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 June 30, 2000
----- 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 IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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 August 7, 2000 there were 36,000,273 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>
June 30 December 31,
2000 1999
---------- ----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 27,577 $ 5,898
Restricted cash 330 566
Accounts receivable, net 24,912 24,141
Prepaid expenses and other current assets 5,262 4,740
---------- ----------
Total current assets 58,081 35,345
---------- ----------
Property and equipment, at cost:
Land and buildings 3,733 3,727
Marine vessels 590,429 619,544
Construction-in-progress 3,930 3,250
Transportation and other 2,343 3,960
---------- ----------
600,435 630,481
Less accumulated depreciation and amortization 87,330 77,093
---------- ----------
Net property and equipment 513,105 553,388
---------- ----------
Goodwill, net 93,702 101,762
Other assets 33,317 40,084
---------- ----------
$ 698,205 $ 730,579
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 9,026 $ 7,618
Accounts payable 8,924 9,467
Accrued expenses 7,147 7,935
Accrued interest 9,212 11,746
Income taxes payable 56 57
---------- ----------
Total current liabilities 34,365 36,823
---------- ----------
Long-term debt 333,652 393,510
Deferred income taxes, net 19,827 27,279
Other non-current liabilities 2,245 2,859
---------- ----------
Total liabilities 390,089 460,471
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 55,000,000 and 40,000,000 shares
authorized, 36,072,305 and 28,462,448 shares issued and
36,000,273 and 28,390,416 shares outstanding at June 30, 2000
and December 31, respectively 361 285
Additional paid-in capital 335,526 265,031
Retained earnings 24,656 37,176
Accumulated other comprehensive loss (52,426) (32,383)
Treasury stock, at par value, 72,032 shares (1) (1)
---------- ----------
Total stockholders' equity 308,116 270,108
---------- ----------
$ 698,205 $ 730,579
========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Charter hire $ 29,456 $ 26,617 $ 55,812 $ 54,903
Other vessel income 26 47 51 79
----------- ----------- ----------- -----------
Total revenues 29,482 26,664 55,863 54,982
----------- ----------- ----------- -----------
Operating expenses:
Direct vessel operating expenses and other 17,149 16,736 32,962 34,074
Asset write-down 0 1,111 0 1,111
General and administrative 2,761 2,921 5,305 5,455
Amortization of marine inspection costs 3,545 3,444 7,434 6,696
----------- ----------- ----------- -----------
Total operating expenses 23,455 24,212 45,701 47,336
----------- ----------- ----------- -----------
Depreciation and amortization expense 8,508 8,098 17,056 16,102
----------- ----------- ----------- -----------
Operating loss (2,481) (5,646) (6,894) (8,456)
Interest expense 7,727 7,722 16,071 15,513
Amortization of deferred financing costs 367 491 716 969
Gain on sale of assets (3,923) - (3,923) -
Other income, net (152) (237) (332) (295)
----------- ----------- ----------- -----------
Loss before income taxes and extraordinary item (6,500) (13,622) (19,426) (24,643)
Income tax benefit (2,325) (4,616) (6,190) (8,294)
----------- ----------- ----------- -----------
Loss before extraordinary item (4,175) (9,006) (13,236) (16,349)
Extraordinary item, net of taxes 715 (1,830) 715 (1,830)
----------- ----------- ----------- -----------
Net loss $ (3,460) $ (10,836) $ (12,521) $ (18,179)
=========== =========== =========== ===========
Basic and diluted earnings per common share:
Loss before extraordinary item $ (0.13) $ (0.39) $ (0.45) $ (0.75)
Extraordinary item, net of taxes 0.02 (0.08) 0.03 (0.09)
----------- ----------- ----------- -----------
Net loss $ (0.11) $ (0.47) $ (0.42) $ (0.84)
=========== =========== =========== ===========
Average common shares outstanding 30,683,250 22,975,339 29,536,833 21,684,051
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended
June 30,
--------------------------
2000 1999
-------- --------
<S> <C> <C>
Net loss $(12,521) $(18,179)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 25,165 23,742
Deferred income taxes (5,805) (8,339)
Gain on sales of assets (3,923) -
Asset write-off - 1,111
Extraordinary item (715) 1,830
Changes in operating assets and liabilities:
Restricted cash 228 164
Accounts receivable (1,117) 3,490
Prepaid expenses and other current assets (1,252) (1,805)
Accounts payable and accrued expenses (2,911) (1,178)
Other, net 507 (338)
-------- --------
Net cash provided by (used in) operating activities (2,344) 498
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (2,918) (8,832)
Deferred marine inspection costs (3,148) (7,855)
Proceeds from sales of assets 14,000 37
Other (272) (260)
-------- --------
Net cash provided by (used in) investing activities 7,662 (16,910)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of expenses 39,006 46,454
Proceeds from issuance of long-term debt 28,400 41,238
Repayment of long-term debt (50,683) (47,332)
Deferred financing costs and other (154) (1,180)
-------- --------
Net cash provided by financing activities 16,569 39,180
-------- --------
Effect of exchange rate changes on cash and cash equivalents (208) (165)
-------- --------
Net increase in cash and cash equivalents 21,679 22,603
Cash and cash equivalents at beginning of period 5,898 8,737
-------- --------
Cash and cash equivalents at end of period $ 27,577 $ 31,340
======== ========
Supplemental information:
Income taxes paid $ - $ 7
======== ========
Interest paid $ 17,601 $ 15,328
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss $ (3,460) $(10,836) $(12,521) $(18,179)
-------- -------- -------- --------
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (5,061) (2,425) (20,043) (5,460)
-------- -------- -------- --------
Comprehensive loss $ (8,521) $(13,261) $(32,564) $(23,639)
======== ======== ======== ========
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 and six months ended
June 30, 2000 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, 1999.
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 loss, total stockholders' equity
or cash flows.
2. EARNINGS PER SHARE:
For the three-month and six-month periods ending June 30, 2000 and 1999,
options to purchase 2,128,480 and 1,841,855 common shares, respectively, at
prices ranging from $0.91 to $23.13 have been excluded from the computation
of diluted 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 8 1/2 % 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 rates for the three-month periods ended
June 30, 2000 and June 30, 1999 were 36% and 34%, respectively, and for the
six-month periods ended June 30, 2000 and 1999, 32% and 34%, respectively.
The variance from the Company's statutory rate is primarily due to income
contributed by our wholly-owned Norwegian subsidiary, 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"). SFAS No. 133
establishes accounting and reporting standards for derivative instruments
and is, as amended, effective for all fiscal years beginning after June 15,
2000. The Company is currently evaluating the impact SFAS No. 133 will
have on its financial statements, if any.
The Company is reviewing SEC Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements" and does not expect the
effect of the pronouncement on its consolidated financial condition and
results of operations to be material.
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 Company's domestic operations.
The North Sea segment primarily includes Norway and the United Kingdom, and
the Other segment mainly represents the Company's Brazilian operations.
Segment data as of and for the three-month and six-month periods ended June
30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months Ended June 30, 2000 U.S. NORTH SEA OTHER TOTALS
-------------------------------- ---------- ---------- --------- ----------
Revenues from external customers $ 13,852 $ 13,238 $ 2,392 $ 29,482
Intersegment revenues 36 --- --- 36
Segment net income (loss) (4,390) 1,461 (531) (3,460)
Three Months Ended June 30, 1999 U.S. NORTH SEA OTHER TOTALS
-------------------------------- ---------- ---------- --------- ----------
Revenues from external customers $ 9,622 $ 14,869 $ 2,173 $ 26,664
Intersegment revenues 36 --- --- 36
Segment net income (loss) (12,743) 2,298 (391) (10,836)
Six Months Ended June 30, 2000 U.S. NORTH SEA OTHER TOTALS
-------------------------------- ---------- ---------- --------- ----------
Revenues from external customers $ 27,831 $ 23,563 $ 4,469 $ 55,863
Intersegment revenues 72 --- --- 72
Segment net loss (11,467) (7) (1,047) (12,521)
Segment total assets 579,062 362,191 40,260 981,513
Six Months Ended June 30, 1999 U.S. NORTH SEA OTHER TOTALS
-------------------------------- ---------- ---------- --------- ----------
Revenues from external customers 21,122 29,597 4,263 54,982
Intersegment revenues 252 --- --- 252
Segment net income (loss) (21,808) 4,580 (951) (18,179)
Segment total assets 621,620 399,048 42,164 1,062,832
</TABLE>
A reconciliation of segment data to consolidated data as of and for the
three-month and six-month periods ended June 30, 2000 and 1999 is as
follows:
<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues
Total revenues from external customers and intersegment revenues
for reportable segments $ 29,518 $ 26,700
Elimination of intersegment revenues (36) (36)
--------- ---------
Total consolidated revenues $ 29,482 $ 26,664
========= =========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Revenues
Total revenues from external customers and intersegment revenues
for reportable segments $ 55,935 $ 55,234
Elimination of intersegment revenues (72) (252)
--------- ---------
Total consolidated revenues $ 55,863 $ 54,982
========= =========
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------
2000 1999
--------- ------------
<S> <C> <C>
Assets
Total assets for reportable segments $1,062,832 $1,062,832
Elimination of intersegment receivables (2,679) (1,342)
Elimination of investment in subsidiaries (280,629) (289,683)
----------- -----------
Total consolidated assets $ 698,205 $ 771,807
========== ============
</TABLE>
7. SALE OF LIFTBOATS:
In May, 2000 the Company sold its six liftboats for $14,000,000 in cash.
The Company recognized a gain of approximately $3,923,000, before taxes, on
the sale and all proceeds from the sale were used to reduce outstanding
debt under the Company's bank credit facility.
8. PUBLIC OFFERING OF COMMON STOCK:
In May, 2000 the Company completed a public offering of 4,500,000 shares of
$.01 par value common stock. The proceeds received from the offering were
$39,006,000, net of underwriting discounts and other costs of $1,494,000.
Of the net proceeds, $31,624,000 was used to repay amounts outstanding
under the Company's bank credit facility plus related accrued interest and
the balance of the proceeds was used for working capital.
9. EXCHANGE OF COMMON STOCK FOR SENIOR NOTES:
In June, 2000 the Company exchanged 3,109,857 shares of $.01 par value
common stock for $32,140,000 face amount, plus accrued interest, of its
$280,000,000 8 1/2 % senior notes due 2005. In connection with the
exchange, the Company recognized an extraordinary gain of approximately
$715,000, after taxes of $386,000 and the write-off of unamortized debt
issuance costs.
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 second quarter and six months ended June 30, 2000 were
$29.5 million and $55.9 million, respectively, compared to the $26.7
million and $55.0 million in revenues for the second quarter and first six
months of 1999, respectively. This increase in revenues was principally due
to the increase in average vessel day rates and utilization for our Gulf
supply boats. Low oil prices experienced in 1998 and early 1999 resulted
in a decrease in offshore industry activity, which resulted in decreases in
average day rates and utilization of our vessels. Additionally, the entry
of newly built vessels into markets where we operate contributed to an
increased competitive environment, which also depressed day rates and
utilization rates. Such decreases in day rates and utilization were most
pronounced during the first three quarters of 1999, in the case of 1the
Gulf, and in late 1999 and the first quarter of 2000 for the North Sea. 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 JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average Day Rates:
Supply $ 3,409 $ 3,123 $ 3,379 $ 3,399
Supply/Anchor Handling (N. Sea) 9,802 10,093 9,259 10,496
Lift 3,891 4,016 3,942 4,296
Crew/Line Handling 2,422 1,783 2,354 1,841
Utilization:
Supply 71% 52% 70% 53%
Supply/Anchor Handling (N. Sea) 82% 95% 77% 91%
Lift 50% 47% 46% 47%
Crew/Line Handling 74% 80% 75% 81%
Average Number of Vessels:
Supply 53.0 53.0 53.0 53.0
Supply/Anchor Handling (N. Sea) 18.0 17.0 18.0 17.0
Lift 3.0 6.0 4.5 6.0
Crew/Line Handling 22.0 21.0 22.0 21.0
</TABLE>
Supply boat day rates in the Gulf for the second quarter and first six
months of 2000 increased 9.2% to $3,409, compared to $3,123 for the second
quarter of 1999, but were essentially unchanged for the first six months of
2000 compared to the first six months of 1999. Utilization for the Gulf
supply boat fleet increased for the second quarter and six-month period to
71% and 70%, respectively, compared to 52% and 53% for the year-ago
periods, due to improved market conditions in the Gulf and reduced vessel
downtime for drydocking and refurbishment.
Average day rates for our North Sea vessels for the second quarter and
first six months of 2000 decreased 2.9% to $9,802 and 11.8% to $9,259,
respectively, compared to $10,093 and $10,496 for the comparable 1999
periods, due to decreased demand in the North Sea compared to the year-ago
period, especially in the first quarter of 2000.
Utilization of our North Sea vessels was 82% and 77% for the second quarter
and first six months of 2000, respectively, compared to 95% and 91% for the
year-ago periods. As a result of low market day rates and utilization,
which existed in 1999 and early 2000, we de-activated two of our North Sea
PSV's in the third quarter of 1999. A third PSV was de-activated in the
fourth quarter of 1999. North Sea utilization in the first quarter of 2000
was also adversely affected by vessel downtime for the drydocking of three
vessels. Additionally, during the first quarter of 2000 we also mobilized
two North Sea vessels to other international areas in response to new
contract awards. Late in the first quarter of 2000, we began to experience
increases in utilization and day rates for our vessels in the North
Sea and, as a result, in June we activated one of the three inactive
PSV's. A second inactive PSV was activated and began working in July 2000.
Day rates for crew boats and line handling vessels increased 35.8 % to
$2,422 for the second quarter, from $1,783 for the second quarter of 1999
due to new contracts we were awarded for several of our line handling
vessels in Brazil and increases in day rates for crew boats in the Gulf.
Utilization for the crew boats and line handling vessels decreased to 74%
for the second quarter of 2000, compared to 80% for the comparable 1999
period, due to a high level of vessel drydocking for the line handling
vessels in Brazil.
During the second quarter and first six months of 2000, direct vessel
operating expenses were $17.1 million (58.2% of revenues) and $33.0 million
(59.0% of revenues), respectively, compared to $16.7 million (62.8% of
revenues) and $34.1 million (62.0% of revenues), for the second quarter and
first six months of 1999. Direct vessel operating expenses decreased in
the first six months of 2000 compared to the year-ago period due to cost
controls that we implemented. The decrease in direct vessel operating
expenses was partially offset by additional expenses associated with two
large new vessels that were placed into service in mid-1999. Direct vessel
operating expenses as a percentage of revenues decreased due to the
increase in utilization and average vessel day rates for our Gulf supply
boats and the cost controls that we implemented.
Depreciation and amortization expense increased to $8.5 million and $17.1
million for the second quarter and first six months of 2000, respectively,
up from $8.1 million and $16.1 million for the year-ago periods as a result
of the new vessels added to the fleet. Amortization of marine inspection
costs increased to $3.5 million and $7.4 million for the quarter and six
month period ended June 30, 2000, respectively, from $3.4 million and $6.7
million in the comparable 1999 periods, due to increased drydocking and
marine inspection costs which we incurred over the previous two years due
to our fleet upgrade and refurbishment program.
General and administrative expenses decreased to $2.8 million (9.4% of
revenues) and $5.3 million (9.5% of revenues) in the second quarter and
first six months of 2000, respectively, from $2.9 million (11.0% of
revenues) and $5.5 million (9.9% of revenues) for the 1999 periods. General
and administrative expenses, as a percentage of revenues, decreased in the
2000 periods due to various cost control measures we implemented, and the
increase in utilization and average day rates for our Gulf supply boats.
Interest expense was unchanged at $7.7 million for the second quarter of
2000 from $7.7 million for the second quarter of 1999.
In the second quarter and first six months of 2000, we had income tax
benefits of $1.9 million and $5.8 million, respectively, compared to
income tax benefits of $5.6 million and $9.3 million in the 1999 periods.
Our effective income tax rate for the three-month period ended June 30,
2000 was 36%.
LIQUIDITY AND CAPITAL RESOURCES
Our ongoing capital requirements arise primarily from our need to service
debt, fund working capital, acquire, maintain or improve equipment and make
other investments. Historically, internally generated funds and equity and
debt financing had provided funding for these activities. However, due to
the reduction in industry activity, which occurred in 1998 and 1999, and
the resulting decreases in day rates and utilization rates, we experienced
a net loss during 1999 and the first six months of 2000. As a result, our
capital requirements have been primarily funded through the issuance of
additional equity and the incurrence of debt.
During 1999, we completed vessel construction and upgrade projects that we
committed to prior to the downturn in industry activity. Additionally,
during the second quarter of 1999 we completed our vessel improvement
program that consisted of the extensive upgrade and refurbishment of a
significant portion of our Gulf supply boat fleet. While this refurbishment
program resulted in significant vessel downtime in 1998 and in the first
half of 1999, we believe that it extended the service lives of many of our
vessels and will significantly reduce required capital expenditures in 2000
and beyond. Capital expenditures for the first six months of 2000
consisted principally of $2.9 million for vessel improvements, and $3.1
million of deferred marine inspection costs. Capital expenditures for the
remainder of 2000 will be primarily limited to regulatory-mandated vessel
dry-docking costs.
Funds during the first six months of 2000 were provided by $39.0 million in
net proceeds from the issuance of common equity in a public offering, $14.0
million in proceeds from asset sales, and $28.4 million in borrowings under
our bank credit facilities. During the first six months of 2000, we used
$2.3 million in funds for operating activities, repaid $50.7 million of
debt and made capital expenditures totaling $6.1 million, which included
$3.1 million of deferred marine inspection costs. Other capital
expenditures during the period consisted primarily of vessel improvements.
In May 2000 we closed on the sale of our six liftboats for $14.0 million in
cash. As a result of the sale, we recognized a gain, before taxes, of
approximately $3.9 million. Proceeds of the sale were used to reduce
amounts outstanding under our bank credit facility.
In June 2000, we exchanged 3.1 million shares of our common stock for $32.1
million face amount, plus accrued interest, of our $280.0 million 8-1/2%
senior notes due 2005. We now have outstanding approximately $247.9
million in senior notes. The senior notes are unsecured and are required
to be guaranteed by all of our significant subsidiaries. Except in certain
circumstances, the senior notes may not be prepaid until August 1, 2001, at
which time they may be redeemed, at our option, 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 our ability to incur
additional debt, pay dividends or make other distributions, create certain
liens, sell assets, or enter into certain mergers or acquisitions.
We maintain a bank credit facility that provides a revolving line of credit
that can be used for acquisitions and general corporate purposes. In
August 2000, we amended our $52.5 million revolving line of credit to
reduce the facility amount to $45.0 million, decrease the interest margin
and modify certain covenants. The bank credit facility is collateralized by
a mortgage on substantially all of our vessels other than those located in
the North Sea and Brazil. Amounts borrowed under the bank credit facility
mature on July 19, 2002 and bear interest at a Eurocurrency rate plus a
margin that depends on our leverage ratio. As of August 11, 2000, we had
no outstanding borrowings under the bank credit facility. The bank credit
facility requires us to maintain certain financial ratios and limits our
ability 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 our
subsidiaries to make distributions to us, it expressly permits
distributions to us by our significant subsidiaries for scheduled principal
and interest payments on the senior notes.
We also maintain a Norwegian revolving credit facility in the amount of NOK
500 million ($58.3 million). The commitment amount for this Norwegian bank
facility reduces by NOK 50 million ($5.8 million) every six months, with
the balance of the commitment to expire in June 2003. As of August 11,
2000, we had approximately NOK 450 million ($52.4 million) of debt
outstanding under the facility. The weighted average interest rate for the
Norwegian bank facility was 7.8% as of June 30, 2000. In April 2000, we
executed a new loan agreement for an additional Norwegian bank facility in
the amount of NOK 125 million ($14.6 million). The commitment amount for
this additional facility reduces by NOK 12.5 million ($1.5 million) every
six months beginning June 2001, with the balance of the commitment to
expire June 2003. As of August 11, 2000, this additional facility was fully
drawn. The weighted average interest rate for this additional Norwegian
bank facility was 8.1% as of June 30, 2000. The two Norwegian bank
facilities are collateralized by security interests in certain of our 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.
We believe that cash generated from our operations, together with available
borrowings under our bank credit facilities and additional borrowings
permitted under the indenture governing the senior notes, will be
sufficient to fund our working capital requirements and currently planned
capital expenditures. As we have previously stated, it has been our
objective to improve our financial flexibility by taking steps to reduce
financial leverage and improve liquidity. As part of that objective, we
completed the transactions described above, including the issuance of
common stock in connection with the equity offering and the senior note
exchange, as well as the sale of the lift boats. We also intend to position
ourselves to pursue any acquisition opportunities that we believe may be
presented in our selected market areas. Depending upon the size of any
acquisition, it is likely that we would require additional equity or debt
financing. However, we can give no assurances regarding the availability or
terms of any possible transactions and the related debt and equity
financing.
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"). SFAS No. 133
establishes accounting and reporting standards for derivative instruments
and is, as amended, effective for all fiscal years beginning after June 15,
2000. The Company is currently evaluating the impact SFAS No. 133 will
have on its financial statements, if any.
The Company is reviewing SEC Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements" and does not expect the
effect of the pronouncement on its consolidated financial condition and
results of operations to be material.
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 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
Our market risk exposures primarily include interest rate and exchange rate
fluctuations on derivative and financial instruments as detailed below.
Our market risk sensitive instruments are classified as "other than
trading".
We have entered into a number of variable and fixed rate debt obligations,
demoninated in both the U.S. Dollar and the Norwegian Kroner (Norwegian
debt payable in Norwegian Kroner). The instruments are subject to interest
rate risk. We manage this risk by monitoring our ratio of fixed and
variable rate debt obligations in view of changing market conditions and
from time to time altering that ratio. We also enter into interest rate
swap agreements, when considered appropriate, in order to manage our
interest rate exposure.
Our foreign subsidiaries collect revenues and pay expenses in several
different foreign currencies. We monitor the exchange rate of our foreign
currencies and, when deemed appropriate, enter into hedging transactions in
order to mitigate the risk from foreign currency fluctuations. We also
manage our foreign currency risk by attempting to contract foreign revenue
in U.S. Dollars whenever practicable. At June 30, 2000, we had no open
foreign currency forward exchange contracts.
Our market risk estimates have not changed materially from those disclosed
in our 1999 Form 10-K, incorporated herein by reference.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on June
7, 2000 (the "Annual Meeting").
(b) At the Annual Meeting, Ronald O. Palmer and Joel V. Staff were re-
elected to serve until the annual meeting of stockholders for the
year 2003. In addition to the directors elected at the Annual
Meeting, the terms of Thomas E. Fairley, Benjamin F. Bailar, H.K.
Acord, Edward C. Hutcheson, Jr. and James C. Comis, III continued
after the Annual Meeting.
(c) At the Annual Meeting, holders of shares of the Company's Common
Stock elected two directors with the number of votes cast for and
withheld for such nominees as follows:
<TABLE>
<CAPTION>
NAME FOR WITHHELD
---------------- ---------------- ---------------
<S> <C> <C>
Ronald O. Palmer 25,998,842 278,075
Joel V. Staff 25,999,692 277,225
</TABLE>
With respect to the election of the directors, there were no
abstentions and non-votes totaled 2,113,499.
At the Annual Meeting, the stockholders voted on and approved an
amendment to the Company's Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of Common
Stock to 55,000,000 shares. Holders of 25,604,025 shares voted for,
holders of 626,414 shares voted against and holders of 46,478 shares
abstained from voting on such proposal. Non-votes with respect to
such proposal totaled 2,113,499.
At the Annual Meeting, the stockholders also voted on and approved an
amendment to the Company's Amended and Restated 1996 Incentive
Compensation Plan to increase the number of shares of Common Stock
available thereunder from 900,000 to 1,500,000. Holders of 22,658,975
shares voted for, holders of 3,554,560 shares voted against and
holders of 63,382 shares abstained from voting on such proposal. Non-
votes with respect to such proposal totaled 2,113,499.
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 Amendment to the Amended and Restated Certificate of
Incorporation of the Company.
3.3 By Laws of the Company. 1
4.1 Specimen Common Stock Certificate. 2
11.1 Computation of Earnings Per Share.
27.1 Financial Data Schedule.
____________________________
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).
(b) Reports on Form 8-K:
(i) Report on Form 8-K dated May 11, 2000 reporting "Item 5 - Other Events
and Item 7 -Financial Statements and Exhibits."
(ii) Report on Form 8-K dated May 23, 2000 reporting "Item 5 - Other Events
and Item 7 -Financial Statements and Exhibits."
(iii) Report on Form 8-K dated May 23, 2000 reporting "Item 5 - Other Events
and Item 7 -Financial Statements and Exhibits."
(iv) Report on Form 8-K dated May 26, 2000 reporting "Item 5 - Other Events
and Item 7 -Financial Statements and Exhibits."
(v) Report on Form 8-K dated June 14, 2000 reporting "Item 5 - Other Events
and Item 7 -Financial Statements and Exhibits."
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.
By: /s/ Kenneth W. Bourgeois
------------------------------------
Kenneth W. Bourgeois
Chief Accounting Officer and
duly authorized officer
Date: August 14, 2000
