
Income taxes paid $ 3,757 $ 2,453
============ ================
Income taxes refunded $ 3 $ -
============ ================
Interest paid $ 24,148 $ 2,002
============ ================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
-------- ------- ------- -------
Net Income $ 2,627 $ 9,801 $24,195 $24,446
-------- ------- ------- -------
Other comprehensive income, net of tax:
Foreign currency translation adjustments 4,278 - 164 -
-------- ------- ------- -------
Comprehensive income $ 6,905 $ 9,801 $24,359 $24,446
======== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial
1. Financial Statement Presentation:
The consolidated financial statements for Trico Marine Services, Inc. (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, 1998 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, 1997.
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:
In March 1998, the Company amended its agreement with its bank lenders (the
"Amended Facility") to remove certain subsidiaries as participants in the
agreement, to release a portion of the assets pledged as collateral, to
reduce the interest rate and to reduce the commitment fee on the unused
portion of the Amended Facility. Effective July 16, 1998, the Company
reduced the total commitment available under the Amended Facility from
$150,000,000 to $100,000,000.
In June 1998, the Company amended the Saevik Supply bank credit facilities
creating one revolving credit facility in the amount of NOK 650 million, or
$87.8 million (the "Saevik Bank Facility"), and a term loan in the amount
of NOK 29.7 million ($4.0 million). As of September 30, 1998, the Company
had approximately NOK 530 million ($71.6 million) of debt outstanding under
the Saevik Bank Facility and a term loan in the amount of NOK 26.7 million
($3.6 million). The Saevik Bank Facility is collateralized by a security
interest in certain of the Company's North Sea vessels, requires Saevik
Supply to maintain certain financial ratios and limits the ability of
Saevik Supply to create liens, or merge or consolidate with other entities.
Amounts borrowed under the Saevik Bank Facility bear interest at NIBOR
(Norwegian Interbank Offered Rate) plus a margin. The weighted average
interest rate for the Saevik Bank Facility was 5.80% as of September 30,
1998. The commitment amount for the Saevik Bank Facility reduces by NOK 50
million ($6.8 million) every six months beginning December 1998, with the
balance of the commitment to expire in June 2003.
3. Separate Financial Statements For Subsidiary Guarantors:
During 1997, the Company issued three Series of 81/2% Senior Notes due
2005, Series A/B Notes -- $110,000,000, Series C/D Notes -- $100,000,000
and Series E/F Notes -- $70,000,000 (the "Senior Notes"). The Senior
Notes are uncollateralized and guaranteed by Trico Marine Assets, Inc.,
Trico Marine Operators, Inc., Trico Marine International Holdings,B.V.,
Saevik Supply ASA and Saevik Shipping AS (the "Subsidiary Guarantors").
Separate financial statements of 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 and (e) management has
determined that separate financial statements and disclosures concerning
the Subsidiary Guarantors are not material to investors.
4. United States Government Guaranteed Ship Financing Bonds:
In April 1998, the Company issued $10,000,000 principal amount of 8 year
United States Government Guaranteed Ship Financing Bonds, SWATH Series I,
at an interest rate of 6.08% (the "Bonds"). The Bonds are due in 16
semi-annual installments of principal and interest. The Bonds are
collateralized by a first preferred ship mortgage on the Stillwater River,
a Small Waterplane Area Twin Hull ("SWATH") vessel, and by an assignment of
the charter contract that the vessel will commence upon its completion.
The proceeds from the Bonds were released to the Company upon completion
and delivery of the vessel in November 1998.
5. Acquisition:
In March 1996, the Company acquired 40% of the outstanding shares of Walker
Servicos Maritimos, Ltda ("Walker"), a marine operating company located in
Brazil. On July 1, 1998 the Company acquired the remaining 60% of
outstanding shares of Walker. The total cost of the acquisition was
$1,150,000. The acquisition has been accounted for by the purchase method,
and Walker's results are included in the accompanying consolidated
financial statements from July 1, 1998. Previously, Walker's results were
accounted for on an equity basis. Goodwill of $1,251,000 was recorded in
conjunction with the purchase of Walker. The goodwill is being amortized
over eight years.
6. Foreign Exchange:
In June and September 1998, the Company entered into several forward
foreign currency exchange contracts to hedge certain of its exposures
relating to fluctuations in the Great Britain pound. These contracts
generally expire within one year. Gains and losses on the contracts are
deferred until the hedged transaction is completed. Through September 30,
1998, losses of $65,000 had been recognized on completed contracts. As of
September 30, 1998, deferred gains and losses on forward foreign currency
exchange contracts were not material to the consolidated financial
statements.
7. Income Taxes:
The Company's effective income tax rates for the three-month and nine-month
periods ended September 30, 1998 were 31% and 32%, respectively. The
variance from the Company's statutory rate is due to income contributed by
Saevik Supply ASA, which is deferred at the Norwegian statutory rate of
28%, due to the Company's intent to permanently reinvest the unremitted
earnings and postpone their repatriation indefinitely.
8. New Accounting Standards:
During the year, the Company adopted Statement of Financial Accounting
Standards, No. 130, "Reporting Comprehensive Income" (FASB No. 130). FASB
No. 130 requires the reporting of comprehensive income in addition to net
income from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of
net income. Prior periods presented herein have been reclassified in
accordance with FASB No. 130. In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards, No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
effective for fiscal years beginning after December 15, 1997. In February
1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, No. 132, "Employer's Disclosures about
Pensions and Others Retirement Benefits," 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.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FASB No. 133), effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The Company
is currently evaluating the impact FASB No. 133 will have on its financial
statements, if any.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations should be read in conjunction with the unaudited consolidated
financial statements and the related disclosures included elsewhere herein.
RESULTS OF OPERATIONS
Revenues for the third quarter and nine months ended September 30, 1998
were $43.0 million and $144.9 million, respectively, an increase of 26.2%
and 72.7% compared to the $34.1 million and $83.9 million in revenues for
the third quarter and first nine months of 1997, respectively. This
increase was principally due to the inclusion, for the full 1998 periods,
of the Company's North Sea operations, which commenced as a result of the
acquisition of Saevik Supply ASA ("Saevik Supply") in December 1997 and the
growth in the Company's fleet of marine vessels in the U.S. Gulf of Mexico
("Gulf"). The table below sets forth by vessel class, the average day
rates and utilization of the Company's vessels and the average number of
vessels owned during the periods indicated.
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---- ---- ---- ----
Average Day Rates:
Supply $ 6,408 $ 7,590 $ 7,625 $ 7,130
Supply/Anchor Handling (N. Sea) 14,072 - 14,234 -
Lift 6,218 6,013 6,366 5,705
Crew/Line Handling 2,070 2,045 2,078 1,937
Utilization (1):
Supply 53% 85% 64% 85%
Supply/Anchor Handling (N. Sea) 96% - 94% -
Lift 55% 76% 59% 71%
Crew/Line Handling 93% 98% 94% 97%
Average Number of Vessels:
Supply 51.3 47.7 50.1 40.7
Supply/Anchor Handling (N. Sea) 17.0 - 16.8 -
Lift 6.0 6.0 6.0 6.0
Crew/Line Handling 21.0 23.0 22.1 24.0
</TABLE>
Supply boat day rates in the Gulf for the third quarter of 1998 decreased
15.6% to $6,408, compared to $7,590 for the third quarter of 1997.
Utilization for the supply boat fleet decreased for the third quarter and
nine-month period due to vessel downtime resulting from the Company's
extensive fleet upgrade and refurbishment program and decreased demand due
to decreased activity in the Gulf. Toward the end of the second quarter of
1998, the Company began to experience a decrease in average day rates and
utilization for its Gulf supply boat fleet as a result of decreased
activity in the Gulf due to lower oil prices and increased overall fleet
capacity due to newly-constructed supply boats entering the market. These
factors, which have led to decreased demand and increased competition in
the Gulf supply boat market, continued through the third quarter.
**ENDNOTES**
(1) 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 mobilized/demobilized under contracts with customers.
Day rates for the Company's North Sea vessels averaged $14,072 and $14,234
for the third quarter and first nine months of 1998, respectively.
Utilization was 96% for the third quarter of 1998, and 94% for the
nine-month period of 1998. In mid-March 1998, the Company took delivery of
a new 276-foot platform supply vessel ("PSV"), which commenced a three-year
contract in the U.K. sector of the North Sea.
Lift boat day rates averaged $6,218 for the quarter and $6,366 for the
first nine months of 1998, an increase of 3.4% and 11.6%, respectively,
compared to $6,013 and $5,705 for the comparable 1997 periods. Utilization
for the Company's lift boats decreased to 55% and 59% for the third quarter
and first nine months of 1998, respectively, compared to 76% and 71% for
the year-ago periods, due to weather downtime experienced in the third
quarter of 1998, and the scheduled drydocking in the second quarter of the
Company's two 170-foot class lift boats. During September 1998,
utilization of the Company's lift boats averaged 14% due to the tropical
storms and hurricanes in the Gulf.
Day rates for crew boats and line handling vessels increased to $2,070 for
the third quarter, from $2,045 for the third quarter of 1997. Utilization
for the crew boats and line handling vessels decreased to 93% for the third
quarter of 1998, compared to 98% for the comparable 1997 period, due to
vessel downtime resulting from the scheduled drydocking of certain of the
Company's crew boats in the Gulf.
During the third quarter and first nine months of 1998, direct vessel
operating expenses increased to $19.1 million (44.3% of revenues) and $52.9
million (36.5% of revenues), respectively, compared to $11.2 million (32.8%
of revenues) and $28.4 million (33.8% of revenues) for the third quarter
and first nine months of 1997. This increase was primarily due to the
addition of the North Sea operations, the expanded vessel fleet, and the
consolidation, for financial statement purposes, of the Company's
previously unconsolidated Brazilian affiliate. Direct vessel operating
expenses as a percentage of revenues increased due to the decrease in
utilization and average vessel day rates for the Company's Gulf supply
vessel fleet, and the consolidation of the Brazilian operations which,
because of the small line handling vessels it operates, has a lower gross
profit margin than the Company's operations as a whole.
Depreciation and amortization expense increased to $7.6 million and $22.0
million for the third quarter and first nine months of 1998, respectively,
up from $3.3 million and $8.0 million for the year-ago periods as a result
of the Company's expanded vessel fleet and the amortization of goodwill
associated with the acquisition of Saevik Supply in December 1997.
Amortization of marine inspection costs increased to $2.5 million and $6.2
million for the quarter and nine month period ended September 30,1998,
respectively, from $819,000 and $2.1 million in the comparable 1997
periods, due to the increased dry docking and marine inspection costs
associated with the Company's expanded vessel fleet and the Company's fleet
refurbishment program.
General and administrative expenses increased to $2.7 million (6.4% of
revenues) and $7.5 million (5.2% of revenues) in the third quarter and
first nine months of 1998, respectively, from $1.4 million (4.2% of
revenues) and $4.2 million (5.0% of revenues) for the 1997 periods due to
additions of personnel in connection with the growth in the Company's
vessel fleet, the addition of the North Sea operations and the
consolidation of the previously unconsolidated Brazilian operations.
General and administrative expenses, as a percentage of revenues, increased
in the 1998 periods due to the decrease in utilization and average day
rates for the Company's Gulf supply boat fleet.
Interest expense increased to $7.2 million for the third quarter of 1998
from $2.2 million for the third quarter of 1997. This increase was due to
increased borrowings in 1997 that were used to fund the Company's
acquisition of supply boats in the Gulf, the Company's various vessel
construction and upgrade projects and the acquisition of Saevik Supply. In
July 1997, the Company issued $110 million principal amount of 81/2% Senior
Notes due 2005 (the "Notes"), the proceeds of which were used to fund the
acquisition of supply boats in the Gulf and to repay outstanding amounts
under the Company's revolving credit facility. In November and December
1997, the Company issued an additional $170 million principal amount of the
Notes ($100 million in November and $70 million in December), the proceeds
of which were used to fund a portion of the acquisition of Saevik Supply
and to repay outstanding amounts under the Company's Bank Credit Facility
(as defined below). Interest expense was low for the first nine months of
1997 because the Company had reduced its borrowings under its credit
facility with proceeds from the Company's equity offering that was
completed in November 1996.
In the third quarter and first nine months of 1998, the Company had income
tax expense of $1.2 million and $11.5 million, respectively, compared to
income tax expense of $5.3 million and $13.2 million in the 1997 periods.
The Company's effective income tax rate for the three-month and nine-month
periods ended September 30, 1998 was 30.7% and 32.2%, respectively. The
variance from the Company's statutory rate is due to income contributed by
Saevik Supply, which is deferred at the Norwegian statutory rate of 28%,
due to the Company's intent to permanently reinvest the unremitted earnings
and postpone their repatriation indefinitely.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically focused on growth through acquisitions. In
December 1997, the Company significantly expanded its international
operations by acquiring Saevik Supply for approximately $289.0 million in
cash. Since its initial public offering in May 1996, 37 supply boats in
the Gulf were also acquired at an aggregate cost of $177.0 million. The
Company has also selectively constructed new vessels, and lengthened and
upgraded vessels, to expand its presence in either the international or the
Gulf deepwater market. Additionally, the Company implemented a program to
refurbish and upgrade many of the Gulf supply boats acquired over the past
two years, to increase their capabilities and extend their service lives.
As a result of this growth, Trico is now the second largest owner and
operator of supply boats in the Gulf and a leading operator in the North
Sea. This strategy of growth through acquisitions, has enabled the Company
to significantly increase total revenues.
Funds during the first nine months of 1998 were provided by $148.0 million
in borrowings under the Company's bank credit facilities and $67.2 million
in funds from operating activities. During the period, the Company repaid
$103.3 million of debt and made capital expenditures totaling $102.8
million, which included $22.2 million of deferred marine inspection costs.
During the first nine months of 1998, the Company spent approximately $75.5
million on vessel upgrade or construction projects. To expand its North
Sea operations, the Company took delivery in the first quarter of a
276-foot PSV which began a three-year charter for a U.K. oil and gas
operator in March 1998. The Company also continued construction in Norway
of a 275-foot, technologically advanced multi-purpose anchor handling
towing and supply vessel ("AHTS") with 23,800 horsepower that is expected
to be delivered in June 1999. The Company also has two 230-foot supply
vessels currently under construction at a shipyard on the U.S. Gulf Coast.
The first vessel is expected to be completed in November 1998 and has been
committed to a three-year charter to an oil and gas company active in the
Gulf. The second vessel is expected to be delivered in the first quarter
of 1999. Other capital expenditures for vessel upgrade and construction
projects during the period included: (i) costs to lengthen and upgrade two
supply boats for the Gulf, both of which were placed in service in March
1998; (ii) costs for the construction of a supply boat for use in the
Brazilian market which was placed in service in July 1998, and the
continued construction of the SWATH vessel which was delivered in November
1998; and (iii) U.S. Coast Guard drydocking costs and vessel refurbishment
costs.
In 1997, the Company issued $280.0 million in aggregate principal amount of
the Notes, which were used to fund certain acquisitions of supply boats in
the Gulf, to repay outstanding borrowings under the Company's revolving
credit facility and to fund a portion of the acquisition of Saevik Supply.
The Notes are unsecured and are required to be guaranteed by all of the
Company's Significant Subsidiaries (as such term is defined in the
indentures governing the Notes, the "Subsidiary Guarantors"). 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. The indentures governing 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.
To provide funding for the acquisition of Saevik Supply, effective December
1, 1997, the Company amended and restated its existing bank credit facility
to provide for a $150.0 million revolving credit facility and $200.0
million in term loans (collectively, the "Bank Credit Facility"). The term
loans were repaid with the net proceeds of the Company's issuance of
4,600,000 shares of common stock (approximately $123.7 million) that was
completed in December 1997 (the "Common Stock Offering"). Proceeds from
the $70 million issuance of Notes completed in December 1997 were used to
repay outstanding amounts under the revolving portion of the Bank Credit
Facility.
As a result of the repayment of substantially all of its borrowings under
the Bank Credit Facility as discussed above, the Company renegotiated and
amended the terms of the Bank Credit Facility (the "Amended Facility") in
March 1998. The Amended Facility provides a $100.0 million revolving line
of credit that can be used for acquisitions and general corporate purposes.
The Amended Facility is collateralized by a mortgage on certain of the
Company's vessels. Amounts borrowed under the Amended Facility, which
totaled $51 million at September 30, 1998, mature on December 1, 2002 and
bear interest at LIBOR plus a margin that depends on the Company's leverage
ratio (currently approximately 7.1%). The Amended Facility requires the
Company to maintain certain financial ratios and 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 Amended 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 Notes.
In addition to the Notes and the Amended Facility, as a result of the
acquisition of Saevik Supply, the Company incurred debt under several bank
facilities that were originally established by Saevik Supply to make vessel
acquisitions. In June 1998, the Company amended the existing Saevik Supply
bank credit facilities creating one revolving credit facility in the amount
of NOK 650 million, or $87.8 million (the "Saevik Bank Facility"). As of
September 30, 1998, the Company had approximately NOK 530 million ($71.6
million) of debt outstanding under the Saevik Bank Facility and a term loan
in the amount of NOK 26.7 million ($3.6 million). The Saevik Bank Facility
is collateralized by a mortgage on certain of the Company's North Sea
vessels, requires Saevik Supply to maintain certain financial ratios and
limits the ability of Saevik Supply to create liens, or merge or
consolidate with other entities. Amounts borrowed under the Saevik Bank
Facility bear interest at NIBOR (Norwegian Interbank Offered Rate) plus a
margin. The weighted average interest rate for the Saevik Bank Facility was
5.8% as of September 30, 1998. The commitment amount for the Saevik Bank
Facility reduces by NOK 50 million ($6.8 million) every six months
beginning December 1998, with the balance of the commitment to expire in
June 2003.
In connection with the construction of the SWATH vessel, in April 1998, the
Company issued $10.0 million aggregate principal amount of 8 year, 6.08%
Ship Financing Bonds (the "Ship Bonds") guaranteed by the United States
Government. The Ship Bonds are due in 16 semi-annual installments of
principal and interest, beginning February 1999, and are secured by a first
preferred ship mortgage on the SWATH vessel and by an assignment of the
vessel's charter. The proceeds from the Ship Bonds were placed in escrow
at the indenture closing and were distributed to the Company upon
completion and delivery of the SWATH vessel in November 1998. The proceeds
were used to reduce the amounts outstanding under the Company's Amended
Facility.
Capital expenditures planned for the remainder of 1998 are expected to
total approximately $9.0 million, consisting primarily of the existing
vessel construction projects, scheduled vessel drydockings and expenditures
associated with the Company's fleet refurbishment program. Existing vessel
construction projects include: (i) final costs to complete the SWATH vessel
for the Brazilian market, which was delivered in November 1998; (ii)
completion of the two 230-foot supply vessels, one of which is expected to
be delivered in November 1998, and the second in the first quarter of 1999;
and (iii) continuation of the construction of the 275-foot AHTS in Norway
to be completed in June 1999.
The Company believes that cash generated from operations together with
available borrowings under the Amended Facility will be sufficient to fund
the Company's currently planned capital projects and working capital
requirements. The Company's strategy, however, is to make other
acquisitions and to selectively construct new special-purpose vessels as
part of an effort to expand its worldwide presence. To the extent the
Company is successful in identifying such opportunities, it most likely
will require additional debt or equity financing depending on the size of
the investments required.
YEAR 2000 COMPLIANCE
Currently, the Company utilizes third party sofware in all of its computer
applications. In the normal course of business, the Company is in the
process of replacing its accounting and certain other information systems,
and has established a target date of mid-1999 for their installation at all
locations. While the Company's growth is driving the Company's efforts to
replace these systems,the Company does expect the implementation of the new
systems to mitigate any potential Year 2000 issues related to any of its
existing systems. In addition, the Company's information systems personnel
are currently working with its third party vendors to resolve the potential
problems associated with the year 2000 and the processing of date sensitive
information by the Company's computer and other systems. The Company is
still evaluating the effect of the Year 2000 on other computer systems and
non-information technology systems, including telephone systems, office and
vessel-based electronic equipment and devices with embedded microprocessors.
Additionally, the Company intends to contact any key vendors and suppliers
to ensure that they have a Year 2000 compliance plan in an effort to
minimize the Company's exposure to their potential Year 2000 problems. The
Company anticipates completion of its evaluation of non-information
technology equipment, any key vendors and suppliers and any remedial action
and/or a contingency plan, if necessary, by mid-1999. With the Company's
purchase of new software and conversions to new software, the Year 2000
issue is not expected to pose significant operational problems for the
Company's computer systems. However, if such modifications or conversions
are not made or are not completed on time, the Year 2000 issue could have
an adverse impact on the Company's operations. The Company believes that
it will be able to implement successfully the changes necessary to address
the Year 2000 issues with reliance on its third party vendors and does not
expect the cost of such changes to have a material impact on the Company's
financial position, results of operations or cash flows in future periods.
CAUTIONARY STATEMENTS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" includes certain "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 in this section regarding the Company's financial position and
liquidity, its strategic alternatives, future capital needs, business
strategies, scheduled drydockings and related vessel downtime, 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's management 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 risks involved with the Company's
acquisition of Saevik Supply and the integration thereof, the Company's
dependence on the oil and gas industry and the volatility of that industry,
the Company's ability to manage growth, competition in its industry, the
risk of international operations and currency fluctuations, 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 the Company 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. 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3.1 Certificate of Incorporation of the Company. 1
3.2 By Laws of the Company.1
4.1 Specimen Common Stock Certificate.2
4.2 Indenture dated July 21, 1997 by and among the Company,
Trico Marine Operators, Inc., Trico Marine Assets, Inc. and
Texas Commerce Bank National Association, as Trustee ("July
Indenture").1
4.3 Form of Note and Subsidiary Guarantee under the July
Indenture. 1
4.4 First Supplemental Indenture to the July Indenture.3
4.5 Indenture dated November 14, 1997 by and among the Company,
Trico Marine Operators, Inc., Trico Marine Assets, Inc.
and Texas Commerce Bank National Association, as Trustee,
including form of Note and Subsidiary Guarantee (the
"November Indenture").4
4.6 First Supplemental Indenture to the November Indenture. 3
4.7 Indenture dated December 24, 1997 by and among the Company,
Trico Marine Operators, Inc., Trico Marine Assets, Inc.
and Texas Commerce Bank National Association, as Trustee
(the "December Indenture").5
4.8 Form of Note and Subsidiary Guarantee under the December
Indenture.5
4.9 First Supplemental Indenture to the December Indenture.3
4.10 Certificate of Designations for the Company's Series AA
Participating Cumulative Preference Stock.6
4.11 Rights Agreement dated as of February 19, 1998, by and
between the Company and ChaseMellon Shareholder Services,
L.L.C.6
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
Report on Form 8-K dated September 4, 1998 reporting
"Item 5 - Other Events."
1 Incorporated by reference to the Company's Current Report on Form 8-K
dated July 21, 1997 and filed with the commission on August 1, 1997.
2 Incorporated by reference to the Company's Registration Statement on
Form S-1 (Registration Statement No. 333-2990).
3 Incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1997.
4 Incorporated by reference to the Company's Current Report on Form 8-K
dated November 14, and filed with the Commission on November 21, 1997.
5 Incorporated by reference to the Company's Current Report on Form 8-K
dated December 24, and filed with the Commission on January 14, 1998.
6 Incorporated by reference to the Company's Registration Statement on
Form 8-A dated March 3, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRICO MARINE SERVICES, INC.
By:______________________________________
Kenneth W. Bourgeois
Chief Accounting Officer and
duly authorized officer
Date: November 16, 1998
TRICO MARINE SERVICES, INC.
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30,1998 Three Months Ended September 30, 1997
-------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per- Per-
Income Shares share Income Shares share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------- -------------- -------- ------------- --------------- --------
Net income $ 2,627 $ 9,801
-------------- -------------
Basic earnings per share
Income available to common
shareholders 2,627 20,357,612 $0.13 9,801 15,646,534 $0.63
====== ======
Effect of Dilutive Securities
Stock option grants - 654,637 - 1,299,741
-------------- ----------- ------------- ---------------
Diluted earnings per share
Income available to common
shareholders plus assumed
conversions $ 2,627 21,012,249 $0.13 $ 9,801 16,946,275 $0.58
=============== ============= ====== ============ =============== ======
Nine Months Ended September 30, 1998 Nine Months Ended September 30, 1997
------------------------------------ ------------------------------------
Per- Per-
Income Shares share Income Shares share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
-------------- -------------- -------- ------------ -------------- --------
Net income $ 24,195 $ 24,446
-------------- -----------
Basic earnings per share
Income available to common
shareholders 24,195 20,331,300 $1.19 24,446 15,583,348 $1.57
====== ======
Effect of Dilutive Securities
Stock option grants - 737,794 - 1,305,221
--------------- ----------- ----------- --------------
Diluted earnings per share
Income available to common
shareholders plus assumed
conversions $ 24,195 21,069,094 $1.15 $ 24,446 16,888,569 $1.45
=============== ============ ====== =========== ============== =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from consolidated
financial statements for the period ending September 30, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 24,435
<SECURITIES> 0
<RECEIVABLES> 30,895
<ALLOWANCES> 390
<INVENTORY> 0
<CURRENT-ASSETS> 57,775
<PP&E> 602,457
<DEPRECIATION> 41,576
<TOTAL-ASSETS> 776,622
<CURRENT-LIABILITIES> 42,895
<BONDS> 401,273
<COMMON> 204
0
0
<OTHER-SE> 285,920
<TOTAL-LIABILITY-AND-EQUITY> 776,622
<SALES> 144,873
<TOTAL-REVENUES> 144,873
<CGS> 88,880
<TOTAL-COSTS> 88,880
<OTHER-EXPENSES> 1,314
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,753
<INCOME-PRETAX> 35,675
<INCOME-TAX> 11,480
<INCOME-CONTINUING> 24,195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,195
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.15
</TABLE>
