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 March 31, 1999
_________ 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 May 10, 1999 there were 24,383,416 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>
March 31, December 31,
1999 1998
ASSETS -------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,046 $ 9,236
Accounts receivable, net 26,230 30,936
Prepaid expenses and other current assets 4,660 2,911
-------------- ----------------
Total current assets 34,936 43,083
-------------- ----------------
Property and equipment, at cost:
Land and buildings 3,465 3,402
Marine vessels 570,670 565,397
Construction-in-progress 41,223 45,861
Transportation and other 3,645 3,604
-------------- ----------------
619,003 618,264
Less accumulated depreciation and amortization 54,803 47,855
-------------- ----------------
Net property and equipment 564,200 570,409
-------------- ----------------
Goodwill, net 115,376 116,170
Other assets 40,873 39,228
-------------- ----------------
$ 755,385 $ 768,890
============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 2,018 $ 2,033
Accounts payable 8,482 11,058
Accrued expenses 9,103 9,894
Accrued interest 5,096 10,674
Income taxes payable 58 66
-------------- ----------------
Total current liabilities 24,757 33,725
-------------- ----------------
Long-term debt 412,247 402,518
Deferred income taxes, net 41,806 45,622
Other non-current liabilities 2,713 2,785
-------------- ----------------
Total liabilities 481,523 484,650
-------------- ----------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 40,000,000 shares,
issued 20,450,448 shares, outstanding 20,378,416 shares 205 205
Additional paid-in capital 218,807 218,807
Retained earnings 63,243 70,586
Accumulated other comprehensive loss (8,392) (5,357)
Treasury stock, at par value, 72,032 shares (1) (1)
-------------- ----------------
Total stockholders' equity 273,862 284,240
-------------- ----------------
$ 755,385 $ 768,890
============== ================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
Charter hire $ 28,286 $ 48,866
Other vessel income 32 21
---------- ----------
Total revenues 28,318 48,887
---------- ----------
Operating expenses:
Direct vessel operating expenses and other 17,338 16,819
General and administrative 2,534 2,294
Amortization of marine inspection costs 3,252 1,448
---------- ----------
Total operating expenses 23,124 20,561
---------- ----------
Depreciation and amortization expense 8,004 6,943
---------- ----------
Operating income (loss) (2,810) 21,383
Interest expense 7,791 6,552
Amortization of deferred financing costs 478 428
Other income, net (58) (321)
---------- ----------
Income (loss) before income taxes (11,021) 14,724
Income tax expense (benefit) (3,678) 4,880
---------- ----------
Net income (loss) $ (7,343) $ 9,844
========== ==========
Basic earnings per common share:
Net income (loss) $ (0.36) $ 0.48
========== ==========
Average common shares outstanding 20,378,416 20,298,403
========== ==========
Diluted earnings per common share:
Net income (loss) $ (0.36) $ 0.47
========== ==========
Average common shares outstanding 20,378,416 21,091,922
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income (loss) $ (7,343) $ 9,844
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 11,732 9,390
Deferred income taxes (3,634) 4,705
Gain on sales of assets - 2
Provision for doubtful accounts - 30
Changes in operating assets and liabilities:
Accounts receivable 4,296 510
Prepaid expenses and other current assets (1,800) (852)
Accounts payable and accrued expenses (8,631) (1,811)
Other, net (624) 713
----------- -----------
Net cash provided by (used in) operating activities (6,004) 22,531
----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (4,897) (34,726)
Deferred marine inspection costs (4,380) (7,297)
Proceeds from sales of assets - 6
Other (424) (2,034)
----------- -----------
Net cash used in investing activities (9,701) (44,051)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of
registration expenses - (115)
Proceeds from issuance of long-term debt 21,000 20,840
Repayment of long-term debt (10,174) (4,823)
Deferred financing costs and other (224) (343)
----------- -----------
Net cash provided by financing activities 10,602 15,559
----------- -----------
Effect of exchange rate changes on cash and cash equivalents (87) (210)
----------- -----------
Net decrease in cash and cash equivalents (5,190) (6,171)
Cash and cash equivalents at beginning of period 9,236 10,940
----------- -----------
Cash and cash equivalents at end of period $ 4,046 $ 4,769
=========== ===========
Supplemental information:
Income taxes paid $ 6 $ 3,700
=========== ===========
Income taxes refunded $ --- $ 3
=========== ===========
Interest paid $ 13,883 $ 7,973
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Net income (loss) $ (7,343) $ 9,844
----------- -----------
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (3,035) (3,299)
----------- -----------
Comprehensive income (loss) $ (10,378) $ 6,545
=========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 three months ended March 31,
1999 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, 1998.
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. Earnings Per Share:
For the three-month period ending March 31, 1999, options to purchase
1,832,480 common shares at prices ranging from $0.91 to $23.13 have been
excluded from the computation of earnings per share because inclusion of
these shares would have been antidilutive.
3. Separate Financial Statements for Subsidiary Guarantors:
During 1997, the Company issued $280,000,000 of 81/2% senior notes due 2005
in three different series. In November 1998, the Company completed an
exchange offer of all the existing series of senior notes for one series of
senior notes (the "Senior Notes"). The terms and conditions of the Senior
Notes are identical to the predecessor senior notes.
Pursuant to the terms of the indenture governing the Senior Notes, the
Senior Notes must be guaranteed by each of the Company's "significant
subsidiaries" (the "Subsidiary Guarantors"), whether such subsidiary was a
"significant subsidiary" at the time of the issuance of the Senior Notes or
becomes a "significant subsidiary" thereafter. Separate financial
statements of 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 are wholly-owned subsidiaries of the Company, comprise all of
the Company's direct and indirect subsidiaries (other than inconsequential
subsidiaries) and, on a consolidated basis, represent substantially all of
the assets, liabilities, earnings and equity of the Company, (c) each of
the Subsidiary Guarantors must fully and unconditionally guarantee the
Company's obligations under the Senior Notes on a joint and several basis
(subject to a standard fraudulent conveyance savings clause) and (d)
management has determined that separate financial statements and
disclosures concerning the Subsidiary Guarantors are not material to
investors.
4. Income Taxes:
The Company's effective income tax rate for the three-month periods ended
March 31, 1999 and March 31, 1998 was 33%. The variance from the Company's
statutory rate is due to income contributed by Trico 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.
5. New Accounting Standards:
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"), effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. The
Company is currently evaluating the impact SFAS No. 133 will have on its
financial statements, if any.
6. Segment and Geographic Information (In Thousands):
The Company is a provider of marine support services to the oil and gas
industry. Substantially all revenues result from the charter of vessels
owned by the Company. The Company's three reportable segments are based on
geographic area, consistent with the Company's management structure. The
accounting policies of the segments are the same, except for purposes of
income taxes and intercompany transactions and balances. The North Sea
segment provides for a flat tax rate of 28%, which is the Norwegian
statutory tax rate. Additionally, segment data includes intersegment
revenues, receivables and payables, and investments in consolidated
subsidiaries. The Company evaluates performance based on net income
(loss). The U.S. segment represents the domestic operations, the North Sea
segment includes Norway and the United Kingdom, and the Other segment
primarily includes Brazil. Segment data as of and for the three months
ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
North
March 31, 1999 U.S. Sea Other Totals
---------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Revenues from external customers $ 12,645 $ 14,696 $ 945 $ 28,286
Intersegment revenues 216 --- --- 216
Segment net income (loss) (9,290) 2,282 (335) (7,343)
Segment total assets 642,983 215,067 683 858,733
</TABLE>
<TABLE>
<CAPTION>
North
March 31, 1998 U.S. Sea Other Totals
---------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
Revenues from external customers $ 30,952 $ 17,914 $ --- $ 48,866
Intersegment revenues --- --- --- ---
Segment net income 4,115 5,729 --- 9,844
Segment total assets 610,288 210,607 --- 820,895
A reconciliation of segment data to consolidated data as of March 31, 1999
and 1998 is as follows:
</TABLE>
<TABLE>
<CAPTION>
1999 1998
------ ------
<S> <C> <C>
Revenues
Total revenues from external customers and intersegment revenues for
reportable segments................................................ $ 28,502 $ 48,866
Elimination of intersegment revenues.................................. (216) ---
------------- ------------
Total consolidated revenues.................................... $ 28,286 $ 48,866
============= ============
Assets
Total assets for reportable segments.................................. $ 858,733 $ 820,895
Elimination of intersegment receivables............................... (1,147) ---
Elimination of investment in subsidiaries............................. (102,201) (101,608)
------------- ------------
Total consolidated assets...................................... $ 755,385 $ 719, 287
============= ============
</TABLE>
7. Subsequent Events:
On April 16, 1999, the Company entered into a definitive agreement whereby
affiliates of Inverness Management LLC ("Inverness") agreed to purchase $50
million of the Company's common shares in a private placement. Under the
terms of the agreement, Inverness will purchase an aggregate of 8 million
shares of the Company's common stock in two tranches at $6.25 per share.
The first tranche was closed on May 6, 1999. The remaining tranche is
subject to stockholder approval and will be voted on at the Company's
annual meeting of stockholders scheduled for June 8, 1999.
On April 21, 1999, the Company issued $18,867,000 principal amount of 15
year United States Government Guaranteed Ship Financing Bonds (the "Ship
Bonds") at an interest rate of 6.11% per annum. The Ship Bonds are due in
30 semi-annual installments of principal and interest. The Bonds are
secured by first preferred ship mortgages on two supply boats, the Spirit
River and the Hondo River. Approximately half of the proceeds from the
Ship Bonds were received by the Company at the closing and the remaining
proceeds were placed in escrow and will be distributed to the Company upon
completion and delivery of the Hondo River in May 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis of the Company's 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 first quarter ended March 31, 1999 were $28.3 million, a
decrease of 42.1% compared to the $48.9 million in revenues for the first
quarter of 1998. Low oil and gas prices and the resulting decrease in
offshore industry activity have resulted in decreases in average day rates
and utilization for all of the Company's vessel classes. 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 March 31,
------------------------------
1999 1998
---- ----
<S> <C> <C>
Average Day Rates:
Supply $ 3,662 $ 8,159
Supply /Anchor Handling (N. Sea) 11,451 13,421
Lift 4,580 6,717
Crew/line handling 1,574 2,082
Utilization:
Supply 56% 70%
Supply /Anchor Handling (N. Sea) 87% 92%
Lift 47% 69%
Crew/line handling 82% 98%
Average Number of Vessels:
Supply 52.0 48.5
Supply /Anchor Handling (N. Sea) 17.0 16.1
Lift 6.0 6.0
Crew/line handling 21.0 23.0
</TABLE>
Supply boat day rates in the Gulf of Mexico (the "Gulf") for the first
quarter of 1999 decreased 55.1% to $3,662, compared to $8,159 for the first
quarter of 1998. Decreased demand due to decreased offshore activity in the
Gulf significantly affected vessel day rates and utilization in the first
quarter of 1999. Vessel downtime for drydocking and refurbishment also
impacted the Company's supply boat utilization rates for both periods, and
de-activation, or stacking, of ten supply boats impacted first quarter 1999
utilization.
Day rates for the Company's North Sea vessels averaged $11,451 for the
first quarter of 1999 compared to $13,421 for the first quarter of 1998.
Day rates in the North Sea decreased in the 1999 first quarter principally
due to decreases in day rates for the Company's two large anchor-handling
vessels that were working in the spot market. Utilization was 87% for the
first quarter of 1999, compared to 92% for the first quarter of 1998. North
Sea utilization in the first quarter of 1999 was adversely affected by
vessel downtime for repairs, maintenance and drydockings.
Lift boat day rates averaged $4,580 for the quarter, a decrease of 31.8%
compared to $6,717 for the comparable 1998 period. Utilization for the
Company's lift boats decreased to 47%, compared to 69% for the year-ago
period.
Day rates for crew boats and line handling vessels decreased to $1,574 for
the first quarter, from $2,082 for the first quarter of 1998. Utilization
for the crew boats and line handling vessels decreased to 82% for the first
quarter of 1999, compared to 98% for the comparable 1998 period.
Utilization of the crew boats and line handling vessels in the 1999 first
quarter was adversely impacted by vessel downtime resulting from the
scheduled drydocking during the quarter of four of the Company's crew boats
in the Gulf.
During the first quarter of 1999, direct vessel operating expenses
increased to $17.3 million (61.2% of revenues) compared to $16.8 million
(34.4 % of revenues) for the first quarter of 1998. This increase was due
to the growth in the Company's vessel fleet, principally the addition of
four new vessels which began service during 1998, and the consolidation,
for financial statement purposes, of the Company's previously
unconsolidated Brazilian affiliate. The increase in direct vessel
operating expenses for the reasons stated above, was partially offset by
the Company's cost reduction initiatives and the de-activation of ten of
the Company's Gulf supply boats. 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 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 $8.0 million for the
first quarter of 1999, up from $6.9 million for the year-ago period as a
result of the Company's expanded vessel fleet. Amortization of marine
inspection costs increased to $3.3 million for the quarter ended March 31,
1999, from $1.4 million in the comparable 1998 period, due to the increased
drydocking and marine inspection costs associated with the Company's fleet
upgrade and refurbishment program.
General and administrative expenses increased to $2.5 million (8.9% of
revenues) in the first quarter of 1999, from $2.3 million (4.7% of
revenues) for the 1998 period due to the consolidation of the previously
unconsolidated Brazilian operations. General and administrative expenses,
as a percentage of revenues, increased in the 1999 period due to the
decrease in utilization and average day rates for the Company's vessel
fleet.
Interest expense increased to $7.8 million for the first quarter of 1999
from $6.6 million for the first quarter of 1998. This increase was due to
increased borrowings in the first quarter of 1999 that were used to fund
the Company's various vessel construction and upgrade projects.
In the first quarter of 1999, the Company had an income tax benefit of $3.7
million compared to income tax expense of $4.9 million in the 1998 period.
The Company's effective income tax rate for the three-month period ended
March 31, 1999 was 33%. The variance from the Company's statutory rate is
due to income contributed by Trico 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
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 by pursuing opportunities to acquire vessel fleets and by
diversifying into international markets. Primarily as a result of
acquisitions, the Company's total assets have grown from $52.1 million at
December 31, 1995, to $755.4 million at March 31, 1999. During the 1996 to
1997 period, the Company completed the acquisition of Trico Supply, a then
publicly traded Norwegian company, for approximately $293.7 million, which
amount includes certain costs of the transaction, and acquired 37 supply
boats in the Gulf at an aggregate cost of $177.0 million.
The Company has also constructed, or is in the process of constructing, six
new vessels, to increase its international market presence and increase its
deepwater capabilities. Additionally, in 1997 and 1998 the Company
undertook a vessel improvement program consisting of extensive upgrading
and refurbishment of its Gulf supply boat fleet. While this refurbishment
program resulted in significant vessel downtime in 1998, which extended
into the first quarter of 1999, the Company believes it has extended the
service lives of many of its vessels and has significantly reduced required
maintenance spending in the future.
As a result of the reduction in industry activity and resulting decreases
in day rates and utilization, principally for the supply boats in the Gulf,
the Company has limited capital expenditures in 1999 to those that are
necessary to complete existing vessels under construction and vessels which
were being refurbished as of the end of 1998, and regulatory-mandated
drydocking costs for the vessels that are due for U.S. Coast Guard
inspection. Due to the decreased day rates for the Gulf supply boats, as
part of this reduced capital expenditure plan, the Company plans to
de-activate or "stack" an average of 10 to 12 of its Gulf supply vessels
during 1999 depending upon market conditions.
Funds during the first three months of 1999 were provided by $21.0 million
in borrowings under the Company's bank credit facilities. During the
period, the Company used $6.0 million in operating activities, repaid $10.2
million of debt and made capital expenditures totaling $9.3 million, which
included $4.4 million of deferred marine inspection costs.
During the first three months of 1999, the Company spent approximately $4.9
million on vessel upgrade or construction projects. During the quarter, the
Company 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 the second of two 230-foot supply vessels currently under
construction at a shipyard on the U.S. Gulf Coast. The first vessel was
completed in December 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 May of 1999. Other capital expenditures for
vessel upgrade and construction projects during the period consisted of
U.S. Coast Guard drydocking costs and vessel refurbishment costs.
The Company has outstanding $280.0 million in aggregate principal amount of
81/2% Senior Notes due 2005 (the "Senior Notes"). The Senior Notes are
unsecured and are required to be guaranteed by all of the Company's
Significant Subsidiaries (as such term is defined in the indenture
governing the Senior Notes, the "Subsidiary Guarantors"). 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 indenture governing the Senior
Notes contains 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 Company maintains a bank credit facility that provides a revolving line
of credit that can be used for acquisitions and general corporate purposes
(the "Bank Credit Facility"). The Bank Credit Facility is collateralized
by a mortgage on certain of the Company's vessels. Amounts borrowed under
the Bank Credit Facility mature on December 1, 2002 and bear interest at a
Eurocurrency rate plus a margin that depends on the Company's leverage
ratio. The weighted average interest rate for the Bank Credit Facility was
6.8% as of March 31, 1999. The Bank Credit Facility was amended in
December 1998 to reduce permitted borrowings from $100 million to $85
million. As a result of proceeds received, or to be received, from the
issuance of common equity and the Ship Bonds, the Company expects to amend
the Bank Credit Facility to reduce its size to $65 million and modify
certain terms to increase the Company's financial flexibility. As of May
12, 1999, the Company had $43 million of borrowings under the Bank Credit
Facility. The Bank Credit Facility requires the Company to maintain certain
financial ratios and limits the ability of the Company to incur additional
indebtedness, make capital expenditures, pay dividends or make certain
other distributions, create certain liens, sell assets or enter into
certain mergers or acquisitions. Although the Bank 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 Notes.
In June 1998, the Company refinanced Trico Supply's existing bank credit
facilities with a revolving credit facility in the amount of NOK 650
million, or $84.1 million (the "Norwegian Bank Facility"). As of March 31,
1999, the Company had approximately NOK 395 million ($51.1 million) of debt
outstanding under the Norwegian Bank Facility. The Norwegian Bank Facility
is collateralized by a security interest in certain of the Company's North
Sea vessels, requires Trico Supply to maintain certain financial ratios
and limits the ability of Trico Supply to create liens, or merge or
consolidate with other entities. Amounts borrowed under the Norwegian Bank
Facility bear interest at NIBOR (Norwegian Interbank Offered Rate) plus a
margin. The weighted average interest rate for the Norwegian Bank Facility
was 7.5% as of March 31, 1999. The commitment amount for the Norwegian
Bank Facility reduces by NOK 50 million ($6.5 million) every six months
beginning December 1998, with the balance of the commitment to expire in
June 2003.
On April 21, 1999, the Company issued $18.9 million principal amount of 15
year 6.11% Ship Financing Bonds guaranteed by the United States Government.
The Ship Bonds are due in 30 semi-annual installments of principal and
interest, with the first principal payment beginning October 21, 1999, and
are secured by first preferred ship mortgages on the Spirit River and Hondo
River vessels. Approximately half of the proceeds from the Ship Bonds,
associated with the Spirit River, were distributed to the Company, and the
remainder was placed in escrow at the indenture closing and upon completion
and delivery of the Hondo River will be distributed to the Company. The
proceeds will reduce the amounts outstanding under the Company's Bank
Credit Facility.
On April 16, 1999, the Company executed a definitive agreement under which
affiliates of Inverness Management LLC ("Inverness") will purchase $50
million of the Company's common shares in a private placement. Under the
terms of the agreement, Inverness will purchase an aggregate of 8 million
shares of the Company's common stock in two equal tranches at $6.25 per
share. The first tranche was closed on May 6, 1999 upon the early
termination of the waiting period under the Hart-Scott-Rodino Act. The
closing of the remaining tranche is subject to stockholder approval at the
Company's annual meeting scheduled for June 8, 1999. The Company also
agreed, under certain circumstances, to file a registration statement
covering resale of the shares issued in the private placement. Proceeds
from the equity investment will be used initially to prepay amounts
outstanding under the Bank Credit Facility.
Capital expenditures planned for the remainder of 1999 consist primarily of
the remaining costs to complete two new vessels currently under
construction. The Company is completing construction in Norway of the
Northern Admiral, a 275-foot, technologically advanced AHTS with 23,800
horsepower that is scheduled to be delivered in June 1999. The Company is
also completing construction in the Gulf of the Hondo River, the second of
two deepwater 230-foot supply vessels. The first vessel, the Spirit River,
was launched in December 1998, while the Hondo River will be completed in
May 1999. Expenditures for the two new vessels in 1999 are expected to
total $27.0 million. The remainder of the Company's planned capital
expenditures for 1999 consist principally of completing vessel upgrade and
refurbishment projects which were in progress as of the end of 1998 and
regulatory-mandated U.S. Coast Guard drydocking costs.
The Company believes that cash generated from operations together with
available borrowings under the amended Bank Credit Facility will be
sufficient to fund the Company's currently planned capital projects and
working capital requirements. The Company historically has grown through
acquisitions, and intends to pursue opportunities to make strategic
acquisitions in the future. To the extent the Company is successful in
identifying such opportunities, it most likely would require additional
equity and/or debt financing depending on the size of the investments
acquired. There can be no assurance regarding the availability or terms of
any such additional equity or debt financing, and the Company could be
adversely affected if it is unable to obtain such additional financing or
if the terms of any such additional financing are not favorable to the
Company.
YEAR 2000 COMPLIANCE
In accordance with the U.S. Securities and Exchange Commission's ("SEC")
Staff Legal Bulletin No. 5 and the SEC's subsequent interpretive release,
the Company has assessed both the cost of addressing and the cost or the
consequence of incomplete or untimely resolution of the Year 2000 ("Y2K")
issue. This process includes (i) the development of Y2K awareness, (ii) a
comprehensive review to identify systems that could be affected by the Y2K
issue, (iii) an assessment of potential risk factors (including
non-compliance by the Company's suppliers, subcontractors and customers),
(iv) the allocation of required resources, (v) a determination of the
extent of remediation work required, (vi) the development of an
implementation plan and time table, and (vii) the development of
contingency plans.
The Company, in the normal course of business, 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 Y2K 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 Y2K effect 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 has contacted key vendors and
suppliers to ensure that they have a Y2K compliance plan in an effort to
minimize the Company's exposure to their potential Y2K problems. The
Company anticipates completion of its evaluation of non-information
technology equipment, key vendors and suppliers and any remedial action
and/or a contingency plan, if necessary, by mid-1999.
Because of the Company's purchase of new software and conversions to new
software, the Y2K 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
Y2K issue could have an adverse impact on the Company's operations. Among
other things the Company could be impacted by: the inability of the
Company to retain qualified personnel and outside consultants to
successfully remediate Y2K issues and implement a new business system as
demand for their services rises; the inability of the Company's customers
to accurately and timely pay invoices; the inability of the Company to
access necessary capital from lenders or other sources when required; and
the inability of the Company's significant suppliers, subcontractors and
others to provide the necessary materials, services or systems required to
operate the Company's business.
The Company believes that it will be able to implement successfully the
changes necessary to address the Y2K 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 Trico 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
The Company's market risk exposures primarily include interest rate and
exchange rate fluctuation on derivative and financial instruments as
summarized below. The Company's market risk sensitive instruments are
classified as "other than trading."
The Company has entered into a number of variable and fixed rate debt
obligations, denominated in both the U.S. Dollar and the Norwegian Kroner
(Norwegian debt payable in Norwegian Kroner). The instruments are subject
to interest rate risk. The Company manages this risk by monitoring its
ratio of fixed and variable rate debt obligations in view of changing
market conditions and from time to time altering that ratio. The Company
has also entered into an interest rate swap agreement in order to manage
its interest rate exposure.
The Company's foreign subsidiaries collect revenues and pay expenses in
several different foreign currencies. The Company monitors the exchange
rate of its foreign currencies and, when deemed appropriate, enters into
hedging transactions in order to mitigate the risk from foreign currency
fluctuations. The Company also manages its foreign currency risk by
attempting to contract foreign revenue in U.S. Dollars whenever
practicable. At March 31, 1999, there were no material unrealized gains or
losses on open foreign currency forward exchange contracts.
The Company's market risk estimates have not changed materially from those
disclosed in the Company's 1998 Form 10-K, incorporated herein by
reference.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Amended and Restated Certificate of Incorporation of the
Company. 1
3.2 By Laws of the Company.1
4.1 Specimen Common Stock Certificate.2
4.2 Amendment No. 2 to that certain Second Amended and Restated
Revolving Credit Agreement dated as of March 31, 1999 by and
among the Company, Trico Marine Operators, Inc., Trico Marine
Assets, Inc., and BankBoston, N.A., as agent for itself and the
other lending institutions that may become party thereto from
time to time in accordance with the terms thereof.
4.3 Stockholders' Agreement dated as of May 6, 1999 among the
Company, Inverness/Phoenix Partners LP and Executive Capital
Partners I LP.3
10.1 Purchase Agreement dated as of April 16, 1999 by and among
the Company, Inverness/Phoenix Partners LP and Executive
Capital Partners I LP. 3
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
None.
________________________
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 definitive
Proxy Statement dated May 7, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRICO MARINE SERVICES, INC.
Date: May 14, 1999 By: /s/ KENNETH W. BOURGEOIS
------------------------------
Kenneth W. Bourgeois
Chief Accounting Officer and
duly authorized officer
AMENDMENT NO. 2
to that certain
SECOND AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
This AMENDMENT NO. 2 (this "Amendment"), dated as of March 31, 1999, is by
and among (a) TRICO MARINE OPERATORS, INC. ("Marine Operators"), TRICO MARINE
ASSETS, INC. ("Marine Assets") (each of Marine Operators and Marine Assets is
referred to herein as a "Borrower" and collectively as the "Borrowers"), (b)
TRICO MARINE SERVICES, INC. (the "Parent"), (c) BANKBOSTON, N.A. and the other
lending institutions party to the Credit Agreement referred to below
(collectively, the "Banks"), and (d) BANKBOSTON, N.A. as agent for the Banks
(the "Agent").
WHEREAS, the Borrowers, the Parent, the Banks and the Agent are parties to
that certain Second Amended and Restated Revolving Credit Agreement, dated as
of March 13, 1998 (as amended, restated, modified or supplemented and in effect
from time to time, the "Credit Agreement"), pursuant to which the Banks and the
Agent upon certain terms and conditions, have agreed to make loans and to
otherwise extend credit to the Borrowers; and
WHEREAS, the Borrowers and the Parent have requested that the Banks and
the Agent agree to amend certain provisions of the Credit Agreement; and
WHEREAS, the Banks and the Agent have agreed, subject to the satisfaction
of the conditions precedent set forth herein, to so amend the Credit Agreement;
and
WHEREAS, capitalized terms which are used herein without definition and
which are defined in the Credit Agreement shall have the same meanings herein
as in the Credit Agreement.
NOW, THEREFORE, the Borrowers, the Parent, the Banks and the Agent hereby
agree as follows:
<section>1. AMENDMENTS TO THE CREDIT AGREEMENT. Subject to the
satisfaction of the conditions precedent set forth in <section>4 hereof, the
Credit Agreement is hereby amended as follows:
<section>1.1 DEFINITIONS.
(a) The definition of "Applicable Margin" set forth in <section>1.1 of the
Credit Agreement is hereby amended by deleting the table set forth in such
definition and substituting in lieu thereof the following new table:
<TABLE>
<CAPTION>
BASE EUROCURRENCY
LEVEL LEVERAGE RATIO RATE LOANS RATE LOANS
<S> <C> <C> <C>
I Greater than 4.00 to 1.00 0.75% 2.50%
II Less than or equal to 4.00 to 0.50% 1.50%
1.00
</TABLE>
(b) The definition of "Commitment Fee Rate" set forth in Section 1.1 of
the Credit Agreement is hereby amended by deleting the table set forth in such
definition and substituting in lieu thereof the following new table:
<TABLE>
<CAPTION>
LEVEL LEVERAGE RATIO COMMITMENT FEE
<S> <C> <C>
I Greater than 4.00 to 1.00 0.50%
II Less than or equal to 4.00 to 1.00 0.50%
</TABLE>
(c) Section 1.1 of the Credit Agreement is hereby further amended by
deleting the definition of "Available Commitment" set forth therein in its
entirety.
<section>1.2 COMMITMENT TO LEND. Section 2.1 of the Credit Agreement is
hereby amended by deleting the words "Available Commitment" occurring in the
twelfth line thereof and substituting in lieu thereof the words "Total
Commitment".
<section>1.3. MANDATORY REPAYMENTS OF LOANS. Section 2.13 of the Credit
Agreement is hereby amended by deleting the words "Available Commitment"
occurring in the third line thereof and substituting in lieu thereof the words
"Total Commitment".
<section>1.4. COMMITMENT TO ISSUE LETTERS OF CREDIT. Section 3.1.1. of
the Credit Agreement is hereby amended by deleting the words "Available
Commitment" occurring in the seventeenth line thereof and substituting in lieu
thereof the words "Total Commitment".
<section>1.5. LEVERAGE RATIO. Section 10.2 of the Credit Agreement is
hereby amended by deleting the table set forth in such section and substituting
in lieu thereof the following new table:
<TABLE>
<CAPTION>
PERIOD LEVERAGE RATIO
<S> <C>
10/1/98 through 4.10:1.0
12/31/98
1/1/99 through
3/31/99 5.50:1.0
4/1/99 through
6/30/99 5.90:1.0
7/1/99 through
9/30/99 6.00:1.0
10/1/99 through 5.90:1.0
12/31/99
1/1/00 through
6/30/00 5.50:1.0
7/1/00 through
12/31/00 4.75:1.0
1/1/01 and at all times
thereafter 3.50:1.0
</TABLE>
<section>1.6. Minimum Mortgaged Vessel Value. Section 10.4 of the Credit
Agreement is hereby amended by deleting the percentage "175%" set forth in the
sixth line thereof and substituting in lieu thereof the percentage "200%".
<section>1.7. Schedule 1.1. The Credit Agreement is hereby further
amended by deleting Schedule 1.1 thereto and substituting in lieu thereof
Schedule 1.1 attached hereto.
<section>2. Representations and Warranties. The Parent and each of the
Borrowers jointly and severally represent and warrant to the Banks and the
Agent as follows:
(a) Representations and Warranties in Credit Agreement. The
representations and warranties of the Parent and the Borrowers contained in the
Credit Agreement, each as amended by this Amendment, (a) were true and correct
in all material respects when made, and (b) except to the extent such
representations and warranties by their terms are made solely as of a prior
date, continue to be true and correct in all material respects on the date
hereof.
(b) Authority, Etc. The execution and delivery by the Borrowers
and the Parent of this Amendment and the performance by the Borrowers and the
Parent of all of their agreements and obligations under this Amendment (i) are
within the corporate authority of each of the Borrowers and the Parent, (ii)
have been duly authorized by all necessary corporate proceedings by each of the
Borrowers and the Parent, (iii) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
either of the Borrowers or the Parent is subject or any judgment, order, writ,
injunction, license or permit applicable to either of the Borrowers or the
Parent, and (iv) do not conflict with any provision of the corporate charter or
by-laws of, or any agreement or other instrument binding upon, either of the
Borrowers or the Parent.
(c) Enforceability of Obligations. This Amendment, and the Credit
Agreement as amended hereby, constitute the legal, valid and binding
obligations of each of the Borrowers and the Parent enforceable against each
such Person in accordance with their respective terms. After giving effect to
this Amendment, no Default or Event of Default exists under the Credit
Agreement or any other Loan Document.
(d) Receipt of Equity Proceeds. The Parent has received from the
sale of its common stock equity interests gross proceeds of not less than
$25,000,000, less commissions, fees, and expenses directly associated with such
sale.
<section>3. Affirmation of Borrowers and the Parent. (a) Each of the
Borrowers hereby affirms its absolute and unconditional promise to pay to each
Bank and the Agent such Borrower's respective Obligations due under the Notes,
the Credit Agreement as amended hereby, and the other Loan Documents, at the
times and in the amounts provided for therein. Each of the Borrowers confirms
and agrees that (i) the obligations of the Borrowers to the Banks and the Agent
under the Credit Agreement as amended hereby are secured by and entitled to the
benefits of the Security Documents and (ii) all references to the term "Credit
Agreement" in the Security Documents shall hereafter refer to the Credit
Agreement as amended hereby.
(b) The Parent hereby acknowledges that it has read and is aware of
the provisions of this Amendment. The Parent hereby reaffirms its absolute and
unconditional guaranty of the Borrowers' payment and performance of their
obligations to the Banks and the Agent under the Credit Agreement as amended
hereby. The Parent hereby confirms and agrees that all references in the
Guaranties to the term "Credit Agreement" shall hereafter refer to the Credit
Agreement as amended hereby.
<section>4. Conditions to Effectiveness. Subject to the immediately
succeeding sentence, this Amendment shall be effective as of the date hereof;
provided that <section><section>1.1(a), 1.1(b), and 1.6 hereof shall be
effective as of May __, 1999. The effectiveness of this Amendment is subject
to the satisfaction of the following conditions precedent (each of the
following to be in form and substance satisfactory to the Agent):
(i) receipt by the Agent of an original counterpart signature to this
Amendment, duly executed and delivered by the Borrowers, the Parent, the Banks
and the Agent;
(ii) receipt by the Agent of appropriate corporate authority
documentation for the Borrowers and the Parent, including copies (to the extent
not already furnished to the Agent) of each such Person's organizational
documents, bylaws, if any, and resolutions authorizing the transactions
contemplated by this Amendment;
(iii) receipt by the Agent, for the pro rata account of each Bank, of an
amendment fee in an amount for each such Bank equal to one-eighth of one
percent (0.125%) of such Bank's Commitment;
(iv) the representations and warranties of the Parent and each of the
Borrowers set forth in Section 2 hereof shall be true and correct in all
material respects; and
(v) payment by the Borrowers of all outstanding legal, appraisal, and
out-of-pocket fees and expenses of the Agent and the Agent's special counsel,
including any prior expenses which have not yet been paid.
<section>5. Miscellaneous Provisions. (a) Except as otherwise expressly
provided by this Amendment, all of the terms, conditions and provisions of the
Credit Agreement shall remain the same. It is declared and agreed by each of
the parties hereto that the Credit Agreement, as amended hereby, shall continue
in full force and effect, and that this Amendment and the Credit Agreement
shall be read and construed as one instrument.
(b) THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT UNDER SEAL
AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS.
(c) This Amendment may be executed in any number of counterparts, but
all such counterparts shall together constitute but one instrument. In making
proof of this Amendment it shall not be necessary to produce or account for
more than one counterpart signed by each party hereto by and against which
enforcement hereof is sought.
(d) Headings or captions used in this Amendment are for convenience of
reference only and shall not define or limit the provisions hereof.
(e) The Borrowers hereby jointly and severally agree to pay to the
Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses
incurred or sustained by the Agent in connection with the preparation of this
Amendment (including reasonable legal fees and expenses).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an
agreement under seal as of the date first written above.
TRICO MARINE OPERATORS, INC.
By:____________________________
Name:
Title:
TRICO MARINE ASSETS, INC.
By:___________________________
Name:
Title:
TRICO MARINE SERVICES, INC.
By:___________________________
Name:
Title:
BANKBOSTON, N.A., individually
and as Agent
By:____________________________
Name:
Title:
BNY FINANCIAL CORPORATION
By:____________________________
Name:
Title:
BANK OF SCOTLAND
By:____________________________
Name:
Title:
CHRISTIANIA BANK OG KREDITKASSE
ASA, NEW YORK BRANCH
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
FIRST UNION NATIONAL BANK (as
successor to CORESTATES BANK,
N.A.)
By:____________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:____________________________
Name:
Title:
BANK ONE, LOUISIANA, NA (as
successor to FIRST NATIONAL BANK
OF COMMERCE)
By:____________________________
Name:
Title:
THE FUJI BANK, LIMITED
By:____________________________
Name:
Title:
HIBERNIA NATIONAL BANK
By:____________________________
Name:
Title:
MEESPIERSON CAPITAL CORP.
By:____________________________
Name:
Title:
By:____________________________
Name:
Title:
WELLS FARGO BANK (TEXAS) N. A.
By:____________________________
Name:
Title:
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 March 31, 1999 Three Months Ended March 31, 1998
----------------------------------- -----------------------------------
Per- Per-
Loss Shares share Income Shares share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------- ------------- -------- ------------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $ (7,343) $ 9,844
------------- -------------
Basic earnings per share
Income (loss) available to common
shareholders (7,343) 20,378,416 ($0.36) 9,844 20,298,403 $0.48
======= ======
Effect of Dilutive Securities
Stock option grants - - - 793,519
------------- ------------ ------------ ------------
Diluted earnings per share
Income (loss) available to common
shareholders plus assumed
conversions $ (7,343) 20,378,416 ($0.36) $ 9,844 21,091,922 $0.47
============= ============= ======== ============= ============= ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from consolidated
financial statements for the period ending March 31, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,046
<SECURITIES> 0
<RECEIVABLES> 26,921
<ALLOWANCES> 691
<INVENTORY> 0
<CURRENT-ASSETS> 34,936
<PP&E> 619,003
<DEPRECIATION> 54,803
<TOTAL-ASSETS> 755,385
<CURRENT-LIABILITIES> 24,757
<BONDS> 412,247
<COMMON> 205
0
0
<OTHER-SE> 273,657
<TOTAL-LIABILITY-AND-EQUITY> 755,385
<SALES> 28,318
<TOTAL-REVENUES> 28,318
<CGS> 31,128
<TOTAL-COSTS> 31,128
<OTHER-EXPENSES> 478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,791
<INCOME-PRETAX> (11,021)
<INCOME-TAX> (3,678)
<INCOME-CONTINUING> (7,343)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,343)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
