As filed with the Securities and Exchange Commission on May 13, 1996
Registration No. 33-78166
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------------------
HVIDE MARINE INCORPORATED
(Exact name of Registrant as specified in its charter)
Florida 4424 65-0524593
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code No.) Identification No.)
---------------------------
2200 Eller Drive, P.O. Box 13038
Fort Lauderdale, FL 33316
(954) 523-2200
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-------------------------------------
J. Erik Hvide, Chairman, President, and Chief Executive Officer
2200 Eller Drive, P.O. Box 13038
Fort Lauderdale, Florida 33316
(954) 523-2200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------------------
Copies of communications to:
Michael Joseph, Esq. Seth R. Molay, P.C.
Dyer Ellis & Joseph Akin, Gump, Strauss, Hauer & Feld, L.L.P.
600 New Hampshire Avenue, N.W. 1700 Pacific Avenue, Suite 4100
Washington, D.C. 20037 Dallas, Texas 75201
(202) 944-3000 (214) 969-2800
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
Proposed Proposed
Title of each class Amount maximum maximum Amount of
of securities to be offering price aggregate registration
to be registered registered(1) per share(2) offering price(2) fee
<S> <C> <C> <C> <C>
Class A Common Stock,
$.001 par value . . 8,050,000 shares $14.00 $112,700,000 $38,862.07*
</TABLE>
(1) Includes 1,050,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee.
* A registration fee of $24,982.93 was paid on April 26, 1994 with the initial
filing of the registration statement. An additional registration fee of
$13,879.14 computed pursuant to Rule 457(a) is being paid herewith.
-------------------------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a)
may determine.
================================================================================
<PAGE>
Hvide Marine Incorporated
Cross Reference Sheet
Furnished Pursuant to Item 501(b) of Regulation S-K
Item Number and Caption Location in Prospectus
- ----------------------- ----------------------
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus . . . . . . . . . . . . Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus . . . . . . . Inside Front Cover Page; Outside Back
Cover Page
3. Summary Information, Risk Factors
and Ratio of Earnings to
Fixed Charges . . . . . . . . . . Prospectus Summary; The Company; Risk
Factors
4. Use of Proceeds . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price Outside Front Cover
Page; Underwriting
6. Dilution . . . . . . . . . . . . . Dilution
7. Selling Security Holders . . . . . . *
8. Plan of Distribution . . . . . . . . Outside Front Cover Page; Prospectus
Summary; Underwriting
9. Description of Securities to be
Registered . . . . . . . . . . . . Outside Front Cover Page; Prospectus
Summary; Dividend Policy; Description
of Capital Stock
10. Interests of Named Experts and
Counsel . . . . . . . . . . . . *
11. Information with Respect to the
Registrant . . . . . . . . . . . . Outside Front Cover Page; Prospectus
Summary; The Company; Risk Factors;
Dividend Policy; Management's Discus-
sion and Analysis of Financial Condi-
tion and Results of Operations;
Business; Selected Historical and Pro
Forma Consolidated Financial Data;
Security Ownership of Principal
Stockholders and Management; Manage-
ment; Certain Transactions; Descrip-
tion of Certain Indebtedness;
Description of Capital Stock;
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities . . . . . . . . . . . *
- ---------------------------------------
* Not applicable or answer thereto is negative.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 13, 1996
PROSPECTUS
, 1996
[logo] 7,000,000 Shares
Hvide Marine Incorporated
Class A Common Stock
All of the shares of Class A Common Stock offered hereby are being sold by
the Company. Prior to this offering (the "Offering"), there has been no public
market for the Class A Common Stock. It is currently estimated that the initial
public offering price will be between $12.00 and $14.00 per share. See
"Underwriting" for information relating to the factors considered in determining
the initial public offering price.
After the Offering, the Company's issued and outstanding capital stock will
consist of Class A Common Stock and Class B Common Stock. Each holder of Class
A Common Stock is entitled to one vote per share and each holder of Class B
Common Stock is entitled to ten votes per share on all matters submitted to a
vote of stockholders. Except as required by law and the Company's Articles of
Incorporation, holders of the Class A Common Stock and the Class B Common Stock
vote together as a single class. Each share of Class A Common Stock and Class B
Common Stock will share ratably in any dividends or other distributions,
including upon the liquidation, dissolution, or winding up of the Company.
Ownership and control of the Class A Common Stock by persons not citizens of the
United States are limited by the terms of the Company's Articles of
Incorporation. See "Description of Capital Stock."
Application has been made to list the Class A Common Stock on the Nasdaq
National Market under the symbol "HMAR."
See "Risk Factors" beginning on page 8 for information that should be
considered by prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting
Price to Discounts and Proceeds to
the Public Commissions(1) the Company (2)
Per Share . . . . $ $ $
Total (3) . . . . $ $ $
(1) See "Underwriting" for indemnification arrangements with the
Underwriters.
(2) Before deduction of expenses payable by the Company estimated at $ .
(3) The Investor Group (as defined herein) has granted the Underwriters a
30-day option to purchase up to 1,050,000 additional shares of Class A
Common Stock at the Price to the Public less Underwriting Discounts and
Commissions, solely to cover over-allotments, if any. See
"Underwriting." If such option is exercised in full, the total Price to
the Public, Underwriting Discounts and Commissions, Proceeds to the
Company, and Proceeds to the Investor Group will be $ ,
$ , $ , and $ , respectively.
The shares are being offered by the several Underwriters when, as and if
delivered to and accepted by the Underwriters and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the share certificates will be made in New York, New
York, on or about , 1996.
Donaldson, Lufkin & Jenrette Howard, Weil, Labouisse, Friedrichs
Securities Corporation Incorporated
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with
the Securities and Exchange Commission. These securities may not be sold
nor may offers to buy be accepted prior to the time the registration
statement becomes effective. This prospectus shall not constitute an offer
to sell or the solicitation of an offer to buy nor shall there be any sale
of these securities in any State in which such offer, solicitation or sale
would be unlawful prior to registration or qualification under the
securities laws of any such State.
<PAGE>
Description of Picture: The Description of Picture: The
Seabulk California OMI Hudson and the tug Broward
Caption: One of Hvide's 180-foot Caption: The tractor tug
supply boats, the Seabulk Broward docking the OMI Hudson
California, in transit to an in Port Everglades,
offshore production platform. Florida.
Description of Picture: The Seabulk Texas at an offshore
location.
Caption: The Seabulk Texas, a 180-foot supply boat, servicing
an offshore drilling rig in the Gulf of Mexico.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE>
Description of Picture: The Description of Picture: A side-
Seabulk Georgia supply boat carrying view of a crew boat
a crew boat
Caption: The Seabulk Georgia supply Caption: One of the Company's
boat carrying one of the Company's 110-foot crew boats en route to
crew boats to an international a drilling location.
destination.
Description of Picture: The Seabulk America at sea
Caption: The Seabulk America, the only chemical carrier to
enter service in the domestic trade since 1984, on a voyage
from Houston, Texas to several ports on the Atlantic coast.
<PAGE>
Description of Picture: Description of Picture: Description of Picture:
The OMI Hudson The OMI Dynachem The OMI Star
Caption: The OMI Caption: The OMI Caption: The OMI
Hudson, a 360,000 barrel, Dynachem, a 360,000 barrel, Star, a 260,000 barrel,
50,900 dwt capacity 50,900 dwt capacity 37,500 dwt capacity
chemical carrier. chemical carrier. chemical carrier.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and consolidated financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Except as otherwise indicated, all information in this Prospectus (i) gives
effect to a 1.584274-for-1 stock split, (ii) reflects the consummation of the
Acquisitions (as defined and described in "Business -- The Acquisitions"), (iii)
gives effect to the exchange of certain outstanding indebtedness of the Company
for shares of Class A Common Stock and Class B Common Stock and
the exchange of all shares of Class C Common Stock for Class A Common Stock
and Class B Common Stock as described in "The Company," and (iv) assumes no
exercise of the Underwriters' over-allotment option. The Company is a holding
company that conducts all its operations through its direct and indirect
subsidiaries. Unless the context otherwise requires, all references
in the Prospectus to the "Company" or "Hvide" include Hvide Marine
Incorporated, its predecessors, and its consolidated subsidiaries.
See "Glossary of Shipping Terms" for definitions of certain terms
used herein.
THE COMPANY
Hvide (pronounced "vee-dah") provides marine support and transportation
services primarily in the U.S. domestic trade and principally to the energy and
chemical industries. The Company is the third largest operator of supply and
crew boats in the Gulf of Mexico. In addition, the Company is the sole provider
of commercial tug services in Port Everglades and Port Canaveral, Florida, and a
leading provider of such services in Mobile, Alabama. The Company also
transports petroleum products and specialty chemicals in the U.S. domestic
trade, a market insulated from international competition under the Jones Act.
The total capacity of the Company's five chemical carriers, pro forma for the
Acquisitions, represents approximately 44% of the capacity of the independent
domestic specialty chemical carrier fleet. In addition, the Company has
options to acquire up to a 75% interest in five double-hull petroleum product
carriers currently under construction for delivery during 1998.
The Company has grown rapidly through a series of strategic acquisitions,
increasing its marine support fleet from 20 vessels in 1993 to 73 vessels
currently and its marine transportation fleet from three vessels in 1993 to 29
vessels currently, in each case pro forma for the Acquisitions. As a result,
the Company's revenues increased 198% from $41.5 million in 1993 to $123.8
million in 1995, pro forma for the Acquisitions. Over the same period, the
Company's EBITDA increased 183% from $11.3 million to $32.1 million, pro
forma for the Acquisitions.
The Company's strategy is to realize the benefits presented by the
integration of its recent and pending acquisitions with its existing operations
and to continue to grow through selected acquisitions that further consolidate
the marine support and transportation services markets in which the Company
operates. The Company believes it has numerous opportunities to make further
accretive acquisitions in its core businesses. Critical elements of the
Company's strategy include continuing to (i) leverage its demonstrated expertise
in acquiring and consolidating diverse marine operations, (ii) focus its
operations in the U.S. domestic trade, (iii) capitalize upon its leadership in
marine vessel engineering innovation, (iv) build upon its long-term
relationships with its customers, and (v) enhance its record of quality service
and safety.
Marine Support Services
Offshore Energy Support. The Company's fleet of 62 offshore energy support
vessels, pro forma for the Acquisitions, consists of 23 supply boats, 37 crew
boats, and two utility boats that transport supplies and personnel and provide
towing and other support services to offshore oil and natural gas exploration
and production operations, primarily in the Gulf of Mexico. The offshore energy
support industry in the Gulf of Mexico has experienced dramatic consolidation
and vessel attrition during the past
3
<PAGE>
decade. As a result, the Company believes that industry fundamentals
have improved, resulting in increasing day rates and utilization, and
expects this trend to continue through further consolidation. The
Acquisitions strengthen the Company's position as the third largest
operator of supply and crew boats in the Gulf of Mexico.
Offshore and Harbor Towing. The Company's 11 tugs provide offshore towing
services and harbor assistance to tankers, barges, containerships, other cargo
vessels, and cruise ships calling at Port Everglades and Port Canaveral,
Florida, and Mobile, Alabama. Port Everglades and Mobile are among the fastest
growing ports in the United States. In Port Everglades and Port Canaveral, the
Company is the sole franchisee providing commercial tug services. The Company
has also recently directed the design and construction of a technologically
advanced 5,100-hp tractor tug, the Broward, designed to provide escort services
to tankers and other large vessels and specialized services to the offshore
energy industry, such as deepwater facilities installation support. Through the
combination of the distinctive underwater shape of its hull and its omni-
directional propulsion system, a tractor tug can control the direction of an
assisted vessel more effectively and can develop greater relative pulling power
than a conventional tug.
Marine Transportation Services
Chemical Transportation. The total capacity of the Company's five chemical
carriers, pro forma for the Acquisitions, represents approximately 44% of the
capacity of the independent domestic specialty chemical carrier fleet, and four
of the five vessels are among the most recently built and the only independently
owned, diesel-powered chemical carriers with full double-bottom hulls operating
in the U.S. domestic trade. Two of the carriers currently transport industrial
chemicals in bulk parcel lots and the other three carriers currently transport
petroleum products and petrochemicals, primarily for major oil companies. The
Company believes that domestic energy and chemical transportation freight rates
will increase within the next three to five years and continue thereafter, as
the supply of vessels eligible to carry petroleum products and certain chemicals
diminishes as a result of mandatory retirement imposed by the Oil Pollution Act
of 1990 ("OPA 90").
Petroleum Product Transportation. The Company's petroleum product
transportation fleet is currently comprised of the Seabulk Challenger, a 39,300
dwt product carrier, and a fleet of ten towboats and 13 fuel barges. The Seabulk
Challenger has since 1975 operated under successive charters to Shell Oil
Company ("Shell") (extending to January 2000) carrying refined petroleum
products from Shell's refineries in Texas and Louisiana to various U.S. Gulf of
Mexico and Atlantic coast ports. The towboat and barge fleet is engaged in the
transportation of residual and diesel fuels along the Atlantic intracoastal
waterway and in the St. Johns River in Florida, primarily for a major Florida
utility.
The Company also owns a minority interest in five 45,300 dwt double-hull
petroleum product carriers currently under construction for delivery during
1998. The product carriers are intended to serve the domestic market currently
served by single-hull tankers whose retirement is mandated by OPA 90. The
Company, whose ownership is currently 2.4%, has options to purchase up to
an additional 72.6% ownership interest in the vessels. The Company is
supervising the construction of the vessels and will provide operational
management following delivery.
4
<PAGE>
THE OFFERING
Class A Common Stock Offered . . 7,000,000 shares
Common Stock to be Outstanding
After the Offering:
Class A Common Stock. . . . 7,452,414 shares(1)
Class B Common Stock . . . . 3,316,816 shares(2)
----------
Total . . . . . . . . . .10,769,230 shares
==========
Voting Rights . . . . . . . . . After the Offering, the Company's outstanding
capital stock will consist of Class A Common
Stock and Class B Common Stock (together, the
"Common Stock"). Each holder of Class A
Common Stock is entitled to one vote per
share and each holder of Class B Common Stock
is entitled to ten votes per share on all
matters submitted to a vote of stockholders.
Except as required by law and the Company's
Articles of Incorporation, holders of the
Class A Common Stock and the Class B Common
Stock vote together as a single class. After
the Offering, the holders of the Class A
Common Stock and the Class B Common Stock
will have 18.3% and 81.7% of the voting power
of the Common Stock, respectively. Each
share of Class A Common Stock and Class B
Common Stock will share ratably in any
dividends or other distributions, including
upon the liquidation, dissolution, or
winding up of the Company. See "Description
of Capital Stock."
Use of Proceeds . . . . . . . . . To pay the cash portion of the purchase
price of the Acquisitions, to repay a
portion of the Company's indebtedness,
and for general corporate purposes.
Proposed Nasdaq National
Market symbol . . . . . . . . . HMAR
- --------------
(1) Excludes shares of Class A Common Stock reserved for
issuance upon exercise of options to be granted prior to completion of the
Offering and includes (i) 131,735 shares of Class A Common Stock to be
issued in exchange for a portion of the principal and accrued interest
on the Junior Notes (as defined herein) remaining outstanding upon
consummation of the Offering (see "Use of Proceeds" and "The Company"),
(ii) 85,750 shares of Class A Common Stock to be issued in payment for
services, and (iii) 23,692 shares of Class A Common Stock to be issued in
exchange for certain outstanding indebtedness upon consummation of the
Offerings. See "Management -- Equity Ownership Plans" and "Certain
Transactions."
(2) Includes 993,212 shares of Class B Common Stock to be issued in exchange
for the remainder of the principal and accrued interest remaining
outstanding on the Junior Notes. The Class B Common Stock is held entirely
by members of the Hvide Family (as defined herein) and the Investor Group.
See "Security Ownership of Principal Stockholders and Management,"
"Description of Capital Stock," and "Description of Certain Indebtedness -
Acquisition Notes and Assumed Debt."
5
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA
The summary consolidated financial data presented below should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company, the financial statements and notes thereto of the OMI Chemical Carrier
Group (the "OMI Chemical Carriers"), the Seal Fleet Vessels (as defined
herein), and Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc.
(together, "GBMS"), "Selected Historical and Pro Forma Consolidated
Financial Data," "Pro Forma Condensed Consolidated Financial Statements,"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
The summary unaudited pro forma statement of operations data give
effect to the pending acquisitions of the OMI Chemical Carriers and the Seal
Fleet Vessels, the acquisition of certain vessels from GBMS in January 1996, the
acquisition of one vessel in February 1996, the Offering, and the exchange of
certain indebtedness for shares of Common Stock as if all such transactions
had occurred on January 1, 1995. The summary unaudited pro forma balance
sheet and vessel data give effect to the foregoing transactions and to the
acquisition of two additional vessels as if all such transactions had
occurred on December 31, 1995. Such pro forma data are presented for
illustrative purposes only and do not purport to represent what the
Company's results actually would have been if such events had occurred
at the dates indicated, nor do such data purport to project the financial
position or results of operations for any future period or as of any
future date.
Year Ended December 31,
--------------------------------
Pro Forma
1993 1994 1995 1995
(in thousands, except per share, vessel,
and operating data)
Statement of Operations Data:
Revenue $41,527 $49,792 $70,562 $ 123,766
Income from operations 6,584 5,838 11,072 20,077
Interest expense, net 3,412 5,302 11,460 10,525
Income (loss) before provision for income
taxes and cumulative effect
of a change in accounting principle 3,691 547 (362) 9,575
Income (loss) before cumulative
effect of a change in accounting
principle 1,818 358 (360) 6,128
Cumulative effect of a
change in accounting principle 1,491 - - --
Net income (loss) 3,309 358 (360) 6,128
===== === ==== =====
Earnings (loss) per common share:
Income before cumulative effect
of a change in
accounting principle (1) $0.26 $ 0.03 $ (0.14) $ 0.57
Net income (1) 0.50 0.03 (0.14) 0.57
===== ====== ======= ======
Weighted average number of common shares
and common share
equivalents outstanding (2) 6,268 5,302 2,535 10,769
===== ===== ===== ======
Other Financial Data:
EBITDA(3) $11,319 $10,338 $ 17,380 $ 32,062
======= ======= ======== ========
Vessel Data (at end of period):
Marine Support Services
Supply boats 10 14 14 23
Crew boats(4) -- 21 28 39
Tugs 10 10 11 11
Marine Transportation Services
Chemical carriers 2 2 2 5
Product carriers 1 1 1 1
Towboats and barges -- 18 23 23
Total 23 66 79 102
Operating Data:
Supply boats:
Average vessel day rates(5) $ 2,696 $ 3,195 $ 3,023
Average vessel utilization rates(6) 98% 84% 81%
Crew boats:
Average vessel day rates(5) -- $ 1,421 $ 1,434
Average vessel utilization rates(6) -- 88% 85%
Tugs:
Total offshore and ship docking
tug revenue (in thousands) $10,587 $11,140 $12,582
Total ship docking tug jobs 8,178 8,740 9,233
Chemical and product carriers:
Time charter equivalents(7) $24,765 $24,898 $26,034
- -----------------
(Notes on following page)
6
<PAGE>
At December 31, 1995
-------------------------
Actual Pro Forma
(in thousands)
Balance Sheet Data:
Working capital . . . . . . . . . . . . . . . . $4,315 $ 7,368
Total assets . . . . . . . . . . . . . . . . . . 143,683 241,701
Total debt . . . . . . . . . . . . . . . . . . . 109,051 120,072
Stockholders' equity and minority partners' equity 13,999 101,317
- -----------------
(1) For the purpose of calculating earnings per share for the years 1993 and
1994, historical income available to common stockholders has been reduced
for dividends on Class A Preferred Stock of $203,000 and $222,000,
respectively. The Class A Preferred Stock was redeemed on September 30,
1994. See "Certain Transactions."
(2) For the years 1993 and 1994, the weighted average number of common shares
and common share equivalents assumes the conversion of the Class B Preferred
Stock into shares of Common Stock. The Class B Preferred Stock was redeemed
on September 30, 1994. Pro forma shares reflect the weighted
average number of common shares giving effect to the issuance of 7,000,000
shares of Class A Common Stock in the Offering, 85,750 shares of Class A
Common Stock in payment of services, 23,692 shares of Class A Common Stock
in exchange for certain outstanding indebtedness, 131,735 shares of Class A
Common Stock and 993,212 shares of Class B Common Stock in exchange for the
principal and accrued interest on the Junior Notes remaining outstanding
upon consummation of the Offering and exclude shares of Class A
Common Stock reserved for issuance upon exercise of options to be granted
prior to the consummation of the Offering. See "Management -- Equity
Ownership Plans," "Certain Transactions," and "Description of Certain
Indebtedness - Acquisition Notes and Assumed Debt."
(3) EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interests, and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. EBITDA is not required by generally accepted
accounting principles and should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows from operations as a measure of liquidity.
(4) For the years 1994, 1995, and pro forma 1995, the number of crew boats
includes two utility boats.
(5) Average day rates are calculated by dividing total vessel revenue by the
total number of vessel days utilized.
(6) Utilization rates are average rates based on a 365-day year. Vessels are
considered utilized when they are generating charter revenue.
(7) Time charter equivalents are calculated by deducting total voyage expenses
from total voyage revenue and dividing the result by the total days per
voyage.
7
<PAGE>
RISK FACTORS
In addition to other information contained in this Prospectus, prospective
purchasers of the Class A Common Stock should carefully consider the following
factors in evaluating an investment in the Company.
Potential Loss of Jones Act Protection
Most of the Company's operations are conducted in the U.S. domestic trade,
which, by virtue of the U.S. coastwise laws (often referred to as the "Jones
Act"), is restricted to vessels built in the United States, owned and crewed by
U.S. citizens, and registered under U.S. law. There have been repeated
attempts to repeal the coastwise laws, and efforts to effect such repeal are
underway and are expected to continue in the future. The Company is already
subject to vigorous competition and potential additional competition in all
aspects of its operations, including competition by companies with financial
resources greater than those of the Company which could be committed to the
construction of new vessels in excess of market requirements. Repeal of the
coastwise laws would result in additional competition from vessels built in
lower-cost foreign shipyards and manned by foreign nationals accepting lower
wages than U.S. citizens and could have a material adverse effect on the
Company.
Hazardous Activities
The operation of ocean-going vessels carries an inherent risk of
catastrophic marine disasters and property losses caused by adverse weather
conditions, mechanical failures, human error, and other circumstances or events.
In addition, the transportation of petroleum and toxic chemicals is subject to
the risk of spills and environmental damage. Any such event may result in loss
of revenues or increased costs. While the Company carries insurance to protect
against most of the accident-related risks involved in the conduct of its
business, including environmental damage and pollution insurance coverage, there
can be no assurance that all risks are adequately insured against, that any
particular claim will be paid, or that the Company will be able to procure
adequate insurance coverage at commercially reasonable rates in the future. In
particular, more stringent environmental regulations may result in increased
costs for, or the lack of availability of, insurance against the risks of
environmental damage or pollution.
Cyclical Industry Conditions
Historically, the marine support and transportation services industry has
been cyclical, with corresponding volatility in profitability and vessel values.
This industry cyclicality has been due to changes in the level of general
economic growth as well as changes in the supply of and demand for vessel
capacity, which impact charter rates and vessel values. The supply of vessels
is influenced by the numbers of vessels constructed and retired and by
government and industry regulation of maritime transportation practices. The
Company's offshore energy support services and offshore and harbor towing
services are dependent upon the levels of activity in offshore oil and natural
gas exploration, development, and production. Such activity levels are affected
by both short- and long-term trends in world oil and natural gas prices.
Utilization of the Company's towboat and fuel barge fleet is also partly
dependent on such prices as well as energy utilization, which is partly a
function of the weather. In recent years, oil and natural gas prices, and
therefore the level of offshore drilling and exploration activity, have been
extremely volatile. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Any future prolonged decline in natural
gas or oil prices will, in all likelihood, depress the level of offshore
exploration and development activity and result in a corresponding decline in
the demand
8
<PAGE>
for the services provided by the Company's offshore energy support vessels, and
any sustained reduction in such activity could have a material adverse effect on
the Company. See "Business --The Industry--Marine Support Services-- Offshore
Energy." In addition, marine support and transportation services are dependent
on general economic conditions. Any general economic slowdown could have an
adverse effect on the level of the provision of those services and therefore
upon the Company.
Environmental Risk and Regulations
Current laws and regulations could impose substantial liability on the
Company for damages, remediation costs, and penalties associated with oil or
hazardous-substance spills or other discharge into the environment involving the
Company's vessel operations. Shoreside industrial operations, including a small
marine maintenance and drydocking facility owned and operated by the Company,
are also subject to federal, state, and local environmental laws and regula-
tions. Amendment of these laws and regulations to impose more stringent
requirements would likely result in increased maintenance and operating
expenses. In addition, OPA 90 requires tanker owners and operators to establish
and maintain with the U.S. Coast Guard evidence of financial responsibility, as
demonstrated by a certificate of financial responsibility ("COFR"), with respect
to potential oil spill liability, which the Company and most of its competitors
currently satisfy by virtue of self-insurance or third-party insurance.
Additional laws and regulations may be adopted that could limit the ability of
the Company to do business or increase the cost of its doing business and could
have a material adverse effect on its operations. See "Business--Environmental
and Other Regulation."
High Leverage and Debt Service; Certain Restrictions on Capital Expenditures
Upon completion of the Offering, the Company will continue to have
substantial indebtedness. Giving pro forma effect to the Offering and the
Acquisitions, the Company's total outstanding indebtedness would have been
$120.1 million as of December 31, 1995. In addition, the Company has a minority
interest, and options to acquire a majority interest, in five vessels currently
under construction that are being financed, in substantial part, with non-
recourse indebtedness. See "Business -- Company Operations -- Marine
Transportation Services -- Petroleum Product Transportation." Such leverage
poses certain risks for the Company, including the risks that the Company may
not generate sufficient cash flow to service its indebtedness; that the Company
will be unable to renegotiate the terms of its indebtedness; that
it may be unable to obtain additional financing in the future; that, to the
extent it is significantly more leveraged than its competitors, it may be placed
at a competitive disadvantage; and that the Company's capacity to respond to
market conditions and other factors may be adversely affected. The Company's
ability to service its debt will depend on its future performance, which will be
subject to prevailing economic and competitive conditions and other specific
factors discussed herein, as well as developments in capital markets generally.
The terms of certain of the Company's existing indebtedness (i) require the
Company to maintain minimum levels of working capital and net worth and to meet
specified financial ratios, (ii) restrict the ability of its subsidiaries to pay
dividends or make distributions to the Company, and (iii) restrict the Company's
ability to make certain investments or issue capital stock, place additional
liens on its or its subsidiaries' property, incur additional long-term
indebtedness, make capital expenditures in excess of specified limitations, and
enter into mergers or similar transactions. In particular, such terms currently
limit annual capital expenditures, including expenditures for maintenance and
improvement of vessels as well as for acquisitions, to $10.0 million.
The Company has budgeted approximately $8.0 million and $10.0 million
for maintenance and improvements during 1996 and 1997, respectively.
Accordingly, such
9
<PAGE>
restrictions on the Company's ability to make such expenditures will, if not
waived, adversely affect the Company's ability to pursue its strategy of growth
through acquisitions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Financial Resources" and
"Description of Certain Indebtedness -- Bank Debt."
Mandated Removal of Vessels from Jones Act Trade
OPA 90 establishes a phase-out schedule for single-hull vessels carrying
crude oil and petroleum products which, in the case of the Company's product
carrier (Seabulk Challenger) and two chemical carriers (Seabulk Magnachem and
Seabulk America), are the years 2003, 2007, and 2015, respectively; in the case
of its fuel barges is the year 2015; and in the case of the three OMI Chemical
Carriers (OMI Hudson, OMI Dynachem, and OMI Star) are the years 2011, 2011, and
2000, respectively. As a result of this requirement, these vessels will
be prohibited from transporting petroleum products in U.S. waters
after their respective phase-out dates. There can be no assurance that future
tanker market rates will be sufficient to support construction of replacement
vessels. Although the Company's remaining vessels are not subject to mandatory
retirement, and the Company employs what it believes to be a rigorous
maintenance program for all its vessels, there can be no assurance that the
Company will be able to maintain its fleet by extending the economic lives of
existing vessels or acquiring new or used vessels. See "Business -- Company
Operations -- Marine Transportation Services" and "-- Environmental and Other
Regulation."
Reliance on Significant Customers
Shell, the Company's largest single customer and the long-term charterer of
the Company's product carrier, accounted for between 10% and 15% of the
Company's 1995 revenues (less than 10% on a pro forma basis assuming the
Acquisitions had occurred on January 1, 1995). Florida Power & Light Company
("FPL"), the Company's second largest customer, accounted for between 5% and 10%
of the Company's 1995 revenues (less than 5% on a pro forma basis assuming the
Acquisitions had occurred on January 1, 1995). The loss of either of these
customers could have a material adverse effect on the Company. See "Business --
Company Operations -- Customers and Charter Terms."
Risk of Loss and Insurance
The business of the Company is affected by a number of risks, including the
mechanical failure of its vessels, collisions, vessel loss or damage, cargo loss
or damage, hostilities, and labor strikes. In addition, the operation of any
vessel is subject to the inherent possibility of a catastrophic marine disaster,
including oil, fuel, or chemical spills and other environmental mishaps, as well
as other liabilities arising from owning and operating vessels. Any such event
may result in loss of revenues and increased costs and other liabilities.
Although the Company's losses from such hazards have not historically exceeded
its insurance coverage, there can be no assurance that this will continue to be
the case.
OPA 90, by imposing virtually unlimited liability upon vessel owners,
operators, and certain charterers for certain oil pollution accidents in the
United States, has made liability insurance more expensive and has also prompted
insurers to consider reducing available liability coverage. See "Business --
Environmental and Other Regulation." While the Company maintains insurance,
there can be no assurance that all risks are adequately insured against
particularly in light of the virtually unlimited liability imposed by OPA 90,
that any particular claim will be paid, or that the Company will be able to
procure adequate insurance coverage at commercially reasonable rates in the
future.
10
<PAGE>
Restriction on Foreign Ownership
In order to maintain the eligibility of the Company's vessels to be
operated in the U.S. domestic trade, 75% of the outstanding capital stock and
voting power of the Company is required to be held by U.S. citizens. See
"Business -- Environmental and Other Regulation." Although the Company's
Articles of Incorporation contain provisions limiting non-citizen ownership of
its capital stock (see "Description of Capital Stock -- Foreign Ownership
Restrictions"), the Company could lose its ability to conduct operations in the
U.S. domestic trade if such provisions prove unsuccessful in maintaining the
required level of citizen ownership. Such loss would have a material adverse
effect on the Company.
Acquisition Strategy
One element of the Company's strategy is to continue to grow through
selected acquisitions that further consolidate the marine support and
transportation markets in which the Company operates. There can be no assurance
that the Acquisitions or any additional acquisitions will be successful in
enhancing the operations or profitability of the Company; that the Company will
be able to identify suitable additional acquisition candidates; that it will
have the financial ability to consummate additional acquisitions; or that it
will be able to consummate such additional acquisitions on terms favorable to
the Company.
Pending Litigation
The Company's chemical carrier Seabulk America is the subject of two
pending legal proceedings, one involving the eligibility of the vessel to
operate in the U.S. domestic trade and the other involving the cost of its
completion, either of which, if determined adversely to the Company, could have
a material adverse effect on the Company. See "Business -- Legal Proceedings."
International Marine Operations
The Company currently operates an aggregate of three offshore supply boats
in the Arabian Sea and Southeast Asia, and of the supply boats to be acquired
in the Acquisitions, two will be operated in the North Sea and one in Southeast
Asia. Such operations are subject to risks inherent in conducting business in
foreign countries, including political changes, possible vessel seizure and
asset nationalization, or other government actions, all of which are beyond the
control of the Company.
Key Personnel
The Company is materially dependent upon the continued services of key
members of its management, including its Chairman, President, and Chief
Executive Officer, J. Erik Hvide. The loss of one or more key members of
management could have a material adverse effect on the Company. See
"Management."
No Prior Market for Class A Common Stock
Prior to the Offering, there has been no public market for the Class A
Common Stock or any other securities of the Company. The initial public offer-
ing price for the shares of Class A Common Stock has been determined through
negotiations between the Company and the Representatives of the Underwriters.
See "Underwriting." Although application has been made to list the Class A
Common Stock on the Nasdaq National Market, there can be no assurance that an
active trading market will develop or be
11
<PAGE>
sustained or that investors in shares of the Class A Common Stock will be able
to resell their shares at or above the initial public offering price, if at all.
Control by Current Stockholders; Anti-takeover Effect of Dual Classes of Stock
and Certain Other Provisions
The Company's Common Stock is divided into Class A Common Stock, of which
each share is entitled to one vote with respect to all matters submitted to
stockholder vote, and Class B Common Stock, of which each share is entitled to
ten votes with respect to such matters. Upon completion of the Offering, J.
Erik Hvide, the Company's Chairman, President, and Chief Executive Officer, will
beneficially own 1,769,107 shares of Class B Common Stock, and the group of
investors (the "Investor Group") that in September 1994 purchased
shares of Common Stock and the Company's Junior Notes and Senior
Notes (each as defined herein) will beneficially own 342,971 shares
of Class A Common Stock and 1,547,709 shares of Class B Common Stock.
Upon completion of the Offering, Mr. Hvide and the Investor Group will
therefore own shares that will represent 16.4% and 17.6%,
respectively, of the outstanding shares of Common Stock and
43.6% and 38.9%, respectively, of the voting power of all Common Stock.
Accordingly, Mr. Hvide and the Investor Group will, if they act together, be
able to elect a majority of the Company's directors and to determine the
disposition of all matters submitted to a vote of the Company's stockholders.
In addition, the Investor Group has the right to nominate three persons to the
Company's 11-member Board of Directors, and certain transactions require
approval of all holders of the Class B Common Stock. Each share of Class
B Common Stock is convertible by its holder into one share of Class A
Common Stock at any time, and automatically converts into Class A Common
Stock following the Offering if held by persons other than the Hvide
Family and members of the Investor Group. See "Management," "Security
Ownership of Principal Stockholders and Management," and "Description
of Capital Stock -- Shareholders Agreement." Pursuant to certain
agreements, Mr. Hvide will be required to transfer shares of Common
Stock to the Investor Group. See "Description of Capital Stock --
Contingent Share Issuance Agreement."
Such control by Mr. Hvide and the Investor Group may also have the effect
of discouraging certain types of transactions involving an actual or potential
change of control of the Company, including transactions in which the holders of
Class A Common Stock might otherwise receive a premium for their shares over
then-current market prices. In addition, pursuant to the Company's Articles of
Incorporation, the Board of Directors is divided into three classes of directors
serving staggered three-year terms and, consequently, it would likely require
two annual meetings rather than one for the stockholders to replace a majority
of the Board of Directors.
Shares Eligible for Future Sale
Sales of substantial amounts of Class A Common Stock in the public market
following the Offering, or the perception that such sales may occur, could have
an adverse effect on the market price of the stock. Subject to an agreement
that restricts their sale without the prior approval of the Representatives of
the Underwriters for 180 days following the date of this Prospectus, all
1,769,106 of the shares of Class B Common Stock owned by Mr. Hvide will be
eligible for public sale (Class B Common Stock is freely convertible, share for
share, into Class A Common Stock), subject to volume and other limitations of
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
In September 1996, 765,734 shares of Common Stock owned by the Investor Group
will also be eligible for public sale under Rule 144. The Company has granted
Mr. Hvide and the Investor Group certain registration rights under the
Securities Act with respect to the Common Stock owned by them. Prior to the
consummation of the
12
<PAGE>
Offering, certain directors, officers, and employees of the Company will be
granted options to purchase shares of Class A Common Stock at an
exercise price equal to the offering price of the shares offered hereby.
The shares acquired upon exercise of these options, of which options to purchase
shares will be immediately exercisable upon consummation of the Offering,
will also be eligible for public sale subject to Rule 144 under the Securities
Act. See "Shares Eligible for Future Sale." Moreover, the Company may issue
shares of Common Stock in connection with future acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- Strategy."
13
<PAGE>
THE COMPANY
Hvide Marine Incorporated was incorporated in the state of Florida in 1994
as the holding company for its principal operating subsidiary. The Company's
principal operating subsidiary began operations in 1958 as a harbor tug operator
and in 1975 acquired its first petroleum product carrier. It began transporting
specialty chemicals in 1977 and expanded into the operation of offshore energy
support vessels with the acquisition of eight supply boats in 1989.
In 1994, the Company substantially expanded its fleet, adding 20 crew
boats, six supply boats, and two utility boats to its offshore energy support
fleet and an 18-vessel tug and barge fleet to its petroleum product
transportation operations. This expansion also included the acquisition of the
remaining minority interests in certain vessels that were majority owned by the
Company, and the redemption of preferred stock held by the Company's founder.
The 1994 expansion was financed primarily through borrowings under the Credit
Facility (as defined herein) and the issuance to the Investor Group of $25.0
million aggregate principal amount of senior subordinated notes (the "Senior
Notes") and $25.0 million aggregate principal amount of junior subordinated
notes (the "Junior Notes"). See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources," "Certain Transactions," and "Description of Certain Indebtedness."
Since September 1994, the Company has continued to grow through strategic
acquisitions. In addition, the Company has entered into purchase agreements
with four different sellers to acquire title to an aggregate of 13
vessels and bareboat charter rights to one additional vessel. The purchase of
these vessels, which constitute the Acquisitions, will be funded with a
combination of (i) a portion of the proceeds from the Offering and (ii) the
assumption or issuance of debt and lease obligations. See "Use of Proceeds" and
"Business -- The Acquisitions."
Immediately prior to the Offering, the 313,215 shares of
Class C Common Stock owned by the Investor Group will be exchanged
for 211,236 shares of Class A Common Stock and 101,979 shares of
Class B Common Stock and the 663,415 shares of Class C Common Stock
owned by the Hvide Family will be converted into 663,415 shares of
Class B Common Stock. In addition, $13.6 million of principal and accrued
interest on the Junior Notes remaining outstanding after application of a
portion of the proceeds from the Offering will be converted into 993,212 shares
of Class B Common Stock and 131,735 shares of Class A Common Stock, 85,750
shares of Class A Common Stock will be issued in payment for services, and
$308,000 of outstanding principal and accrued interest of certain other
indebtedness will be converted into 23,692 shares of Class A Common Stock upon
consummation of the Offering. See "Description of Certain Indebtedness."
The Company's principal office is located at 2200 Eller Drive, Fort
Lauderdale, Florida 33316, and its telephone number is (954) 523-2200.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Class A Common Stock
offered hereby, based on an assumed initial offering price of $13.00 per share
and after deducting underwriting discounts and commissions and estimated
offering expenses, are estimated to be approximately $82.9 million. Of such
net proceeds, (i) approximately $26.7 million will be used to fund the cash
portion of the $84.5 million aggregate purchase price of the Acquisitions, (ii)
approximately $53.2 million will be used to repay certain outstanding
indebtedness as described below, and (iii) the balance will be used for general
corporate purposes.
Of the $53.2 million to be used to repay outstanding indebtedness, (i)
$25.7 million will be used to repay in full the Senior Notes and accrued
interest thereon, which mature in two equal installments in September 2003 and
2004 and bear interest at the rate of 12% per annum; (ii) $15.1 million will be
used
14
<PAGE>
to repay an equal principal amount of Junior Notes, which mature in September
2014 and bear interest at the rate of 8% per annum; (iii) $8.1 million will be
used to repay a revolving line of credit under the Credit Facility, which line
is due in March 1997 and bears interest at a fluctuating rate (8.5% per annum on
March 31, 1996), (iv) $2.4 million will be applied to reduce the $3.0 million
principal amount of the Vessel Acquisition Note (as defined herein), which is
payable in four equal annual installments commencing October 1995 and bears
interest at the lesser of 10% per annum or prime plus 2% (10% per annum at March
31, 1996); (v) $1.6 million will be applied to reduce the $3.6 million principal
amount of the Founder's Note (as defined herein), which is due in 2000 and bears
interest at the greater of 12% per annum or prime plus 3% (12% per annum at
March 31, 1996); and (vi) $0.3 million will be applied to reduce the $2.1
million aggregate principal amount of the HOS Notes and the HCL Notes (each as
defined herein), which notes are due in full in 2004 and bear interest at a rate
of 12% per annum. For additional information concerning the indebtedness that
is being repaid with a portion of the proceeds from the Offering, see
"Management's Analysis and Discussion of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Certain
Indebtedness."
To the extent that the Underwriters' over-allotment option is exercised,
the shares will be purchased by the Underwriters from the Investor Group. The
Company will not receive any of the proceeds from the sale of the shares by the
Investor Group.
Pending the use of proceeds as described above, the Company intends to
invest such proceeds in short-term, interest-bearing, investment-grade
securities.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock since its
formation. It presently intends to retain its earnings for use in its business
and therefore does not anticipate paying any cash dividends in the foreseeable
future. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and requirements, restrictions in financing
agreements, business conditions, and other factors. The Company is a holding
company whose assets consist primarily of its ownership interest in its
subsidiaries. Consequently, the Company's ability to pay dividends is
dependent upon the earnings of its subsidiaries and the
distribution of those earnings to the Company and loans or advances
by the subsidiaries to the Company. The ability of the subsidiaries to
pay dividends or to make distributions is restricted by the terms
of the Credit Facility. Due to such restrictions, the Company is
not expected to have access to the cash flow generated by the
subsidiaries for the foreseeable future. In addition, the Company's
ability to pay dividends or make distributions to its stockholders
is also restricted by the terms of the Credit Facility. See "Description of
Certain Indebtedness -- Bank Debt."
15
<PAGE>
DILUTION
After giving effect to the Acquisitions and to the sale of the shares of
Class A Common Stock offered hereby (at an assumed initial public offering
price of $13.00 per share) and the application of the estimated net
proceeds therefrom as described in "Use of Proceeds," the pro forma net tangible
book value of the Company as of December 31, 1995 would have been approximately
$90.6 million, or $8.41 per share of Common Stock. This represents an immediate
increase in pro forma net tangible book value of $7.14 per share to
existing stockholders and an immediate dilution in pro forma net tangible book
value per share of Common Stock of $4.59 after completion of the
Offering from the per share price paid by purchasers of Class A Common Stock in
the Offering. The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Initial public offering price .............................................. $ 13.00
Net tangible book value per share before the Offering(1) ...... $ 1.27
Increase in net tangible book value attributable to new
investors................................................... 7.14
--------
Pro forma net tangible book value after giving effect to the Offering.... 8.41
--------
Dilution per share to new investors ........................................ $ 4.59
========
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1995, the total shares purchased and the total consideration and average price
per share paid by existing stockholders and paid by the new investors purchasing
the shares offered hereby, assuming the sale of the 7,000,000 shares in the
Offering at an assumed initial public offering price of $13.00 per share.
<TABLE><CAPTION>
Shares Purchased Total Consideration Average
---------------------- ------------------------- Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
New Investors ............... 7,000,000 65% $ 91,000,000 82% $ 13.00
Existing stockholders ....... 3,769,230 35% 20,544,100 18% $ 5.45
--------- ------ ------------ -----
Total ................... 10,769,230 100% 111,544,100 100%
========= ====== ============ =====
</TABLE>
- -------
(1) Excludes shares of Class A Common Stock reserved for issuance upon
exercise of options to be granted prior to the consummation of the
Offering and includes 85,750 shares of Class A Common Stock to be issued
in payment for services, 23,692 shares of Class A Common Stock to be issued
in exchange for certain outstanding indebtedness, and 131,735 shares
of Class A Common Stock and 993,212 shares of Class B Common Stock to be
issued in exchange for the principal and accrued interest on the Junior
Notes remaining outstanding upon consummation of the Offering. See
"Management -- Equity Ownership Plans," "Certain Transactions," and
"Description of Certain Indebtedness - Acquisition Notes and
Assumed Debt."
16
<PAGE>
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
the Company as of December 31, 1995 and as adjusted to give effect to the
Offering and the application of the net proceeds therefrom, the Acquisitions,
the exchange of a portion of the Junior Notes into shares of Class B
Common Stock, and the exchange of certain other indebtedness for shares of
Class A Common Stock. The information presented below should be read in
conjunction with the Company's consolidated financial statements and the
Pro Forma Condensed Consolidated Financial Statements included elsewhere
in this Prospectus.
<TABLE><CAPTION>
December 31, 1995
-----------------------
Actual As Adjusted
(dollars in thousands)
<S> <C> <C>
Current portion of long-term debt . . . . . . . . . . . . $ 8,285 $ 14,769
========= =========
Long-term debt (excluding current portion)(1) $ 103,372 $ 105,303
Minority partners' equity in subsidiaries . . . . . . . . 1,654 1,654
Stockholders' equity:
Class A Common Stock, par value $0.001; 100,000,000
shares authorized; none issued and outstanding:
7,452,414 shares to be issued and outstanding(2). . - 7
Class B Common Stock, par value $0.001; 5,000,000
shares authorized; 1,558,210 shares issued and
outstanding and 3,313,816 shares to be issued and
outstanding(2) . . . . . . . . . . . . . . . . . . 1 3
Class C Common Stock, par value $0.001; 2,500,000
shares authorized; 976,630 shares issued and
outstanding; no shares to be issued and outstanding(3) 1 -
Additional paid-in capital . . . . . . . . . . . . . . . 6,341 102,012
Retained earnings (accumulated deficit) 6,002 (2,359)
---------- -----------
Total stockholders equity 12,345 99,663
---------- -----------
Total minority partners' equity in subsidiaries
and stockholders' equity . . . . . . . . . . . . . 13,999 101,317
---------- -----------
Total capitalization . . . . . . . . . . . . . $ 117,371 $ 206,620
========== ===========
</TABLE>
- ------------------------------
(1) See "Description of Certain Indebtedness" and Note 3 to the Company's
consolidated financial statements for a description of long-term debt.
(2) See "Description of Capital Stock" for a description of the relative
rights of the Class A Common Stock and Class B Common Stock.
(3) The Class C Common Stock outstanding at December 31, 1995 will be
exchanged for Class B Common Stock immediately prior to the
consummation of the Offering on a one-for-one basis. See "The
Company." Outstanding shares exclude shares reserved for
issuance upon exercise of options to be granted prior to consummation
of the Offering and include 85,750 shares of Class A Common Stock to be
issued in payment for services, 23,692 shares of Class A Common Stock
to be issued in exchange for certain outstanding indebtedness upon
consummation of the Offering, and 131,735 shares of Class A Common Stock
and 993,212 shares of Class B Common Stock to be issued in exchange for
the principal and accrued interest on the Junior Notes remaining
outstanding upon consummation of the Offering. See "Management -- Equity
Ownership Plans," "Certain Transactions," "Description of Certain
Indebtedness -- Acquisition Notes and Assumed Debt."
17
<PAGE>
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below should be read in
conjunction with the consolidated financial statements and notes thereto of the
Company, the financial statements and notes thereto of the OMI Chemical
Carriers, the Seal Fleet Vessels, and GBMS, "Pro Forma Condensed Consolidated
Financial Statements," "Summary Consolidated Historical and Pro Forma Financial
and Operating Data," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus.
The selected unaudited pro forma statement of operations data give effect to the
pending acquisitions of the OMI Chemical Carriers and the Seal Fleet Vessels,
the acquisition of certain vessels from GBMS in January 1996, the acquisition of
one vessel in February 1996, the Offering, and the conversion of the Junior
Notes into shares of Common Stock as if all such transactions had occurred on
January 1, 1995. The selected unaudited pro forma balance sheet and vessel
data give effect to the foregoing transactions and to the acquisition of two
additional vessels as if all such transactions had occurred on December 31,
1995. Such pro forma data are presented for illustrative purposes only and do
not purport to represent what the Company's results actually would have been if
such events had occurred at the dates indicated, nor do such data purport to
project the financial position or results of operations for any future period or
as of any future date.
<TABLE><CAPTION>
Year Ended December 31,
----------------------------------------------------------------
Pro Forma
1991 1992 1993 1994 1995 1995
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue..................................$ 45,120 $39,639 $ 41,527 $ 49,792 $ 70,562 $ 123,766
Operating expenses....................... 28,165 24,602 24,032 29,873 40,664 76,685
Overhead expenses........................ 7,150 6,778 6,176 9,581 12,518 15,019
------- ------ ------- ------ ------ ------
Earnings before interest, taxes,
depreciation and amortization (EBITDA)(1) 9,805 8,259 11,319 10,338 17,380 32,062
Depreciation and amortization............ 3.829 4,106 4,735 4,500 6,308 11,985
----- ----- ------- ------ ------ ------
Income from Operations................... 5,976 4,153 6,584 5,838 11,072 20,077
Interest expense, net.................... 5,024 3,993 3,412 5,302 11,460 10,525
Other income ............................ 601 8 519 11 26 23
------ ------ ----- ----- ------ ------
Income(loss)before provision for (benefit from)
Income taxes and cumulative effect of a
change in accounting principle.......... 1,553 168 3,691 547 (362) 9,575
Provision for (benefit from)income taxes 601 158 1,873 189 (2) 3,447
----- --- ----- --- ----- --------
Income(loss) before cumulative effect of a
change in accounting principle......... 952 10 1,818 358 (360) 6,128
Cumulative effect of a change in
accounting principle................... ---- ---- 1,491 --- ---- ----
---- ---- ----- --- ---- ----
Net income(loss) $ 952 $ 10 $ 3,309 $ 358 $ (360) $ 6,128
------- ----- ------- ------- ------- ------
Earnings(loss) per common share:
Income(loss) before cumulative effect of a
change in accounting principle(2)..... $ 0.14 $(0.01) $ 0.26 $ 0.03 $ (0.14) $ 0.57
Net income(loss)(2)................... 0.14 $(0.01) 0.50 0.03 (0.14) 0.57
Weighted average number of common shares and
common share equivalents outstanding
(In thousands)(3).................... 6,268 6,268 6,268 5,302 2,535 10,769
Balance Sheet Data:
(at period end)
Working capital......................... $ 3,330 $ 847 $ 2,640 $ 7,793 $ 4,315 $ 7,368
Total assets............................ 90,916 83,718 82,373 135.471 143,683 241,701
Total debt.............................. 59,394 57,011 51,273 104,281 109,051 120,072
Stockholders' equity and minority
partners' equity..................... 15,755 15,858 19,926 14,903 13,999 101,317
______________________
(Notes on following page)
18
<PAGE>
(1) EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interests, and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. EBITDA is not required by generally accepted
accounting principles and should not be considered as an alternative to
net income as an indicator of the Company's operating performance or as an
alternative to cash flows from operations as a measure of liquidity.
(2) For the purposes of calculating earnings per share for the years 1991,
1992, 1993, and 1994, historical income available to common stockholders
has been reduced for dividends on Class A Preferred Stock of $69,000,
$50,000, $203,000, and $222,000, respectively. The Class A Preferred
Stock was redeemed on September 30, 1994. See "Certain Transactions."
(3) For the years 1993 and 1994, the weighted average number of common shares
and common share equivalents assumes the conversion of the Class B
Preferred Stock into shares of Common Stock. The Class B Preferred Stock
was redeemed on September 30, 1994. Pro forma shares reflect the weighted
average number of common shares giving effect to the issuance of 7,000,000
shares of Class A Common Stock in the Offering, 85,750 shares of Class A
Common Stock in payment for services, 23,692 shares in exchange for certain
outstanding indebtedness upon consummation of the Offering, 131,735 shares
of Class A Common Stock and 993,212 shares of Class B Common Stock
in exchange for the principal and accrued interest on the Junior Notes
remaining outstanding upon completion of the Offering and excludes
shares of Class A Common Stock reserved for issuance upon exercise of
options to be granted prior to the consummation of the Offering. See
"Management -- Equity Ownership Plans," "Certain Transactions," and
"Description of Certain Indebtedness - Acquisition
Notes and Assumed Debt."
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of the Company's financial condition and
historical results of operations should be read in conjunction with the
Company's consolidated historical financial statements, the Company's unaudited
pro forma condensed consolidated financial statements, and the financial
statements of the OMI Chemical Carriers, the Seal Fleet Vessels, and the GBMS
vessels and the related notes thereto included elsewhere in this Prospectus.
Recent and Pending Acquisitions
The Company's results of operations have been and will be significantly
affected by a series of acquisitions, aggregating 83 vessels and certain
partnership interests, since September 1994 as summarized in the following
table.
</TABLE>
<TABLE><CAPTION>
Number of Assets Aggregate
Period Transactions Acquired Investment
<S> <C> <C> <C> <C>
Offshore Energy Support 1994 5 6 supply boats $19.6 million
20 crew boats
2 utility boats
1995 1 7 crew boats 5.9 million
1996(1) 5 9 supply boats
11 crew boats 25.3 million
Offshore and Harbor Towing 1994 1 1 tug $ 1.8 million
1995 1 1 tractor tug 6.4 million
Chemical Transportation 1996(1) 1 3 chemical $64.7 million
carriers
Petroleum Product
Transportation 1994 1 10 tugs $13.9 million
8 barges
1995 1 5 barges 0.1 million
</TABLE>
---------------
(1) 1996 transactions include the Acquisitions.
<PAGE>
Area of Operations Overview
The financial information presented below represents historical results
by major areas of operations. The historical financial data presented below
should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere in this Prospectus.
Year Ended December 31,
1993 1994 1995
----------------------------
Revenues:
Marine support services:
Offshore energy support $4,518 $11,317 $23,217
Offshore and harbor towing 10,585 11,140 12,582
------ ------ ------
15,103 22,457 35,799
Marine transportation services:
Chemical transportation 17,337 16,886 18,632
Petroleum product transportation 9,087 10,449 16,131
----- ------ ------
26,424 27,335 34,763
------ ------ ------
Total revenues $41,527 $49,792 $70,562
======= ======= =======
Operating costs:
Marine support services:
Offshore energy support $1,719 $7,017 $13,335
Offshore and harbor towing 5,748 5,568 6,001
----- ----- -----
7,467 12,585 19,336
Marine transportation services:
Chemical transportation 10,678 10,698 11,105
Petroleum product transportation 5,887 6,590 10,223
----- ----- ------
16,565 17,288 21,328
------ ------ ------
Total operating costs $24,032 $29,873 $40,664
======= ======= =======
Fleet operating income:
Marine support services:
Offshore energy support $2,799 $4,300 $9,882
Offshore and harbor towing 4,837 5,572 6,581
----- ----- -----
7,636 9,872 16,463
Marine transportation services:
Chemical transportation 6,659 6,188 7,527
Petroleum product transportation 3,200 3,859 5,908
----- ----- -----
9,859 10,047 13,435
----- ------ ------
Total fleet operating income $17,495 $19,919 $29,898
====== ====== ======
Overhead expenses $ 6,176 $ 9,581 $12,518
Depreciation and amortization
expense 4,735 4,500 6,308
----- ----- -----
Operating income $6,584 $5,838 $11,072
====== ===== ======
Revenue Overview
Marine Support Services
Revenue derived from vessels providing marine support services is
attributable to the Company's offshore energy support fleet and its offshore and
harbor towing operations.
Offshore Energy Support. Revenue derived from the Company's offshore
energy support services is primarily a function of the size of the Company's
fleet, vessel day rates or charter rates, and fleet utilization. Rates and
utilization are primarily a function of offshore drilling, production, and
construction activities. Levels of offshore drilling, production, and
construction have increased recently as a result of fundamental changes in the
Gulf of Mexico energy industry, including (i) improvements in exploration
technologies, such as computer-aided exploration and 3-D seismic, that have
increased drilling success rates in the region; (ii) improvements in subsea
completion and production technologies
20
<PAGE>
that have led to increased deepwater drilling and development; and (iii)
expansion of the region's production infrastructure that has improved the
economics of developing smaller oil and gas fields. In addition, the short
reserve life characteristics of Gulf of Mexico gas production require continuous
drilling to replace reserves and maintain production. These higher overall
activity levels have led to increased demand for the Company's offshore energy
support services and higher overall vessel utilization and day rates in the Gulf
of Mexico. Crew boats generally have higher utilization rates than supply boats
because, unlike supply boats, which are used primarily in connection with
exploration activities, crew boats are utilized in connection with both
exploration and production activities. Contracts for the utilization of
offshore service vessels commonly include termination provisions with three-to
five-day notice requirements and no termination penalty. As a result, the
operations of companies engaged in the offshore energy service market are
particularly sensitive to market demand. See "Business--The Industry--Marine
Support Services--Offshore Energy Support."
The following table sets forth average day rates achieved by the offshore
supply boats and crew boats owned, operated, or managed by the Company in the
Gulf of Mexico and their average utilization for the periods indicated.
<TABLE>
<CAPTION>
1993 1994
------------------------------ ---------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of
supply boats . . . . 3 3 3 3 5 7 7 8
Average supply boat
day rates(1). . . . $2,325 $2,400 $2,852 $3,209 $3,433 $3,035 $3,200 $3,060
Average supply boat. .
utilization rates(2) 100% 100% 100% 94% 94% 73% 80% 90%
Number of
crew boats(3)(4). . . -- -- -- -- -- -- 20 19
Crew boat
day rates(1)(3). . . -- -- -- -- -- -- $1,405 $1,435
Average crew boat
utilization rates(2)(3) -- -- -- -- -- -- 87% 88%
<CAPTION>
1995 1996
-------------------------------- -------
<S> Q1 Q2 Q3 Q4 Q1
Number of <C> <C> <C> <C> <C>
supply boats . . . . 10 10 10 10 10
Average supply boat
day rates(1). . . . $2,886 $ 2,843 $3,113 $ 3,244 $3,468
Average supply boat. .
utilization rates(2) 71% 76% 84% 93% 92%
Number of
crew boats(3)(4). . . 26 26 26 26 35
Crew boat
day rates(1)(3). . . $1,444 $ 1,412 $1,422 $ 1,458 $1,460
Average crew boat
utilization rates(2)(3) 79% 81% 90% 91% 89%
</TABLE>
- -----------------------
(1) Average day rates are calculated by dividing total vessel revenue by the
total number of days the vessel worked.
(2) Utilization rates are calculated by dividing the fleet average number of
days worked by 365.
(3) Excludes utility boats.
(4) The Company first began operating crew boats in July 1994.
During the past five years, utilization and day rates in the Gulf of Mexico
were at their lowest during the summer of 1992 when the Company estimates
average offshore supply vessel day rates were $1,300 to $1,400. As a
result, in the summer of 1992, a number of operators relocated supply boats from
the Gulf of Mexico to West Africa, the Arabian Sea, and Southeast Asia. The
Company relocated five supply boats to the Arabian Sea and two to Southeast
Asia in September 1992. Utilization and day rates in the Gulf of Mexico
increased through the end of 1993 as a result of (i) Hurricane Andrew in the
fall of 1992, which caused substantial damage to rigs and greater demand for
supply boats, (ii) higher natural gas prices and increased drilling activity for
natural gas, and (iii) the reduced supply of immediately available vessels.
Relocation of vessels to the Gulf of Mexico in early 1994 depressed rates and
utilization until the end of the second quarter of 1994. Utilization and day
rates were lower in the first half of 1995 because of weak natural gas prices,
primarily due to the warm winter in North America and Europe.
21
<PAGE>
Increased activity in the Gulf of Mexico since the second quarter of 1995
has been primarily attributable to improved technology in the seismic industry
and an approximate balance in the supply of and demand for offshore service
vessels. Deepwater activity is also currently a positive factor in the market,
and management believes further deepwater exploration and production will likely
increase demand for available vessels, resulting in higher day rates and
utilization. Domestic inventories of energy reserves are currently closer to
demand levels and, as a result, management believes that exploration and
development activity will continue at an aggressive pace in order for oil
companies to maintain inventories, thereby resulting in a more disciplined
market without the dramatic fluctuations historically experienced. As a result,
management believes the offshore energy support sector should be subject to less
market fluctuation in the future.
Day rates in the Arabian Sea, where the Company operates one supply boat,
decreased during 1995, and that market continues to be depressed. Rates in
Southeast Asia increased slightly, although utilization was lower than
anticipated by the Company.
Offshore and Harbor Towing. Revenue derived from the Company's tug
operations is primarily a function of the number of tugs available to provide
services, the rates charged for their services, and the volume of vessel traffic
requiring docking and other ship-assist services. Vessel traffic, in turn, is
largely a function of the general trade activity in the region served by the
port. The Company generally has maintained four to five tugs in Port Ever-
glades, and three each in Port Canaveral and Mobile, although it has shifted
tugs among ports depending upon demand. With the delivery of the tractor tug
Broward, the Company has operated up to five tugs in Port Everglades with one of
the tugs available to provide offshore towing services. The Company's tug
revenue increased 5% from 1993 to 1994 and 13% from 1994 to 1995, primarily as a
result of higher port activity levels and, to a lesser extent, rate increases to
cover cost inflation.
The following table summarizes certain operating information for the
Company's tugs.
Year Ended December 31,
-------------------------
1993 1994 1995
Number of tugs(1) 10 10 11
Total ship docking tug jobs(2) 8,178 8,740 9,233
Total offshore and harbor
towing revenue (in thousands) $10,585 $11,140 $12,582
__________________
(1) The Company's eleventh tug was delivered in August 1995.
(2) Excludes offshore towing jobs.
Marine Transportation Services
Chemical Transportation. Generally, demand for industrial chemical
transportation services coincides with general economic activity. Since 1989,
revenue derived from chemical transportation operations has been entirely
attributable to the operations of Ocean Specialty Tankers Corporation
("OSTC"), a company owned equally by OMI Corp. ("OMI") and the Company. The
Company's two chemical carriers, together with the three OMI Chemical Carriers
to be acquired by the Company, have been chartered to OSTC, which has marketed
the five vessels under a pool arrangement. The Company has derived efficiencies
in overhead and utilization by participating in the pool arrangement. The
Company's revenue from industrial chemical transportation operations has
consisted of distributions from OSTC based upon a formula
22
<PAGE>
that takes into account individual vessel performance characteristics applied to
OSTC's revenues (net of fuel costs, port charges, and overhead). Under the
formula, the Company has received approximately 40% of OSTC's net revenue since
September 1990. Following the acquisition by the Company of the OMI Chemical
Carriers and the remaining 50% interest in OSTC, the Company intends to continue
to have OSTC market the Company's five chemical carriers. See "Business --
Company Operations--Marine Transportation Services--Chemical Transportation--
OSTC."
Petroleum Product Transportation. Since entering service in 1975, the
product carrier Seabulk Challenger has derived all of its revenue from
successive voyage and time charters to Shell. Under the current charter, fuel
and port costs are for the account of the charterer, charter hire escalates
based upon changes in the consumer price index, and charter hire is suspended
while the vessel is unavailable to transport cargo, as when it is undergoing
repairs or regularly scheduled maintenance. The charter extends to January
2000, with the charterer retaining the right to early termination upon the
payment to the Company of a significant penalty. Revenue from the Company's
towboats and fuel barges has been derived primarily from contracts of
affreightment with FPL and Steuart Petroleum Co. that require the
Company to transport fuel as needed by those two customers, with the FPL
contract having a guaranteed minimum utilization.
The following table sets forth the average time charter equivalents for the
Company's chemical and product carriers, including the three OMI Chemical
Carriers to be acquired.
Year Ended December 31,
---------------------------
1993 1994 1995
Number of vessels 6 6 6
Time charter equivalents (1) $ 24,566 $24,751 $25,626
_________________
(1) Time charter equivalents are calculated by deducting total voyage expenses
from total voyage revenue and dividing the result by the total days per
voyage.
Overview of Operating Expenses and Capital Expenditures
The Company's operating expenses are primarily a function of fleet size and
utilization levels. The most significant expense categories are crew payroll
and benefits, depreciation and amortization, charter hire, maintenance and
repairs, fuel, and insurance.
The crews of the Company's chemical and product carriers are paid on a
time-for-time basis by which they receive paid leave in proportion to time
served aboard a vessel. The crews of certain tugs, towboats, and offshore
energy support vessels are paid only for days worked.
The Company capitalizes expenditures exceeding $5,000 for product and
chemical tankers and $3,000 for all other vessels, where the item acquired has a
useful life of three years or greater. Vessel improvements and vessel
maintenance and repair are capitalized only if they also extend the useful life
of the vessel or increase its value. The Company overhauls main engines and key
auxiliary equipment in accordance with a continuous planned maintenance program.
Under applicable regulations, the Company's chemical and product carriers,
offshore service vessels, and its four largest tugs are required to be drydocked
twice in a five-year period for inspection
23
<PAGE>
and routine maintenance and repairs. These vessels are also required to undergo
special surveys every five years involving comprehensive inspection and
corrective measures to insure their structural integrity and proper functioning
of their cargo and ballast piping systems, critical machinery and equipment, and
coatings. The Company's fuel barges, because they are operated in fresh water,
are required to be drydocked only twice in each ten-year period. The Company's
harbor tugs and towboats generally are not required to be drydocked on a
specific schedule. During the years ended December 31, 1993, 1994, and 1995,
the Company drydocked five, 13, and 42 vessels, respectively, at an aggregate
cost (exclusive of lost revenue) of $0.9 million, $1.6 million, and $2.0
million, respectively. See "-- Liquidity and Capital Resources -- Capital
Expenditures" for information regarding anticipated maintenance and improvement
expense, including drydocking expense. Effective January 1, 1993, the Company
changed its method of accounting for drydocking costs from the accrual method
to the deferral method. Under the deferral method, capitalized drydocking
costs are expensed over the period preceding the next scheduled drydocking.
The Company believes the deferral method better matches costs with revenue and
minimizes any significant changes in estimates associated with the accrual
method. See Note 1 of the Company's consolidated financial statements. In
addition to variable expenses associated with vessel operations, the Company
incurs fixed charges to depreciate its marine assets. The Company calculates
depreciation based on a useful life ranging from 25 years for its steel-hull
offshore energy support vessels to 30 years for aluminum-hull vessels, the
lesser of any applicable lease term life or the OPA 90 life for its product and
chemical carriers, ten years for its fuel barges, and 40 years for its towboats
and tugs.
Charter hire consists primarily of payments made with respect to the
bareboat charters of the Seabulk Challenger and Seabulk Magnachem, which were
acquired pursuant to leveraged lease transactions (see "Description of Certain
Indebtedness -- Long-Term Charter Obligations -- Title XI Bonds"). The Company
intends to enter into a sale/leaseback arrangement for the OMI Star. The
Company also pays charter hire when it charters harbor tugs to meet requirements
in excess of its own tugs' availability. This typically occurs in Mobile when
the Company charters one or two tugs to assist with the docking or undocking of
a particular vessel.
Insurance costs consist primarily of premiums paid for (i) protection and
indemnity insurance for the Company's marine liability risks, which are insured
by a mutual insurance association of which the Company is a member and through
the commercial insurance markets; (ii) hull and machinery insurance and other
maritime-related insurance, which are provided through the commercial marine
insurance markets; and (iii) general liability and other traditional insurance,
which is provided through the commercial insurance markets. Insurance costs,
particularly costs of marine insurance, are directly related to overall
insurance market conditions and industry and individual loss records, which vary
from year to year.
Results of Operations
Year Ended December 31, 1995 Compared with Year Ended December 31, 1994
Revenue. Revenue increased 42% to $70.6 million in 1995 compared with
$49.8 million in 1994 primarily due to the Company's purchase of new businesses
and additional vessels.
Offshore energy operations showed a 105% increase in revenue in 1995
primarily due to the acquisition of additional supply and crew boats. Although
revenue increased, the utilization of supply boats decreased to 81% in 1995 from
84% in 1994 and the utilization of crew boats decreased to 85% in 1995 from 88%
in 1994 due primarily to the relatively warm winter in early 1995, which caused
a decline in oil and gas prices thereby reducing exploration and production
activities. There was a 5% decrease in average day rates for supply boats in
1995 from 1994, while day rates for crew boats remained relatively stable.
24
<PAGE>
Chemical transportation revenue increased 10% in 1995 primarily due to
fewer off-hire (out-of-service) days incurred by the Seabulk Magnachem in 1995
following its regularly scheduled drydocking in 1994.
Revenue from fuel transportation increased 54% in 1995 primarily due to a
full year of operating results for the Sun State tug and barge fleet, which was
acquired in September 1994.
Revenue from harbor tug operations increased 13% to $12.6 million in 1995
from $11.1 million in 1994 primarily due to an increase in overall traffic in
the ports served by the Company.
Operating Expenses. Operating expenses increased 36% to $40.7 million in
1995 from $29.9 million in 1994 primarily due to increased operating expenses
associated with acquisitions, although operating expenses decreased as a
percentage of revenues to 58% in 1995 from 60% in 1994.
Overhead Expenses. Overhead expenses increased 31% to $12.5 million in
1995 compared with $9.6 million in 1994 primarily due to increases in staffing,
certain benefits, and insurance expenses directly related to new business
acquisitions. Also, in addition to paying discretionary performance bonuses in
April 1995 which were, in part, related to prior periods, an accrual of $400,000
was made at year end for 1995 performance bonuses. As a percentage of revenues,
overhead expenses decreased to 18% in 1995 from 19% in 1994.
Depreciation and Amortization. Depreciation and amortization expense
increased 40% to $6.3 million in 1995 compared with $4.5 million in 1994
primarily due to an increase in fleet size as a result of acquisitions.
Income from Operations. Income from operations increased 90% to $11.1
million, or 16% of revenue, in 1995 compared with $5.8 million, or 12% of
revenue, in 1994. This increase was a result of a substantial increase in
income from operations from the Company's offshore energy segment and an
increase in the Company's fuel energy segment that were mainly the
result of acquisitions. Harbor towing achieved an increase in gross profit of
25% over 1994 as a result of an overall increase in traffic in Mobile, Port
Canaveral, and Port Everglades.
Interest. Net interest expense increased 116% to $11.5 million, or 16% of
revenue, in 1995 compared with $5.3 million, or 11% of revenue, in 1994
primarily due to interest on debt incurred in the last quarter of 1994 to
finance acquisitions.
Net Income (Loss). The Company had a net loss of $0.4 million in 1995
compared with net income of $0.4 million in 1994, primarily due to an increase
in financing costs incurred in connection with acquisitions completed in 1994
and the other factors noted above.
Year Ended December 31, 1994 Compared with Year Ended December 31, 1993
Revenue. Revenue increased 20% to $49.8 million for the year ended
December 31, 1994 compared with $41.5 million for the year ended December 31,
1993 primarily due to the addition of revenue from acquisitions completed in
1994. Revenue from offshore energy support services increased 150% primarily
due to revenue from such acquisitions. In addition, average Gulf of Mexico
supply boat rates increased 19% in 1994 from an average of $2,696 per day in
1993 to $3,195 per day in 1994,
25
<PAGE>
although supply boat fleet utilization decreased from 98% to 84% due to the
drydocking of two boats and the addition of two boats with relatively low
utilization rates in 1994. Revenue from chemical transportation decreased 3%
due to the Seabulk Magnachem having greater off-hire time due to a regularly
scheduled drydocking in April 1994. Revenue from fuel transportation increased
15% primarily due to the Sun State acquisition in September 1994. Towing
revenues increased 5% due to a general increase in vessel traffic in the ports
served by the Company.
Operating Expenses. Operating expenses increased 24% to $29.9 million, or
60% of revenue, for the year ended December 31, 1994 compared with $24.0
million, or 58% of revenue, for the year ended December 31, 1993 primarily due
to the increased operating expenses associated with the acquisitions completed
in 1994. Charter hire expense increased due to the Company's chartering in May
and June of 1994 of certain supply and crew boats that were acquired in
September 1994, partly offset by a decrease in charter hire expense due to the
acquisition in September 1994 of the interests in the limited partnership that
owned the tug Hollywood (formerly the Cape Canaveral), which was previously
chartered to the Company.
Overhead Expenses. Overhead expenses increased 55% to $9.6 million, or 19%
of revenue, for the year ended December 31, 1994 compared with $6.2 million, or
15% of revenue, for the year ended December 31, 1993 primarily due to increased
corporate staffing and other greater infrastructure costs associated with the
acquisitions completed in 1994, greater litigation expenses relating to the
Seabulk America (see "Business -- Legal Proceedings"), and expenses incurred to
prepare an initial public offering which was postponed due to market conditions.
Bonuses of approximately $280,000 were paid to Company management personnel in
October 1994 (no bonuses to management personnel were paid in 1993).
Depreciation and Amortization. Depreciation and amortization expense
decreased 5% to $4.5 million for the year ended December 31,
1994 compared with $4.7 million for the year ended December
31, 1993 primarily due to the amortization of expenses incurred in 1993 to
transport four offshore supply boats from the Gulf of Mexico to the Arabian
Sea.
Income from Operations. Income from operations decreased 11% to $5.8
million, or 12% of revenue, for the year ended December 31, 1994 compared with
$6.6 million, or 16% of revenue, for the year ended December 31, 1993 primarily
as a result of the factors described above.
Interest. Net interest expense increased 55% to $5.3 million, or 11% of
revenue, for the year ended December 31, 1994 compared with $3.4 million, or 8%
of revenue, for the year ended December 31, 1993 primarily due to interest due
on the debt incurred to finance the acquisitions completed in 1994.
Net Income. Net income decreased to $0.4 million for the year ended
December 31, 1994 compared with $3.3 million for the year
ended December 31, 1993 primarily due to the factors described above.
Seasonality
The Company has experienced some slight seasonality in its overall
operations. The first half of the year is generally not as strong as the
second half due to lower activity in offshore energy support activity and
petroleum transportation during the months of February, March, and April.
26
<PAGE>
Liquidity and Capital Resources
The Company's liquidity requirements historically have arisen primarily
from its debt service requirements, working capital needs, preferred stock
dividends, and vessel acquisitions and improvements. During 1994, the
Company's primary capital requirements included an aggregate of $56.8 million
for debt service requirements and a total of $33.6 million for acquisitions. In
1995, debt service requirements totalled $15.0 million and the cash portion of
the acquisition costs were $2.9 million.
The Company's principal sources of cash have been proceeds from borrowings
and cash provided by operating activities. In September 1994, the Company
entered into the Credit Facility with certain banks which, as amended in March
1996, provides for a $47.0 million term loan, $15.0 million of revolving lines
of credit, and a $5.6 million letter of credit. At December 31, 1994 and 1995,
aggregate borrowings under the Credit Facility were $50.0 million and $53.5
million, respectively. Also in September 1994, the Company issued $25.0 million
of Senior Notes and $25.0 million of Junior Notes. Borrowings under the Credit
Facility, the Senior Notes, and the Junior Notes were utilized primarily to
repay other indebtedness and to fund vessel acquisitions. See "-- Recent and
Pending Acquisitions" and "Description of Certain Indebtedness." A portion of
the proceeds from the Offering will be used to repay $8.1 million under the
Credit Facility, $25.7 million representing all outstanding principal and
interest under the Senior Notes, and $15.1 million of principal under the
Junior Notes. See "Use of Proceeds." The balance of the outstanding principal
and interest under the Junior Notes will be converted into Class B Common Stock.
See "The Company."
The Credit Facility will be amended effective upon the consummation of the
Offering to increase the term loan to $54.5 million, decrease the lines of
credit to $7.5 million, and establish a $12.5 million vessel acquisition credit
line which decreases to $5.0 million over a five-year period. After giving
effect to (i) consummation of the Offering and application of the net proceeds
therefrom and (ii) completion of the Acquisitions, the Company will have $54.5
million outstanding under the term loan and no borrowings outstanding under the
lines of credit or the acquisition line. The Company expects to fund $7.0
million of the cash portion of the purchase price for the OMI Chemical Carriers
with additional borrowings under the Credit Facility, although there can be no
assurance that this will be the source of such funds. Borrowings under the
Credit Facility currently bear interest, and upon consummation of the Offering
will continue to bear interest, at prime or LIBOR, at the Company's option,
plus a margin based on the Company's compliance with certain financial ratios.
See "Description of Certain Indebtedness -- Bank Debt" for additional
information concerning the Credit Facility.
The Company's future capital needs are expected to relate primarily to debt
service obligations, maintenance and improvement of its fleet, and acquisitions.
The Company's outstanding indebtedness at December 31, 1995, on a pro forma
basis after giving effect to the Offering and the Acquisitions, would have been
approximately $120.1 million. Debt service requirements for 1996 include
principal and interest payments of approximately $12.6 million and $8.9 million,
respectively, and operating lease obligations for 1996 total approximately
$3.8 million. The Company's principal and interest payment obligations increase
to $14.9 and $7.8 million, respectively, in 1997 and operating lease obligations
increase slightly in 1997 to approximately $3.9 million.
Capital requirements for vessel maintenance and improvement are estimated
to be $8.0 million for 1996, of which $2.0 million had been expended as of
March 31, 1996, and $10.0 million for 1997.
Since 1993, the Company has grown primarily through a series of strategic
acquisitions. See "--Recent and Pending Acquisitions." Pursuant to the
Acquisitions, the Company has the right to acquire title to 13 vessels
and bareboat charter rights to one additional vessel. The aggregate
purchase price of the Acquisitions is $84.5 million, consisting of
approximately $26.7 million in cash and the assumption or
27
<PAGE>
issuance of $57.8 million of debt and capital lease obligations, including $7.5
million of lease obligations that will arise through concurrent sale/leaseback
transactions. The cash portion of the purchase price of the Acquisitions will
be funded with a portion of the proceeds from the Offering. See "Use of
Proceeds" and "Business -- The Acquisitions."
One element of the Company's strategy is to continue to grow through
selected acquisitions. If the Company is successful in identifying additional
vessels or operations, the Company anticipates funding such acquisitions
primarily with proceeds from debt or equity offerings and/or the issuance to the
seller of Class A Common Stock. Although, upon completion of the Offering, the
Credit Facility will provide an additional $12.5 million credit line for
acquisitions and permit additional borrowings of $10.0 million outside the
Credit Facility, the Credit Facility will continue to limit the Company's annual
capital expenditures, including capital expenditures for maintenance and
improvements of existing vessels as well as for acquisitions, to $10.0 million
without the consent of the lending banks. Based upon the Company's anticipated
maintenance expenditures, the existing restrictions will require consent for
additional acquisitions exceeding approximately $2.0 million for the balance of
1996 and for any acquisitions in 1997. The Company is seeking an amendment to
the Credit Facility that would increase the annual limitations on capital
expenditures for acquisitions.
The Company has a 2.4% equity interest in five 45,300 dwt petroleum product
carriers currently under construction. The aggregate cost of the five carriers
is estimated to be $255.0 million, of which approximately $40.0 million will
constitute equity investment and $215.0 million will be financed with the
proceeds of government-guaranteed Title XI ship financing bonds issued in
March 1996. Subject to certain conditions, the Company has an
option, exercisable through 2002, to purchase a 49.3% interest at
a price equal to (i) the investor's equity investment plus a stated annual
return, or (ii) if exercised after December 31, 1997, the greater of the fair
market value of the interest or the amount set forth in (i). The Company also
has an option, exercisable on January 15, 1998, to purchase an additional 23.4%
interest at a price equal to the investor's equity investment plus a stated
return. Should the Company fail to exercise the latter option, the investor
has the option to acquire 1.6% of the ownership interest from the Company for
nominal consideration. The Company currently has no understandings or
agreements with respect to the financing that it would require if it were to
exercise any or all of these options, which could be in excess of
$30.0 million, and there can be no assurance that such financing will be
available.
The Company's existing indebtedness restricts the Company's subsidiaries
from paying dividends or making other distributions to the Company. The Company
does not believe that this restriction has had or will have a material effect
upon its ability to meet its cash obligations because a substantial portion of
those obligations are payable by its subsidiaries.
The Company is the defendant in litigation in which one of the shipyards
that completed the Seabulk America is seeking additional payments aggregating
$8.5 million for its work. See "Business -- Legal Proceedings." Although the
Company believes the shipyard's claims are without merit and has asserted
counterclaims aggregating $5.6 million, the Company has obtained a bank letter
of credit to finance up to $5.6 million of any additional payment that it might
ultimately be required to make pursuant to this litigation. See "Description of
Certain Indebtedness -- Bank Debt."
Working capital at December 31, 1995, pro forma for the Acquisitions, would
have been $7.4 million. The Company believes that its available funds,
including proceeds from the Offering, together with cash generated from
operations and amounts available under the Credit Facility, will be sufficient
to fund debt service requirements, planned capital expenditures, and working
capital requirements for the
28
<PAGE>
foreseeable future. The Company also believes that such resources, together
with the potential use of equity financing, will allow the Company to pursue its
strategy of growth through acquisitions. As future cash flows are subject to a
number of uncertainties, including the condition of the markets served by the
Company, there can be no assurance that these resources will continue to be
sufficient to fund the Company's cash requirements.
Effect of Inflation
The Company does not consider inflation a significant business risk in the
current and foreseeable future although the Company has experienced some cost
increases. In some cases, these increases have been offset by charter hire
escalation clauses.
New Accounting Standards
In March 1995, the FASB issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, ("FASB Statement No. 121") which requires impairment
losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. FASB Statement No.
121 also addresses the accounting for long-lived assets that are expected to be
disposed of. The Company adopted FASB Statement No. 121 in the first quarter
of 1996 and the effect of adoption was not material.
29
<PAGE>
BUSINESS
General
The Company provides marine support and transportation services primarily
in the U.S. domestic trade and principally to the energy and chemical
industries. The Company is the third largest operator of supply and crew boats
in the Gulf of Mexico. In addition, the Company is the sole provider of
commercial tug services in Port Everglades and Port Canaveral, Florida, and a
leading provider of such services in Mobile, Alabama. The Company also
transports petroleum products and specialty chemicals in the U.S. domestic
trade, a market insulated from international competition under the Jones Act.
The total capacity of the Company's five chemical carriers, pro forma for the
Acquisitions, represents approximately 44% of the capacity of the independent
domestic specialty chemical carrier fleet, and four of the five vessels are
among the most recently built and the only independently owned, diesel-powered
chemical carriers with full double-bottom hulls operating in the U.S. domestic
trade.
The Company has grown rapidly through a series of strategic acquisitions,
increasing its marine support fleet from 20 vessels in 1993 to 73 vessels
currently and its marine transportation fleet from three vessels in 1993 to 29
vessels currently, in each case pro forma for the Acquisitions. As a result,
the Company's revenues increased approximately 198% from $41.5 million in 1993
to $123.8 million in 1995, pro forma for the Acquisitions. Over the same
period, the Company's EBITDA increased approximately 183% from $11.3
million to $32.1 million, pro forma for the Acquisitions.
The Company has been operating in the marine support services industry
since its founding in 1958 and has been engaged in the transportation of
petroleum products and chemicals for 21 and 19 years, respectively.
The Company's executive officers have an average of over 18 years
of experience in the marine transportation industry, including
an average of over 13 years with the Company. The Company emphasizes
promotion from within, regular training, and permanent vessel assignments, which
it believes results in a comparatively low rate of personnel turnover. As a
result, the Company believes that its employees are among the most efficient in
the marine transportation industry and that it has had favorable experience with
respect to employee turnover and employee injury claims. The Company's
employees are predominantly non-union. See "-- Employees."
Strategy
The Company's strategy is to realize the benefits presented by the
integration of its recent and pending acquisitions with its existing operations
and to continue to grow through selected acquisitions that further consolidate
the marine support and transportation services markets in which the Company
operates. The Company believes it has numerous opportunities to make further
accretive acquisitions in its core businesses. Critical elements of the
Company's strategy include continuing to (i) leverage its demonstrated expertise
in acquiring and consolidating diverse marine operations, (ii) focus its
operations in the U.S. domestic trade, (iii) capitalize upon its leadership in
marine vessel engineering innovation, (iv) build upon its long-term
relationships with its customers, and (v) enhance its record of quality service
and safety.
Demonstrated Expertise in Acquiring and Consolidating Diverse Marine
Operations. Many domestic maritime transportation markets, including offshore
energy support and towing, are undergoing consolidation. Small, privately owned
companies face increasing difficulty competing for market share,
30
<PAGE>
obtaining adequate insurance coverage at economically viable rates, and meeting
increasingly more stringent customer and regulatory safety and environmental
requirements. The Company believes it is well positioned to take advantage of
this consolidation trend. The Company's recent acquisitions have substantially
increased the size of its fleet, established it as one of the leading operators
in the offshore energy market, and given it a reputation as a successful
consolidator in its niche markets. See "-- The Acquisitions" and "Management's
Discussion and Analysis of Financial Conditions and Results of Operations --
Recent and Pending Acquisitions."
U.S. Domestic Market Focus. The Company intends to continue to concentrate
its operations in markets protected by the Jones Act against competition from
foreign-built, foreign-crewed vessels. As a result, most of the Company's
vessels are, and will continue to be, built and maintained to U.S. standards and
registered under the U.S. flag. The Company believes that domestic energy and
chemical transportation freight rates will increase within the next three to
five years and continue thereafter, as the supply of vessels eligible to carry
petroleum and other hazardous substances diminishes as a result of mandatory
retirement imposed by OPA 90.
Technological Leadership and Business Innovation. The Company believes it
has been a leader in developing and applying marine technology to meet its
customers' needs in a cost-effective manner. Principals of the Company
designed, engineered, and developed the CATUG(R) integrated tug/barge ("ITB"),
in which a catamaran-hull tug is married to the stern section of a dedicated
barge to achieve construction cost savings and operating efficiencies, such as
lower manning requirements. The Seabulk Challenger, the Company's petroleum
product carrier, was the first of 12 CATUG(R)s constructed in the world. The
Company's Seabulk America is an innovative combination of the stern portion of a
wrecked oil tanker with the forebody of the chemical barge portion of a former
ITB. By combining this stern and forebody, the Company obtained the most
recently constructed chemical carrier in the U.S. domestic trade at a cost
substantially lower than that of a newly constructed vessel. The Company has
demonstrated its business innovation in the formation of the only pool of
chemical carriers in the U.S. domestic trade and most recently in the formation
of the entities that will own five new petroleum product carriers currently
under construction. See "-- Company Operations--Marine Transportation
Services."
Long-term Relationships. The Company currently maintains and continues to
pursue long-term customer relationships. Long-term contracts can
both minimize the risk associated with the substantial investments frequently
required for new vessels and mitigate the effects of any cyclical downturns in
the industry. This element of the strategy began with the Company's long-term
charter of its petroleum product carrier to Shell and continued with the
acquisition of the towboat and fuel barge fleet in September 1994, which has a
long-term contract with FPL.
Quality Service and Safety. Over a span of nearly 38 years, the Company
believes it has built a reputation for providing its customers with the highest
quality service and safety in terms of timeliness, dependability, and technical
expertise. The Company continuously seeks to improve the quality of its service
both by upgrading the capabilities of its vessels and by increasing the skill
levels of its employees. It believes, for example, that its chemical carriers
have experienced a particularly low level of cargo degradation claims relative
to its competitors; that its emphasis on preventive maintenance minimizes vessel
time out of service and repair expenses; and that its reputation provides an
advantage in retaining customer loyalty (particularly in times of excess
capacity) and in entering new markets.
31
<PAGE>
As part of its continuing effort to maintain high standards of quality and
safety, the Company has implemented a program intended to qualify it for
certification under quality assurance, safety, and environmental standards
established under ISO 9002, which are voluntary, and the International Ship
Management Code, which become mandatory in July 1998. The Company was recently
audited as part of the certification process for both sets of standards, and
expects to be notified regarding such certification by June 1996. The Company's
success in establishing high levels of quality and safety are further reflected
by its receipt of Shell's offshore safety award for three consecutive years and
a 69% reduction in the rate of recordable safety incidents per manhour from 1991
to 1995, a period during which total manhours increased 68%.
The Acquisitions
The Company has entered into purchase agreements with four different
sellers to acquire (i) title to an aggregate of 13 vessels and (ii) bareboat
charter rights to one additional vessel (collectively, the "Acquisitions"). The
Acquisitions include the purchase of (i) the three OMI Chemical Carriers and the
remaining 50% interest in OSTC from OMI; (ii) eight offshore supply boats and
bareboat charter rights to one supply boat (the "Seal Fleet Vessels") from Seal
Fleet, Inc. and certain partnerships (collectively, "Seal Fleet"); (iii) a 152-
foot crew/supply boat, to be named the Seabulk St. Francis, currently under
construction, from Mr. J. Erik Hvide, Chairman of the Board of the Company, and
the Investor Group; and (iv) an existing 120-foot crew boat from Leppaluoto
Offshore Marine, Inc. ("Leppaluoto"). These transactions are expected to be
completed as soon as practicable after consummation of the Offering, except
for the acquisition of the crew/supply boat, which is expected to be completed
following completion of its construction in October 1996.
The aggregate purchase price of the Acquisitions is $84.5 million,
consisting of approximately $26.7 million in cash and the assumption or issuance
of $57.8 million of debt and capital lease obligations, including $7.5 million
of lease obligations that will arise through concurrent sale/leaseback
transactions. The cash portion of the purchase price will be funded with a
portion of the proceeds from the Offering. Additional information concerning
the acquisitions from OMI, Seal Fleet, and Leppaluoto is set forth below and
additional information concerning the purchase from Mr. Hvide and the Investor
Group is set forth in "Certain Transactions."
OMI. The Company and OMI entered into a stock purchase agreement, dated as
of October 12, 1995, as amended (the "OMI Agreement"), pursuant to which the
Company has agreed to purchase from OMI the three OMI Chemical Carriers and
OMI's 50% interest in OSTC for an aggregate purchase price of approximately
$64.7 million, consisting of approximately $30.0 million in cash and
the assumption of approximately $34.7 million in mortgage obligations related to
two of the OMI Chemical Carriers. The cash portion of the purchase
price will be funded with $15.5 million from the proceeds of the Offering,
$7.5 million provided by third party lease financing of one of the vessels,
and $7.0 million expected to be provided through additional borrowings. The
Company anticipates that the Credit Facility will be increased to fund such
borrowings. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." For additional
information concerning the OMI Chemical Carriers, see "-- Marine Transportation
Services -- Chemical Transportation."
Seal Fleet. The Company and Seal Fleet have entered into asset purchase
agreements, dated as of March 29, 1996 (the "Seal Fleet Agreements"), pursuant
to which the Company has agreed to
32
<PAGE>
purchase three offshore supply boats and short-term rights under a bareboat
charter of one additional supply boat from Seal Fleet, Inc. and five supply
boats currently managed by Seal Fleet, Inc., from certain partnerships. The
aggregate purchase price is $16.9 million in cash, of which $8.9 million will be
funded with a portion of the proceeds of the Offering and $8.0 million will be
financed with borrowings under the Credit Facility.
The Seal Fleet acquisition is subject to certain conditions, including the
approval of the shareholders of Seal Fleet, Inc., a publicly held company. In
connection with the Seal Fleet acquisition, the Company has agreed to guarantee
repayment of a $3.0 million promissory note payable by Seal Fleet, Inc. to
certain of its affiliates and has agreed to indemnify such affiliates against
certain liabilities to creditors of Seal Fleet, Inc. The Company's maximum
liability pursuant to these contingencies is $6.8 million.
In connection with the Seal Fleet acquisition, the Company has also agreed
to acquire, for nominal consideration, 212,655 shares, or approximately 11% of
the outstanding shares of Class A Common Stock, and 50,000 shares, or 100% of
the outstanding shares of Class B Common Stock, of Seal Fleet, Inc. The Company
has agreed to the simultaneous transfer, for nominal consideration, of 37,600
Class A shares and all of the Class B shares to an entity controlled by Thomas
M. Ferguson, the principal of a consulting firm engaged by the Company. See
"Certain Transactions." The holder of the Seal Fleet Class B Common Stock is
entitled to elect a majority of the Board of Directors of Seal Fleet, Inc. Mr.
Ferguson has agreed to indemnify the Company against any liability it incurs
under the guarantee and indemnification it undertakes in connection with the
Seal Fleet acquisition.
Leppaluoto. On January 8, 1996, the Company entered into an agreement with
Leppaluoto to purchase the Carol, a 120-foot crew boat for $825,000, consisting
of $150,000 in cash and a $675,000 promissory note.
The Industry
All marine transportation between points in the United States, including
drilling rigs affixed to the U.S. outer continental shelf, is restricted by law
to vessels built and registered in the United States and owned and manned by
U.S. citizens. The U.S. domestic trade includes a number of market segments,
including the servicing of domestic offshore oil and gas drilling and production
platforms, the providing of offshore and harbor towing services to the offshore
energy industry, tankers and other vessels, and the transportation of fuels,
petroleum products, and chemicals along and between U.S. coasts. Approximately
40,000 vessels participate in the U.S. domestic trade. All of the Company's
vessels are eligible to participate in the U.S. domestic trade except for two
Panamanian-flag offshore supply boats operating in Southeast Asia pursuant to
contracts expiring in 1998.
Marine Support Services
Offshore Energy Support. Marine support vessels serving offshore energy
exploration and production operations are used primarily to transport materials,
supplies, equipment, and personnel to drilling rigs and to support the
construction, positioning, and ongoing operation of oil and gas production
platforms. Offshore energy support vessels are hired by oil companies and
others engaged in offshore exploration activities, generally on a short-term
(less than six months) basis at varying day rates. See "--Customers and Charter
Terms." The types of vessels primarily utilized in these activities are supply
boats, crew boats, and anchor handling vessels.
33
<PAGE>
Supply boats (also called workboats) are generally at least 150 feet in
length and serve exploration and production facilities and support offshore
construction and maintenance activities. Supply boats are differentiated from
other vessel types by cargo flexibility and capacity. In addition to
transporting deck cargo, such as drill pipe and heavy equipment, supply boats
transport liquid mud, potable and drilling water, diesel fuel, dry bulk cement,
and dry bulk mud. With their relatively large liquid mud and dry bulk cement
capacity and large areas of open deck space, they are generally in greater
demand than other types of support vessels for exploration and workover drilling
activities.
Crew boats (also called crew/supply boats) are faster and smaller than
supply boats and are utilized primarily to transport light cargo, including food
and supplies, and personnel to and among production platforms, rigs, and other
offshore installations. They can be chartered together with supply boats to
support drilling or construction operations or separately to serve the various
requirements of offshore production platforms. Crew boats are typically
constructed of aluminum and generally have longer useful lives than steel-hull
supply boats. Crew boats also provide a cost-effective alternative to
helicopter transportation services and can operate reliably in all but the most
severe weather conditions. Because crew boats support a wider range of offshore
activities than other vessel types, their utilization and day rates are
generally more stable than those of other types.
Anchor handling vessels, which include anchor handling tug/supply vessels
and some tugs, are more powerful than supply boats and are capable of towing and
positioning drilling rigs, production facilities, and construction barges. Some
are specially equipped to assist tankers while they are loading from single-
point buoy mooring systems.
There has been little new construction of offshore supply boats since the
early 1980s, resulting in substantial worldwide vessel attrition over the past
ten years as many vessels have reached the end of their useful lives. The
number of offshore supply boats available for service in the Gulf of Mexico
decreased from a peak of approximately 700 in 1985 to approximately 275 in March
1996. During the same period, the number of companies operating supply boats of
at least 150 feet in length decreased from approximately 40 to 19. Day rates
declined in the mid-1980s and have since improved from an average of $1,730 in
1987 to an average of $3,793 in the first quarter of 1996. Although some supply
boats were redeployed from the Gulf of Mexico to overseas locations, management
believes that existing regulations, mobilization costs, and overseas
opportunities will limit the number of such vessels returning to the Gulf of
Mexico in the foreseeable future. Management believes that day rates have not
reached a level that will support significant new construction and estimates
that sustained minimum average day rates of $5,000 would be required to support
new construction of a 180-foot offshore supply vessel.
The Company estimates that there are currently approximately 34 crew boat
operators in the Gulf of Mexico, with a total fleet of 248 vessels of at least
100 feet in length. There are approximately 14 crew boats greater than 120 feet
in length currently under construction, including one such vessel the Company
intends to acquire, and the Company believes that current demand created by
exploration for oil in the deeper waters of the Gulf of Mexico may support
construction of a limited number of additional crew/supply boats.
34
<PAGE>
The following table sets forth as of May 1, 1996, the Company's estimate
of the number of crew boats and supply boats operating in the Gulf of Mexico.
Supply Boats
------------
Company Total Boats
Tidewater, Inc. ................. 130
Seacor Marine, Inc. ............. 33
Ensco, Inc. ..................... 28
Trico Marine Services, Inc. ..... 20
Hvide Marine .................... 17(1)(2)
Others .......................... 53
Crew Boats
----------
Company Total Boats
Seacor Marine, Inc............... 72
Hvide Marine..................... 37(1)(3)
Tidewater, Inc................... 28
Trico Marine Services, Inc....... 16
Others........................... 87
- ---------------------
(1) Pro forma for the Acquisitions.
(2) Includes four vessels of which the Company is bareboat charterer and
operator.
(3) Includes ten vessels of which the Company is bareboat charterer and
operator.
While offshore energy support vessels service existing exploration and
production activities, incremental vessel demand depends primarily upon the
level of drilling activity, which in turn depends on oil and gas prices. As a
result, utilization and day rates generally correlate with oil and gas prices,
which are highly cyclical. The relationship since 1993 between natural gas
prices and drilling rig utilization in the Gulf of Mexico and, similarly,
average vessel utilization, is displayed in the following table.
35
<PAGE>
<TABLE>
<CAPTION>
1993 1994 1995 1996(1)
------------------------------ ------------------------------ ------------------------------ ----------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Natural gas prices(2) $1.92 $2.16 $2.20 $2.21 $2.42 $1.95 $1.70 $1.60 $1.51 $1.63 $1.54 $2.06 $3.44
Competitive mobile
rig utilization(3) 71.6% 75.9% 78.5% 81.0% 75.5% 76.6% 76.7% 80.6% 70.3% 73.6% 81.8% 85.2% 83.3%
Offshore service
vessels(4)
Utilization 83.9% 88.6% 89.0% 91.2% 88.6% 83.9% 91.6% 94.6% 84.2% 89.7% 91.7% 94.8% 95.3%
Day rates $3,050 $3,233 $3,700 $4,050 $3,717 $3,200 $3,033 $3,258 $2,917 $2,975 $3,307 $3,543 $3,793
Anchor handling tug/
supply vessels(5)
Utilization 71.0% 82.6% 82.6% 88.6% 85.0% 74.7% 76.3% 92.3% 86.0% 81.5% 92.6% 92.5% 94.9%
</TABLE>
- -----------------------
(1) For the period ended March 31, 1996.
(2) Average monthly natural gas cash price delivered at Henry Hub in $/MMBtu,
as reported in Natural Gas Week.
(3) Includes all jack-up rigs, semi-submersible rigs, submersible rigs,
drillships, and other mobile rig units operating in the Gulf of Mexico, as
compiled by Offshore Data Services.
(4) Includes all supply boats, crew boats, and other offshore service vessels
greater than or equal to 150 feet in length operating in the Gulf of
Mexico, as compiled by Offshore Data Services.
(5) Includes all anchor handling tug/supply vessels operating in the Gulf of
Mexico, as compiled by Offshore Data Services. Day rates are not included
as they are not considered meaningful (i.e., tugs work on a per-job basis,
not a daily basis.
During the fourth quarter of 1995 and continuing into the first quarter of
1996, both oil and natural gas prices have increased as a result of strong
demand for energy.
Offshore and Harbor Towing. Offshore and harbor towing services are
provided by tugs to vessels utilizing the ports in which the tugs operate and to
vessels at sea to the extent required by environmental regulations, casualty, or
other emergency. The Company's anchor handling tug/supply boats and offshore
towing-equipped tugs have been engaged in towing a wide variety of barges
carrying heavy equipment, refinery modules, and petroleum products for the
energy industry in the Gulf of Mexico, the Atlantic Ocean, and the Mediterranean
Sea. In the case of docking services, charges are based on a fixed rate per
job, and in the case of towing services, on hourly or daily rates. In most
ports competition is unregulated, although a few port authorities -- including
Port Canaveral and Port Everglades, Florida where the Company's tugs operate --
grant franchises to harbor tug operators. Rates are unregulated in franchised
ports served by the Company. See "--Customers and Charter Terms." Each port is
generally a distinct market for harbor tugs, even though harbor tugs can be
moved from port to port. Demand for towing services depends on vessel traffic,
which is in turn generally dependent on local and national economic conditions.
OPA 90 and current state legislation require oil tankers to be escorted in and
around certain ports located in Alaska and the U.S. Pacific coast. The Company
anticipates that such regulatory requirements will be expanded, increasing the
demand for specially designed tractor tugs, such as the Broward, to perform
active escort services.
Marine Transportation Services
Chemical Transportation. In the domestic chemical transportation trade,
vessels carry chemicals primarily from chemical manufacturing plants and storage
tank facilities along the Gulf of Mexico coast to industrial users in and around
the Atlantic and Pacific coast ports and along inland rivers and waterways. The
chemicals primarily transported are caustic soda, alcohols, chlorinated
solvents, paraxyzlene, alkylates, toluene, methyl tertiary butyl ether (MTBE),
phosphoric acid, and lubricating oils. Since 1989, coastwise chemical tonnage
demand has increased as a result of the general expansion of the U.S.
36
<PAGE>
economy and as gasoline additives have begun to move coastwise. Certain of the
chemicals transported must be carried in vessels with specially coated or
stainless steel cargo tanks. Many are very sensitive to contamination and
require special cargo-handling equipment.
The Company estimates that approximately 13% (in terms of tonnage) of bulk
domestic chemical transportation is waterborne, with the remainder transported
by rail or truck. The Company also estimates that approximately 60% of that
waterborne trade is in specialty chemicals, such as caustic soda, which can be
transported only by specially designed vessels. Although chemical carriers and
petroleum product carriers are similar in design, vessels engaged in the
transportation of petroleum products generally lack the large number of small
tanks, special tank coatings, and sophisticated cargo-handling capability
necessary to operate in the parcel or specialty chemical trade. Parcel
shipments are usually carried pursuant to contracts of affreightment by which a
shipper contracts for the use of a portion of a vessel's cargo capacity. See "--
Customers and Charter Terms."
Vessels engaged in domestic chemical transportation that are owned by major
chemical or other companies that use the vessels to transport cargoes for their
own accounts are referred to as "captive" or proprietary vessels. Management
believes that there are 13 specialty chemical carriers active in the domestic
trade, of which nine are non-proprietary, or independently operated, and four
are proprietary. Some of these vessels also transport petroleum products, and
all but one of them will be ineligible to do so after the year 2015 in
accordance with OPA 90 double-hull requirements. See "--Environmental and Other
Regulation -- Clean Water Regulations." The Seabulk America is the only chemical
carrier to enter service in the domestic trade since 1984, and no new specialty
chemical carriers are currently under construction. In addition to the
specialty chemical tankers, there are 44 tankers and 90 barges in the U.S.-flag
domestic fleet over 10,000 gross tons that are capable of carrying some so-
called "easy chemicals," such as gasoline additives (e.g. MTBE), and that
compete with specialty chemical carriers for the transportation of those
chemicals.
The following tables set forth certain information concerning mandatory OPA
90 retirement dates for the 13 active specialty chemical carriers eligible to
participate in the U.S. domestic trade. The Company believes that certain of
these vessels will be retired once they are no longer able to augment their
cargoes with petroleum products and that some may be retired in advance of their
OPA 90 retirement dates as required capital investments may not be economically
justifiable over the remaining lives of the vessels.
<TABLE>
<CAPTION>
OPA 90
Year Built/ Retirement Deadweight
Vessel Name Owner/Operator Rebuilt Date Tons (000's)
<S> <C> <C> <C> <C>
Keystone Georgia(1) Keystone Shipping Co. 1964 1998 26.3
OMI Star . . . . . Hvide Marine (2) 1970 2000 37.5
Marine Chemist . . Marine Transport Lines 1970 2000 35.9
Guadalupe . . . . Sabine/Kirby Corp. 1945/1978 2003 30.4
Chilbar . . . . . Keystone Shipping Co. 1959/1981 2006 39.4
Seabulk Magnachem Hvide Marine 1977 2007 39.3
OMI Dynachem . . . Hvide Marine (2) 1981 2011 50.9
OMI Hudson . . . . Hvide Marine (2) 1981 2011 50.9
SeaRiver Charleston(1) SeaRiver Maritime 1983 2011 48.1
SeaRiver Wilmington(1) SeaRiver Maritime 1984 2012 48.0
Sea Venture . . . Atlantic Tankships 1972/1983 2013 18.7
Seabulk America . Hvide Marine 1975/1990 2015 46.3
Chemical Pioneer(1) Marine Transport Lines 1968/1983 n/a(3) 34.9
-----
Total capacity 508.2
=====
</TABLE>
(notes on following page)
37
<PAGE>
---------------------------
Source: Lloyd's Maritime Directory 1994 (for owner/operators, year
built/rebuilt, and deadweight tons); U.S. Maritime Administration (for
OPA 90 retirement dates)
(1) Proprietary.
(2) One of the OMI Chemical Carriers to be acquired. See "-- The Acquisitions."
(3) Double-hull vessel.
Although single-hull chemical carriers may be permitted to continue to
carry certain chemicals in the U.S. domestic and foreign trade after their OPA
90 retirement dates, the Company believes that the inability of single-hull
carriers to transport hazardous chemicals and petroleum products (such as
lubricating oils) after such dates will, in light of the current near balance
between supply and demand and increasing chemical shipment volume as a result of
improvements in the economy, result in increased charter rates for the Company's
chemical carriers.
Petroleum Product Transportation. In the domestic energy transportation
trade, oceangoing and inland-waterway vessels transport fuel and other petroleum
products, primarily from the Gulf of Mexico coast refineries and storage
facilities to utilities, waterfront industrial facilities, and distribution
facilities along the Gulf of Mexico, Atlantic and Pacific coasts and inland
rivers. The inventory of U.S.-flag oceangoing vessels eligible to participate
in the U.S. domestic trade and capable of transporting fuel or petroleum
products has steadily decreased since 1980 as vessels have reached the end of
their useful lives and the cost of constructing a vessel in the United States (a
requirement for U.S. domestic trade participation) has exceeded the level at
which it was economically feasible to order a new vessel.
The following graph sets forth the projected number of U.S.-flag chemical
and product tankers from 20,000 dwt to 55,000 dwt remaining eligible to
transport crude oil and petroleum products in the U.S. domestic trade
as of the dates indicated:
38
<PAGE>
OPA 90 Retirement of Jones Act Tankers
80
75
70
65
60
55
[ G R A P H ]
50
45
40
35
30
25
20
15
10
5
0
1996 1995 2000 2002 2004 2006 2008 2010 2012 2014 2016
YEAR
Year Tanker
Vessels
- --------------
1996 71
1997 67
1998 71
1999 65
2000 62
2001 62
2002 56
2003 52
2004 49
2005 45
2006 45
2007 44
2008 42
2009 41
2010 35
2011 30
2012 22
2013 21
2014 20
2015 20
_________________
Source: Keith Chartering
(1) Assumes delivery of twelve vessels from 1997 through 2004, including
delivery in 1998 of the five petroleum product carriers in which the
Company has an interest, and scrap dates one year in advance of OPA 90
mandated retirement dates.
As a result of the retirement dates for single-hull tankers mandated by OPA
90, the Company believes that, of the 71 U.S.-flag product and chemical carriers
and product and chemical barges from 20,000 dwt to 55,000 dwt currently
operating, 19 will have to be retired by the end of year 2000. See "--
Environmental and Other Regulation -- Clean Water Regulations." Replacement
vessels currently under construction consist of four late 1950s-built steam-
powered single-hull product carriers being converted to double-hull vessels for
delivery in 1996 and 1997 and the five new diesel-powered double-hull product
carriers in which the Company has an interest. See "-- Company Operations --
Marine Transportation Services -- Petroleum Product Transportation -- New
Product Carriers." The Company believes that the mandatory replacement of
single-hull carriers by environmentally safer double-hull vessels will result in
a gradual increase in charter rates for product carriers over the next few
years.
39
<PAGE>
Company Operations
Marine Support Services
Offshore Energy Support. The Company has provided services to the oil and
gas drilling industry since 1989, when it acquired its first eight offshore
supply boats. In September 1994, March 1995, and February 1996, the Company
expanded its offshore energy support service fleet by acquiring an aggregate of
six supply boats and two utility boats (seven of which it was previously
operating or managing) and 36 crew boats. The Acquisitions will add nine supply
boats, including one bareboat charter, and two crew boats.
Supply Boats. The Company's 23 supply boats, including those to be
------------
acquired following completion of the Offering as part of the Acquisitions, are
as follows:
Length Year Built/ Horse- Area of
Supply Boat Name (feet) Rebuilt power Operation
Baltic Seal(1) . . . . . 205 1976/1994 2,250 U.S. Gulf
Indian Seal(1) . . . . . 205 1974/1994 5,350 U.S. Gulf
Seabulk North Carolina(2) 190 1979/1993 4,000 U.S. Gulf
Baffin Seal(1) . . . . . 185 1982/1994 2,250 U.S. Gulf
Pegasus Seal(1) . . . . . 185 1982 2,250 U.S. Gulf
Hawke Seal(1) . . . . . . 185 1982 2,250 U.S. Gulf
Bengal Seal(1) . . . . . 185 1979 2,250 North Sea
Seabulk Hawaii . . . . . 180 1979/1995 3,000 U.S. Gulf
Seabulk Georgia(3) . . . 180 1984 3,000 Arabian Sea
Seamark South Carolina(4)(5) 180 1983 3,000 SE Asia
Seabulk California . . . 180 1982 2,250 U.S. Gulf
Seabulk Florida . . . . . 180 1982 2,250 U.S. Gulf
Seabulk Alabama . . . . . 180 1982 2,250 U.S. Gulf
Seamark Mississippi(5) . 180 1982 2,250 SE Asia
Seabulk Texas . . . . . . 180 1982 2,250 U.S. Gulf
Seabulk Louisiana . . . . 180 1982 2,250 U.S. Gulf
Ross Seal(1) . . . . . 176 1977/1987 1,700 SE Asia
China Seal(1) . . . . . . 176 1977 1,700 North Sea
Seabulk Oregon . . . . . 175 1979 2,250 U.S. Gulf
Seabulk Washington . . . 175 1978 2,250 U.S. Gulf
Seabulk Maryland(2) . . . 165 1980 1,860 U.S. Gulf
Seabulk Virginia(2) . . . 165 1979 1,860 U.S. Gulf
Sabine Seal(1)(6) . . . . 150 1980 1,600 U.S. Gulf
- -----------------------
(1) To be acquired from Seal Fleet. See "-- The Acquisitions."
(2) The Company is bareboat charterer and operator with an option to purchase
the vessel at the end of the bareboat charter for a nominal amount.
(3) Owned by the Company and operated in the United Arab Emirates pursuant to
an arrangement with a local company.
(4) Anchor handling tug/supply vessel.
(5) These offshore supply boats are currently chartered to a joint venture in
which the Company has a 49% interest and are operated by the joint venture
in Southeast Asia. The Company receives bareboat charter hire, which is at
a rate that is approximately equivalent to the capital costs of the
vessels, and the right to receive a 49% share of net income from the
venture. The joint venture has the right to purchase each vessel for
$300,000 upon expiration of the charters in 1998.
(6) The Company is bareboat charterer under a charter expiring in April 1997.
40
<PAGE>
Crew boats. The 37 crew and two utility boats currently owned, operated,
----------
or to be acquired in the Acquisitions by the Company, all of which are operated
in the Gulf of Mexico, are as follows:
Length Year Built/ Horse-
Crew Boat Name (feet) Rebuilt power
Seabulk St. Francis (1)..... 152 1996 4,400
Seabulk St. Charles(2)...... 152 1993 3,820
Seabulk Winn................ 135 1991 3,056
Big Blue.................... 135 1990 3,056
Storm Runner................ 135 1990 3,056
Sea Robin III............... 135 1978 2,250
Seabulk LaFourche........... 130 1991 2,040
Carol (1)................... 125 1985 2,600
Thunderuniverse............. 125 1985 2,040
Seabulk Starr............... 120 1984 2,040
ThunderU.S.A................ 120 1984 2,040
Nautic Runner............... 120 1980 2,040
Seabulk Liberty............. 110 1985 2,040
Thunderplanet............... 110 1982 2,040
Seabulk Mobile.............. 110 1982 2,040
Thunderroad................. 110 1981 2,040
Thunderwar.................. 110 1981 2,040
Thunderworld................ 110 1980 2,040
Seabulk Bay................. 110 1980 2,040
Seabulk Beauregard.......... 110 1980 2,040
Seabulk Jackson............. 110 1980 2,100
David Jr. (3)............... 110 1980 2,820
Jillian (3)................. 110 1980 2,820
Seabulk Nassau.............. 110 1979 2,040
Seabulk Aransas............. 110 1978 2,100
Ralph Thompson (3).......... 110 1978 2,820
Buster Thompson (3)......... 110 1978 2,820
Seabulk Austin (4).......... 110 1978 1,080
Billy Jay (3)............... 110 1976 2,400
Judy L. (3)................. 110 1975 2,400
Seabulk Baton Rouge (3)(4).. 100 1981 910
Thundereagle................ 100 1977/1995 1,530
Seabulk Cameron............. 100 1976/1995 1,530
Thundercat.................. 100 1976/1995 1,530
Seabulk Sabine.............. 100 1976/1995 1,530
Gulf Runner II.............. 100 1981 1,530
Seabulk Iberia.............. 100 1981 1,530
Rig Runner (3).............. 90 1974 1,650
85 1976 1,200
- ---------------------
(1) Vessel to be acquired. See "-- The Acquisitions."
(2) The Company is bareboat charterer and operator with an option to purchase
the Seabulk St. Charles, formerly the Royal Runner, at the end of the
bareboat charter for $400,000.
(3) The Company is bareboat charterer and operator with an option to purchase
the vessel at the end of the bareboat charter for a nominal amount.
(4) Utility vessel.
41
<PAGE>
Offshore and Harbor Towing. The Company's 11 tugs serve Port Everglades
and Port Canaveral, Florida and Mobile, Alabama, where they primarily assist
product carriers, barges, other cargo vessels, and cruise ships in docking and
undocking and in proceeding in confined waters.
Port Everglades. Port Everglades has the third largest petroleum storage
---------------
tank farm in the United States, providing substantially all of the petroleum
products for South Florida. Since 1958, when the Company's tug operations were
established, the Company has enjoyed a franchise as the sole provider of docking
services in the port. That franchise specifies, among other things, that three
tugs serving the port be less than 90 feet in length, because of the narrowness
of slips in the port, and that tugs have firefighting capability. The franchise
is not exclusive and another operator could be granted an additional franchise.
Although a significantly larger potential competitor sought a franchise in 1992,
the Company won unanimous endorsement from the Port Authority to continue its
sole-franchise relationship with the port when that competitor failed to make
the requisite showing of public need and necessity. The current franchise
expires in 2001, and there can be no assurance that it will be renewed.
In 1995, the Company took delivery of a new 5,100 hp tractor tug, the
Broward, to be operated in Port Everglades. The Broward was built at a cost of
approximately $6.4 million. Company personnel, working in conjunction with
consulting marine engineers and architects, prepared the conceptual design,
including the tug's distinctive hull form, prepared detailed specifications, and
supervised the construction of the tug.
Tractor tugs have forward-mounted, omni-directional propulsion units,
giving them a high degree of maneuverability and control over the operation of
an escorted oil tanker or other vessel, and are generally considered superior
for tanker escort service. The Broward has twin 2,550 hp diesel engines and
twin propeller nozzles capable of turning 360 degrees. Although all of the
Company's harbor tugs are equipped for firefighting and their crews trained to
respond to fires and oil-spill emergencies, the Broward has significantly
enhanced firefighting capabilities, with two large water cannons capable of
producing 6,000 gallons per minute for spraying water or foam. Although a
number of tractor tugs are in operation around the world, there are no others in
commercial service in the southeastern United States. As a result of the
delivery of the Broward, the Company intends to offer tanker escort services and
specialized offshore energy support services.
Port Canaveral. The Company expanded its services in the early 1960s to
--------------
Port Canaveral, Florida where, like Port Everglades, it also has the sole
franchise from the port authority to provide harbor docking services. Port
Canaveral is the smallest of the Company's harbor tug operations, providing
docking and undocking services for commercial cargo vessels serving central
Florida and for cruise ships visiting the Disney World/Kennedy Space Center
attractions. The Company's franchise is a month-to-month arrangement and,
although there can be no assurance that the Company will be able to retain its
franchise in Port Canaveral, there has been no challenge to the franchise since
1984.
Mobile. In 1988, the Company purchased a division of a towing company
------
operating in the port of Mobile, Alabama. The port provides docking and
undocking services primarily for commercial cargo vessels, including vessels
transporting coal and other bulk exports. At the time, that division operated
three harbor tugs in Mobile and had an approximate 30% market share. The
Company added additional equipment and believes it significantly upgraded the
quality and performance of the tug service, thus enabling the Company to
increase its market share to approximately 50% of the harbor tug business in
that port since commencing operations.
42
<PAGE>
The Company currently owns and operates the following tugs engaged in
providing towing services:
Horse- Length Year Built/ Current
Vessel Name power (feet) Rebuilt Port Served
Broward (1)........... 5,100 100 1995 Everglades
Ft. Lauderdale........ 4,200 90 1971/1996 Everglades
Hollywood............. 4,200 106 1985 Mobile
Mobile Power.......... 4,100 98 1957/1986 Mobile
Mobile Pride (1)...... 3,300 107 1969/1989 Mobile
Paragon (1)........... 3,300 105 1978/1989/1996 Offshore
Mobile Persistence.... 3,000 98 1940/1975 Canaveral
Brevard............... 2,400 88 1945/1986/1996 Canaveral
Captain Brinn......... 2,145 88 1960/1986 Canaveral
Everglades............ 2,145 88 1956/1984 Everglades
Manatee............... 2,145 88 1959/1982 Everglades
------------------
(1) Equipped for offshore towing.
Marine Transportation Services
Chemical Transportation.
Existing Vessels. The Company's two existing chemical carriers, the
----------------
298,000-barrel, 39,300 dwt Seabulk Magnachem and the 297,000-barrel, 46,300
dwt Seabulk America are primarily engaged in the U.S. domestic chemical
parcel trade. The Company operates the Seabulk Magnachem pursuant to a
long-term bareboat charter. See "Description of Certain Indebtedness --
Long-Term Charter Obligations -- Title XI Bonds." The Company owns a 67%
economic interest in the Seabulk America and Stolt Tankers (U.S.A.), Inc.
owns a 33% economic interest in the Seabulk America.
The Seabulk Magnachem and the Seabulk America have full double bottoms
(as distinct from double hulls) and 16 and 24 cargo segregations, respec-
tively, enabling each vessel to carry a variety of different chemical
products on a particular voyage. Many of the chemicals transported by the
Company are hazardous substances. Voyages are currently generally
conducted from the Houston and Corpus Christi, Texas, and Lake Charles,
Louisiana areas to such ports as New York, Philadelphia, Baltimore,
Norfolk, Wilmington, North Carolina, and Charleston, South Carolina.
Delivered in 1977, the Seabulk Magnachem is a CATUG(R) ITB, which
requires fewer personnel to operate than a conventional carrier of
equivalent size and has a higher level of dependability, propulsion
efficiency, and performance than an ordinary tug and barge. Delivered in
1990, the Seabulk America is the only vessel in the U.S. domestic trade
capable of carrying large cargoes of acid, as a result of its large high-
grade alloy stainless steel tanks, and the only such vessel strengthened to
carry relatively heavy cargoes such as phosphoric and other acids. The
Seabulk America's stainless steel tanks were constructed without internal
structure, which greatly reduces cargo residue from transportation and
results in less cargo degradation. Stainless steel tanks, unlike epoxy-
coated tanks, also do not require periodic sandblasting and recoating. The
Seabulk America was one of the first U.S.-flag carriers to be equipped
43
<PAGE>
with state-of-the-art integrated navigation, cargo control monitoring, and
automated engine room equipment.
Pursuant to the requirements of OPA 90, the Seabulk America and
Seabulk Magnachem, which were built with full double bottoms but not double
sides, cannot be utilized to transport petroleum and petroleum products in
U.S. commerce after 2015 and 2007, respectively. See "-- Environmental and
Other Regulation -- Clean Water Regulations." They may, however, be
permitted to continue to carry certain chemicals in U.S. commerce and may
be redocumented in another country and transport chemicals in non-U.S.
trades. Although it has no current plans to do so, the ITB design of the
Seabulk Magnachem would allow the Company to replace only the cargo-
carrying portion of the vessel with a double-hull barge, which the Company
anticipates would be substantially less expensive than constructing an
entirely new double-hull conventional tank vessel.
The OMI Chemical Carriers. The three OMI Chemical Carriers, the
-------------------------
360,000-barrel, 50,900 dwt OMI Dynachem, the 360,000-barrel, 50,900 dwt OMI
Hudson, and the 260,000-barrel, 37,100 dwt OMI Star, have from 13 to 24
individual cargo tanks configured, strengthened, and coated to handle
various sized parcels of a wide variety of industrial chemical and
petroleum products giving them the ability to handle a broader range of
chemicals than chemical-capable product carriers. The OMI Dynachem and the
OMI Hudson have full double bottoms and are diesel powered; the OMI Star
has a partial double bottom and is steam powered. Double bottoms provide
increased protection over single hull vessels from a spill in the event of
mishap. The OMI Dynachem, the OMI Hudson, and the OMI Star cannot
transport petroleum and petroleum products in U.S. commerce after 2011,
2011, and 2000, respectively, although like the Seabulk Magnachem and
Seabulk America, they may thereafter transport certain chemicals in U.S.
and non-U.S. commerce.
Unlike the Company's existing fleet, the OMI Chemical Carriers are
manned by members of national maritime labor unions pursuant to collective
bargaining agreements. The Company has agreed to retain the unions on
terms comparable to existing terms for three years following the
acquisitions of the vessels.
OSTC. OSTC is currently 50% owned by each of the Company and OMI.
----
The Seabulk America and Seabulk Magnachem, along with the three OMI
Chemical Carriers, are currently time chartered to and marketed by OSTC.
Under the pool arrangement, the Company receives charter hire from OSTC
based upon a formula which takes into account the speed and carrying
capacity of the vessels and other factors applied to OSTC's revenues (net
of fuel costs, port charges, and overhead). Through application of this
formula, the Company has received approximately 40% of OSTC's net revenues
since the fifth vessel (the Seabulk America) joined the pool in September
1990.
Following its acquisition of the OMI Chemical Carriers and OMI's 50%
interest in OSTC, the Company intends to continue to market the five
chemical carriers through OSTC. The total capacity of the five carriers
operated under the OSTC pool arrangement represents approximately 44% of
the capacity of the independent domestic specialty chemical carrier fleet,
and four of the five chemical carriers marketed by OSTC are among the most
recently built and the only independently owned, diesel-powered carriers
with full double bottoms operating in the U.S. domestic trade. See "-- The
Industry -- Marine Transportation Services -- Chemical Transportation."
44
<PAGE>
OSTC books cargoes either on a spot (movement-by-movement) or time
basis. Approximately 75% of contracts for cargo are committed on a 12- to
18-month basis, with minimum and maximum cargo tonnages specified over the
period at fixed rates per ton. The OMI Hudson and OMI Star are currently
chartered to major oil companies under charters that expire in August 1997
and November 1996, respectively, assuming charter extension options are not
exercised (November 1998 for the OMI Star if certain options are exercised).
Due to the flexibility of the pool, OSTC is often able to generate additional
revenues by chartering cargo space on competitors' vessels and by expanding
the pool carriers' backhaul (return voyage) opportunities.
Petroleum Product Transportation.
Seabulk Challenger. The 320,000-barrel, 39,300 dwt CATUG(R) ITB Seabulk
------------------
Challenger is engaged in the transportation of fuel and other petroleum
products from Shell's refineries in Texas and Louisiana to tank farms and
industrial sites primarily in Port Everglades, Tampa, and Jacksonville,
Florida. Delivered in 1975, the Seabulk Challenger has six cargo
segregations and was the first CATUG(R) ITB constructed in the world. Like
the Seabulk Magnachem, it enjoys certain manning and other advantages over
conventional tank vessels. In 1989 and 1991, the vessel had extensive
steel renewals and tank recoatings. In addition, in 1991 the vessel was
outfitted with an inert-gas system at the expense of the charterer.
The Seabulk Challenger has been under continuous contract to Shell
since its delivery in 1975 and to date has performed over 600 voyages for
Shell. In January 1990, Shell renewed the charter for a ten-year period
ending in January 2000. Under the charter, the Company is responsible for
operating costs such as crew, maintenance, and insurance, and Shell pays
for voyage costs such as fuel and port charges. The charter hire rate is
adjusted annually for inflation. The charter may be canceled by Shell in
January 1997 and each subsequent January upon payment of a percentage of
the charter hire due over the remaining term of the charter. Shell has in
the past repeatedly renewed its charter of the Seabulk Challenger, and
continues to fully utilize the vessel. Because the termination penalties
are substantial, and Shell has provided significant capital enhancement to
the vessel, the Company believes that Shell will continue to charter the
vessel until January 2000, although there can be no assurance that it will
do so.
The Seabulk Challenger, like the Company's chemical carriers and
single-hull barges, cannot be operated in U.S. waters after its January
2003 phase-out date under OPA 90. As with the Seabulk Magnachem, the
Company could, but has no current plans to, replace the barge portion of
the Seabulk Challenger with a double-hull barge, which the Company
anticipates would be substantially less expensive than constructing an
entirely new double-hull conventional tank vessel.
Sun State. In September 1994, the Company acquired the marine assets
---------
of Sun State Marine, Inc. ("Sun State"), which then owned and operated an
energy transportation fleet of ten towboats and eight fuel barges (one
small barge was acquired in April 1995 and four small barges were acquired
in December 1995), all of which are engaged in fuel transportation along
the Atlantic intracoastal waterway and in the St. Johns River in Florida.
Sun State has been in operation for over 50 years, and the Company
continues to operate it as a wholly-owned subsidiary.
A majority of Sun State's revenue for the year ended December 31, 1995
was derived from a fuel transportation contract with FPL. The remainder of
its revenue was derived from its marine maintenance, repair, and drydocking
facility. See " -- Other Services." Under its contract with FPL, which has
45
<PAGE>
a term extending to September 1998, Sun State has agreed to transport fuel oil
from Port Canaveral and Jacksonville to certain FPL electric power generating
facilities at specified rates (a combination of per diem and variable rates
based upon barrels transported) with an escalation provision. The FPL contract
has a specified guaranteed minimum utilization provision.
The Sun State towboats are as follows:
Horse- Length Year Built/
Vessel Name power (feet) Rebuilt
Sun River City . . . . . . 1,000 72 1994
Sun Commander . . . . . . . 1,000 70 1968/1990
Sun Chief . . . . . . . . . 1,000 72 1971/1990
Sun Merchant . . . . . . . 1,000 65 1966/1994
Sun Trader . . . . . . . . 850 56 1972/1980
Sun St. Johns . . . . . . . 850 58 1961/1990
Sun Explorer . . . . . . . 800 57 1980
Sun Gypsy . . . . . . . . . 800 53 1976/1992
Sun Rebel . . . . . . . . 800 60 1957/1991
Sun Venture . . . . . . . . 800 66 1956/1986
The Sun State barges are as follows:
Barge Year Built/
Vessel Name Capacity(feet) Length Rebuilt
Sun State No. 1 . . . 25,684 bbls 290 1952/1994
Sun State No. 2 . . . . 25,684 bbls 290 1952/1979
Sun State No. 3 . . . . 25,974 bbls 290 1962/1986
Sun State No. 4 . . . . 25,974 bbls 290 1962/1984
Sun State No. 6 . . . . 21,408 bbls 264 1950/1982
Sun State No. 7 . . . . 20,700 bbls 264 1967/1990
Sun State No. 8 . . . . 23,000 bbls 272 1970
Sun State No. 9 . . . . 23,000 bbls 272 1970
Sun State 501 . . . . . 4,880 bbls 126 1966
Sun State 701 . . . . . 7,000 bbls 175 1942
Sun State 901 . . . . . 9,000 bbls 177 1948
Sun State 902 . . . . . 9,500 bbls 195 1947
Sun State 1101. . . . . 11,000 bbls 200 1963
OPA 90 requires all single-hull barges, including the Sun State
barges, to discontinue transporting fuel and other petroleum products in
2015.
New Product Carriers. The Company has a 2.4% equity interest in
--------------------
five 45,300 dwt, double-hull petroleum product carriers currently under
construction by Newport News Shipbuilding and Dry Dock Co. for delivery
during 1998. The aggregate cost of the five carriers is estimated to be
$255 million, of which approximately $40 million will constitute equity
investment and $215 million will be financed with the proceeds of
government-guaranteed ship financing bonds issued in March 1996. In
46
<PAGE>
addition to the Company's interest, 25% of the equity interest in the
vessels is held by Van Ommeren International BV and 49.3% and 23.4%,
respectively, by two other investors. The Company has options to acquire
the interests of these two other investors. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources."
The five product carriers, the operations of which will be managed by
the Company, are intended to serve the market currently served by single-
hull product carriers whose retirement is mandated by OPA 90. The vessels
will operate in the U.S. domestic trade and may be operated pursuant to
long- or short-term charters, depending upon market conditions during the
period prior to their delivery and thereafter. The Company will also serve
as the construction supervisor during the construction period. The
construction project is currently the subject of litigation. See "-- Legal
Proceedings."
Other Services
As part of the Sun State acquisition, the Company also acquired a
small marine maintenance, repair, and drydocking facility in Green Cove
Springs, Florida, which is engaged principally in the maintenance of tugs
and barges, offshore support vessels, and other small vessels. The lease
for the facility, including options, expires in 2000. The towboat Sun
River City was constructed in the Green Cove Springs facility, which is
capable of drydocking vessels up to 300 feet in length for repair and can
make dockside repairs on vessels up to 320 feet in length. Since October
1994, the Green Cove Springs facility has been utilized to overhaul or
rebuild a number of the Company's harbor tugs and offshore energy support
vessels. The facility (originally a U.S. government naval repair and
operations station) has covered steel fabrication facilities, workshops,
and office spaces adjacent to a 1,840-foot finger pier and mooring basins,
where the facility's three floating drydocks are located. The drydocks are
60, 80, and 108 feet in length, and are capable of lifting 350, 200, and
500 tons, respectively. The 60 and 108 foot drydocks are capable of being
joined together for lifting a vessel or barge with a nominal capacity of
1,175 long tons.
Customers and Charter Terms
The Company offers its offshore energy support services primarily to
oil companies and large drilling companies. Consistent with industry
practice, the Company's Gulf of Mexico operations are conducted primarily
in the "term" market pursuant to short-term (less than six months) charters
at varying day rates. Generally, such short-term charters can be
terminated by either the Company or its customer upon notice of five days
or less. The Company's foreign operations in the Arabian Sea and in
Southeast Asia are typically conducted pursuant to longer charters with
varying notice requirements and compensation for early termination.
The Company offers its offshore and harbor towing services to vessel
owners and operators and their agents. The Company's rates for harbor
towing services are set forth in the Company's published tariffs and are
subject to modification by the Company at any time, limited by competitive
factors. The Company also grants volume discounts to major users of harbor
services. Offshore towing services are priced based upon the service
required on an ad hoc basis.
The primary purchasers of chemical transportation services are
chemical and oil companies. The primary purchasers of petroleum product
transportation services are utilities, oil companies, and large industrial
consumers of fuel with waterfront facilities. Both services are generally
contracted for on the basis of short-term or long-term time charters,
voyage charters, contracts of affreightment, or other
47
<PAGE>
transportation agreements tailored to the shipper's requirements. Shell,
the Company's largest single customer and the long-term charterer of the
Company's product carrier, accounted for between 10% and 15% of the
Company's 1995 revenues (less than 10% on a pro forma basis assuming the
Acquisitions had occurred on January 1, 1995). Florida Power & Light
Company ("FPL"), the Company's second largest customer, accounted for
between 5% and 10% of the Company's 1995 revenues (less than 5% on a pro
forma basis assuming the Acquisitions had occurred on January 1, 1995).
The loss of either of these customers could have a material adverse effect
on the Company. See "Business -- Customers and Charter Terms."
Competition
The Company operates in a highly competitive environment in all its
operations. The principal competitive factors in each of the markets in
which the Company operates are suitability of equipment, personnel, price,
service, and reputation. The Company's vessels that provide chemical and
petroleum products transportation services compete with both other vessel
operators and, in some areas and markets, with alternative modes of
transportation, such as pipelines, rail tank cars, and tank trucks.
Moreover, the users of such services are placing increased emphasis on
safety, the environment, and quality, partly due to heightened liability
for the cargo owner in addition to the vessel owner/operator under OPA 90.
See "-- Environmental and Other Regulation -- Clean Water Regulations." With
respect to towing services, the Company's vessels compete not only with
other providers of tug services, but with the providers of tug services in
nearby ports. Many of the companies with which the Company competes have
substantially greater financial and other resources than the Company.
Additional competitors may enter the Company's markets in the future.
Moreover, should U.S. coastwise laws be repealed, foreign-built, foreign-
manned, and foreign-owned vessels could be eligible to compete with the
Company's vessels. See "-- Environmental and Other Regulation -- Coastwise
Laws."
Environmental and Other Regulation
The Company's operations are subject to significant federal, state,
and local regulation, the principal provisions of which are described
below.
Clean Water Regulations. OPA 90 established an extensive regulatory
and liability regime for the protection of the environment from oil spills.
OPA 90 affects all owners and operators of vessels in United States waters,
which include the United States territorial sea and the 200-mile exclusive
economic zone of the United States. Although it applies in general to all
vessels, for purposes of its liability limits and financial-responsibility
and response-planning requirements, OPA 90 differentiates between tank
vessels (which include the Company's chemical carriers, product carrier,
and fuel barges) and "other vessels" (which include the Company's tugs and
offshore energy service vessels).
Under OPA 90, owners, operators, and certain charterers of vessels are
"responsible parties" and are jointly, severally, and strictly liable for
containment and cleanup costs and other damages arising from oil spills
relating to their vessels, unless the spill results solely from the act or
omission of a third party, an act of God, or an act of war. Such "other
damages" are defined broadly to include (i) natural resources damages and
the costs of assessment thereof; (ii) damages for injury to, or economic
losses resulting from the destruction of, real and personal property; (iii)
net loss of taxes, royalties, rents, fees, and other lost revenues by the
U.S. government, a state, or political subdivision thereof; (iv) lost
profits or impairment of earning capacity due to property or natural
resources damage; (v) net cost of
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public services necessitated by a spill response, such as protection from
fire or other hazards; and (vi) loss of subsistence use of natural
resources.
For tank vessels, the statutory liability of responsible parties is
limited to the greater of $1,200 per gross ton or $10 million ($2 million
for a vessel of 3,000 gross tons or less) per vessel; for "other vessels,"
such liability is limited to the greater of $600 per gross ton or $500,000
per vessel. Such liability limits do not apply, however, to an incident
proximately caused by violation of federal safety, construction, or
operating regulations or by the responsible party's gross negligence or
willful misconduct, or if the responsible party fails to report the
incident or to cooperate and assist in connection with oil removal
activities. Although the Company currently maintains pollution liability
insurance with coverage of $700 million per incident for its tank vessels
($500 million per incident for its fuel barges), a catastrophic spill
could result in liability in excess of available insurance coverage,
resulting in a material adverse effect on the Company.
Under OPA 90, with certain limited exceptions, all newly built or
converted tankers operating in U.S. waters must be built with double hulls,
and existing single-hull vessels must be phased out at some point,
depending upon their size, age and place of discharge, between 1995 and
2015 unless retrofitted with double hulls. As a result of this phase-out
requirement, as interpreted by the U.S Coast Guard, the Company's chemical
carriers and its petroleum product carrier will be required to cease
transporting petroleum products over the next 20 years, and its fuel barges
will cease transporting fuel in 2015.
OPA 90 expanded pre-existing financial responsibility requirements and
requires vessel owners and operators to establish and maintain with the
United States Coast Guard evidence of insurance or qualification as a self-
insurer or other evidence of financial responsibility sufficient to meet
their potential liabilities under OPA 90. U.S. Coast Guard regulations
require evidence of financial responsibility demonstrated by insurance,
surety bond, self-insurance, or guaranty. The regulations also implement
the financial responsibility requirements of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"),
which imposes liability for discharges of hazardous substances such as
chemicals, by increasing the amount of financial responsibility from $1,200
to $1,500 per gross ton. The Company has obtained COFRs pursuant to the
Coast Guard regulations for its product carrier and for its chemical
carriers through self-insurance and commercial insurance and for the fuel
barges through insurance purchased from the Water Quality Insurance
Syndicate, a syndicate of American insurance companies that insures oil
pollution liability risks. The Company intends to obtain COFRs for the OMI
Chemical Carriers in the same fashion as the existing product carrier's
COFR.
OPA 90 also amended the Federal Water Pollution Control Act to require
the owner or operator of a tank vessel to prepare vessel response plans and
to contract with oil spill response organizations to remove to the maximum
extent practicable a worst-case discharge (loss of all cargo). The Company
has complied with both requirements. As is customary, the Company's oil
spill response contracts are executory in nature and are not activated
unless required. Once activated, the Company's pollution liability
insurance covers the cost of spill removal subject to overall coverage
limitations and deductibles.
OPA 90 also expressly permits individual states to impose their own
liability regimes with respect to oil pollution incidents occurring within
their boundaries, and many states have enacted legislation providing for
unlimited liability for oil spills. Some states that have enacted such
legislation have not yet issued implementing regulations defining tanker
owners' responsibilities under the legislation. The
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Company does not anticipate that such legislation or regulations will have
any material impact on its operations.
The Company manages its exposure to losses from potential discharges
of pollutants through the use of well-maintained and well-equipped vessels,
safety and environmental programs, and its insurance program, and believes
that it will be able to accommodate reasonably foreseeable environmental
regulatory changes. There can be no assurance, however, that any new
regulations or requirements or any discharge of pollutants by the Company
will not have an adverse effect on the Company.
Clean Air Regulations. The federal Clean Air Act of 1970, as amended
by the Clean Air Act Amendments of 1990, requires the Environmental
Protection Agency to promulgate standards applicable to the emission of
volatile organic compounds and other air pollutants. These standards are
designed to reduce hydrocarbon emissions released in the atmosphere and are
implemented by the states through State Implementation Plans for areas that
are not in compliance with those standards. The Company's vessels are
subject to vapor control and recovery requirements when loading petroleum
cargoes in Louisiana and when loading, unloading, ballasting, cleaning, and
conducting other operations in certain ports in Texas. The Company's
chemical and petroleum product carriers, as well as the OMI Chemical
Carriers, are equipped with vapor control systems that satisfy the state
requirements. The fuel barges are not equipped with, and are not operated
in areas that require, such systems.
Coastwise Laws. Most of the Company's operations are conducted in the
U.S. domestic trade, which is governed by the coastwise laws of the United
States (principally, the Jones Act). The coastwise laws reserve marine
transportation (including harbor tug services) between points in the United
States (including drilling rigs fixed to the ocean floor in U.S. territori-
al waters) to vessels built in and documented under the laws of the United
States (U.S. flag) and owned by U.S. citizens. A corporation is deemed a
citizen for these purposes so long as (i) it is organized under the laws of
the U.S. or a state, (ii) each of its president or other chief executive
officer and the chairman of its board of directors is a citizen, (iii) no
more than a minority of the number of its directors necessary to constitute
a quorum for the transaction of business are non-citizens, and (iv) 75% of
the interest and voting power in the corporation are held by citizens.
Because the Company would lose its privilege of operating its vessels in
the U.S. domestic trade if non-citizens were to own or control in excess of
25% of the Company's outstanding capital stock, the Company's Articles of
Incorporation contain restrictions concerning foreign ownership of its
stock. See "Description of Capital Stock -- Foreign Ownership
Restrictions." A coalition of shipper interests opposed to the Jones Act
announced in the summer of 1995 its intention to seek changes to the Jones
Act. Although the Company believes that it is unlikely that the Jones Act
will be substantially modified or repealed, there can be no assurance that
Congress will not substantially modify the Jones Act or repeal it. Such
changes could have a material adverse effect on the Company's operations
and financial condition.
Occupational Health Regulations. The Company's vessel operations are
subject to occupational safety and health regulations issued by the Coast
Guard. Such regulations currently require the Company to perform extensive
monitoring, medical testing, and record keeping with respect to seamen
engaged in the handling of the various cargoes transported by the Company's
chemical and petroleum products carriers.
Vessel Condition. The Company's chemical and petroleum product
carriers, offshore energy support vessels, four of its tugs, and the fuel
barges are subject to periodic inspection and survey by, and
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drydocking and maintenance requirements of, the Coast Guard and/or the
American Bureau of Shipping, a marine classification society whose periodic
certification as to the construction and maintenance of certain vessels is
required in order to maintain insurance coverage. All of the Company's
vessels requiring certification to maintain insurance coverage are
certified.
Oil Tanker Escort Requirements. Implementation of oil tanker escort
requirements of OPA 90 and pending state legislation are expected to
introduce certain performance or engineering standards on tugs to be
employed as tanker escorts. The Company believes its new tractor tug will
be able to comply with any existing or currently anticipated requirements
for escort tugs. Adoption of such new standards could require modification
or refitting of the tugs currently operated by the Company to the extent
such tugs are employed as tanker escorts. The Company does not anticipate
OPA 90 or state requirements to require modification of tugs, such as the
Company's, involved in harbor tug operations.
The Company believes that it is currently in compliance in all material
respects with the environmental and other laws and regulations, including OSHA
shipyard requirements, to which its operations are subject and is unaware
of any pending or threatened litigation or other judicial, administrative
or arbitral proceedings against it occasioned by any alleged non-compliance
with such laws or regulations. The risks of substantial costs, liabili-
ties, and penalties are, however, inherent in marine operations, and there
can be no assurance that significant costs, liabilities, or penalties will
not be incurred by or imposed on the Company in the future.
Insurance
The Company's marine transportation services operations are subject to
the normal hazards associated with operating vessels carrying large volumes
of cargo or rendering services in a marine environment. These hazards
include the risk of loss of or damage to the Company's vessels, damage to
third parties as a result of collision, loss, or contamination of cargo,
personal injury of employees, pollution, and other environmental damages.
The Company maintains insurance coverage against these hazards. Risk of
loss of or damage to the Company's vessels is insured through hull
insurance policies currently insuring approximately $174 million in hull
values, and approximately $262 million in hull values upon completion of
the Offering, which approximates fair market value. Vessel operating
liabilities, such as collision, cargo, environmental, and personal injury,
are insured primarily through the Company's participation in the Steamship
Mutual Underwriting Association (Bermuda Limited), a mutual insurance
association under which the coverage against such hazards is currently
unlimited for each incident except in the case of pollution, which is
limited to $700 million (the maximum amount available) for each incident
involving the Company's chemical and petroleum product carriers and $500
million with respect to its other vessels. Because it maintains mutual
insurance, the Company is subject to funding requirements and coverage
shortfalls in the event claims exceed available funds and reinsurance and
to premium increases based on prior loss experience.
Legal Proceedings
The Company is party to two legal proceedings involving its chemical
carrier Seabulk America, one involving the Company's continued ability to
operate the vessel in the U.S. domestic trade, the other involving the cost
of completing the vessel.
The Seabulk America was completed in 1990 by combining the stern
portion of the wrecked oil tanker Fuji with the forebody of the chemical
barge portion of the former integrated tug/barge Oxy
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Producer/Oxy 4102. The Company purchased the stern portion of the Fuji in
1985 after the tanker had broken apart following an explosion at sea, and
had previously purchased the barge portion of the Oxy Producer/Oxy 4102
after the tug portion separated from the barge and was lost at sea. At the
time of their respective acquisitions by the Company, neither vessel was
qualified to operate in the U.S. domestic trade. The Fuji was not
qualified because it was built in Japan and the U.S. coastwise laws
generally exclude foreign-built vessels from the U.S. domestic trade. The
barge was not qualified because (i) the Oxy Producer/Oxy 4102, although
built in the United States, was built with the assistance of federal
subsidy, (ii) the barge was purchased by the Company with certain tax-
deferred funds, and (iii) the provisions of the Merchant Marine Act, 1936,
as amended, authorizing the subsidy and tax-deferral programs involved
exclude vessels that have been the subject of the programs from operating
in the U.S. domestic trade.
An exception to the coastwise laws' exclusion of foreign-built vessels
from the U.S. domestic trade is the Wrecked Vessel Act, which provides that
a foreign-built vessel wrecked on the coast of the United States may become
qualified for the U.S. domestic trade if it is repaired in the United
States at a cost of at least three times its appraised salvaged value. In
a series of rulings between 1985 and 1987, the Coast Guard, which
administers the Wrecked Vessel Act, determined that the Fuji would qualify
for domestic operation under the Act if it were repaired in the United
States, by combining it with the barge portion of the Oxy Producer/Oxy
4102, at a cost of at least $11.5 million. Also in 1987, the Maritime
Administration, which administers the Merchant Marine Act, determined that
once the barge was incorporated into the rebuilt Fuji, the barge would have
lost its character as a vessel and the domestic-trading restrictions
applicable to vessels built with subsidy assistance and purchased with tax-
deferred funds would no longer be operative. In 1990, following the
Company's completion of the repair project, the Coast Guard determined that
the value of the repairs exceeded $20 million and that the repaired vessel
was the rebuilt Fuji, renamed Seabulk America, eligible to operate in the
U.S. domestic trade.
In Keystone Shipping Co. v. United States, pending in the U.S.
District Court for the District of Columbia (Civil Action No. 90-2762), the
plaintiffs, competitors of the Company, in 1990 asked the court to
invalidate the foregoing Coast Guard and Maritime Administration
determinations that the Seabulk America is qualified to operate in the U.S.
domestic trade. The Company, as the sole beneficiary of those
determinations, has intervened as a defendant in the suit. In September
1992, the court upheld certain aspects of the Coast Guard determinations,
concluded that the agencies had provided insufficient explanation to enable
the court to determine the validity of the Maritime Administration
determinations and the remaining aspects of the Coast Guard determinations,
and remanded the matter to each agency for further explanation of its
respective determinations. Those explanations were provided by August
1994, and the plaintiffs have to date not renewed their requests for an
order declaring the agency determinations unlawful. Should plaintiffs
renew such requests and obtain such an order, the Seabulk America would be
limited to operations in the foreign trades, where, although it would be
less competitive than in the U.S. domestic trade, it would be eligible to
receive operating-differential subsidy under a currently inactive subsidy
contract held by the Company. The Company believes that plaintiffs' suit
was without merit and, should it be renewed, intends to continue vigorously
to support the government's defense of the agency determinations.
In Norfolk Shipbuilding and Dry Dock Corporation v. Seabulk
Transmarine Partnership, Ltd., pending in the U.S. District Court for the
Eastern District of Louisiana (Civil Action No. 93-1312), one of the
shipyards that contracted to complete the Seabulk America for the Company
is seeking to recover from the Company approximately $6.1 million for
alleged additions and changes to the contract work and
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costs of alleged delay and disruption, in addition to $2.4 million of the
$5.9 million contract price that the Company has withheld. The Company has
asserted counterclaims aggregating $5.6 million for contract deletions,
unfinished and defective work, and liquidated damages for late delivery.
In 1993, when this suit was filed, the Company was required to obtain a
$5.6 million letter of credit in order to furnish a bond to obtain the
release of the Seabulk America, which had been arrested pursuant to
customary procedures in litigation involving vessels. The suit, which
involves numerous complex factual issues, is currently in the pre-trial
discovery stage. While the Company believes that the plaintiff's claims
are without merit and that its counterclaims are meritorious, there can be
no assurance that the ultimate resolution of the suit will not require some
payment by the Company in addition to the $3.6 million previously paid.
The Company is also a defendant in a suit relating to certain of its
offshore supply boats pending in the Circuit Court of the 17th Judicial
Circuit of Florida, U.S. Offshore, Inc. v. Seabulk Offshore, Ltd. (No. 93-
32963(09)). The suit involves a claim by a former limited partner in the
partnership that owns eight of the supply boats seeking an unspecified
amount of damages for alleged breach of a contract by which the Company
agreed to pay the plaintiff 5% of the revenues (not to exceed $1.3 million)
earned from the operation of the boats during the 40 months ended March 31,
1994. The Company has paid the plaintiff approximately $700,000 pursuant
to the contract and believes that the claim for any additional amount is
without merit.
Affiliates of the Company have intervened in two parallel judicial
proceedings brought by Kirby Corporation ("Kirby"), an operator of vessels with
which the five new product carriers in which the Company has an interest will
briefly compete, seeking to have the construction project stopped. Kirby's
actions allege that the U.S. Maritime Administration acted unlawfully in
guaranteeing, pursuant to Title XI of the Merchant Marine Act, 1936, as
amended ("Title XI"), the $215 million of ship financing bonds issued to
finance the project, specifically asserting that the Maritime
Administration erroneously determined that the project is economically
sound and that the entities that will own the vessels are U.S. citizens
qualified to operate the vessels in the coastwise trade. The Company
believes the complaints are without merit and is supporting the U.S.
Department of Justice in seeking their dismissal.
From time to time the Company is also party to litigation arising in
the ordinary course of its business, most of which is covered by insurance.
Properties
The Company's principal offices are located in Fort Lauderdale,
Florida, where the Company leases approximately 36,000 square feet of
office and shop space under a lease that expires in 2009. In addition, the
Company leases facilities in Houston, Texas, Lafayette, Louisiana, and
Green Cove Springs, Florida, to support its operations.
Employees
As of April 15, 1996, the Company had approximately 800 employees.
Management considers relations with employees to be satisfactory. The
Company is not a party to any collective bargaining agreement with a
national labor union with respect to any of its current fleet. The
officers and crew of the Seabulk America, Seabulk Challenger, and Seabulk
Magnachem are, however, subject to collective bargaining arrangements.
Unlike the Company's existing fleet, the OMI Chemical Carriers are manned
by members of national maritime labor unions pursuant to collective
bargaining agreements. The Company has agreed to retain the unions on
terms comparable to existing terms for three years following the
acquisition of the vessels.
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MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are:
Name Age Current Positions
J. Erik Hvide(a) . . . 47 Chairman of the Board, President, Chief Execu-
tive Officer, and Director
John H. Blankley(a) . . 48 Executive Vice President, Chief Financial
Officer, Treasurer, and Director
Donald L. Caldera . . . 60 Executive Vice President - Development and
Director
Eugene F. Sweeney(a) . 53 Executive Vice President - Operations and
Director
Arthur E. Bailey . . . 48 Vice President - Human Resources and
Strategic Quality Planning
Andrew W. Brauninger . 49 Vice President - Offshore Division and
President - Seabulk Offshore, Ltd.
Gene Douglas . . . . . 48 Vice President - Legal & General Counsel and
Secretary
William R. Ludt . . . . 48 Vice President - Inland Services Division and
President - Sun State Marine Services, Inc.
Robert A. Santos . . . 64 Vice President - Offshore and Harbor Towing
Operations
Robert B. Calhoun,
Jr.(c). . . . . . . . 53 Director
Gerald Farmer(b)(c) . . 50 Director
Jean Fitzgerald(a)(b) . 70 Director
John Lee(b) . . . . . . 59 Director
Walter C. Mink(c) . . . 69 Director
Robert Rice(c) . . . . 73 Director
Raymond B. Vickers (b) 46 Director
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(a) Member of the Executive Committee.
(b) Member of the Compensation Committee.
(c) Member of the Audit and Financial Committee.
Mr. Hvide has been the Company's Chairman since September 1994 and its
President and Chief Executive Officer since January 1991. He has been a
director of the Company since 1973. From 1981 until 1991, Mr. Hvide was
President and Chief Operating Officer of the Company. From January 1991 to
September 1994, he was also Vice Chairman. He has been employed by the
Company in various capacities since 1970 and became Vice President in 1973.
He is also a director of the American Waterways Operators, a participant on
the Transportation Committee of the American Petroleum Institute, a member
of the American Bureau of Shipping, a past Chairman of the Board of the
American Institute of Merchant Shipping and a past appointee to the U.S.
Coast Guard's Towing Safety Advisory Committee. Mr. Hvide is the son of
Hans J. Hvide, the founder of the Company.
Mr. Blankley has been a director of the Company since September 1991
and was appointed Executive Vice President -- Chief Financial Officer and
Treasurer effective as of September 1, 1995. He previously served as a
director and Chief Financial Officer of Harris Chemical Group Inc., a
chemical
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manufacturing company, from April 1993 to August 1994. Mr. Blankley is the
owner of Seafirst Capital, a ship finance consulting business he founded in
1994. He served as Executive Vice President - Finance and Chief Financial
Officer of Stolt-Nielsen, Inc., a publicly traded international operator of
specialty chemical tankers, from 1985 to 1991; and from 1983 until 1985,
Mr. Blankley was a director, Senior Vice President, and Chief Financial
Officer of BP North America Inc. Mr. Blankley is also a director of MC
Shipping, a publicly traded operator of container feeder vessels.
Mr. Caldera has been Executive Vice President - Development of
the Company since September 1994. Mr. Caldera became a director of the
Company in April 1994. From November 1990 to January 1992, he was Chief
Executive Officer of Global Sovcruise Lines, a joint Swiss-Soviet shipping
venture. Between 1985 and June 1990 he was Chairman and Chief Executive of
Norex-America, Inc. (formerly Bermuda Star Lines, Inc.), a publicly traded
cruise ship line. Between 1980 and 1985 Mr. Caldera served as Senior Vice
President - Marketing and Sales of Midland Enterprises, Inc., a diversified
inland waterways company. From 1976 to 1980 he was Executive Vice President
and Chief Operating Officer of Interocean Management Corporation, a firm
managing foreign-flag and U.S.-flag tankers.
Mr. Sweeney has been Executive Vice President - Operations of the
Company since September 1994 and a director since 1984. He was Senior Vice
President - Operations of the Company from 1991 to September 1994. He
joined the Company in 1981 as Vice President - Ship Management. Prior to
joining the Company, Mr. Sweeney was employed for 17 years by Texaco, Inc.,
where he served in sea-going and shore management positions, including
operations manager of Texaco's U.S. tanker fleet. Mr. Sweeney is past
President of the Chemical Carriers Association, a member of the Society of
Naval Architects and Marine Engineers and served as a member of a National
Academy of Sciences Committee to study marine navigation and pilotage.
Mr. Bailey has been Vice President - Human Resources and Strategic
Quality Planning since December 1994. From November 1993 to December 1994,
he was President of Advantage Training Associates, a consulting company he
founded. From September 1983 to November 1993, he was employed by Florida
Power & Light Company.
Mr. Brauninger has been Vice President - Offshore Division since March
1990 and the President of Seabulk Offshore, Ltd., the Company's offshore
energy support services subsidiary, since September 1994. He was Vice
President of Offshore Operations from May 1990 to September 1994 and Vice
President - Development from April 1989 to May 1990. From 1987 to 1989,
Mr. Brauninger was President of OMI Offshore Services, Inc., an operator of
offshore service vessels. Previously, he was employed by Sabine Towing and
Transportation Company, where he held a variety of posts including Vice
President - Harbor Division.
Mr. Douglas has been Vice President - Legal, General Counsel and
Secretary of the Company since 1975. He was an attorney with the Fort
Lauderdale, Florida law firm of Spear and Deuschle, P.A. prior to joining
the Company. He has been admitted to the Florida Bar since 1972 and is
admitted to practice before various federal courts. He is also a member of
the American Bar Association, the Maritime Law Association of the United
States and other professional organizations.
Mr. Ludt has been Vice President - Inland Services Division since
January 1995 and the President of Sun State Marine Services, Inc., the
Company's energy tug and barge subsidiary, since September 1994. He was
director - Fleet Operations of the Company from July 1982 to September
1994.
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Since joining the Company in 1979, he has also served as Fleet Manager and
Port Engineer. He served as the President of the Chemical Carriers
Association from 1989 to 1990 and as Vice President of that association
from 1990 to 1992. Mr. Ludt has also served on various working groups
within the U.S. Coast Guard's Chemical Transportation Advisory Committee
concerning issues such as vapor control and marine occupational safety and
health. Mr. Ludt holds a dual license as a Third Mate and Third Assistant
Engineer, Steam and Motor Vessels.
Mr. Santos has been Vice President - Towing Operations of the Company
since 1983. Mr. Santos joined the Company as its towing operations manager
in 1962. He has served as a Commissioner of Florida's Board of Pilot
Commissioners, Chairman of the Escort Vessel Subcommittee of the American
Waterways Operators and as a member of various marine-related trade
associations and boards.
Mr. Calhoun has been a director of the Company since September 1994.
Mr. Calhoun has been President of Clipper Asset Management Corporation, the
sole general partner of The Clipper Group, L.P., a private investment firm,
since 1991. From 1975 to 1991, Mr. Calhoun was a Managing Director of CS
First Boston Corporation, an investment banking firm. Mr. Calhoun serves
as a director of Highway Master Communications, the operator of a wireless
services network, and Interstate Bakeries Corporation, a national
distributor of baked goods. He also serves as a director of several
privately held companies.
Mr. Farmer has served as a director of the Company since 1975. He was
Executive Vice President - Chief Financial Officer and Treasurer of the
Company from September 1994 until September 1, 1995. In May 1995 Mr.
Farmer, for reasons unrelated to the Company or his responsibilities,
retired effective as of September 1, 1995 as Chief
Financial Officer and Treasurer. He continued as an Executive Vice
President of the Company through December 15, 1995. He was Senior Vice
President - Finance and Administration from January 1991 to September 1994,
having joined the Company in 1973 as Vice President - Finance.
Mr. Fitzgerald has been a director of the Company since March 1994.
Since 1992, he has served as the Chairman of Florida Alliance, Inc., a
consortium of maritime interests. From 1990 to 1992, he was Executive Vice
President of NDE Testing & Equipment, Inc., a nationwide storage-tank
testing company. From 1988 to 1990, he was with Frederic R. Harris, Inc.,
an international consulting engineering firm. Mr. Fitzgerald was a co-
founder and the President of American Tank Testing Service, Inc., a firm
that was subsequently acquired by NDE Environmental Corporation, from 1986
to 1987. In 1982 and 1983, he served as the Company's Vice President for
Governmental Affairs. His other business experience includes service as
President of Tracor Marine, Inc. from 1976 to 1979 and Director of
Engineering of Tracor's Systems Technology Division from 1974 to 1976. Mr.
Fitzgerald retired from the U.S. Navy in 1974 in the rank of Captain.
During his naval career he commanded major fleet units at sea and served in
the offices of the Chief of Naval Operations and the Secretary of Defense.
He is a past Commissioner and Chairman of the Port Everglades Authority.
Mr. Lee has been a director of the Company since September 1994 and is
Chairman and Chief Executive Officer of Hexcel Corporation, an advanced
materials manufacturer. Mr. Lee joined the Board of Hexcel Corporation in
May of 1993 as an outside independent director. In August 1993, Mr. Lee
was asked to become the Chairman and Co-Chief Executive Officer of Hexcel
Corporation, which was experiencing financial difficulties, in order to
effect a consensual reorganization. In December 1993, having concluded
that a consensual reorganization could not be accomplished, Hexcel
Corporation filed for protection under Chapter 11 of the Federal Bankruptcy
Code and appointed Mr. Lee sole Chief
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Executive Officer to effect a Plan of Reorganization. The reorganization
was completed in February 1995 and Hexcel emerged from Chapter 11. Mr. Lee
has been a Director of Aviva Petroleum, Inc. since August 1993, and has
been Chairman, President and Chief Executive Officer of Lee Development
Corporation, a corporation providing investment and merchant banking
services, since 1987. He was a director of XTRA Corporation, a
Massachusetts-based transportation and equipment leasing company, from 1990
through January 1996. Mr. Lee also served as Chairman and Chief Executive
Officer of Seminole Corporation, a fertilizer manufacturer, from July 1989
through April 1993 and director of Tosco Corporation, a refiner, from April
1988 through April 1993 and was President and Chief Operating Officer of
Tosco Corporation from April 1990 through April 1993. Mr. Lee is an
advisor to The Clipper Group, L.P., a private investment firm, and is a
trustee of Yale University.
Mr. Mink has been a director of the Company since October 1990. He is
President of Walter C. Mink & Associates, a maritime advisory and
consulting firm in Las Vegas, Nevada. From 1978 to 1986, Mr. Mink was
President of Mobil Shipping and Transportation Company. Previously, he was
President of Seabrokers, Inc., a marine brokerage firm, and was earlier
employed by Lago Oil, Esso Tankers, and Mobil Oil Transport. Mr. Mink is a
director of First Olsen Tankers, Ltd. He served on the Board of Managers
of the American Bureau of Shipping and is a member of the Society of Naval
Architects and Marine Engineers.
Mr. Rice has been a director of the Company since January 1992. A
financial consultant, he was Senior Vice President of Citibank, N.A. from
1954 to his retirement in 1983. Mr. Rice is a director of ATCO Ltd., First
Olsen Tankers Ltd., Pride Refining Inc., and Atcor Resources Ltd.
Dr. Vickers has been a director of the Company since March 1994. An
attorney in private practice in Florida, he has represented more than a
hundred financial institutions. He is the author of Panic in Paradise:
Florida's Banking Crash of 1926 and an adjunct professor of U.S. economic
and business history at Florida State University. From 1975 to 1979, he
served as Assistant Comptroller of the State of Florida.
Upon consummation of the Offering, the Company's Board of Directors will be
divided into three classes, one class of which is elected each year to hold
office for a three-year term and until successors are elected and qualified.
Under the terms of the Shareholders Agreement, the Investor Group currently
nominates three persons to the Company's 11-member Board of Directors and
Mr. Hvide currently nominates eight persons to the Board. See "Description
of Capital Stock -- Shareholders Agreement" and "-- Common Stock."
Board Committees
The Company's Board of Directors has three committees: (i) the Execu-
tive Committee; (ii) the Compensation Committee; and (iii) the Audit and
Financial Committee.
The Executive Committee exercises the powers of the Board of Directors
in the management of the business and affairs of the Company between Board
meetings to the extent permitted by Florida law. Its current members are
Messrs. Hvide (Chairman), Blankley, Fitzgerald, and Sweeney.
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The Compensation Committee reviews and recommends to the Board of
Directors the compensation and benefits of all executive officers of the
Company and reviews general policy matters relating to compensation and
benefits of employees of the Company. The Compensation Committee also
administers the Company's bonus and stock option plans. Its current
members are Messrs. Fitzgerald (Chairman), Vickers, Lee, and Farmer.
The Audit and Financial Committee is authorized by the Board to
review, with the Company's independent public accountants, the annual
financial statements of the Company prior to publication; to review the
work of, and approve audit services performed by, such independent
accountants; to make annual recommendations to the Board for the appoint-
ment of independent public accountants for the ensuing year; and to
administer the Company's policy with respect to transactions with
affiliated persons. See "Certain Transactions." Its current members are
Messrs. Farmer (Chairman), Calhoun, Mink, and Rice.
Executive Compensation
The following table sets forth the compensation for the Chief
Executive Officer and each of the four most highly compensated executive
officers whose individual remuneration exceeded $100,000 for the year ended
December 31, 1995 (the "Named Executives").
Summary Compensation Table
Annual
Compensation
-----------------------
-
Other All
Annual Other
Name and Compen- Compen-
Princiapl Position Salary Bonus sation(1) sation(2)
J. Erik Hvide . . . . $462,000 $100,000 $ 4,286 $56,238
Chief Executive Officer
Gerald Farmer(3) . 153,939 15,000 3,399 18,782
Former Executive
Vice President
Eugene F. Sweeney . . 150,000 50,000 2,676 16,470
Executive Vice
President - Operations
Donald L. Caldera . . 152,625 35,000 709 15,572
Executive Vice
President - Development
Gene Douglas . . . 115,000 20,000 0 9,871
Vice President - Legal
and General Counsel
- -----------------------
(1) Includes personal use of Company automobiles in the amounts of $4,286,
$3,399, $2,676, and $709 for Messrs. Hvide, Farmer, Sweeney, and
Caldera, respectively.
(2) Consists of Company 401(k) contributions of $10,500 for each of
Messrs. Hvide, Farmer, Sweeney, and Caldera, and $8,890 for Mr.
Douglas, and Company life insurance premium payments of $1,091, $576,
$540, $1,404, and $66 for Messrs. Hvide, Farmer, Sweeney, Caldera and
Douglas, respectively, and club and professional membership payments
of $13,357, $430, $180, $1,568, and $915 for Messrs. Hvide, Farmer,
Sweeney, Caldera, and Douglas, respectively, and additional benefits
of $31,290, $7,276, $5,250, and $2,100, for Messrs. Hvide, Farmer,
Sweeney, and Caldera, respectively.
(3) Chief Financial Officer until September 1, 1995 and Executive Vice
President until December 15, 1995.
58
<PAGE>
The Compensation Committee of the Board of Directors is currently
reviewing executive compensation with the view to aligning the interest of
executive officers with those of stockholders.
The following table contains information concerning stock options to
be granted to each of the Named Executives (other than Mr. Farmer) and
Mr. Blankley prior to the consummation of the Offering. All options will be
granted pursuant to the Hvide Marine Incorporated Equity Ownership Plan.
Options to be Granted Prior to Offering
Individual Grants
---------------------------------------
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at Assumed
Total Shares Annual Rates of
Shares Underlying Stock Appre-
Underlying Options Per Share ciation for
Options to be to be Granted Exercise Expiration Option Term (2)
------------------
Name Granted(1) to Employees Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
J. Erik Hvide . . . % (3) (4) $ $
John H. Blankley % (3) (4) $ $
Donald L. Caldera % (3) (4) $ $
Eugene F. Sweeney % (3) (4) $ $
Gene Douglas . . . % (3) (4) $ $
</TABLE>
- ----------------------
(1) Options vest 25% per annum over four years.
(2) The dollar amounts are the result of calculations at specified rates
of appreciation, assuming an initial public offering price of $15.00
per share, and therefore are not intended to forecast possible future
appreciation.
(3) Exercise price will be equal to offering price of shares offered
hereby.
(4) Ten years following the grant date.
Equity Ownership Plans
Long-Term Incentive Plan. The Company has reserved shares of
Class A Common Stock for issuance under the Hvide Marine Incorporated
Equity Ownership Plan (the "Plan"). The Plan is administered by the
Compensation Committee. Subject to selection by the Compensation
Committee, any key employee, including executive officers, is eligible to
participate in the Plan. The benefits to be granted under the Plan may
take the form of (i) incentive or non-qualified stock options, (ii) stock
awards subject to future vesting, (iii) stock appreciation rights, (iv)
phantom shares, or (v) performance unit awards. Options granted under the
Plan may not be exercised until vested and shares of Common Stock may not
be issued pursuant to any stock award until vested. The Compensation
Committee is empowered under the Plan to determine all terms and provisions
under which options, awards, and other rights are granted under the Plan,
including (i) the number of shares subject to each option, award, or right,
(ii) when the option, award, or right becomes exercisable, (iii) the
exercise price, and (iv) the duration of the option, award, or right, which
cannot exceed ten years. The Compensation Committee has determined to grant
prior to the consummation of the Offering options to 53 employees (including
four employees of OSTC who will become employees of the Company) to purchase
shares at an exercise price equal to the initial public offering price
of the Class A Common Stock. Such options will have ten year terms and will
vest 25% each year over four years.
Employee Stock-Purchase Plan. The Company has reserved shares
of Class A Common Stock for purchase over the next five years under its
1995 Employee Stock-Purchase Plan. This plan permits employees to purchase
stock at a discount to market value and be eligible to receive favorable
59
<PAGE>
income tax treatment of the discount under Section 423 of the Internal
Revenue Code. Under this plan, all employees working more than twenty
hours weekly are eligible to purchase reserved shares at a discount equal
to 15% of market price. The market cost of shares purchased by an employee
under this plan may not exceed $25,000 per year.
Director Compensation and Options
Directors not employed by the Company are paid $2,000 per board meeting and
$1,500 per board committee meeting attended and are reimbursed by the Company
for reasonable out-of-pocket expenses incurred for attendance at such meetings
in accordance with Company policy. All committee chairmen not employed by the
Company are also paid an annual retainer of $3,000. In order to promote the
alignment of the directors' and the stockholders' financial interests, it is the
intent of the Board of Directors that each Director should initially acquire at
least 500 shares of Common Stock and should increase this ownership interest by
a minimum of 500 shares annually. Each director's ownership interest can be
achieved by the purchase of Common Stock on the open market, by stock grants, or
by the exercise of stock options. In this regard, the Company intends to grant
to each director who is not an employee 500 shares of Class A Common Stock per
year. Additionally, the Company intends to adopt a stock option plan for
directors (the "Directors Plan") and to reserve shares of Class A
Common Stock for issuance under that plan. Under the Directors Plan, all
directors not employed by the Company will annually be granted an option to
purchase 1,500 shares of Class A Common Stock with an exercise price equal to
the fair market value of the Class A Common Stock on the date of grant. The date
of grant for these options will be the first business day following the annual
meeting of shareholders. Also, the Company intends to grant to each director not
employed by the Company prior to the consummation of the offering and pursuant
to the Directors Plan, an option to purchase 4,000 shares with an exercise price
equal to the offering price of the Class A Common Stock. Directors elected
to the Board after consummation of the Offering will each be granted an
option to purchase 1,500 shares with an exercise price equal to the fair market
value of the Class A Common Stock as of the first business day following the
stockholder meeting at which the director is elected to the Board. All stock
options under the Directors Plan will vest at the earliest of death, disability,
change-in-control, voluntary retirement from the Board at or after age 62,
completion of ten years service on the Board, or one year from the date of
grant. All directors have agreed not to sell any shares of Class A Common Stock
for 180 days after the date of the Prospectus without the written consent of the
Representatives.
Non-Compete and Benefits Agreements
The Company is party to a non-compete agreement dated September 28,
1994 with Hans J. Hvide, the founder of the Company and father of its
current Chairman, pursuant to which Mr. Hvide receives a fee of $185,000
per year commencing January 1, 1995 (subject to annual adjustments based on
the Consumer Price Index) in exchange for an agreement not to provide any
services to any person in competition with the Company. The non-compete
agreement expires upon the earlier of September 30, 2014 or the death of
Mr. Hvide. The non-compete agreement can be terminated by the Company
only if Mr. Hvide materially breaches the Agreement, and by Mr. Hvide if
the Company fails to pay the non-compete fees. The Company is also party
to a post-retirement benefits agreement with Mr. Hvide pursuant to which he
receives the use of an automobile, major medical health insurance, the use
of an office and secretarial assistance, and a payment of $2,000 per month
commencing October 1, 1994 in lieu of other expenses. The term of the
post-retirement benefits agreement is for the life of Mr. Hvide except for
major medical health insurance for Mr. Hvide's spouse, which is for the
life of Mr. Hvide's spouse. In the event the Company terminates the non-
compete agreement, the post-retirement benefits agreement terminates
automatically.
60
<PAGE>
CERTAIN TRANSACTIONS
The Company's Articles of Incorporation require that any material
transaction between the Company and any of its officers, directors, holders
of more than 5% of any class of its capital stock, or other affiliates be
on terms no less favorable than those that could be obtained from
unaffiliated persons and be approved by a majority of the independent and
disinterested directors. The Company believes that the transactions
described below were or will be on terms no less favorable than those that
could be obtained from unaffiliated persons. Furnished below is
information regarding certain transactions since January 1, 1993 in which
executive officers and directors of the Company have had an interest.
In September 1994, the Company purchased all of the partnership
interests owned by certain directors, officers, and employees of the
Company in Hvide Offshore Services, Ltd. ("HOS") for $607,000 in cash and
$1.0 million in promissory notes (the "HOS Notes") and assumed the bareboat
charter rights and obligations of HOS, which charters were acquired by HOS
at no cost. HOS was the bareboat charterer of four offshore service
vessels managed by the Company. See "Description of Certain Indebtedness --
Long-Term Charter Obligations -- Bareboat Charters" and "-- Acquisition Notes
and Assumed Indebtedness." The purchase price of these interests was based
upon an independent appraisal of the fair market value of the vessels being
acquired. The appraisal, which was based upon a market analysis, was
conducted by Bassoe Offshore (USA), Inc., a company with substantial
experience in the maritime industry. The general partner of HOS was
Maritime Transport Development Corp. ("Maritime Transport"), a company wholly
owned by Hans J. Hvide and for which J. Erik Hvide serves as an officer
and a director. The limited partners of HOS were Messrs. Hans J. Hvide (32%),
J. Erik Hvide (32%), Farmer (10%), Sweeney (7.5%), Brauninger (10%), Krumenacker
(5%), and Douglas (2.5%). HOS has since been dissolved and the Company has
assumed all of its obligations. As a result of the cancellation of $0.1 million
in principal amount of the HOS Notes held by Messrs. J. Erik and Hans J. Hvide
as described below, there is currently outstanding $0.9 million principal amount
of HOS Notes. Of the currently outstanding principal and accrued interest
thereon, $0.3 million will be repaid in cash with a portion of the proceeds
from the Offering and $0.2 million will be exchanged for shares of Class A
Common Stock valued at the initial public offering price.
Also in September 1994, the Company purchased for $781,000 in cash and
an aggregate of $1,089,000 in promissory notes (the "HCL Notes")
partnership interests owned by certain directors, officers, and employees
of the Company in (i) Hvide Chartering, Ltd. ("HCL"), which owns the tug
Hollywood (formerly the Cape Canaveral) and chartered it to the Company;
(ii) Hvide Leasing Partnership, Ltd. ("HLP"), which owned office and
computer equipment leased to the Company (acquired by HLP in 1988 for
$87,000); and (iii) HLP II, Ltd. ("HLP II"), which owned office furniture
and equipment leased to the Company (acquired by HLP II in 1990 for
$372,000). HLP and HLP II have since been dissolved. See "Description of
Certain Indebtedness -- Acquisition Notes and Assumed Indebtedness" for a
description of the HCL Notes. The purchase price of the HCL interests was
based upon an independent appraisal of the fair market value of the
Hollywood. As with the appraisal performed with respect to HOS, the HCL
appraisal, which was based upon a market analysis, was conducted by Charles
S. Smith, a marine consultant with substantial experience in the maritime
industry. The HLP and HLP II partnership interests were purchased at book
value, which the Company believes approximated fair market value, for
$20,000 and $93,000, respectively, in cash. The Company believes that the
book value approximated fair market value because the interests were not
liquid and had declining values which the Company believes correspond with
their depreciated book value. Messrs. Hans J. Hvide (33.33%), J. Erik
Hvide (20.0%), Farmer (2.67%), Sweeney (2.67%), Santos (2.67%), Sowrey
(2.66%), and Douglas (2.67%) were the limited partners of HCL. The Company
was the sole general partner of HCL and the owner of a 33.33% interest in
that partnership. Messrs. J. Erik Hvide (30%), Farmer (10%), Sweeney (5%),
Santos (10%), and Douglas (5%) were the limited partners of HLP. The
Company was the sole general partner of HLP and the owner of a 40.0%
interest in that partnership. The Company, Mr. J. Erik Hvide (14.29%), and
Mr. Farmer (14.29%) were the limited partners of HLP II. As a result of the
cancellation of $0.8 million in principal amount of the HCL Notes held by
Messrs. J. Erik and Hans J. Hvide as described below, there is currently
outstanding $0.3 million principal amount of HCL Notes. Of the currently
outstanding principal and accrued interest thereon, $0.1 million will be
exchanged for shares of Class A Common Stock valued at the initial public
offering price.
61
<PAGE>
The Company was the sole general partner of HLP II, the owner of a 5%
interest as general partner in that partnership, and the owner of a 66.42%
interest as a limited partner in that partnership.
In September 1994, the Company redeemed its outstanding preferred
stock, all of which was owned by Hans J. Hvide, at its par value in
exchange for $2.4 million in cash and a $3.6 million promissory note (the
"Founder's Note"). The Company will repay $1.6 million of outstanding
principal and accrued interest on the Founder's Note with a portion of
the proceeds from the Offering. See "Description of Certain Indebtedness
- -- Acquisition Notes and Assumed Indebtedness" and Note 3 to the Company's
consolidated financial statements.
Maritime Transport is the successor in interest to the entity which
developed and engineered the CATUG(R) vessel design. Maritime Transport
receives a commission equal to 1.25% of charter hire received by the Company for
the Seabulk Challenger and the Seabulk Magnachem as payment for those
development and engineering services. For the years ended December 31, 1993,
1994, and 1995, the Company made payments to Maritime Transport of $0.21
million, $0.19 million, and $0.21 million, respectively.
The Company intends to purchase a 152-foot crew/supply boat, to be
named Seabulk St. Francis, from J. Erik Hvide and the Investor Group for a
purchase price of approximately $2.2 million, which is equal to the
sellers' cost of the vessel. The Seabulk St. Francis is currently under
construction and is expected to be available for delivery in October 1996.
As of December 31, 1995, J. Erik Hvide was indebted to Maritime
Transport in the amount of $675,000 as a result of miscellaneous personal
advances made to him over a number of years. In 1996, Mr. Hvide guaranteed
repayment of a like portion of approximately $0.9 million owed to the Company by
Maritime Transport. All amounts owed to the Company by Maritime Transport,
including the amount guaranteed by Mr. Hvide, have been repaid
by the cancellation of $0.8 million of the HCL Notes and $0.1
million of the HOS Notes held by Mr. Hvide and Hans J. Hvide.
The Company has entered into agreements with and has issued notes to
the Investor Group. See "Description of Certain Indebtedness -- Senior
Notes," "-- Junior Notes," "Description of Capital Stock -- Shareholders
Agreement," and "-- Contingent Share Issuance Agreement." The Company made
aggregate payments on the notes during 1995 in the approximate amount of
$3.0 million. In addition, the Company agreed to pay an annual advisory
fee of $100,000 to the Investor Group. Such fee was paid in full in 1995
and in a pro rata amount of $25,000 was paid for 1994. Following the
Offering, the amount of the fee will be reduced by the compensation
received by Messrs. Calhoun and Lee in their capacities as directors of the
Company. See "Management -- Director Compensation and Options."
The Company has verbal arrangements with Jean Fitzgerald and Gerald
Farmer to provide technical and financial consulting services,
respectively, to the Company. Mr. Fitzgerald, whose arrangement commenced
in February 1994, is compensated for such services at the rate of $6,500
per month, and received total compensation of $66,000 during 1995. Mr.
Farmer, whose arrangement commenced in December 1995, is compensated at an
hourly rate. Both arrangements may be terminated by either party without
prior notice.
In addition to the foregoing transactions involving officers and
directors, the Company engaged First Stanford Corporation to render
advisory services to the Company. In exchange for these services, the
Company agreed to pay a fee equal to approximately $1.6 million subject to
adjustment, of which 30% is payable in cash and 70% is payable in Class A Common
Stock of the Company. The Company has also agreed to indemnify and hold First
Stanford harmless from and against any liabilities arising from its
engagement except those arising from First Stanford's bad faith or gross
negligence. Neither First Stanford nor its principal, Thomas M. Ferguson,
is affiliated with or related to the Company. Mr. Ferguson has agreed to
indemnify the Company against liability incurred by it pursuant to the
guaranty and indemnity
62
<PAGE>
obligations that the Company is undertaking in connection with the Seal
Fleet acquisition. See "Business -- The Acquisitions." The Class A Common
Stock payable to First Stanford will be held by the Company as security for
Mr. Ferguson's indemnity obligation, subject to release beginning 24 months
following the Offering.
63
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL
STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock immediately prior to the Offering and as adjusted to
give effect to the sale of 7,000,000 shares of Class A Common Stock in the
Offering, by (i) each Named Executive, (ii) each director of the Company, (iii)
each of the Company's stockholders who is known by the Company to beneficially
own at least five percent of any class of Common Stock of the Company or at
least five percent of the voting power of the Company's Common Stock, and (iv)
all executive officers and directors of the Company as a group. Management
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole voting and investment power with
respect to such shares, subject to community property laws where applicable and
the information contained in the footnotes to the table below.
<TABLE><CAPTION>
Class B Common Percent of Total
Class A Common Stock Stock Voting
---------------------------------- --------------------------- Power of
Percent of Class Percent of Class Outstanding
Beneficially Beneficially Common
Owned Owned Stock
--------------------- ------------------ --------------------
Number Number
Beneficially Before After Beneficially Before After Before After
Owned(2) Offering Offering Owned(2) Offering Offering Offering Offering
------- -------- --------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Name and Address
of Beneficial Owner(1)
- ----------------------
J. Erik Hvide (3) . . . . . -- * * 1,769,106 76.1% 53.3% 75.5% 43.6%
Hvide Family Trust I (4) . -- * * 1,454,383 62.6 43.8 62.0 35.8
Hvide Family Trust II (4) . -- * * 110,215 4.7 3.3 4.7 2.7
Clipper/Park HMI, L.P. (5). -- * * 700,630 10.0 21.1 9.9 17.2
Clipper/Hercules, L.P. (5). -- * * 387,408 5.5 11.7 5.5 9.5
Clipper/Merban,
L.P. (5) . . . . . . . . 203,555 34.0 2.7% 148,516 4.0 4.5 4.3 4.2
Clipper/Merchant HMI,
L.P. (5) . . . . . . . . -- 280,251 4.0 8.4 3.9 6.9
Clipper Capital
Associates(5) . . . . . -- 30,903 * * * *
Metropolitan Life
Insurance Company (5) . 71,820 34.0 1.0 -- * * * *
Olympus Growth Fund
II, L.P. (5) . . . . . . 67,596 32.0 * -- * * * *
John H. Blankley (6) . . .
Eugene F. Sweeney (6) . . .
Gene Douglas (6). . . . . . * * -- * * * *
Donald L. Caldera (6) . . . * * -- * * * *
Robert B. Calhoun, Jr. (6). * * -- * * * *
Gerald Farmer (6) . . . . . * * -- * * * *
Jean Fitzgerald (6) . . . . * * -- * * * *
John Lee (6). . . . . . . . * * -- * * * *
Walter C. Mink (6). . . . . * * -- * * * *
Robert Rice (6) . . . . . . * * -- * * * *
Raymond B. Vickers (6). . . * * -- * * * *
All executive officers and
directors as a group
(16 persons) . . . . . .
</TABLE>
- ---------------
* Less than one percent
(footnotes continue on next page)
64
<PAGE>
(1) Unless otherwise indicated, the address of each of the persons whose name
appears in the table above is: c/o Hvide Marine Incorporated, 2200 Eller
Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316.
(2) Assumes consummation of the following transactions, which will occur
simultaneously with the consummation of the Offering: (i) the issuance of
211,236 shares of Class A Common Stock and 765,394 shares of Class B
Common Stock; (ii) the issuance of 85,750 shares of Class A Common Stock
in payment for services (iii) the issuance of 23,692 shares of Class A
Common Stock in exchange for certain indebtedness; and (iv) the exchange of
131,735 shares of Class A Common Stock and 913,212 shares of Class B Common
Stock in exchange for the principal and accrued interest on the Junior
Notes to be outstanding upon consummation of the Offering.
(3) Includes the shares held by Hvide Family Trust I and Hvide Family Trust
II, of which Mr. Hvide is the sole trustee.
(4) J. Erik Hvide is the sole trustee for both trusts. Hvide Family Trust I is
a trust for the benefit of Mr. Hvide, his sister, and their children in
which Mr. Hvide has an economic interest in 65% of the income of the trust.
Hvide Family Trust II is a trust for the benefit of Elsa Hvide Mumma and
her children, in which Mr. Hvide has no economic interest.
(5) Member of the Investor Group, as defined in the Company's Articles of
Incorporation. The Investor Group owns an aggregate of 211,236
shares of Class A Common Stock and 1,679,444 shares of Class B
Common Stock (38.9%) of total voting power).
(6) Shares owned represent shares issuable upon the exercise
of stock options exercisable within sixty days of the date hereof.
Pursuant to certain agreements, on or about , 1997 (300 days following
completion of the Offering), the Investor Group will receive additional shares
of Class A Common Stock from J. Erik Hvide, thereby changing the amounts of
Class A Common Stock and Class B Common Stock owned, respectively, by the
Investor Group and Mr. Hvide. For information concerning the manner in which
the number of shares to be transferred will be determined, see "Description of
Capital Stock -- Contingent Share Issuance Agreement."
65
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a description of the principal terms of certain of the
Company's indebtedness, including indebtedness to be repaid with a portion of
the proceeds of the Offering and indebtedness to be incurred in connection with
the Acquisitions. Copies of the definitive agreements setting forth the terms
of this indebtedness have been filed as exhibits to the Registration Statement
of which this Prospectus is a part. The following summaries of certain provi-
sions of the agreements do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all the provisions of the
agreements.
Bank Debt
The Company's outstanding bank indebtedness, aggregating $53.5 million at
December 31, 1995, is held by a five-bank syndicate led by Citibank, N.A. under
a loan agreement (the "Credit Facility"). The Credit Facility currently
provides the Company with a $47.0 million term loan, $15.0 million of revolving
lines of credit, and a $5.6 million letter of credit, all maturing January 15,
2001, with the exception of the letter of credit, which matures on January 15,
2000. Upon consummation of the Offering, the amount available under the term
loan will increase to $54.5 million, the amount available under the revolving
lines of credit will decrease to $7.5 million, and an additional $12.5 million
vessel acquisition credit line will become available. Borrowings under the
Credit Facility bear interest at prime or LIBOR, at the Company's option, plus a
margin based upon certain financial ratios. Such borrowings were accruing
interest at 8.9% at December 31, 1995. Annual principal payments under the
term loan will aggregate $2.0 million for the remainder of 1996, $6.0 million in
1997, $8.0 million in 1998, $10.0 million in 1999, $12.0 million in 2000,
with the remaining $16.5 million due January 15, 2001. All borrowings are
secured by preferred ship mortgages on all vessels owned by the Company,
assignments of all of the Company's receivables and earnings, and
collateral mortgages of spare parts, supplies, and fuel.
The letter of credit serves as collateral for a surety bond to ensure payment
of any final judgment in the pending litigation relating to the reconstruction
of the Seabulk America. See "Business -- Legal Proceedings" and Note 5 to Notes
to Consolidated Financial Statements.
The Credit Facility also provides that amounts equal to 50% of Annual Excess
Cash Flow (as defined) and 100% of the net proceeds of certain sales of assets
be used to repay borrowings under the Credit Facility.
Covenants under the Credit Facility, among other things, (i) require the
Company to meet certain financial tests, including tests requiring the
maintenance of minimum interest coverage ratios and leverage ratios and levels
of liquidity; (ii) require the Company to maintain certain levels of collateral
securing amounts outstanding under the Credit Facility; (iii) limit the
incurrence of additional indebtedness; (iv) limit purchases of capital equipment
and other capital expenditures; (v) restrict payments, including dividends, with
respect to shares of any class of capital stock; and (vi) limit certain
corporate acts of the Company, such as incurring debt, creating liens and
entering into certain types of business transactions, including mergers and
joint ventures.
Events of default under the Credit Facility include, among other things, (i)
any failure to pay principal thereunder when due, or to pay interest or fees
within three business days after the date due; (ii) the breach of certain
covenants, representations, or warranties made under the Credit Facility; (iii)
66
<PAGE>
any failure to pay amounts due on certain indebtedness, or defaults that result
in or permit the acceleration of such indebtedness; (iv) certain events of
bankruptcy, insolvency, or dissolution; (v) certain judgments or orders; (vi)
certain seizures, condemnations, or similar actions pertaining to the Company's
assets or business; (vii) the invalidity of the security interests granted under
the Credit Facility; and (viii) a Change in Control (as defined).
The Credit Facility permits the acquisitions of the OMI Chemical Carriers and
the Seal Fleet Vessels and the related assumption of Title XI debt, incurrance
of lease debt and making and delivery of promissory notes. See "Use of
Proceeds" and "Business -- The Acquisitions." Although the Credit Facility will
provide an additional $12.5 million credit line for acquisitions and permits
additional borrowings of $10.0 million outside the Credit Facility, the Credit
Facility limits the Company's annual capital expenditures, including capital
expenditures respecting maintenance and improvements of existing vessels, to
$10.0 million without the consent of the lending banks. Based upon the
Company's anticipated maintenance expenditures, the existing restrictions will
require consent for additional acquisitions exceeding approximately $2.0 million
for the balance of 1996 and for any acquisitions in 1997. The Company is seeking
an amendment to the Credit Facility that would increase the annual limitations
upon capital expenditures for acquisitions.
In addition to the letter of credit available under the Credit Facility, the
Company has an available letter of credit issued by California Federal Bank in
the amount of $7.0 million. That letter of credit is pledged to the owner-
trustee of the Seabulk Magnachem and the U.S. Maritime Administration as
security for the Company's obligation to pay charter hire under the long-term
bareboat charter of that vessel. See "-- Long-Term Charter Obligations -- Title
XI Bonds." The Company anticipates that the letter of credit will no longer be
required as a result of the assumption of the Title XI debt associated with the
OMI Hudson and the OMI Dynachem.
Senior Notes
The Senior Notes were issued in the aggregate principal amount of $25.0
million pursuant to that certain Senior Subordinated Note and Common Stock
Purchase Agreement dated September 30, 1994 (the "Senior Note Agreement"). The
Senior Notes will mature in two equal installments on September 30, 2003 and
2004, and bear interest at 12% per annum, payable semi-annually in arrears on
March 31 and September 30 of each year. The Company at its option may prepay
the Senior Notes at any time in whole or in part in a minimum aggregate amount
of $500,000, at a price equal to the principal amount of the Senior Notes being
prepaid, plus accrued interest. The Senior Notes rank pari passu with all other
Senior Debt (as defined).
Covenants under the Senior Note Agreement, among other things, (i) limit the
issuance of debt by the Company and of debt or preferred stock by the Company's
subsidiaries; (ii) restrict certain payments, including dividends, with respect
to shares of any class of capital stock or to repurchase or redeem capital stock
or Subordinated Obligations (as defined); (iii) limit certain corporate acts of
the Company, including permitting any of its subsidiaries to create or permit
any restriction on the subsidiaries' ability to pay dividends, make loans or
advances, or transfer assets or property to the Company; (iv) limit certain
transactions by the Company and its subsidiaries, including certain mergers or
consolidations, asset sales, sales of subsidiary stock, leases, other asset
dispositions, transactions with affiliates, creations of liens, and sale and
leaseback transactions; and (v) provide that upon a Change in Control (as
defined), each holder of the Senior Notes shall have the right to require that
the Company
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repurchase such holders' Senior Notes at a purchase price equal to 100% of
principal plus accrued and unpaid interest. In addition, the Company has agreed
not to consolidate with or merge into, sell all of its issued and outstanding
capital stock, or convey, transfer or lease all of its assets to another person
unless certain conditions are met.
Events of Default (as defined) under the Senior Note Agreement include
(i) failure to pay principal or interest when due; (ii) failure
to comply with certain restrictions
on mergers, consolidations, and transfers of assets; (iii) failure to comply
with certain agreements and covenants in the Senior Notes and the Senior Note
Agreement; (iv) certain events of default on other indebtedness; (v) certain
events of bankruptcy; and (vi) the breach of any representation or warranty.
The Company intends to repay all outstanding principal and interest under the
Senior Notes with a portion of the proceeds from the Offering.
Junior Notes
The Junior Notes were issued in the aggregate principal amount of $25.0
million pursuant to that certain Junior Subordinated Note and Common Stock
Purchase Agreement dated September 30, 1994 (the "Junior Note Agreement"). The
principal of and accrued interest on the Junior Notes are due and payable on
September 30, 2014; provided, however, that the Junior Notes must be prepaid
upon the closing of the Offering of the Company's Common Stock. Interest
accrues on the Junior Notes at a rate of 8% per annum, compounded quarterly.
The Company at its option may prepay the Junior Notes at any time in whole or in
part at a price equal to the principal amount of the Junior Notes being prepaid,
plus accrued interest. The Junior Notes are subordinated to all Senior Debt (as
defined).
Covenants under the Junior Note Agreement, among other things, provide that
upon a Change in Control (as defined), each holder of the Junior Notes shall
have the right to require that the Company repurchase such holders' Junior Notes
at a purchase price equal to 100% of principal plus accrued and unpaid interest.
In addition, the Company has agreed not to consolidate with or merge into, sell
all of its issued and outstanding capital stock, or convey, transfer or lease
all of its assets to another person unless certain conditions are met.
Events of Default (as defined) under the Junior Note Agreement
include (i) failure to pay principal or interest when due;
(ii) failure to comply with covenants; (iii)
certain events of bankruptcy; (iv) certain judgments or decrees; and (v) the
breach of any representation or warranty.
Immediately prior to the consummation of the Offering, the principal of and
accrued interest on the Junior Notes will total $28.7 million, of which
$15.1 million will be repaid from the proceeds of the Offering and the balance
will be exchanged for 131,735 shares of Class A Common Stock and 993,212 shares
of Class B Common Stock valued at $ 12.09 per share (assuming a public offering
price of $ 13.00 per share).
Long-Term Charter Obligations
Title XI Bonds. Two of the Company's subsidiaries are parties to long-term,
"hell or high water" charters of the Seabulk Challenger and the Seabulk Magna-
chem, the performance of which is guaranteed by the Company. Both vessels were
financed by the issuance of U.S. Government Guaranteed Ship Financing Bonds
issued pursuant to Title XI in leveraged lease transactions. As of December 31,
1995, approximately $4.2 million of 8.5% Title XI Bonds due 1999 relating to the
Seabulk Challenger was
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outstanding and approximately $7.3 million of 5.25% Title XI Bonds due 2000
relating to the Seabulk Magnachem was outstanding. The long-term charter for
the Seabulk Challenger is coterminous with the maturity date of the respective
obligation, and the charter for the Seabulk Magnachem terminates in 2002. The
Company has the option to purchase the vessels or renew the charters at fair
market value and, with respect to the Seabulk Magnachem, has the right to share
in the residual value proceeds of any sale to a third party.
In connection with the acquisition of the OMI Chemical Carriers, the Company
is assuming approximately $34.7 million of U.S. Government Guaranteed Ship
Financing Bonds issued pursuant to Title XI in five distinct series bearing
interest at an average rate of 7.65%.
Repayment of the Company's existing Title XI bonds and the Title XI bonds to
be assumed is guaranteed by the full faith and credit of the United States,
acting through the Maritime Administration. As security for such guarantee, the
vessels are mortgaged to the United States, and the subsidiaries that own or
charter the vessels are each party to a security agreement and a financial
agreement with the United States containing various operating covenants and
financial conditions that, among other things, restrict the ability of each to
(i) incur additional indebtedness, (ii) make certain loans, advances, or
investments, (iii) create certain liens, (iv) pay stock dividends, (v) sell,
transfer, or dispose of assets, (vi) change the nature of its business, (vii)
make capital expenditures, (viii) effect certain mergers, consolidations, or
similar business combinations, or (ix) enter into certain vessel charter
arrangements. The agreements specify various events of default, including
failure to pay charter hire, pay certain guarantee fees, satisfy certain
covenants, maintain required insurance, and maintain U.S. citizenship (within
the meaning of Section 2 of the Shipping Act, 1916) and certain events of
insolvency or bankruptcy. No consents or approvals are required under the
existing Title XI bonds to consummate the Offering or accomplish the
Acquisitions.
Bareboat Charters. The Company is party to bareboat charters relating to four
offshore service vessels, two of which expire in June 2001 and two of which
expire in January 2002. See "Certain Transactions" and Note 4 to the Company's
consolidated financial statements. The Company has an option to purchase each
of these vessels for a nominal amount upon the expiration of the charters. The
Company is also party to two bareboat charters relating to a total of nine crew
boats. The charter on one crew boat expires in 2002 with an option to purchase
the vessel for $0.4 million. The charter on the remaining eight crew boats
expires in 2004 with an option to purchase the vessels for a nominal amount. In
addition, the Company is party to a bareboat charter on a tractor tug which
expires in 2010 with an option to purchase the vessel for $1.6 million.
Acquisition Notes and Assumed Debt
In connection with the redemption in September 1994 of the Company's
outstanding preferred stock, the purchase of partnership interests in HOS, and
the purchase of partnership interests in HCL, the Company issued the unsecured
subordinated Founder's Note, HOS Notes, and HCL Notes, in the approximate
principal amounts of $3.6 million, $1.0 million, and $1.1 million, respectively.
See "Certain Transactions." The Founder's Note bears interest, payable
quarterly, at the greater of 12% per annum or prime plus 3%. The HOS and HCL
Notes bear interest at 12% per annum. A portion of the notes will be repaid
in cash with a portion of the proceeds from the Offering and a portion of the
notes will be exchanged for shares of Class A Common Stock. See "Use of
Proceeds" and "Certain Transactions." Of the balance of $4.8 million of
currently remaining outstanding principal amount of such notes, $1.6 million
will be repaid in cash on the Founder's Note and $0.3 million will be repaid
in cash on the HOS Notes. In addition, $0.3 million of outstanding principal
on the HCL and HOS Notes will be exchanged for 23,692 shares of Class A Common
Stock (assuming an Offering price of $13.00 per share).
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In September 1994, the Company issued a $3.0 million promissory note (the
"Vessel Acquisition Note") in partial payment for the 20% minority interest in a
partnership that owned, directly or indirectly, eight of the Company's
offshore supply boats and substantially all of the Company's interests in its
product carrier and one of its chemical carriers. The unsecured note bears
interest, payable quarterly, at the lesser of 10% per annum or prime plus 2%.
Principal on the Vessel Acquisition Note is payable in five equal annual
installments commencing October 1, 1995. The Company will repay $2.4 million
of outstanding principal and accrued interest on the Vessel Acquisition Note
with a portion of the proceeds from the Offering.
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DESCRIPTION OF CAPITAL STOCK
The following summary description of the Company's capital stock is qualified
in its entirety by reference to the Articles of Incorporation and its Amended
and Restated Bylaws (the "Bylaws"), copies of which have been included as
exhibits to the Registration Statement of which this Prospectus is a part, and
reference to Florida law. All capitalized terms used and not defined below have
the respective meanings assigned to them in the Articles of Incorporation.
Upon consummation of the Offering, the authorized capital stock of the
Company will consist of 100,000,000 shares of Class A Common Stock, par value
$.001 per share, of which 7,452,414 shares will be issued and outstanding,
5,000,000 shares of Class B Common Stock, par value $.001 per share, of which
3,316,816 shares will be issued and outstanding, 2,500,000 shares of Class C
Common Stock, par value $.001 per share, none of which will be issued and
outstanding, and 10,000,000 shares of Preferred Stock, par value $1.00 per
share, none of which will be issued and outstanding. The Class A Common Stock,
Class B Common Stock, and Class C Common Stock are in this section collectively
referred to as the "Common Stock."
Common Stock
The holders of Common Stock are entitled to receive such dividends, in cash,
property or securities, as may be declared from time to time by the Board of
Directors out of funds legally available therefor. The holders of Common Stock
are entitled to participate in dividends ratably on a per share basis. If
dividends consist of Common Stock or other voting securities of the Company, the
voting rights of each such security shall correspond to the voting rights of the
security held. Any dividend declared for one class of Common Stock must be
declared for the other classes of Common Stock. The holders of Common Stock
have no preemptive or redemption rights and are not subject to future calls or
assessments by the Company. Subject to the prior rights of holders, if any, of
any outstanding class or series of capital stock having a preference in relation
to the Common Stock as to distributions upon dissolution, liquidation, and
winding-up of the Company, holders of Common Stock are entitled to share ratably
in any assets of the Company that remain after payment in full of all debts and
liabilities of the Company.
The holders of Class A Common Stock and Class B Common Stock vote together as
a single class on all matters submitted to a vote of the stockholders, including
the election of directors, except as described below under "-- Foreign Ownership
Restrictions" and as provided under Florida law. In all matters submitted to a
vote of the stockholders, including the election of directors, and except as
described below under "-- Foreign Ownership Restrictions," each share of Class A
Common Stock is entitled to one vote and each share of Class B Common Stock is
entitled to ten votes. The stockholders do not have cumulative voting rights.
Except as provided under Florida law, Class C Common Stock is non-voting, and
shares of Class C Common Stock are not included in determining the number of
shares required for a quorum or for actions by stockholders.
The Class B Common Stock can be owned only by (i) J. Erik Hvide and any
person related to him by kinship or marriage, certain trusts for the benefit of
Elsa Hvide Mumma, J. Erik Hvide, his spouse, and their children (of which J.
Erik Hvide is sole trustee), the respective beneficiaries and heirs of such
trusts, and any legal entity majority owned and controlled, directly or
indirectly, by any such persons or legal entities (the "Hvide Family"); (ii) the
Investor Group; or (iii) any person other than a
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member of the Hvide Family or the Investor Group (a "Third Party") to whom Class
B Common Stock shares may have been transferred prior to the Offering in
accordance with the Articles of Incorporation. If the ownership or beneficial
interest in any share of Class B Common Stock ceases to be vested in any of
these persons, then such share will automatically and immediately convert into a
share of Class A Common Stock, although such a conversion will not occur where
Class B Common Stock is transferred from one Hvide Family member, upon death,
to another Hvide Family member.
Except as described below under "-- Foreign Ownership Restrictions," each
holder of Class B Common Stock may elect at any time to convert any of his
shares, share for share, into Class A Common Stock.
Immediately after completion of the Offering, the Hvide Family and the
Investor Group will hold 51.3% and 48.7%, respectively, of the outstanding
Class B Common Stock. The Hvide Family and the Investor Group will thus
own 16.4% and 17.6%, respectively, of the combined classes of Common Stock
and control 43.6% and 38.9%, respectively, of the voting power of such stock
upon completion of the Offering and will control the management and affairs
of the Company and any corporate actions requiring stockholder approval.
Preferred Stock
The Board of Directors has the authority, without further action by the
stockholders, to issue from time to time shares of Preferred Stock in one or
more series and to fix, with respect to each series, the number of shares,
voting powers, designations, relative rights, preferences (including seniority
upon liquidation), privileges, and restrictions thereof. The rights,
preferences, privileges, and restrictions of different series of Preferred Stock
may differ with respect to dividend rates, amounts payable on liquidation,
voting rights, conversion rights, redemption provisions, sinking fund
provisions, and other matters. The Preferred Stock is subject to the dual stock
certificate system described below under " -- Foreign Ownership Restrictions."
The issuance of Preferred Stock could decrease the amount of earnings and
assets available for distribution to holders of Common Stock, could adversely
affect the rights and powers, including voting and distribution rights, of
holders of Common Stock and could have the effect of delaying, deferring, or
preventing a change in control of the Company. Except as otherwise provided by
law, the holders of any series of Preferred Stock may be given the right, voting
separately as a class, to elect one or more directors of the Company. The term
of any such director would expire at the next succeeding annual meeting of
shareholders.
The Company has no present intention to issue any shares of Preferred Stock.
Foreign Ownership Restrictions
The Articles of Incorporation (i) contain provisions limiting the aggregate
percentage ownership by Non-Citizens of each class of the Company's capital
stock (including the Class A Common Stock and the Class B Common Stock) to
24.99% of the outstanding shares of each such class (the "Permitted Percentage")
to ensure that such foreign ownership will not exceed the maximum percentage
permitted by applicable federal law (presently 25.0%), (ii) require institution
of a dual stock certificate system to help determine such ownership, and (iii)
permit the Board of Directors to make such determinations as may reasonably be
necessary to ascertain such ownership and implement such limitations. These
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provisions are intended to protect the Company's ability to operate its vessels
in the U.S. domestic trade governed by the Jones Act. The ability of the
Company to so operate is necessary to avoid default under certain of the
Company's financings, may enhance the Company's ability to incur additional
debt, and may have other effects upon the Company. See "Risk Factors --
Restriction on Foreign Ownership," and "Business -- Environmental and Other
Regulation -- Coastwise Laws."
To provide a method to enable the Company reasonably to determine stock
ownership by Non-Citizens, the Articles of Incorporation require the Company to
institute (and to implement through the transfer agent for the Common Stock) a
dual stock certificate system, pursuant to which certificates representing
shares of Common Stock will bear legends that designate such certificates as
either "citizen" or "non-citizen," depending on the citizenship of the owner.
Accordingly, stock certificates are denominated as "citizen" (blue) in respect
of Class A Common Stock owned by Citizens and as "non-citizen" (red) in respect
of Class A Common Stock owned by Non-Citizens.
For purposes of the dual stock certificate system, a "Non-Citizen" is defined
as any person other than a Citizen, and a "Citizen" is defined as: (i) any
individual who is a citizen of the U.S. by birth, naturalization, or as
otherwise authorized by law; (ii) any corporation (a) organized under the laws
of the U.S., or a state, territory, district, or possession thereof, (b) of
which not less than 75% of its stock is beneficially owned by Citizens, (c)
whose president or chief executive officer, chairman of the board of directors
and all persons authorized to act in their absence or disability are Citizens,
and (d) of which more than 50% of that number of its directors necessary to form
a quorum are Citizens; (iii) any partnership (a) organized under the laws of the
U.S. or a state, territory, district, or possession thereof, (b) all general
partners of which are Citizens, and (c) of which not less than a 75% interest is
beneficially owned by Citizens; (iv) any association or limited liability
company (a) organized under the laws of the U.S., or a state, territory,
district, or possession thereof, (b) of which not less than 75% of its voting
power is beneficially owned by Citizens (c) whose president, chief executive
officer, or equivalent position, chairman of the board of directors, or
equivalent body, and all persons authorized to act in their absence or
disability are Citizens, and (d) of which more than 50% of that number of its
directors or equivalent persons necessary to form a quorum are Citizens; (v) any
joint venture, if not an association, corporation or partnership, (a) organized
under the laws of the U.S. or a state, territory, district, or possession
thereof, and (b) all co-venturers of which are Citizens; and (vi) any trust (a)
domiciled in and existing under the laws of the U.S., or a state, territory,
district, or possession thereof, (b) the trustee of which is a Citizen, and (c)
of which not less than a 75% interest is held for the benefit of Citizens.
A stock certificate is transferable to Citizens at any time and is
transferable to Non-Citizens if, at the time the stock certificate is presented
to the Company's transfer agent, the transfer would not increase the aggregate
Common Stock ownership by Non-Citizens of that particular class of Common Stock
above the Permitted Percentage in relation to the total outstanding shares of
that particular class Common Stock. Non-Citizen certificates may be converted
to Citizen certificates upon a showing, satisfactory to the Company, that the
holder is a Citizen. Any purported transfer to Non-Citizens of shares or of an
interest in shares of the Company represented by a Citizen certificate in excess
of the Permitted Percentage will be ineffective as against the Company for all
purposes (including for purposes of voting, dividends, and any other
distribution, upon liquidation or otherwise). In addition, the shares may not
be transferred on the books of the Company, and the Company, whether or not such
stock certificate is validly issued, may refuse to recognize the holder thereof
as a stockholder of the Company except to the extent necessary to effect any
remedy available to the Company. Subject to the foregoing limitations, upon
surrender of any stock certificate for transfer, the transferee will receive
citizen (blue) certificates or non-citizen (red) certificates, as applicable.
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The Articles of Incorporation establish procedures with respect to the
transfer of shares to enforce the limitations referred to above and authorize
the Board of Directors to implement such procedures. The Board of Directors may
take other ministerial actions or make interpretations of the Company's foreign
ownership policy as it deems necessary in order to implement the policy.
Pursuant to the procedures established in the Articles of Incorporation, as a
condition precedent to each issuance and/or transfer of shares (including the
shares of Class A Common Stock being sold in the Offering), a citizenship
certificate will be required from all transferees (and from any recipient upon
original issuance) of Common Stock or, from the beneficial owner of the Common
Stock being transferred, if the transferee (or the original recipient) is acting
as a fiduciary or nominee for such beneficial owner. The registration of the
transfer (or original issuance) will be denied upon refusal to furnish such
citizenship certificate, which must provide information about the purported
transferee's or beneficial owner's citizenship. All brokers, dealers, banks,
and other persons holding shares of Common Stock as nominees for beneficial
owners will be required to provide the Company's transfer agent with such
citizenship certificates, and a notice will be distributed explaining this
requirement. Furthermore, as part of the dual stock certificate system,
depositories holding the Company's Common Stock will be required to maintain
separate accounts for "Citizen" and "Non-Citizen" shares. When the beneficial
ownership of shares of Common Stock is transferred, the record holders will be
required to advise such depositories as to which account the transferred shares
should be held. In addition, to the extent necessary to enable the Company to
determine the number of shares owned by Non-Citizens, the Company may from time
to time require record holders and beneficial owners of shares of Common Stock
to confirm their citizenship status and may, in the discretion of the Board of
Directors, temporarily withhold dividends payable to, and deny voting rights to,
any such record holder or beneficial owner until confirmation of citizenship is
received.
Should the Company (or its transfer agent for the Common Stock) become aware
that the ownership by Non-Citizens of Common Stock at any time exceeds the
Permitted Percentage (the "Excess Shares"), the Board of Directors is authorized
to withhold dividends and other distributions temporarily on the Excess Shares,
pending the transfer of such shares to a Citizen or the reduction in the
percentage of shares owned by Non-Citizens to or below the Permitted Percentage,
and to deny voting rights with respect to the Excess Shares. If dividends and
distributions are to be withheld, they will be set aside for the account of the
Excess Shares. At such time as such shares are transferred to a Citizen or the
ownership of such shares by Non-Citizens will not result in aggregate ownership
by Non-Citizens in excess of the Permitted Percentage, the dividends withheld
shall be paid to the then record holders of the related shares. Excess Shares
shall, so long as the excess exists, not be deemed to be outstanding for
purposes of determining the vote required on any matter brought before the
stockholders for a vote. The Articles of Incorporation provide that the Board
of Directors has the power, in its reasonable discretion and based upon the
records maintained by the Company's transfer agent, to determine those shares of
Common Stock that constitute the Excess Shares. Such determination will be made
by reference to the date or dates on which such shares were purchased by Non-
Citizens, starting with the most recent acquisition of shares by a Non-Citizen
and including, in reverse chronological order, all other acquisitions of shares
by Non-Citizens from and after the acquisition that first caused the Permitted
Percentage to be exceeded; provided that Excess Shares resulting from a
determination that a record holder or beneficial owner is no longer a Citizen
will be deemed to have been acquired as of the date of such determination.
To satisfy the Permitted Percentage described above, the Articles of
Incorporation authorize the Board of Directors, in its discretion, to redeem
(upon written notice) Excess Shares in order to reduce the aggregate ownership
by Non-Citizens to the Permitted Percentage. As long as the shares of Class A
Common Stock offered hereby continue to be authorized for quotation on the
Nasdaq National Market, the redemption price will be the average of the closing
sale price of the shares (as reported by the Nasdaq
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National Market) during the 30 trading days next preceding the date of the
notice of redemption. The redemption price for Excess Shares will be payable in
cash. In the event the Company is not permitted by applicable law to make such
redemption or the Board of Directors, in its discretion, elects not to make such
redemption, the Company will give notice to the holders of Class B Common Stock
and those of whom are Citizens may elect to purchase their pro rata portion of
the Excess Shares by delivering written notice of such election within 30 days
of receipt of the Company's notice.
Possible Anti-Takeover Provisions
Florida Business Corporation Act. The Company is subject to Sections
607.0901 and 607.0902 of the Florida Business Corporation Act ("FBCA"), which
regulate the acquisition and exercise of corporate control.
Under Section 607.0902 of the FBCA, "control shares" of certain corporations
acquired in a "control share acquisition," with certain exceptions, have no
voting rights unless such rights are granted pursuant to a vote of the holders
of a majority of the corporation's voting stock (excluding all "interested
shares"). "Control shares" are shares that, when added to all other shares
which a person owns or has the power to vote, would give that person any of the
following ranges of voting power: (i) one-fifth or more but less than one-third
of the voting power; (ii) one-third or more but less than a majority of the
voting power; and (iii) more than a majority of the voting power. A "control
share acquisition" is the acquisition of ownership of, or the power to vote,
outstanding control shares. Shares acquired within 90 days, or as part of a
plan to effectuate a control share acquisition, are deemed to have been acquired
in the same transaction. "Interested shares" include shares held by the person
attempting to effectuate the control share acquisition or any officer or
employee-director of the corporation. A corporation may elect to not be
governed by Section 607.0902 of the FBCA in its articles of incorporation or
bylaws.
Section 607.0901 of the FBCA requires that certain transactions between an
interested stockholder (in general, a stockholder that beneficially owns more
than 10% of a corporation's outstanding voting stock) and a corporation be
approved by the affirmative vote of the holders of two-thirds of the
corporation's voting shares (excluding those shares beneficially owned by the
interested stockholder). In general, such approval will not be required if the
transaction is approved by a majority of disinterested directors, the interested
stockholder has been the beneficial owner of at least 80% of the corporation's
outstanding voting stock for at least the preceding five years, the interested
stockholder is the beneficial owner of at least 90% of the outstanding voting
stock of the corporation (excluding stock acquired directly from the corporation
in a transaction not approved by a majority of the disinterested directors), or
the consideration paid in the affiliated transaction satisfies the statutory
"fair price" formula and certain other conditions are met. Transactions covered
by Section 607.0901 include mergers, consolidations, sales of assets having an
aggregate fair market value of 5% or more of the aggregate fair market value of
all the corporation's assets on a consolidated basis or of all the corporation's
outstanding stock or representing 5% or more of the corporation's earning power
or net income on a consolidated basis, transfers of shares having an aggregate
fair market value of 5% or more of the aggregate fair market value of all
outstanding shares of the corporation, liquidations, dissolutions,
reclassifications, recapitalizations, and loans. A corporation may elect, by
the vote of a majority of the outstanding voting stock (not including shares
held by an interested stockholder), by amending such corporation's articles of
incorporation or bylaws, to not be subject to the provisions of Section 607.0901
of the FBCA. Any such election, however, will not be effective until 18 months
after it is made, and will not apply to any affiliated transaction between such
corporation and someone who was an interested stockholder prior to the effective
date of such amendment.
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Each of the foregoing provisions of the FBCA could have the effect of
delaying or making it more difficult to effect a change of control or management
of the Company, even though such a change may be beneficial to the Company and
its stockholders.
Dual Classes of Common Stock. The Class A Common Stock entitles its holders
to one vote per share, and the Class B Common Stock entitles its holders to ten
votes per share. Accordingly, the Hvide Family and the Investor Group, as the
holders of all the outstanding Class B Common Stock, will be able to control the
vote on all matters submitted to a vote of the holders of the Common Stock, and
such control may have the effect of discouraging certain types of transactions
involving an actual or potential change of control of the Company, including
transactions in which the holders of Class A Common Stock might otherwise
receive a premium for their shares over then-current market prices.
Board of Directors. In all elections of directors, except elections, if any,
for directors for Preferred Stock, as described in "-- Preferred Stock," each
share of Class A Common Stock is entitled to one vote and each share of Class B
Common Stock is entitled to ten votes, and neither class has cumulative voting
rights. The Hvide Family, under the terms of the Shareholders Agreement,
will have the ability to nominate at least eight members of the Company's
11-member Board of Directors, who are elected by the holders of Class A Common
Stock and Class B Common Stock, voting together as a class. In addition,
pursuant to the Articles of Incorporation, the Board of Directors will be
divided into three classes of directors serving staggered three-year terms as
well as directors, if any, for Preferred Stock who serve one-year terms. As a
result, approximately one third of the Board of Directors is elected each year.
Each of these provisions could have the effect of delaying or making it more
difficult to effect a change in control or management of the Company, even
though such a change may be beneficial to the Company and its stockholders.
Restrictions on Taking Stockholder Action. The Company's Bylaws provide that
a stockholder must notify the Company in advance of such holder's intent to
bring up items of business or nominate directors at any annual meeting of
stockholders. With respect to other items of business, the Bylaws provide that
a stockholder's notice must be given in accordance with the procedures set forth
in Rule 14a-8 of Regulation 14A under the Securities Exchange Act of 1934, as
amended, which generally requires that such proposals be received by the Company
not less than 120 days prior to the anniversary date that proxy solicitation
materials were sent out for the immediately preceding annual meeting of
stockholders of the Company. As permitted by the FBCA, pursuant to the
Company's Articles of Incorporation, stockholders may only call a special
meeting of stockholders when the holders of not less than 50% of the shares
entitled to vote make written demand on the Company for such a meeting.
Authorized but Unissued Capital Stock. One of the effects of the existence
of authorized but unissued Common Stock and undesignated Preferred Stock may be
to enable the Board of Directors to make more difficult or to discourage an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest, or otherwise, and thereby to protect the continuity of the
Company's management. If, in the exercise of its fiduciary obligations, the
Board of Directors were to determine that a takeover proposal was not in the
Company's best interest, such shares could be issued by the Board of Directors
without stockholder approval in one or more transactions that might prevent or
make more difficult or costly the completion of the takeover transaction by
diluting the voting or other rights of the proposed acquiror or insurgent
stockholder group, by creating a substantial voting block in institutional or
other hands that might undertake to support the position of the incumbent Board
of Directors, by effecting an acquisition that might complicate or preclude the
takeover, or otherwise. In this regard, the Articles of Incorporation grant the
Board of Directors broad power to establish the rights and preferences
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<PAGE>
of the authorized and unissued Preferred Stock, one or more series of which
could be issued entitling holders (i) to vote separately as a class on any
proposed merger or consolidation, (ii) to cast a proportionately larger vote
together with the Common Stock on any such transaction or for all purposes,
(iii) to elect directors having terms of office or voting rights greater than
those of other directors, (iv) to convert Preferred Stock into a greater number
of shares of Common Stock or other securities, (v) to demand redemption at a
specified price under prescribed circumstances related to a change of control,
or (vi) to exercise other rights designated to impede a takeover. The issuance
of shares of Preferred Stock pursuant to the Board of Directors' authority
described above may adversely effect the rights of holders of the Common Stock.
Certain Provisions of Articles of Incorporation and Bylaw Provisions
Rights of Approval. For so long as the Investor Group owns at least 5% of
the Company's outstanding Common Stock, subject to the following exception, the
following actions must be approved by all of the holders of the Class B Common
Stock: (i) the appointment of a new chief executive officer; (ii) engagement of
the Company or its subsidiaries in any material new business; (iii) a merger
involving the Company or a sale of all or substantially all of the Company's
assets; (iv) a recapitalization or voluntary bankruptcy filing; (v) a capital
investment, acquisition, or asset sale in excess of $5 million; (vi) borrowings
or issuances of securities in excess of $5 million; or (vii) amendment to the
Articles of Incorporation affecting the rights of holders of shares of Class B
Common Stock. After September 30, 1999, a merger or sale of substantially all
of the Company's assets no longer will require the approval of all of the
holders of the Class B Common Stock.
Liability of Directors and Officers. The FBCA permits corporations to (i)
include provisions in their articles of incorporation that limit the personal
liability of directors for monetary damages resulting from breaches of the duty
of care, subject to certain exceptions, and (ii) indemnify directors and
officers, among others, in certain circumstances for their expenses and
liabilities incurred in connection with defending pending or threatened suits.
The Articles of Incorporation include a provision that eliminates the
personal liability of a director to the Company and its stockholders for
monetary damages resulting from breaches of the duty of care to the fullest
extent permitted by the FBCA and further provide that any amendment or repeal of
that provision will not adversely affect any right or protection of a director
of the Company existing at the time of such amendment, modification, or repeal
to any director for acts or omissions occurring prior to such amendment.
Pursuant to the Articles of Incorporation, the Board of Directors has
indemnified the Company's current and former directors, officers, employees, and
agents to the fullest extent permitted, from time to time, under the FBCA as
presently or hereafter in effect. The Company also may enter into agreements
providing for greater or different indemnification of any of these persons. The
Company maintains an insurance policy covering the liability of its directors
and officers for actions taken in their official capacity.
Citizenship of Directors and Officers. The Company's Bylaws provide that the
Chairman of the Board of Directors, Chief Executive Officer, President, and all
Vice Presidents must be Citizens, and restrict any officer who is not a Citizen
from acting in the absence or disability of such persons. The Bylaws further
provide that the number of Non-Citizen directors shall not exceed a minority of
the number necessary to constitute a quorum for the transaction of business.
See "Business -- Environmental and Other Regulation -- Coastwise Laws."
77
<PAGE>
Shareholders Agreement
In connection with the September 30, 1994 issuance of the Senior Notes and
the Junior Notes the Company, J. Erik Hvide, two trusts for the benefit of
certain members of Mr. Hvide's family, of which Mr. Hvide is sole trustee, and
the Investor Group entered into an agreement granting certain voting and
approval rights to the Investor Group and the Hvide Family. The agreement, as
amended (the "Shareholders Agreement") provides as follows:
Designations to the Board of Directors. The Investor Group may initially
nominate three persons to the Board of Directors and must vote all its
shares so as to elect eight other persons nominated to the Board of
Directors by Mr. J. Erik Hvide. Of these eight
nominees, one will be Mr. Hvide, no more than three others may be employees of
the Company, its subsidiaries or members of the Hvide Family, and the remainder
must be independent of Mr. Hvide, the Company, and its subsidiaries. The number
of nominees that the Investor Group is entitled to designate will be reduced by
one at such times as the Investor Group's holdings drop below 20%, 10%, and 5%,
respectively, of the Company's outstanding Common Stock. The Investor Group may
remove their nominees, with or without cause, and may nominate successors to
their nominees. All director nominees must be U.S. citizens.
Registration Rights. The Investor Group has the right to demand that its
shares of Common Stock be registered for sale pursuant to the requirements of
the Securities Act, up to three times, subject to certain deferral
rights of the Company. Each of Mr. Hvide and the members of the
Investor Group has the right to request that their shares be
registered pursuant to an underwritten public offering of the
Company's Common Stock, subect to certain cutbacks.
Share Adjustment. The Investor Group has agreed that, if following the
issuance of the CSIs (see below), the aggregate votes held by the Investor Group
by virtue of its ownership of Class A and Class B Common Stock would exceed the
votes held by the Hvide Family by virtue of its ownership of Class A and Class B
Common Stock, the Investor Group will convert sufficient Class B Common Stock to
Class A Common Stock to allow the Hvide Family to maintain a slight voting
majority over the Investor Group.
Contingent Share Issuance Agreement
Also in connection with the issuance of the Junior Notes, the Company and the
Investor Group entered into a Contingent Share Issuance Agreement. The
agreement, as amended (the "CSI Agreement"), provides for the issuance of
additional shares of Class A Common Stock to the purchasers of the Junior Notes
to the extent necessary for such purchasers to earn a specified All-in Return
(as defined by the CSI Agreement) on their investment. Simultaneously, Mr.
Hvide agreed in the Shareholders Agreement to contribute to the Company a number
of shares of Class B Common Stock equal to the number of shares of Common Stock
issued by the Company pursuant to the CSI Agreement.
Pursuant to the CSI Agreement, the Company issued to the purchasers of the
Junior Notes two series of Common Stock Contingent Share Issuances ("CSIs") that
are convertible into shares of Class A Common Stock on , 1997 (300
days following completion of the Offering). The number of shares of such stock
issuable with respect to the first series of CSIs is the lesser of (i) that
number necessary to cause the All-in Return (as defined below) to equal 60% and
(ii) a number of shares equal to 9.375% of the outstanding shares of the
Company's Common Stock on a fully-diluted basis, without giving effect to the
offering or the CSI issuance. The number of shares issuable with respect to the
second series of CSIs is equal to the lesser of (i) that number necessary to
cause the All-in Return to equal 35% and (ii) a number of shares equal to 12.5%
of the outstanding shares of the Company's Common Stock on a fully-diluted
basis, without giving effect to the Offering or the CSI issuance. The value of
the shares of Class A Common Stock issuable upon conversion of the CSIs is based
upon the average market price of the Class A Common Stock during the 30 trading
days preceding , 1997 (the "Valuation Period"). "All-in Return"
is defined as the annual rate of return earned by the purchasers of the Junior
Notes with respect to their aggregate investment in the Junior Notes, the shares
of Common Stock issued to them in connection with their purchase of the Junior
Notes, and the shares of Common Stock issued to them upon conversion of the
CSIs.
78
<PAGE>
While it is not possible to predict the future market value of the Company's
Common Stock, assuming, for illustrative purposes only, that the average market
price of the Class A Common Stock during the Valuation Period is equal to the
initial public offering price of the shares offered hereby, an aggregate of
----
shares of Class A Common Stock (based upon an assumed offering price of $13.00
per share) will be issuable upon conversion of the CSIs, which will increase the
Investor Group's ownership from 17.6% to 22.7% of the outstanding shares and
38.9% and 46.0%, respectively, of the voting interest of Common Stock and will
reduce Mr. Hvide's ownership from 43.6% to 34.1% of the outstanding shares and
16.4% and 11.2%, respectively, of the voting interest. A higher average market
price during the Valuation Period will reduce the number of shares issuable
upon conversion of the CSIs and the corresponding number of shares required to
be contributed to the Company by Mr. Hvide, and a lower market price during
the Valuation Period will increase such numbers of shares.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, 7,452,414 shares of Class A Common Stock
and 3,316,816 shares of Class B Common Stock will be outstanding, of which the
7,000,000 shares of Class A Common Stock offered hereby (assuming the
Underwriters' over-allotment option is not exercised) will be transferable
without restriction under the Securities Act, except for shares acquired by
"affiliates" of the Company (as defined in Rule 144 under the Securities Act
("Rule 144")). Of the 3,769,230 shares beneficially owned by the Company's
existing stockholders, all may become eligible for resale at various times
under Rule 144 or otherwise.
In general, under Rule 144, a person (or persons whose shares are aggregated)
(i) who is not an "affiliate," as that term is defined below, and whose shares
have been outstanding and not owned by an "affiliate" for at least two years, or
(ii) who is an "affiliate" and has beneficially owned his or its shares for a
period of at least two years, is entitled to sell, within any 90-day period,
such number of shares that does not exceed the greater of (i) one percent (1%)
of the then-outstanding shares or (ii) the average weekly trading volume of the
then outstanding shares during the four calendar weeks next preceding each such
sale. Resales under Rule 144 are also subject to certain notice and manner of
sale requirements, and the availability of current public information about the
Company. A person (or persons whose shares are aggregated) who is not deemed an
"affiliate" of the Company at any time during the three months next preceding a
sale by such person (or persons) and who has beneficially owned shares of Common
Stock that were not acquired from the Company or an "affiliate" of the Company
within the previous three years, would be entitled to sell such shares under
Rule 144(k) without regard to volume limitations, manner of sale provisions,
notification requirements, or the availability of current public information
concerning the Company. Affiliates continue to be subject to the restrictions
and requirements of Rule 144. As defined in Rule 144, an "affiliate" of an
issuer is a person that directly, or indirectly through one or more intermediar-
ies, controls, is controlled by, or is under common control with, such issuer.
The Company's current stockholders, who beneficially own 452,414 shares of
Class A Common Stock and 3,316,816 shares of Class B Common Stock in the
aggregate (6.1% of the Class A Common Stock and 100% of the outstanding
shares of Class B Common Stock upon completion of the Offering,
or 82.5% of the voting power of the Common Stock, assuming the Underwriters'
over-allotment option is not exercised) have executed lock-up agreements
pursuant to which they have agreed not to offer, sell, contract to sell, or
otherwise dispose of, directly or indirectly, any of his shares of Common Stock
for a period of 180 days after the date of this Prospectus, without the prior
written consent of the Representatives of the Underwriters. All other executive
officers, directors and employees of the Company who will be granted options to
purchase shares of Class A Common Stock prior to the consummation
79
<PAGE>
of the Offering have also agreed not to offer, sell, contract to sell, or
otherwise dispose of, directly or indirectly, any of their shares of Common
Stock for a period of 180 days after the date of this Prospectus without the
prior written consent of the Representatives of the Underwriters.
Prior to the Offering, there has been no public market for the Common Stock
and no predictions can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price prevailing from time to time. Nevertheless, sales of substantial amounts
of such shares in the public market could adversely affect the prevailing market
price of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities.
As part of its business plan, the Company may, from time to time, issue
shares of Common Stock or Preferred Stock to finance future vessel improvements,
acquisitions, and other transactions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Business -- Strategy."
80
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company and each of the underwriters
named below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, and each of the Underwriters, for whom Donaldson, Lufkin &
Jenrette Securities Corporation and Howard, Weil, Labouisse, Friedrichs
Incorporated are acting as representatives (the "Representatives"), have
severally agreed to purchase from the Company the number of shares of Class A
Common Stock set forth below opposite their respective names. The Underwriters
are committed to purchase all of such shares if any are purchased. Under
certain circumstances, the commitments of non-defaulting Underwriters may be
increased as set forth in the Underwriting Agreement.
Number of
Underwriters Shares
Donaldson, Lufkin & Jenrette
Securities Corporation . . . . . . . . . . . . . . .
Howard, Weil, Labouisse, Friedrichs Incorporated . . .
__________
Total . . . . . . . . . . . . . . . . . . . 7,000,000
==========
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Class A Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may re-allow, a discount not in
excess of $ per share on sale to certain other dealers. After the initial
public offering of the Class A Common Stock, the public offering price,
concession, and discount may be changed.
The Company has granted the Underwriters an option, exercisable by the
Representatives, to purchase up to 1,050,000 additional shares of Class A Common
Stock, at the initial public offering price, less the underwriting discount.
Such option, which expires 30 days after the date of this Prospectus, may be
exercised solely to cover over-allotments. To the extent the Representatives
exercise such option, each of the Underwriters will be obligated, subject to
certain conditions, to purchase approximately the same percentage of the option
shares as the number of shares of Class A Common Stock to be purchased initially
by that Underwriter to the total number of shares to be purchased initially by
the Underwriters.
The initial public offering price for the Class A Common Stock in the
Offering will be determined by negotiations among the Company and the
Representatives. Among the factors to be considered in determining the initial
public offering price include the history of and the prospects for the industry
in which the Company competes, the past and present operations of the Company
and the historical results of operations of the Company, the prospects for
future earnings of the Company, the general condition
81
<PAGE>
of the securities markets at the time of the Offering, the ability of the
Company's management, and the recent market prices of securities of generally
comparable companies. There can be no assurance that an active trading market
will develop for the Class A Common Stock or that the Class A Common Stock will
trade in the public market subsequent to the Offering at or above the initial
public offering price.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has applied to list the Class A Common Stock on the Nasdaq
National Market under the symbol "HMAR."
In accordance with applicable rules of the National Association of
Securities Dealers, Inc. ("NASD"), no NASD member participating in the
distribution is permitted to confirm sales to accounts over which it exercises
discretionary authority without prior written consent, and, accordingly, each
Underwriter intends to abide by such rules.
In connection with the Offering, the Company's officers and directors and
certain of its stockholders have agreed that, during a period of 180 days from
the date of this Prospectus, such holders will not, without the prior written
consent of the Representatives, directly or indirectly, offer, sell, grant any
option with respect to, pledge, hypothecate, or otherwise dispose of, any shares
of Class A Common Stock or Class B Common Stock in a public transaction (or make
public announcement with regard to any such transaction) or demand or request
the registration of any shares of Class A Common Stock or Class B Common Stock
under the Securities Act or otherwise exercise any registration rights with
respect thereto. In addition, the Company has agreed that, during a period of
180 days from the date of this Prospectus, the Company will not, without the
prior written consent of the Representatives, directly or indirectly, offer,
sell, grant any option with respect to, pledge, hypothecate, or otherwise
dispose of any shares of Class A Common Stock, Class B Common Stock, or Class C
Common Stock except for (i) shares of Class A Common Stock to be issued in the
Offering, and (ii) shares issued upon the exercise of options to be granted
under the various employee and director benefit plans, as described under
"Management."
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<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the validity of the issuance of
the Common Stock offered hereby are being passed upon for the Company by Dyer
Ellis & Joseph, Washington, D.C. Certain legal matters in connection with the
Offering will be passed upon for the Underwriters by Akin, Gump, Strauss, Hauer
& Feld, L.L.P.
EXPERTS
The consolidated financial statements of Hvide Marine Incorporated and
subsidiaries at December 31, 1995 and 1994 and for each of the three years in
the period ended December 31, 1995, and the statements of assets to be sold of
Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc. as of September 30,
1994 and 1995, and the related statements of vessel operations for the years
then ended, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon, appearing elsewhere herein and in the Registration Statement,
and are included in reliance upon such reports given upon the authority of such
firm as experts in accounting and auditing.
The combined financial statements of OMI Chemical Carrier Group at December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995 appearing in this Prospectus and Registration Statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein, and are included in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of the Seal Fleet Vessels at December 31, 1995 and
1994 and for each of the three years in the period ended December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Pannell Kerr Forster of Texas, P.C., independent certified public accountants,
as set forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") pursuant to the Securities Act, with respect to the Class A Common
Stock offered hereby. This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract, agreement, or other document
are summaries of the material terms of such contract, agreement, or document.
With respect to each such contract, agreement, or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved. The Registration Statement
(including the exhibits and schedules thereto) filed with the Commission by the
Company may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following regional offices of the Commission: New York Regional
Office, Seven World Trade Center, 13th Floor, New York, New York 10048; and
Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549.
83
<PAGE>
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Class A Common Stock, the Company will
become subject to the informational requirements of the Exchange Act. The
Company will fulfill its obligations with respect to such requirements by filing
periodic reports with the Commission.
The Company intends to furnish holders of the Class A Common Stock offered
hereby with annual reports containing consolidated financial statements audited
by an independent public accounting firm and may provide quarterly reports
containing unaudited financial information for the first three quarters of each
fiscal year.
84
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) . . F-2
HVIDE MARINE INCORPORATED AND SUBSIDIARIES:
Report of Independent Certified Public Accountants . . . . . . . . . F-9
Consolidated Balance Sheets as of December 31, 1994 and 1995 . . . . F-10
Consolidated Statements of Operations for the Three Years Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-12
Consolidated Statements of Stockholders' Equity for the Three
Years Ended December 31, 1995 . . . . . . . . . . . . . . . . . F-14
Consolidated Statements of Cash Flows for the Three Years Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-15
Notes to Consolidated Financial Statements . . . . . . . . . . . . . F-18
OMI CHEMICAL CARRIER GROUP:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-32
Combined Balance Sheets as of December 31, 1994 and 1995 . . . . . . F-33
Combined Statements of Operations and Deficit for the Three Years
Ended December 31, 1995 . . . . . . . . . . . . . . . . . . . . F-34
Combined Statements of Cash Flows for the Three Years Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-35
Notes to Combined Financial Statements . . . . . . . . . . . . . . . F-36
SEAL FLEET VESSELS:
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-41
Combined Statements of Vessel Operations for the Three Years Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-42
Notes to Combined Financial Statements . . . . . . . . . . . . . . . F-43
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F-45
Statements of Assets to be Sold . . . . . . . . . . . . . . . . . . . F-46
Statements of Vessel Operations for the Three Years Ended
December 31, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-47
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . F-48
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.:
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . F-50
Statement of Assets to be Sold . . . . . . . . . . . . . . . . . . . F-51
Statements of Vessel Operations for the Two Years Ended
September 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . F-52
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . F-53
F-1
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The following pro forma condensed consolidated balance sheet at December
31, 1995 and for the year then ended gives effect to the pending acquisitions of
the OMI Chemical Carriers, the Seal Fleet Vessels and two additional vessels,
the acquisition of certain vessels from GBMS in January 1996, the acquisition of
one vessel in February 1996, the Offering and the conversion of certain
indebtedness into shares of Common Stock as if the transactions had occurred on
December 31, 1995. The pro forma condensed consolidated statement of operations
gives effect to the foregoing, except for the pending acquisitions of two
additional vessels. The pro forma financial information is presented for
illustrative purposes only and does not purport to project the financial
position or results of operations for any future period or as of any future
date. The pro forma condensed consolidated financial statements should be read
in conjunction with the notes thereto and with the financial statements and the
notes thereto of the Company, the OMI Chemical Carriers, the Seal Fleet Vessels,
and the GBMS Vessels and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," all appearing elsewhere in this
Prospectus. See "The Acquisitions," "Use of Proceeds" and "Capitalization."
F-2
<PAGE>
<TABLE><CAPTION>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1995
--------------------------------------------------------------------
Pro Forma Adjustments
For the Acquisitions of (1)
Company
Company OMI Pro Forma Pro Forma
as Chemical Seal Royal Other Adjust- Condensed
Reported Carriers Fleet GBMS Runner OSTC Acquisitions ments(1) Offering(2) Consolidated
-------- ---------- ------- ------ -------- ------ ------------ -------- ----------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents . . . $ 3,050 $ $ $ $ $ 2,255 $ $(26,650) $ 30,205 $ 8,860
Accounts receivable . . 14,001 2,812 16,813
Spare parts and supplies 3,417 1,803 52 201 5,473
Prepaid expenses and
other . . . . . . 3,611 149 3,760
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total current
assets . . . . 24,079 1,803 52 5,417 (26,650) 30,205 34,906
Property, net . . . . . 104,603 59,366 16,098 3,400 2,025 851 3,025 189,368
Goodwill, net . . . . . . 9,117 9,117
Deferred costs, net . . . 4,112 3,481 750 40 (962) 7,421
Investment in affiliates 423 423
Other . . . . . . . . 1,248 (883) 466
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total assets . . $143,683 $ 64,650 $ 16,900 $ 3,400 $ 2,025 $ 6,308 $ 3,025 $(26,650) $ 28,360 $241,701
======== ======== ======== ======== ======== ======== ========== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current maturities
of debt . . . . . $ 8,285 $ 4,815 $ $ 313 $ 283 $ 1,594 $ $ 3,587 $ (4,108) $ 14,769
Accounts payable . . . . 4,905 212 5,117
Other . . . . . . . . 6,574 17 1,754 (693) 7,652
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total current
liabilities . . . 19,764 4,815 17 313 283 3,560 3,587 (4,801) 27,538
Long-term debt . . . . 100,766 29,835 3,087 1,742 19,588 (49,715) 105,303
Long-term interest
payable . . . . . . . 2,606 (2,606)
Deferred income
taxes . . . . . . . . 4,317 (2,206) 2,111
Other liabilities . . 2,231 83 2,748 370 5,432
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total liabilities 129,684 34,650 100 3,400 2,025 6,308 23,175 (58,958) 140,384
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Investment in
acquisitions . . 30,000 16,800 3,025 (49,825)
Minority partners'
equity . . . . . . . 1,654 1,654
Common Stock, paid-in
capital, retained
earnings and treasury
stock . . . . . . 12,345 87,318 99,663
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total stockholders'
equity . . . . . 12,345 87,318 99,663
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total stockholders'
equity and
minority partners'
equity . . . . 13,999 87,318 101,317
-------- -------- -------- -------- -------- -------- ---------- -------- -------- --------
Total liabilities
and equity . . $143,683 $ 64,650 $ 16,900 $ 3,400 $ 2,025 $ 6,308 $ 3,025 $(26,650) $ 28,360 $241,701
======== ======== ======== ======== ======== ======== ========== ======== ======== ========
F-3
See notes to the pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE><CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
(Unaudited)
December 31, 1995
----------------------------------------------------------------------
Pro Forma Adjustments
For the Acquisitions of
------------------------------------------------- Company
Company OMI Pro Forma Pro Forma
as Chemical Seal Royal Elimi- Adjust- Condensed
Reported Carriers Fleet GBMS Runner OSTC nations ments Consolidated
-------- ---------- ------- ------ ------ -------- ----------- -------- ------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . $ 70,562 $ 26,099 $ 9,466 $ 3,252 $ 651 $ 57,577 $ (43,841)(3) $ $ 123,766
Operating expenses . . 40,664 29,141 5,131 2,162 243 56,064 (43,841)(3) (12,879) (4) 76,685
Overhead expenses . . . 12,518 429 74 1,205 793 (4) 15,019
-------- -------- -------- -------- ------- -------- --------- --------- ---------
Earnings before
interest, taxes
depreciation and
amortization . . . . 17,380 (3,042) 4,335 661 334 308 12,086 32,062
Depreciation and
amortization . . . . 6,308 3,355 498 210 145 166 1,303 (5) 11,985
-------- -------- -------- -------- ------- -------- --------- --------- ---------
Income (loss) from
operations . . . . . 11,072 (6,397) 3,837 451 189 142 10,783 20,077
Net interest . . . . . 11,460 2,160 95 68 (3,258) (6) 10,525
Other income (expense):
Minority interest
and equity
in subsidiaries . . 137 137
Other . . . . . . . . (111) 167 (3) (167) (7) (114)
-------- -------- -------- -------- ------- -------- --------- --------- ---------
Total other income
(expense) . . . . . 26 167 (3) (167) 23
-------- -------- -------- -------- ------- -------- --------- --------- ---------
Income before
income taxes . . . . (362) (8,390) 3,837 451 94 71 13,874 9,575
Provision (benefit)
for income taxes . . (2) (2,937) 21 6,365 (8) 3,447
-------- -------- -------- -------- ------- -------- --------- --------- ----------
Net income (loss) from
continuing operations
before non-recurring
items directly attri-
butable to the trans-
action . . . . . . . $ (360) $ (5,453) $ 3,837 $ 451 $ 94 $ 50 $ $ 7,509 $ 6,128
======== ======== ======== ======== ======= ======== ========= ========= ==========
Earnings (loss) per
common share . . . . $ (0.14) $ 0.57
======== ==========
Weighted average
number of common
shares and common
share equivalents
outstanding . . . . . 2,534,840 10,769,230
========= ==========
F-4
See notes to the pro forma condensed consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The Company expects the purchase price of the Acquisitions to
be allocated to acquired assets and liabilities as follows:
<TABLE><CAPTION>
December 31, 1995
--------------------------------------------------------------------------------
Other
OMI Acquisitions
Chemical Seal Royal --------------------
Carriers Fleet GBMS Runner OSTC Carol St. Francis Total
---------- ---------- ---------- ---------- ---------- -------- ----------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents . . . . . . . $ $ $ $ $ 2,255 $ $ $ 2,255
Accounts receivable . . . . 2,812 2,812
Prepaid expenses and other. 149 149
Property, net . . . . . . . 59,366 16,098 3,400 2,025 851 825 2,200 84,765
Spare parts and supplies . 1,803 52 201 2,056
Deferred costs (net)(a) . . 3,481 750 40 4,271
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------
$ 64,650 $ 16,900 $ 3,400 $ 2,025 $ 6,308 $ 825 $ 2,200 $ 96,308
========== ========== ========== ========== ========== ========= ========== =========
Current maturities of debt $ 4,815 $ $ 313 283 $ 1,594 $ $ $ 7,005
Accounts payable . . . . . 212 212
Other current liabilities . 17 1,754 1,771
Other long-term liabilities 83 2,748 2,831
Assumption of long-term debt 29,835 3,087 1,742 34,664
Payment of cash . . . . . . 15,500 8,800 150 2,200 26,650
Issuance of debt:
Current . . . . . . . . . 2,554 923 110 3,587
Long-term . . . . . . . . 11,946 7,077 565 19,588
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------
Investment in Acquisitions 30,000 16,800 825 2,200 49,825
---------- ---------- ---------- ---------- ---------- --------- ---------- ---------
$ 64,650 $ 16,900 $ 3,400 $ 2,025 $ 6,308 $ 825 $ 2,200 $ 96,308
========== ========== ========== ========== ========== ========= ========== =========
- ----------
(a) Primarily represents an allocation of the purchase price to reflect deferred drydocking costs in accordance with the
Company's policies.
</TABLE>
F-5
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(Unaudited)
(2) Adjustments to reflect transactions that are expected to use certain of
the proceeds of the Offering, or occur in conjunction with the Offering,
as follows:
Offering
of Repayment
Common of
Stock Loans Total
---------- ---------- ----------
(dollars in thousands)
Cash . . . . . . . . . . . .. $ 82,880 $ (52,675) $ 30,205
Deferred Costs (net) . . . .. (962)(2) (962)
Other Assets . . . . . . . .. (883)(3) (883)
---------- ---------- ----------
$ 82,880 $ (54,520) $ 28,360
========== ========== ==========
Income taxes . . . . . . . .. $ $ (2,206) $ (2,206)
Current maturities of debt .. (4,108) (4,108)
Other current liabilities . .. (693) (693)
Long-term debt . . . . . . .. (49,715) (49,715)
Long-term interest payable .. (2,606) (2,606)
Other long-term liabilities .. 370 370
Common stock . . . . . . . .. 82,880(1) 12,799(4) 95,679
Retained earnings . . . . . .. (8,361)(5) (8,361)
---------- ---------- ----------
$ 82,880 $ (54,520) $ 28,360
========== ========== ==========
(a) Common Stock issued in conjunction with the Offering, less expenses
as follows:
Common Stock . . . . . . . . . . . . . . $ 91,000
Less: Underwriter's discount of 7% . . (6,370)
Cash portion of
investment advisory fee . . . . (478)
Legal and accounting fees . . . . (1,272)
----------
$ 82,880
==========
(b) Represents the write-off of deferred loan costs ($1,406) on the Junior
and Senior Notes to be repaid from the proceeds of the Offering, net
of financing costs incurred on new financing obtained upon the
effective date of the Offering ($444).
(c) Represents the reduction of a long-term receivable due from a company
owned by the former Chairman of the Board of the Company in exchange
for the reduction of the principal portion of notes payable to the
current and former chairman.
(d) Common Stock issued in conjunction with the conversion of Junior Notes
and certain related party notes.
(e) Extraordinary loss on extinguishment of Junior and Senior Notes and
certain related party notes, net of income taxes:
Write-off of deferred loan costs on Junior
and Senior Notes $ (1,406)
Loss on early extinguishment of Junior Notes (7,368)
Loss on early extinguishment of Senior Notes (1,793)
Less applicable income taxes at statutory rates 2,206
----------
$ (8,361)
==========
F-6
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(Unaudited)
(3) Elimination of historical revenue and expense associated with OSTC
charter hire of vessels to Hvide and OMI. $ 43,841
==========
(4) Reflects the reduction in insurance expense based upon quotations
received from the Company's insurance underwriters; adjustment to
drydocking expense to reflect the Company's deferral method; elimination
of operating lease expense on acquired OMI vessels that will be owned or
capital leased by Hvide; elimination of a provision for lease penalties
on an OMI vessel that will not be incurred due to the purchase of the
vessels; and adjustments to reflect incremental corporate overhead and
employee salaries and benefits in accordance with management's plans
with respect to the OMI Chemical Carriers and Seal Fleet Vessels and
reduction of historical overhead expenses related to the integration of
the GBMS vessels into the Company's operations.
<TABLE><CAPTION>
OMI
Chemical Seal Royal
Carriers Fleet GBMS Runner OSTC Total
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Operating Expenses:
Insurance . . . . $ (598) $ (183) $ (99) $ (880)
Drydocking . . . (1,145) (1,145)
Operating lease
expense . . . . (7,557) (7,557)
Provision for
lease penalties (3,297) (3,297)
---------- ---------- ---------- ---------- ---------- ----------
$ (12,597) $ (183) $ (99) $ (12,879)
========== ========== ========== ========== ========== ==========
Overhead Expenses:
Salaries and
benefits . . . $ 247 $ 447 $ (228) $ 466
Other . . . . . . 304 124 (101) 327
---------- ---------- ---------- ---------- ---------- ----------
$ 551 $ 571 $ (329) $ 793
========== ========== ========== ========== ========== ==========
</TABLE>
(5) The adjustment to depreciation and amortization is comprised of:
Depreciation adjustment to reflect the Company's policies applied to the
acquired cost of the vessels of:
OMI(a) . . . . . . . . . . . . . . . . . . . . . . $ 1,094
Seal Fleet . . . . . . . . . . . . . . . . . . . . 308
GBMS . . . . . . . . . . . . . . . . . . . . . . . 8
Royal Runner . . . . . . . . . . . . . . . . . . . (70)
----------
1,340
Amortization Adjustment:
Deferred loan costs amortization - Junior Notes . (32)
Deferred loan costs amortization - Senior Notes . (96)
New money fee for the Seal Fleet acquisition . . . 17
Commitment fee . . . . . . . . . . . . . . . . . . 48
Revolver fee . . . . . . . . . . . . . . . . . . . 26
----------
(37)
$ 1,303
==========
___________________
(a) Includes depreciation on an OMI vessel historically under
an operating lease.
F-7
<PAGE>
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(Unaudited)
<TABLE><CAPTION>
(6) The adjustment of net interest expense is comprised of:
<S> <C>
Interest expense on additional borrowings pursuant
to the OMI acquisition . . . . . . . . . . . . . . . . . . . . . $ 634
Removal of historical interest income of OMI . . . . . . . . . . . 1
Interest expense on assumed Title XI debt from OMI(a). . . . . . . 1,003
Interest expense on OMI Star capital lease . . . . . . . . . . . . 520
Interest expense on debt issued pursuant to the Seal Fleet
acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . 640
Interest expense on debt issued pursuant to the GBMS acquisition . 269
Removal of historical interest expense of Royal Runner . . . . . . (95)
Interest expense on Royal Runner debt . . . . . . . . . . . . . . 131
Reduction of interest expense due to the repayment of Junior Notes (2,199)
Reduction of interest expense due to the repayment of Senior Notes (3,156)
Reduction of interest expense due to the repayment of Credit
Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . (441)
Reduction of interest expense due to the repayment of other
subordinated notes . . . . . . . . . . . . . . . . . . . . . . . (665)
Commitment fee on acquisition line of credit . . . . . . . . . . . 100
----------
$ (3,258)
==========
(a) Reflects a full year of interest expense on Title XI debt that was
outstanding for a partial year for OMI.
(7) Adjust other income for non-recurring gain on asset disposal:
OMI Chemical Carriers . . . . . . . . . . . . . . . . . . . . . . $ (167)
==========
(8) Adjustment for estimated income taxes at combined federal
and state statutory rates for the effect of the pro forma
adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,365
==========
</TABLE>
F-8
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
Hvide Marine Incorporated
We have audited the accompanying consolidated balance sheets of Hvide Marine
Incorporated (f/k/a Hvide Corp.) and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hvide Marine
Incorporated and subsidiaries at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for drydocking
costs from the accrual method to the deferral method.
ERNST & YOUNG LLP
Miami, Florida
March 28, 1996, except the
third paragraph of Note
14, as to which the date is
May 13, 1996.
F-9
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31
1994 1995
(In thousands)
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . $ 6,363 $ 3,050
Escrow deposit . . . . . . . . . . . . . 500 --
Accounts receivable:
Trade, net . . . . . . . . . . . . . . 7,862 9,602
Insurance claims and other . . . . . . 1,292 4,399
Due from affiliate . . . . . . . . . . . 547 101
Spare parts and supplies . . . . . . . . 3,375 3,417
Prepaid expenses . . . . . . . . . . . . 784 960
Deferred costs (net) . . . . . . . . . . 1,523 2,550
-------- --------
Total current assets . . . . . . . . . 22,246 24,079
Property:
Construction in progress . . . . . . . . 1,646 1,387
Vessels and improvements . . . . . . . . 110,542 122,198
Less accumulated depreciation . . . . (16,040) (20,585)
Furniture and equipment . . . . . . . . 2,054 2,601
Less accumulated depreciation . . . . (827) (998)
-------- --------
Net property . . . . . . . . . . . . . 97,375 104,603
Other assets:
Deferred costs (net) . . . . . . . . . . 4,422 4,112
Due from affiliates . . . . . . . . . . 109 131
Investment in affiliates . . . . . . . . 574 423
Goodwill (net) . . . . . . . . . . . . . 9,586 9,117
Long-term receivable (net) . . . . . . . 785 831
Other . . . . . . . . . . . . . . . . . 374 387
-------- --------
Total other assets . . . . . . . . . . 15,850 15,001
-------- --------
Total . . . . . . . . . . . . . . $135,471 $143,683
======== ========
See notes to consolidated financial statements.
F-10
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1994 1995
(In thousands, except share amounts)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt . . $ 4,779 $ 7,708
Current obligations under capital leases 521 577
Accounts payable . . . . . . . . . . . . 4,681 4,905
Charter hire and other liabilities . . . 4,472 6,574
-------- --------
Total current liabilities . . . . . . 14,453 19,764
Long-term liabilities:
Long-term debt . . . . . . . . . . . . . 93,700 96,014
Notes payable to related parties . . . . 1,302 1,302
Obligations under capital leases . . . . 3,979 3,450
Due to charterer . . . . . . . . . . . . 547 547
Deferred income taxes . . . . . . . . . 4,319 4,317
Other . . . . . . . . . . . . . . . . . 2,268 4,290
-------- --------
Total long-term liabilities . . . . . 106,115 109,920
-------- --------
Total liabilities . . . . . . . . . . 120,568 129,684
Minority partners' equity in subsidiaries . 2,198 1,654
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1.00 par value --
10,000,000 shares authorized, no
shares issued and outstanding . . . -- --
Class A Common Stock -- $.001 par value,
100,000,000 shares authorized, no shares
issued and outstanding . . . . . . . -- --
Class B Common Stock -- $.001 par value,
5,000,000 shares authorized, 1,558,210
shares issued and outstanding . . . . 1 1
Class C Common Stock -- $.001 par value,
2,500,000 shares authorized, 976,630
shares issued and outstanding . . . . 1 1
Additional paid-in capital . . . . . . . 6,341 6,341
Retained earnings . . . . . . . . . . . 6,362 6,002
-------- --------
Total stockholders' equity . . . . 12,705 12,345
-------- --------
Total minority partners' equity in
subsidiaries and stockholders' equity . 14,903 13,999
-------- --------
Total . . . . . . . . . . . . . . . . $135,471 $143,683
======== ========
See notes to consolidated financial statements.
F-11
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE><CAPTION>
Year Ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,527 $ 49,792 $ 70,562
Operating expenses:
Crew payroll and benefits . . . . . . . . . . . . . . . . . 11,238 13,510 20,132
Charter hire and bond guarantee fee . . . . . . . . . . . . 4,037 5,013 4,063
Repairs and maintenance . . . . . . . . . . . . . . . . . . 3,024 3,847 5,347
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 2,365 2,991 4,547
Consumables . . . . . . . . . . . . . . . . . . . . . . . . 1,770 2,237 3,395
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,598 2,275 3,180
--------- --------- ---------
Total operating expenses . . . . . . . . . . . . . . . 24,032 29,873 40,664
Selling, general and administrative expenses:
Salaries and benefits . . . . . . . . . . . . . . . . . . . 3,202 4,649 6,856
Office expenses . . . . . . . . . . . . . . . . . . . . . . 633 819 1,068
Professional fees . . . . . . . . . . . . . . . . . . . . . 1,268 2,645 2,137
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,073 1,468 2,457
--------- --------- ---------
Total overhead expenses . . . . . . . . . . . . . . . . 6,176 9,581 12,518
Earnings before interest, taxes, depreciation and
amortization . . . . . . . . . . . . . . . . . . . . . . . 11,319 10,338 17,380
Depreciation and amortization . . . . . . . . . . . . . . . . . 4,735 4,500 6,308
--------- --------- ---------
Income from operations . . . . . . . . . . . . . . . . . . . . 6,584 5,838 11,072
Interest:
Interest expense . . . . . . . . . . . . . . . . . . . . . 3,606 5,614 11,748
Interest income . . . . . . . . . . . . . . . . . . . . . . (194) (312) (288)
--------- --------- ---------
Net interest . . . . . . . . . . . . . . . . . . . . . 3,412 5,302 11,460
Other income (expense):
Minority interest and equity in earnings of subsidiaries . (960) (115) 137
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,479 126 (111)
--------- --------- ---------
Total other income . . . . . . . . . . . . . . . . . . 519 11 26
--------- --------- ---------
Income (loss) before provision for (benefit from) income
taxes and cumulative effect of a change
in accounting principle . . . . . . . . . . . . . . . . . . 3,691 547 (362)
Provision for (benefit from) income taxes . . . . . . . . . . . 1,873 189 (2)
--------- --------- ---------
Income (loss) before cumulative effect of a
change in accounting principle . . . . . . . . . . . . . . 1,818 358 (360)
--------- --------- ---------
Cumulative effect (to January 1, 1993) of
change in drydocking method . . . . . . . . . . . . . . . . 1,491 -- --
--------- --------- ---------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . $ 3,309 $ 358 $ (360)
========= ========= =========
See notes to consolidated financial statements.
</TABLE>
F-12
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
Year Ended December 31,
1993 1994 1995
Net income (loss) applicable to common shares $ 1,615 $ 136 $ (360)
========= ========= =========
Earnings (loss) per common share:
Income (loss) applicable to
common shares before
cumulative effect of a
change in accounting
principle $ 0.26 $ 0.03 $ (0.14)
Cumulative effect (to January 1,
1993) of change in dry-docking method 0.24 -- --
--------- --------- ---------
Net income (loss) applicable to
common shares $ 0.50 $ 0.03 $ (0.14)
========= ========= =========
Weighted average number of common shares
and common share equivalents outstanding 6,267,558 5,302,060 2,534,840
========= ========= =========
See notes to consolidated financial statements.
F-13
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE><CAPTION>
11% 5% Class A Class B Class C
Class A Class B Common Stock Common Stock Common Stock Additional
Preferred Preferred ----------------- -------------- -------------- Paid-In Retained Treasury
Stock Stock Shares Amount Shares Amount Shares Amount Capital Earnings Stock Total
--------- ------- ------ ------ -------- ------ -------- ------ -------- -------- --------- -----
(In thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1993, as
previously
reported . . $ 2,669 $ 3,266 16,302,946 $ 19 --- $ --- --- $ --- $ 1,008 $ 9,381 $(5,935) $10,408
Effect of
recapitalization
(see Note 1) --- --- (16,302,946) (19) 1,105,692 1 663,415 1 17 (5,935) 5,935 ---
------- ------- ----------- ------ -------- ------ -------- ------ -------- ------- ------- -------
Balance at
January 1,
1993, as
restated . . 2,669 3,266 --- --- 1,105,692 1 663,415 1 1,025 3,446 --- 10,408
Net income . . --- --- --- --- --- --- --- 3,309 --- 3,309
Preferred stock
cash
dividends . . --- --- --- --- --- --- --- (366) --- (366)
------- ------- -------- ------ -------- ------ -------- ------ -------- ------- ------- -------
Balance at
December 31,
1993 . . . . 2,669 3,266 --- --- 1,105,692 1 663,415 1 1,025 6,389 --- 13,351
Net income . . --- --- --- --- --- --- --- --- --- 358 --- 358
Common stock
issued, net of
issuance
costs . . . . --- --- --- --- 452,518 --- 313,215 --- 8,640 --- --- 8,640
Redemption of
preferred
stock . . . . (2,669) (3,266) --- --- --- --- --- --- (1,350) --- --- (7,285)
Acquisition of
limited
partnership
interests . . --- --- --- --- --- --- --- --- (1,974) --- --- (1,974)
Preferred
stock cash
dividends . . --- --- --- --- --- --- --- (385) --- (385)
------- ------- -------- ------ -------- ------ -------- ------ -------- ------- ------- -------
Balance at
December 31,
1994 . . . . --- --- --- --- 1,558,210 1 976,630 1 6,341 6,362 --- 12,705
Net loss . . . --- --- --- --- --- --- --- --- --- (360) --- (360)
------- ------- -------- ------ -------- ------ -------- ------ -------- ------- ------- -------
Balance at
December 31,
1995 . . . . $ --- $ --- --- $ --- 1,558,210 $ 1 976,630 $ 1 $ 6,341 $ 6,002 $ --- $12,345
======= ======= ======== ====== ========= ====== ========= ====== ======== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-14
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
Year Ended December 31
1993 1994 1995
(In thousands)
<S> <C> <C> <C>
Operating activities:
Income (loss) before cumulative effect
of a change in accounting principle . . . . . . . . . . . . $ 1,818 $ 358 $ (360)
Adjustments to reconcile income (loss) before cumulative
effect of a change in accounting principle to net cash
provided by operating activities:
Cumulative effect of change in drydocking
method . . . . . . . . . . . . . . . . . . . . . . . . 1,491 -- --
Depreciation and amortization . . . . . . . . . . . . . . 4,735 4,500 6,308
Provision for bad debts . . . . . . . . . . . . . . . . . -- -- 114
Gain on disposals of property . . . . . . . . . . . . . . -- -- (73)
Amortization of discount on long-term debt . . . . . . . -- 52 201
Provision for (benefit from) deferred taxes . . . . . . . 1,402 189 (2)
Minority partners' equity in earnings (losses) of
subsidiaries, net . . . . . . . . . . . . . . . . . . . 1,179 184 (625)
Undistributed (earnings) losses of affiliates, net . . . (219) (69) 488
Changes in operating assets and liabilities,
net of effect of acquisitions:
Accounts receivable . . . . . . . . . . . . . . . . . (790) (4,574) (5,056)
Due from affiliates . . . . . . . . . . . . . . . . . (630) (235) (394)
Other assets . . . . . . . . . . . . . . . . . . . . (819) (1,622) (1,317)
Accounts payable and other liabilities . . . . . . . (1,211) 4,075 4,664
---------- ---------- ----------
Net cash provided by operating activities . . . . . . . . . . . 6,956 2,858 3,948
Investing activities:
Purchase of property . . . . . . . . . . . . . . . . . . . . . (1,917) (5,672) (6,312)
Proceeds from disposals of property . . . . . . . . . . . . . . -- -- 690
Capital contribution to affiliates . . . . . . . . . . . . . . (330) -- --
Deposit of funds in escrow . . . . . . . . . . . . . . . . . . -- (500) --
Acquisitions, net of $500 escrow
deposit utilized in 1995 and net of cash acquired
of $106 in 1994 . . . . . . . . . . . . . . . . . . . . . . . -- (33,643) (2,444)
---------- ---------- ----------
Net cash used in investing activities . . . . . . . . . . . . . (2,247) (39,815) (8,066)
</TABLE>
(Continued)
F-15
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE><CAPTION>
Year Ended December 31
1993 1994 1995
(In thousands)
<S> <C> <C> <C>
Financing activities:
Proceeds from line of credit borrowings . . . . . . . . . . . $ -- $ -- $ 7,500
Proceeds from Senior Note . . . . . . . . . . . . . . . . . . -- 23,072 --
Proceeds from Junior Note . . . . . . . . . . . . . . . . . . -- 17,508 --
Proceeds from term loan . . . . . . . . . . . . . . . . . . . -- 50,000 --
Proceeds from stock issuance . . . . . . . . . . . . . . . . -- 9,420 --
Principal payments of long-term debt . . . . . . . . . . . . (5,738) (51,700) (5,458)
Payment of debt and other financing costs . . . . . . . . . . -- (3,478) (727)
Payment of stock issuance costs . . . . . . . . . . . . . . . -- (780) --
Payment of obligations under capital leases . . . . . . . . . -- (34) (510)
Payment of dividends . . . . . . . . . . . . . . . . . . . . (366) (385) --
Distribution of minority partners' equity . . . . . . . . . . (54) -- --
Redemption of preferred stock . . . . . . . . . . . . . . . . -- (2,374) --
---------- ---------- ----------
Net cash (used in) provided by
financing activities . . . . . . . . . . . . . . . . . . . (6,158) 41,249 805
---------- ---------- ----------
(Decrease) increase in cash and cash equivalents . . . . . . (1,449) 4,292 (3,313)
Cash and cash equivalents at beginning of year . . . . . . . . 3,520 2,071 6,363
---------- ---------- ----------
Cash and cash equivalents at end of year . . . . . . . . . . . $ 2,071 $ 6,363 $ 3,050
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
<TABLE><CAPTION>
Year Ended December 31
1993 1994 1995
(In thousands)
<S> <C> <C> <C>
Supplemental schedule of
noncash investing and
financing activities
Net assets recorded in connection with dissolution
of affiliate $ -- $ -- $ 341
======= ======= =======
Notes payable and notes payable to
related parties issued for the
acquisition of vessels (see Note 3) $ -- $ 2,149 $ 3,000
======= ======= =======
Capital leases assumed for the
acquisition of vessels (see Note 4) $ -- $ 4,534 $ --
======= ======= =======
Note payable issued for the acquisition
of minority interest (see Note 3) $ -- $ 3,039 $ --
======= ======= =======
Note payable issued and other liabilities
incurred in conjunction with the
redemption of preferred stock
(see Note 9) $ -- $ 4,911 $ --
======= ======= =======
Mortgage liabilities assumed for the
acquisition of vessels (see Note 3) $ -- $ 279 $ --
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Organization and Basis of Consolidation -- Hvide Marine Incorporated
("HMI," the "Company," and the "Successor") (f/k/a Hvide Corp.) was
incorporated in the state of Florida on September 28, 1994 as the holding
company for the former Hvide Marine Incorporated (f/k/a Hvide Shipping,
Incorporated) and its majority-owned subsidiaries (the "Predecessor
Company"). On September 30, 1994, 100% of the Common Stock of the
Predecessor Company was exchanged for common stock of HMI and
accounted for in a manner similar to a pooling-of-interests. Accordingly,
the accompanying consolidated financial statements include the combined
successor/predecessor companies for all periods subsequent to
September 30, 1994 and the Predecessor Company for all periods prior
to September 30, 1994. All share and per share amounts have been
adjusted to give retroactive effect to the capital structure of
HMI. All material intercompany transactions and balances have been
eliminated in the consolidated financial statements.
Operations -- The principal operations of the Company consist of vessel
time charters, vessel operating agreements and harbor towing. Through its
vessel time charters and operating agreements, the Company serves the
energy and chemical industries in the U.S. domestic trade. The Company's
harbor towing operations principally serve the passenger cruise ship,
energy, and chemical industries and are concentrated in ports located in
the southeastern United States.
Revenues -- Revenues from time charters are earned and recognized on a
daily basis. Time charter revenues are adjusted periodically based on
changes in specified price indices and market conditions.
Cash and Cash Equivalents -- The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
Insurance Claims Receivable -- Insurance claims receivable represent costs
incurred in connection with insurable incidents for which the Company
expects to be reimbursed by the insurance carrier(s), subject to applicable
deductibles. Deductible amounts related to covered incidents are expensed
in the period of occurrence of the incident.
Spare Parts and Supplies -- Inventories of spare parts and supplies are
stated at the lower of cost, determined on a basis that approximates the
last-in, first-out method, or market.
Prepaid Expenses -- Prepaid expenses primarily include prepaid vessel
insurance.
Property -- Vessels, improvements and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on the straight-line
method over the estimated useful lives of the assets. Major renewals and
improvements are capitalized and replacements, maintenance and repairs
which do not improve or extend the lives of the assets are expensed.
F-18
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Vessels under capital leases are amortized over the estimated useful lives
of the vessels. Included in vessels and improvements at December 31, 1994
and 1995 are vessels under capital leases of approximately $5,003,000 and
$5,229,000, net of accumulated amortization of approximately $37,000 and
$149,000, respectively.
For the years ended December 31, 1993, 1994 and 1995, depreciation and
amortization of vessels, improvements and equipment was approximately
$3,020,000, $3,397,000, and $4,770,000, respectively.
Accounting for Drydocking Expenses -- Approximately every 30 months,
certain Company vessels are drydocked for major repairs and maintenance
which cannot be performed while the vessels are operating.
Through fiscal 1992, the Company provided currently for the estimated
future costs of drydockings. Effective January 1, 1993, the Company
changed its method of accounting for drydocking costs from the accrual
method to the deferral method. Under the deferral method, the Company
capitalizes its drydocking costs and amortizes them over the period through
the next drydocking. Management believes the deferral method better
matches costs with revenues. Also, the deferral method minimizes any
significant changes in estimates associated with the accrual method. The
cumulative effect of this accounting change for years prior to 1993, which
is shown separately in the consolidated statement of operations for 1993,
resulted in a benefit of $1,491,000, or $0.24 per common share.
The following summary reflects net income and net income per common share
for the year ended December 31, 1993 on an historical basis and as if the
change in accounting principle had been retroactively applied:
Net income
per common
share (primary
Net Income and fully diluted)
------------ ------------------
As reported . . . . . . . . . $ 3,309,000 $ 0.50
Pro Forma . . . . . . . . . 1,818,000 0.26
At December 31, 1994 and 1995, deferred costs include unamortized
drydocking of approximately $1,938,000 and $2,534,000, respectively.
Deferred Costs -- Deferred costs primarily represent drydocking and
financing costs. Deferred financing costs are amortized over the term of
the related borrowings.
Goodwill -- Goodwill represents the excess of the purchase price over the
fair value of certain assets acquired and is amortized on the straight-line
basis over 20 to 40 years. The carrying
F-19
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
value of goodwill is reviewed if facts and circumstances suggest that it
may be impaired. If this review indicates that goodwill will not be
recoverable, as determined based on the estimated undiscounted cash flows
of the assets acquired over the remaining amortization period, the carrying
value will be adjusted accordingly. At December 31, 1994 and 1995,
accumulated amortization of goodwill was approximately $1,184,000 and
$1,689,000, respectively.
Income Taxes -- HMI files a consolidated tax return with all corporate
subsidiaries other than Seabulk Ocean Systems Holdings, Inc. and Seabulk
Ocean Systems Corporation, which file a separate consolidated income tax
return. Each partnership subsidiary files a separate partnership tax
return.
The Financial Accounting Standards Board ("FASB") issued Statement No. 109,
"Accounting for Income Taxes," which requires the liability method of
accounting for income taxes. Under the liability method, deferred income
tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities, and are
measured using the enacted tax rates and laws in effect when the
differences are expected to reverse. Under FASB Statement No. 109, the
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company adopted FASB Statement No. 109 in 1993 and applied its provisions
retroactively.
Prospective Accounting Change -- In March 1995, the FASB issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of," which requires impairment losses to be
recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount.
Statement No. 121 also addresses the accounting for long-lived assets that
are expected to be disposed of. The Company will adopt Statement No. 121
in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
Earnings (Loss) per Common Share -- Earnings (loss) per common share is
calculated based on the weighted average number of common shares and
dilutive common stock equivalents outstanding during the period. Common
stock equivalents result from convertible preferred stock outstanding in
1993 and 1994. Weighted average shares outstanding were increased by
4,498,451 and 3,339,946 shares in 1993 and 1994, respectively, to reflect
the if-converted effect of convertible Class B Preferred Stock.
Net income (loss) applicable to common shares used in the calculation of
earnings (loss) per common share has been adjusted to give effect to cash
dividends of $203,000 and $222,000 paid on Class A Preferred Stock during
1993 and 1994, respectively. Shares of common stock contingently issuable
pursuant to the convertible Junior Subordinated Note (see Note 3) had no
effect on earnings per share data for 1994 or 1995 as the effect is
antidilutive.
Concentrations of Credit Risk -- Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
cash and cash equivalents in banks, trade
F-20
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
accounts receivable and insurance claims receivable. The credit risk
associated with cash and cash equivalents in banks is considered low due to
the credit quality of the financial institutions. The Company performs
ongoing credit evaluations of its trade customers and generally does not
require collateral. The credit risk associated with insurance claims
receivable is considered low due to the credit quality and funded status of
the insurance pools that the Company participates in.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Reclassifications -- Certain amounts from the prior years' consolidated
financial statements have been reclassified to conform with the current
year's presentation.
2. CAPITAL CONSTRUCTION FUNDS
Pursuant to a Dual Use Agreement between Seabulk Tankers, Ltd. ("STL") and
the United States of America ("U.S."), the Capital Construction Funds
maintained by STL is collateral to the U.S., which amounts were $33,000 and
$36,000 at December 31, 1994 and 1995, respectively.
3. DEBT
Long-term debt as of December 31, 1994 and 1995 consisted of the following
(in thousands):
December 31,
1994 1995
Borrowings outstanding under
line of credit . . . . . . $ --- $7,500
Term loan . . . . . . . . . . . 50,000 46,000
Senior note . . . . . . . . . . 23,096 23,200
Junior note . . . . . . . . . . 17,536 17,633
Notes payable . . . . . . . . . 7,447 9,389
Mortgage note . . . . . . . . . 276 ---
Other. . . . . . . . . . . . . 124 ---
------- -------
98,479 103,722
Less: Current maturities . . . (4,779) (7,708)
------- -------
$93,700 $96,014
======= =======
On September 28, 1994, the Company entered into an agreement, as amended on
May 15, 1995 and March 26, 1996, for a credit facility (the "Credit
Facility") with its principal banks, under which the Company received
aggregate financing of $63,100,000. Term notes outstanding prior to the
Credit Facility were repaid with proceeds of the Credit Facility.
The Credit Facility provides for a working capital credit line of
$7,500,000 through January 15, 2001 and a stand-by letter of credit (the
"Letter of Credit") of $5,600,000. Borrowings under the
F-21
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
credit line bear interest at the prime rate or LIBOR, at the option of the
Company, plus an applicable margin based upon the Company's compliance with
certain financial covenants (approximately 8.9% at December 31, 1995), and
are subject to an annual commitment fee of 0.50% of the unused portion of
the credit line. Borrowings outstanding under the credit line totaled
$7,500,000 at December 31, 1995, of which $2,500,000 is currently due and
$5,000,000 is due on the ultimate maturity date of January 15, 2001. The
Letter of Credit is collateral for a surety bond to fund any final award
relating to the shipyard's claims discussed in Note 5. Additionally, the
Credit Facility provides for a letter of credit in an amount equal to the
greater of amounts available to be drawn under the credit line or
$4,000,000. Amounts drawn under either letter of credit are due on demand
or the ultimate maturity date of January 15, 2001. There were no amounts
outstanding under the letters of credit at December 31, 1995.
The Credit Facility provided for a term loan (the "Term Loan") in the
original principal amount of $50,000,000. The Term Loan is payable in
quarterly principal and interest payments beginning January 15, 1995.
Borrowings under the Term Loan bear interest at the prime rate or LIBOR, at
the option of the Company, plus an applicable margin based upon the
Company's compliance with certain financial covenants. At December 31,
1995, the Term Loan was accruing interest at LIBOR +3.0% (approximately
8.9%).
The Credit Facility provides for an additional $7,500,000 working capital
line of credit due the earlier of the successful completion of an initial
public offering of the Company's common stock (the "Offering"), as defined,
or March 15, 1997. No amounts were drawn under this line at December 31,
1995. Additionally, the Credit Facility provides that the amount available
under the Term Loan will increase to $54,500,000 and will provide a
$12,500,000 vessel acquisition line of credit upon the successful completion
of the Offering.
The collateral for the Company's debt includes all Company-owned vessels,
outstanding common stock, the partnership interests in STL and Seabulk
Transmarine Partnership, Ltd., spare parts, fuel and supplies, and eligible
accounts receivable.
On September 30, 1994, and as amended on May 24, 1995, the Company issued a
$25,000,000 senior subordinated note (the "Senior Note"). The Senior Note
bears interest at 12%, payable semi-annually on March 31 and September 30.
The principal portion of the Senior Note is payable in equal annual
installments on September 30, 2003 and 2004. The Company received proceeds
of approximately $23,072,000, net of a discount of $1,928,000 ($1,904,000
and $1,800,000 at December 31, 1994 and 1995, respectively) which is being
amortized as interest expense over the term of the Senior Note. Repayment
of the Senior Note is subordinated to the claims of the Company's principal
banks for amounts outstanding under the Credit Facility.
The terms of the Credit Facility and Senior Note prohibit the Company or any
of its wholly owned subsidiaries from paying dividends on any class of
common stock and restrict, among other things, the Company's ability to
enter into new commitments or borrowings over specified amounts and dispose
of assets outside the ordinary course of business. In addition, the Company
is required to maintain a minimum level of tangible
F-22
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
net worth, as defined, and to prepay amounts outstanding under the Credit
Facility to the extent of 50% of excess cash flow, as defined.
On September 30, 1994, HMI issued a $25,000,000 junior subordinated note
(the "Junior Note"). The Junior Note bears interest at 8%, compounded
quarterly. The principal sum and all accrued and unpaid interest
($2,607,000 at December 31, 1995) is payable on the earlier of the Offering
or September 30, 2014. The Company received proceeds of approximately
$17,508,000, net of a discount of $7,492,000 ($7,464,000 and $7,367,000 at
December 31, 1994 and 1995, respectively) which is being amortized as
interest expense over the term of the Junior Note. Repayment of the Junior
Note is subordinated to the claims of the Company's principal banks for
amounts outstanding under the Credit Facility and to the claims of the note
holders for amounts outstanding under the Senior Note. Commencing on
September 30, 1998, the Junior Note, or any portion of the principal amount
thereof, is convertible, at the option of the holders, into a fixed number
of shares of the Company's common stock.
In connection with the acquisition of the minority interest in STL in 1994
(see Note 6), the Company issued a note payable of approximately
$3,039,000. Interest on the note is payable quarterly at Prime +2%,
limited to 10% (10% at December 31, 1995), and the principal portion of the
note is due in equal annual installments through 1999 ($2,431,000
outstanding at December 31, 1995). Repayment of this note is subordinated
to the claims of the Company's principal banks for amounts outstanding
under the Credit Facility.
In connection with the acquisition of the outstanding limited partnership
interests in Hvide Chartering, Ltd. ("HCL") and Hvide Offshore Services,
Ltd. ("HOS") in 1994 (see Note 6), the Company issued notes payable of
approximately $2,149,000. Approximately $1,302,000 of these notes were
issued to certain officers and employees of the Company and are recorded as
notes payable to related parties in the accompanying consolidated balance
sheets. Interest on the notes is payable quarterly at 12% and the notes
are due in 2004.
In connection with redemption of the outstanding preferred stock of the
Predecessor Company in 1994 (see Note 9), the Company issued notes payable
totaling approximately $3,561,000 to the former stockholder. Interest on
the notes is payable quarterly at the greater of 12% or Prime +3% (12% at
December 31, 1995). The principal portion of the notes is due in the year
2000. Repayment of these notes is subordinated to the claims of the
Company's principal banks for amounts outstanding under the Credit
Facility.
In connection with the acquisition of seven crew vessels in 1995 (see Note
11), the Company issued a $3,000,000 note payable. The note bears interest
at 8% and provides for quarterly payments of principal and interest through
the year 2000 ($2,550,000 outstanding at December 31, 1995). The note is
secured by first preferred mortgages on four of the acquired vessels.
The aggregate annual future payments due on debt and notes payable at
December 31, 1995 are as follows (in thousands):
F-23
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
1996 $ 7,708
1997 7,208
1998 9,208
1999 9,208
2000 11,710
Thereafter 58,680
--------
$103,722
========
In addition to the letter of credit available pursuant to the Credit
Facility, the Company has an available letter of credit of $7,000,000 for
future charter hire payments relating to the Seabulk Magnachem lease
financing.
The Company made interest payments of approximately $3,593,000, $3,062,000
and $8,952,000 in 1993, 1994, and 1995, respectively.
4. CAPITAL LEASES
In connection with the transaction with HOS in 1994, the Company assumed
the capital lease obligations for four vessels, which bear interest at 8%.
The following is a schedule of future minimum lease payments under capital
leases together with the present value of the net minimum lease payments as
of December 31, 1995 (in thousands):
1996 $ 875
1997 875
1998 875
1999 863
2000 863
Thereafter 683
--------
Total minimum lease payments 5,034
Less amount representing interest (1,007)
--------
Present value of minimum lease payments,
(including current portion of $577) $ 4,027
========
5. COMMITMENTS AND CONTINGENCIES
A significant portion of the Company's operations consists of charters of
ocean-going vessels. The Seabulk Challenger and Seabulk Magnachem are
bareboat chartered for periods extending through the years 1999 and 2002,
respectively. Charter hire expense on these vessels was approximately
$3,400,000, $3,100,000 and $3,153,000 for the years ended December 31,
1993, 1994, and 1995, respectively. The Company's tractor tug Broward is
bareboat chartered, through
F-24
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
the year 2010. Charter hire expense on this vessel was approximately
$217,000 for the year ended December 31, 1995. The aggregate annual future
payments due under these charter agreements at December 31, 1995 for the
next five years are as follows (in thousands):
1996 $ 3,795
1997 3,842
1998 3,893
1999 3,949
2000 2,592
--------
$ 18,071
========
The Company is party to a lease agreement, as amended, of its office
facilities with a remaining period of 14 years. The estimated remaining
commitment under this lease at December 31, 1995 is $7,450,000 with
approximately $532,000 payable in each of the next five years.
Rent expense for the years ended December 31, 1993, 1994, and 1995 was
approximately $341,000, $467,000, and $666,000, respectively.
In 1990, the Company withheld approximately $2,400,000 from a shipyard
relating to delays and other problems encountered in the construction of a
vessel. In 1993, the shipyard filed a claim to recover approximately
$8,500,000 for costs allegedly due the shipyard, and the Company asserted a
counterclaim for approximately $5,600,000 against the shipyard. Management
believes the shipyard's claim amounts are unsubstantiated and that recover-
ies upon its counterclaim, together with insurance coverage, will exceed
amounts, if any, which may be awarded to the shipyard for its claim.
Management believes that the additional costs it incurred to complete the
construction of the vessel exceeded the amounts withheld and that the final
resolution of this dispute (settlement of construction costs, if any, would
generally be capitalized and depreciated over future periods) will not have
a material adverse effect on the Company's financial position.
In November 1989, STL formed an 88%-owned subsidiary, Seabulk Offshore,
Ltd. ("SOL"), which acquired eight offshore supply vessels for
approximately $13,510,000. In December 1990, STL and Hvide Marine
Transport, Incorporated (a wholly-owned subsidiary of HMI) purchased the
remaining 12% interest in SOL from the limited partner ("U.S. Offshore")
for $825,000. Additionally, SOL agreed to pay U.S. Offshore an amount
equal to 5% of gross revenues from the operation of the vessels for a
period not to exceed a maximum of 40 months (December 1, 1990 through March
31, 1994) and in a total amount not to exceed $1,300,000, whichever
occurred first. Approximately $769,000 has been paid to U.S. Offshore
under this agreement. U.S. Offshore has filed a claim against SOL related
to the amount due under the agreement. SOL is vigorously defending this
claim and believes that it will ultimately prevail and that the outcome
will not have a material adverse impact on the Company's financial
position.
On August 6, 1992, a wholly-owned subsidiary, Seabulk Transmarine II, Inc.
acquired a 49% interest in a joint venture which charters two offshore
supply vessels from SOL for a period of
F-25
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
six years. At the end of the charter period, the joint venture shall have
the option to purchase each of the vessels at an agreed-upon purchase price
of $300,000.
On September 30, 1994, the Company acquired Sun State Marine Services, Inc.
("SSMS"). The acquisition agreement provides the sellers contingent
payments for a period of five years from the date of the agreement. The
contingent amount payable each year is 30% of the amount by which net
income pertaining to the acquired operations for that year, as defined,
exceeds $1,800,000. The aggregate total of the additional consideration is
limited to $3,000,000 over the term of the agreement. Such contingent
payments, when incurred, will be recorded as additional cost of the
acquisition. During the year ended December 31, 1995, contingent payments
made related to 1994 amounted to approximately $36,000. There were no
contingent amounts due related to the acquired operations for the year
ended December 31, 1995.
The Company has guaranteed 50% of the outstanding line of credit borrowings
of its unconsolidated 50%-owned affiliate Ocean Specialty Tankers
Corporation ("OSTC"), up to a maximum of $2,000,000. Total borrowings
outstanding under the line of credit subject to the guarantee were
approximately $1,600,000 at December 31, 1995.
At December 31, 1995, the Company was party to an agreement, as amended on
January 31, 1996 and March 28, 1996, for the purchase of the remaining 50%
of the outstanding common stock of OSTC, pursuant to which the Company is
to acquire three chemical tankers. The agreement, which is subject to the
successful completion of the Offering, provides for an aggregate purchase
price of approximately $64,650,000, consisting of approximately $30,000,000
in cash and the assumption of approximately $34,650,000 in mortgage
obligations related to two of the vessels to be acquired. The agreement
calls for payments to the seller totaling $300,000 in the event that the
transaction does not close by August 15, 1996.
At December 31, 1995, Hvide Partners, L.P. ("HPLP"), an affiliated entity
in which the Company participates as the sole general partner, was party,
through its five 75%-owned limited liability companies Hvide Van Ommeren
Tankers I-V LLC ("HVOT I-V"), to contracts for the construction of five
double-hulled tankers. Pursuant to its general and indirect limited
partnership interests in HPLP, the Company is required to make capital
contributions to HPLP in 1996 totaling approximately $1,000,000. The
Company was also party to an agreement at December 31, 1995 to provide
technical services and support related to the operations of HVOT I-V.
F-26
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Pursuant to this agreement and commencing in 1997, the Company is to be
paid an annual fee of $295,000, subject to future escalation equal to
increases, if any, in the CPI.
6. RELATED PARTY TRANSACTIONS
In 1994, the Company acquired outstanding limited partnership interests of
HCL, a limited partnership in which the Company owned a 33-1/3% interest as
general partner, from certain officers and employees of the Company for
cash and notes payable of approximately $668,000 and $1,089,000,
respectively.
In 1994, the Company acquired the outstanding limited partnership interests
of HOS from certain officers and employees of the Company for cash and
notes payable of approximately $607,000 and $1,060,000, respectively.
Additionally, the company assumed HOS's outstanding capital lease
obligations (see Note 4) and certain other liabilities.
The purchase price of the vessels and other net assets acquired in the
acquisition of the limited partnership interests of HCL and HOS was
approximately $1,974,000 in excess of their historical net book value.
Accordingly, such amounts were deemed special distributions to the related
parties and recorded as a reduction of paid-in capital.
In 1994, the Company acquired the outstanding minority interest in STL for
cash and notes payable of approximately $1,302,000 and $3,039,000,
respectively.
Maritime Transport Development Corp., which is owned by the former Chairman
of the Company, receives a commission equal to 1.25% of charter hire
(approximately $210,000, $190,000, and $210,000 for the years ended
December 31, 1993, 1994, and 1995, respectively) received by the Company
for the Seabulk Challenger and the Seabulk Magnachem as payment for
development and engineering services related to the design of these
vessels.
F-27
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
7. EMPLOYEE BENEFIT PLANS
The Company sponsors a Section 401(k) retirement plan covering
substantially all employees. Expense under this plan for the years ended
December 31, 1993, 1994, and 1995 was approximately $724,000, $834,000, and
$1,047,000, respectively. Contributions under the plan are determined on
the basis of employee compensation.
8. INCOME TAXES
The components of the provision for (benefit from) income taxes for the
years ended December 31, 1993, 1994, and 1995 are as follows (in
thousands):
1993 1994 1995
Current $ 471 $ --- $ ---
Deferred 1,402 189 (2)
------ ------ ------
$1,873 $ 189 $ (2)
====== ====== ======
Incomes taxes paid were approximately $18,000, $400,000, and $0 in 1993,
1994, and 1995, respectively.
A reconciliation of the Company's income tax rate to the federal rate of
34% is as follows:
1993 1994 1995
Income tax expense (benefit)
computed at the statutory rate 34% 34% (34)%
State income taxes 3 2 (2)
Capital Construction Funds 8 16 24
Rate differential 4 -- --
Other 2 (17) 11
------ ------ ------
51% 35% (1)%
====== ====== ======
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred income tax
assets and liabilities as of December 31, 1994 and 1995 are as follows:
F-28
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
1994 1995
Deferred income tax assets:
Net operating loss carryforward $ 3,779 $ 8,388
Charitable contributions carryforward 22 43
Alternative minimum tax credit
carryforward 1,226 1,226
Accrued compensation 142 315
Other 12 161
-------- --------
Total deferred income tax assets 5,181 10,133
-------- --------
Deferred income tax liabilities:
Fixed asset differences 8,850 13,869
Deferred drydocking costs 617 581
Other 33 --
-------- --------
Total deferred income tax liabilities 9,500 14,450
-------- --------
Net deferred income tax liability $ 4,319 $ 4,317
======== ========
At December 31, 1995, the Company had approximately $23,600,000 in net
operating loss carryforwards for federal income tax purposes,
expiring in various amounts from 1998 to 2010. In conjunction with the
anticipated offering, the utilization of the Company's NOL's will be
limited, based upon the estimated value of the Company prior to the
Offering, to approximately $2,000,000 per year.
9. CAPITAL STOCK
On September 29, 1994, all of the outstanding shares of Class A and
Class B Preferred Stock of the Predecessor Company were repurchased
from the shareholder for cash of $2,374,000, notes of $3,561,000 and
certain agreements providing for future payments over a specified term.
The present value of the agreements providing for future payments has
been recorded in other liabilities in the accompanying consolidated
balance sheets and total approximately $1,350,000 and $1,282,000 at
December 31, 1994 and 1995, respectively.
Each share of the Company's Class A Common Stock is entitled to one
vote per share and each share of Class B Common Stock is entitled to
ten votes per share. Shares of Class C Common Stock are nonvoting.
The holders of Class B Common Stock are entitled to convert, at the
holder's election and at any time, such shares into shares of Class A
Common Stock or Class C Common Stock at the rate of one share of Class
B Common Stock for one share of Class A Common Stock or Class C Common
Stock. The holders of Class C Common Stock are entitled to convert, at
the holder's election and subject to certain restrictions, such shares
into shares of Class A Common Stock at the rate of one share of Class C
Common Stock for one share of Class A Common Stock.
In connection with the issuance of the Junior Notes, the Company issued
to the note holders 765,734 shares of its Class B and Class C Common
Stock and Common Stock Contingent Share Issuances ("CSIs") to purchase
a maximum of 554,495 additional shares of its common stock. The CSIs
are generally exercisable, at a price equal to the par value of the
underlying shares, at the earlier of a qualified initial public
offering of the Company's common stock, or September 30, 1998. The
maximum amount of CSI's that may be exercised is based upon the note
holders return on their investment in the Company. Simultaneously with
the issuance of the CSIs, the Company entered into an agreement with
its Chairman and principal stockholder whereby the principal stockholder
agreed to contribute a like amount of shares of common stock to the
Company concurrently with the issuance of shares pursuant to the CSIs.
10. SIGNIFICANT CUSTOMER
The Company derived revenues from a long-term contract with one company
representing 13% to 22% of its revenues over the three year period
ended December 31, 1995.
11. ACQUISITIONS
On September 30, 1994, the Company acquired 24 vessels and associated
spare parts and other equipment. The Company paid an aggregate amount
of approximately $17,886,000, consisting of $17,056,000 in cash and the
assumption of $279,000 of vessel mortgages and $551,000 of bareboat
charter obligations. The operations of these acquired assets for the
periods subsequent to September 30, 1994 are included in the
accompanying consolidated statements of operations for the years ended
December 31, 1994 and 1995.
On September 30, 1994, the Company acquired SSMS in an acquisition
accounted for as a purchase. The aggregate purchase price of
$13,900,000 was approximately $8,615,000 in excess of the net assets
acquired, which is being amortized using the straight-line method over
20 years. The operations of SSMS for periods subsequent to September
30, 1994 are included in the accompanying consolidated statements of
operations for the years ended December 31, 1994 and 1995.
F-29
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
On March 8, 1995, the Company acquired seven offshore crew vessels for
$5,875,000, including cash of $2,875,000 and a $3,000,000 promissory
note. The operations of these acquired vessels subsequent to March 8,
1995 are included in the accompanying consolidated statement of
operation for the year ended December 31, 1995.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of financial instruments included in the following categories:
Cash and cash equivalents and accounts receivable. The carrying
amounts reported in the balance sheets approximates fair value.
Credit Facility, Mortgage note and Other. Amounts outstanding under
the Company's Credit Facility, as amended, bear interest at variable
rates that periodically adjust to reflect changes in overall market
rates and approximate fair value. Amounts outstanding in 1994 under
the mortgage note and other amounts approximate fair value due to their
short-term nature.
Senior and Junior Notes. Amounts outstanding under the Senior and
Junior Notes bear interest at 12% and 8%, respectively. The fair value
of the Senior and Junior Notes is estimated to be $23.5 million and $16.5
million, respectively, using a discounted cash flow analysis at
estimated market rates.
Notes Payable. The carrying amount reported in the balance sheets
approximates fair value using a discounted cash flow analysis at
estimated market rates.
13. CONDENSED FINANCIAL INFORMATION
The following are parent company-only condensed financial statements,
and notes thereto, of Hvide Marine Incorporated:
Parent Company - only Condensed Balance Sheets
December 31
1994 1995
---------------------
(In Thousands)
ASSETS
Current Assets:
Deferred costs $ 78 $ 38
--------- --------
Total current assets 78 38
Other assets:
Deferred costs, net 1,358 1,235
Other (principally investment in wholly-owned
subsidiaries) 29,524 31,614
--------- --------
Total other assets 30,882 32,849
--------- --------
Total $ 30,960 $ 32,887
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities (principally amounts $ 215 $ 302
due to wholly-owned subsidiaries)
Long-Term Debt 17,536 17,633
Other Noncurrent Liabilities
(long-term payable)
504 2,607
--------- --------
Total liabilities 18,255 20,542
Stockholders' Equity:
Common stock 2 2
Other stockholders'equity 12,703 12,343
--------- ------
Total stockholders'equity 12,705 12,345
--------- ------
Total $ 30,960 $ 32,887
========= ========
F-30
<PAGE>
HVIDE MARINE INCORPORA TED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANC IAL STATEMENTS -- Continued
Parent Company - Only Condensed Statements of Operations
Period from
inception
(September 28,
1994) through Year ended
December 31, December 31,
1994 1995
---------------------------------
(In Thousands)
Costs and expenses:
Professional fees $1,195 $ 151
Interest expense 549 2,218
Other 331 81
-----------------------
Total costs and expenses 2,075 2,450
Benefit from income taxes 714 871
-----------------------
1,361 1,579
Equity in net income of subsidiaries 717 1,219
-----------------------
Net loss $ 644 $ 360
=====================
BASIS OF PRESENTATION
In the parent company-only financial statements, the Company's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of its
wholly-owned subsidiaries. The parent company-only financial statements should
be read in conjunction with the Company's consolidated financial statements.
LONG-TERM DEBT
On September 30, 1994, the Company issued the Junior Note (see note 3).
The Company serves as co-guarantor of amounts under the Credit Facility and
Senior Note (see Note 3). Repayment of the Junior Note is subordinated to the
claims for amounts outstanding under the Credit Facility and the Senior Note.
DIVIDENDS FROM SUBSIDIARIES
No cash dividends have been paid to the Parent Company since inception as the
Company's Credit Facility prohibits the payment of dividends or other
distributions on any class of capital stock of the Company or its wholly-owned
subsidiaries.
STATEMENT OF CASH FLOWS
The statement of cash flows has been omitted as the Parent company does not
maintain cash balances.
14. SUBSEQUENT EVENTS
At December 31, 1995, the Company was party to a letter of intent to
purchase eight offshore crew vessels for approximately $3,400,000. On
January 15, 1996, an asset purchase agreement related to the
transaction was executed, pursuant to which the Company deposited
$50,000 in escrow. On January 31, 1996, the Company assigned its
rights under the purchase agreement to a third party, which purchased
the vessels, and, through its subsidiary SOL, entered into an agreement
to bareboat charter the vessels from the third party. The bareboat
charter, which meets the criteria for a capital lease, provides for
aggregate future payments approximating the $3,400,000 purchase price
plus interest at 8.25% per annum.
At December 31, 1995, the Company was also party to a letter of intent to
purchase an offshore crew vessel for approximately $2,025,000. On February
9, 1996, the Company assigned its rights under the letter agreement to a
third party, which purchased the vessel and entered into an agreement
to bareboot charter the vessel to the Company. The bareboat
charter, which meets the criteria for a capital lease, provides for
aggregate future payments approximating the $2,025,000 purchase price plus
interest at 6.8% per annum.
On May 13, 1996, the Company's Board of Directors authorized a 1.5843-for-1
split of its common stock, and an increase of the number of authorized
shares of its Class A, Class B, and Class C Common Stock to 100,000,000,
5,000,000, and 2,500,000, respectively. All share and per share data in the
accompanying financial statements have been restated to reflect the stock
split.
F-31
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Boards of Directors and Stockholder of Omichem Transport, Inc., OMI
Clover Transport, Inc., and OMI Hudson Transport, Inc.:
We have audited the accompanying combined balance sheets of the OMI Chemical
Carrier Group as of December 31, 1994 and 1995 and the related combined
statements of operations and deficit and of cash flows for each of the three
years in the period ended December 31, 1995. The combined financial
statements include the accounts of Omichem Transport, Inc., OMI Clover
Transport, Inc., and OMI Hudson Transport, Inc. which are wholly owned
subsidiaries of OMI Corp. These financial statements are the responsibility
of the companies' management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the OMI Chemical Carrier Group
at December 31, 1994 and 1995 and the combined results of their operations
and their combined cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
New York, New York
January 26, 1996
F-32
<PAGE>
OMI CHEMICAL CARRIER GROUP
COMBINED BALANCE SHEETS
(in thousands)
<TABLE><CAPTION>
December 31,
1994 1995
<S> <C> <C>
Assets
Current assets:
Advances to masters . . . . . . . . . . . . . . . . . . . $ 171 $ 102
Receivables:
Due from OSTC (Notes 1, 3) . . . . . . . . . . . . . . 638 544
Other . . . . . . . . . . . . . . . . . . . . . . . . . 40 52
Deferred income taxes (Note 4) . . . . . . . . . . . . . 731 9,176
Prepaid expenses and other current assets . . . . . . . . 987 524
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . 2,567 10,398
------------ ------------
Vessels (Note 1) . . . . . . . . . . . . . . . . . . . . . . 75,225 84,738
Less accumulated depreciation . . . . . . . . . . . . . . . . (43,872) (47,066)
------------ ------------
Vessels - net . . . . . . . . . . . . . . . . . . . . . 31,353 37,672
------------ ------------
Due from parent (Notes 4, 6) . . . . . . . . . . . . . . . . 5,075 108
Other assets and deferred charges . . . . . . . . . . . . . . 1,537 1,094
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,532 $ 49,272
============ ============
Liabilities and Stockholder's Equity (Deficit)
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 1,328 $ 389
Accrued liabilities:
Voyage and vessel . . . . . . . . . . . . . . . . . . . 2,524 2,273
Interest . . . . . . . . . . . . . . . . . . . . . . . 498 432
Operating lease (Note 3) . . . . . . . . . . . . . . . 738 756
Accrued lease termination costs (Note 5) . . . . . . . . . . 25,000
Accrued loss on lease obligation (Note 5) . . . . . . . . . . 1,487
Current portion of long-term debt (Note 2) . . . . . . . . . 2,525 2,525
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . 9,100 31,375
------------ ------------
Long-term debt (Note 2) . . . . . . . . . . . . . . . . . . . 17,488 14,963
Accrued loss on lease obligation (Note 5) . . . . . . . . . . 18,313
Deferred income taxes (Note 4) . . . . . . . . . . . . . . . 1,523 8,797
Advances from parent (Note 3) . . . . . . . . . . . . . . . . 9,623
Accrued lease payable (Note 3) . . . . . . . . . . . . . . . 2,243
Deferred gain on sale/leaseback of vessel (Note 3) . . . . . 1,281
Advance time charter revenues and other liabilities . . . . . 1,447 830
Commitments and contingencies (Note 7) . . . . . . . . . . .
Stockholder's equity (deficit):
Common stock . . . . . . . . . . . . . . . . . . . . . . -- --
Capital surplus . . . . . . . . . . . . . . . . . . . . 80,881 80,881
Deficit (Note 1) . . . . . . . . . . . . . . . . . . . . (91,744) (97,197)
------------ ------------
Total stockholder's equity (deficit) . . . . . . . . . (10,863) (16,316)
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,532 $ 49,272
============ ============
</TABLE>
See notes to combined financial statements
F-33
<PAGE>
OMI CHEMICAL CARRIER GROUP
COMBINED STATEMENTS OF OPERATIONS AND DEFICIT
(In thousands)
<TABLE><CAPTION>
For the years
ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $ 24,434 $ 26,564 $ 26,099
------------ ------------ ------------
Operating Expenses:
Vessel and voyage . . . . . . . . . . . . . . . 17,418 17,711 18,287
Depreciation and amortization . . . . . . . . . . 3,672 3,878 3,355
Operating lease (Note 3) . . . . . . . . . . . . 10,730 10,805 7,557
Provision for losses (Note 5):
Impaired value of vessel . . . . . . . . . . . 14,798
Lease obligation . . . . . . . . . . . . . . . 19,800 3,297
------------ ------------ ------------
Total operating expenses . . . . . . . . . . 31,820 66,992 32,496
------------ ------------ ------------
Operating loss . . . . . . . . . . . . . . . . . . (7,386) (40,428) (6,397)
------------ ------------ ------------
Other Income (Expense):
Gain on disposal of assets (Note 3) . . . . . . . 334 333 167
Interest expense . . . . . . . . . . . . . . . . (2,888) (2,253) (2,161)
Interest income . . . . . . . . . . . . . . . . 109 105 1
------------ ------------ ------------
Net other expense . . . . . . . . . . . . . . . (2,445) (1,815) (1,993)
------------ ------------ ------------
Loss before income taxes . . . . . . . . . . . . . (9,831) (42,243) (8,390)
Benefit for income taxes (Note 4) . . . . . . . . . 3,003 14,785 2,937
------------ ------------ ------------
Net loss . . . . . . . . . . . . . . . . . . . . . (6,828) (27,458) (5,453)
Deficit, beginning of year . . . . . . . . . . . . (57,458) (64,286) (91,744)
------------ ------------ ------------
Deficit, end of year . . . . . . . . . . . . . . . $ (64,286) $ (91,744) $ (97,197)
============ ============ ============
</TABLE>
See notes to combined financial statements
F-34
<PAGE>
OMI CHEMICAL CARRIER GROUP
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE><CAPTION>
For the years
ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Cash Flows (Used) Provided
By Operating Activities:
Net loss . . . . . . . . . . . . . . . . . . . $ (6,828) $ (27,458) $ (5,453)
Adjustments to reconcile net loss
to cash (used) provided by
operating activities:
Deferred income taxes . . . . . . . . . . . (461) (13,629) (1,171)
Depreciation and amortization . . . . . . . 3,672 3,878 3,355
Gain on disposal of assets - net . . . . . . (334) (333) (167)
Provision for losses on vessel
and lease . . . . . . . . . . . . . . . . . 34,598 3,297
Changes in Assets and Liabilities:
Decrease (increase) in receivables
and other current assets . . . . . . . . . . 135 (371) 614
(Decrease) increase in accounts
payable and accrued expenses . . . . . . . . (1,814) 2,614 (1,975)
Decrease in due from parent . . . . . . . . . 7,809 3,099 4,967
Decrease (increase) in other assets
and deferred charges . . . . . . . . . . . . 260 (200) 443
Increase (decrease) in advance charter
hire and other liabilities . . . . . . . . . 1,369 78 (617)
Other assets & liabilities - net . . . . . . 1,257 133
------------ ------------ ------------
Net cash provided by operating
activities . . . . . . . . . . . . . . . . 5,065 2,276 3,426
------------ ------------ ------------
Cash Flows (Used) Provided By
Investing Activities:
Additions to vessels . . . . . . . . . . . . (3,040) (351) (10,524)
Proceeds received on note receivable . . . . 500 1,500
------------ ------------ ------------
Net cash (used) provided by
investing activities . . . . . . . . . . . (2,540) 1,149 (10,524)
------------ ------------ ------------
Cash Flows (Used) Provided By
Financing Activities:
Payments on long-term debt . . . . . . . . . (2,525) (3,425) (2,525)
Advances from parent . . . . . . . . . . . . 9,623
------------ ------------ ------------
Net cash (used) provided
by financing activities . . . . . . . . . (2,525) (3,425) 7,098
------------ ------------ ------------
Net (decrease) increase in cash . . . . . . . . . . $ -- $ -- $ --
============ ============ ============
</TABLE>
See notes to combined financial statements
F-35
<PAGE>
OMI CHEMICAL CARRIER GROUP
Notes to Combined Financial Statements
For The Three Years Ended December 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Combined Statements -- The combined financial statements for
the OMI Chemical Carrier Group (the "Group" or "Companies") include the
financial statements of Omichem Transport, Inc., OMI Clover Transport,
Inc., and OMI Hudson Transport, Inc. which are wholly owned
subsidiaries of OMI Corp. ("OMI"). The three companies each own, or
lease, a vessel (OMI Star, OMI Hudson and OMI Dynachem, respectively)
which is time chartered to a joint venture, Ocean Specialty Tankers
Corporation ("OSTC"), owned by OMI and Seabulk Ocean Systems
Corporation ("SOSC"), a subsidiary of Hvide Marine Incorporated
("Hvide") (see Note 3). OSTC contracts with customers for ocean
shipping of liquid chemicals.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Since inception, the Companies have incurred cumulative losses
aggregating over $97,000,000 at December 31, 1995, which exceeds their
combined capital surplus. The Companies have been able to sustain
their ongoing operations because of OMI's commitment to provide funding
for working capital and other purposes. These financial statements
have been prepared on the assumption that OMI will continue to provide
required funding in the future.
In October 1995, OMI entered into an agreement with Hvide for the sale
of the OMI Star and OMI Dynachem for $11,512,500 in cash, a long-term
note with a face value of $8,350,000 and the assumption of all
outstanding indebtedness relating to the vessels ($17,488,000 at
December 31, 1995). The Companies anticipate a loss on this
transaction between $3,500,000 and $4,500,000. Hvide has also agreed
to acquire the OMI Hudson subsequent to termination of the related
operating lease as discussed in Note 5. The purchase of these three
vessels by Hvide is contingent upon Hvide successfully completing its
initial public offering of common stock in 1996. In the event Hvide
does not acquire the vessels, OMI Clover Transport, Inc. will acquire
the OMI Hudson for approximately $30,000,000.
Operating Revenues and Expenses -- Voyage revenues are earned and
recognized on a daily basis and are subject to adjustments based on the
operating results of OSTC.
Special survey and drydock expenses are accrued and charged to
operating expense over the survey cycle, which generally is a two- to
three-year period. The accruals of such expenses are based on
management's best estimates of future cost and the expected length of
the survey cycle. However, the ultimate liability may be more or less
than such estimates.
F-36
<PAGE>
OMI CHEMICAL CARRIER GROUP
Notes to Combined Financial Statements -- continued
Vessels and Improvements -- Vessels are recorded at cost. Depreciation
for financial reporting purposes is provided principally on the
straight-line method based on the estimated useful lives of the vessels
up to the vessels' estimated salvage value. The useful lives of the
vessels are 25 and 30 years. Salvage value is based upon a vessel's
light weight tonnage multiplied by a scrap rate.
Improvements on leased vessels are amortized on the straight-line
method over the lives of the leases.
In the event that facts and circumstances indicate that the carrying
amount of a vessel may be impaired, an evaluation of recoverability is
performed. If an evaluation is required, the estimated future
undiscounted cash flows associated with the vessel are compared with
the vessel's carrying value to determine if a write-down to fair value
or discounted cash flow is required (see Note 5).
The Companies adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of" effective January 1, 1995. Adoption of
this statement did not have a material effect on the Companies'
combined financial position or results of operations.
Income Taxes -- The Companies are included in a consolidated Federal
income tax return filed by OMI which includes all eligible subsidiary
Companies. The accompanying financial statements include for each
subsidiary in the Group a cost or benefit for Federal income taxes
based on the related separate taxable income of each subsidiary.
Deferred income taxes are recorded under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Retirement Plans -- The Companies comprising the Group make
contributions to union sponsored multi-employer pension plans covering
seagoing personnel. Contributions to these plans amounted to
approximately $218,000, $276,000, and $262,000 for the years ended
December 31, 1993, 1994 and 1995. If these Companies were to withdraw
from the plans or the plans were to terminate, the Companies would be
liable for a portion of any unfunded plan benefits that might exist.
The Group has been advised by the trustees of such plans that it has no
withdrawal liability as of December 31, 1995.
Cash Flows -- During the years ended December 31, 1993, 1994 and 1995,
the Group paid interest of $2,504,000, $1,932,000, and $1,475,000,
respectively.
F-37
<PAGE>
OMI CHEMICAL CARRIER GROUP
Notes to Combined Financial Statements -- continued
2. LONG-TERM DEBT
Long-term debt consists of the following:
December 31,
1994 1995
Bonds, secured by a vessel, at 5.35% and
10.1% payable in installments to 2006 $20,013,000 $17,488,000
Less: current portion of long-term debt
2,525,000 2,525,000
--------- ---------
Long-term debt . . . . . . . . . . . . . $17,488,000 $14,963,000
=========== ===========
Fair value of long-term debt . . . . . . $19,871,000 $18,926,000
=========== ===========
The bonds are collateralized by a mortgage on the OMI Dynachem and are
guaranteed as to principal and interest by the U.S. Government under
the Title XI Program. At December 31, 1995, the vessel (net book value
of $28,781,000) and investments of $9,765,000 held by OMI Corp. in its
capital construction and other restricted funds have been pledged as
collateral for the long-term debt issues. The security arrangement
restricts OMI Hudson Transport, Inc. from, among other things, the
withdrawal of capital, the payment of common stock dividends and the
extending of loans to affiliated parties.
Aggregate annual maturities of the bonds during each of the next five
years 1996 through 2000 are $2,525,000.
The fair value of the bonds is estimated based on current rates
available for similar issues.
3. OPERATING LEASES
Total rent expense, which relates to two vessels, amounted to
$10,730,000, $10,805,000 and $7,557,000 for the years ended December
31, 1993, 1994 and 1995, respectively.
OMI Clover Transport, Inc. has operated the vessel OMI Hudson under a
long-term operating lease requiring semi-annual payments through
December 2006. Lease payments required under the operating lease for
the OMI Hudson in 1996 approximate $1,245,000 (see Note 5).
In 1992, Omichem Transport, Inc. ("Omichem") entered into a
sale/leaseback transaction for the OMI Star. Omichem received
$11,500,000 in cash, of which $3,500,000 was used to pay the mortgage
on the vessel, a $2,000,000 secured note receivable paid December 1994
and a six year lease. The gain on the transaction of approximately
$2,001,000 was deferred and amortized over the life of the lease until
June 29, 1995 when Omichem repurchased the OMI Star for $9,623,000.
The funds to purchase the OMI Star were in the form of a long-term
advance from OMI at a variable rate based on the London Interbank
Offering Rate.
F-38
<PAGE>
OMI CHEMICAL CARRIER GROUP
Notes to Combined Financial Statements -- continued
The three vessels operated by the Group are time chartered to OSTC, a
joint venture between OMI and SOSC. The balances included in the
financial statements due from OSTC represent charter hire receivables.
As of December 31, 1995 the Companies have time charter agreements with
OSTC for initial terms ending May 31, 2000, with extension options
after that date. The vessels are under charter for "base" hire rates
dependent upon the performance of the vessels.
4. INCOME TAXES
A summary of the components of the benefit for income taxes is as
follows:
For the years
ended December 31,
1993 1994 1995
Current benefit . . . . . . $ (2,542) $ (1,156) $ (1,766)
Deferred tax benefit . . . . (461) (13,629) (1,171)
-------- -------- --------
Benefit for income taxes . . $ (3,003) $(14,785) (2,937)
======== ======== ========
Deferred income taxes are payable to OMI. The components of deferred
income taxes relate to tax effects of temporary differences as follows:
December 31,
1994 1995
Deferred tax liabilities:
Differences between book and tax basis
of vessels . . . . . . . . . . . . . $ 9,424 $ 9,108
Other . . . . . . . . . . . . . . . . . 54 74
-------- --------
Total deferred tax liabilities . . . . . . . 9,478 9,182
-------- --------
Deferred tax assets:
Future lease liability accrual . . . . (6,930) (8,750)
Accrual for drydocking . . . . . . . . (567) (811)
Accrued lease payable . . . . . . . . . (785)
Deferred gain on sale/leaseback . . . . (404)
-------- --------
Total deferred tax assets . . . . . . . . . (8,686) (9,561)
-------- --------
Deferred income taxes . . . . . . . . . . . $ 792 $ (379)
======== ========
On August 2, 1993, Congress passed the Omnibus Budget Reconciliation
Act of 1993 (the "Act"). The major component of the Act affecting the
Group was the retroactive increase in the marginal corporate tax rate
from 34 percent to 35 percent, increasing the 1993 deferred income
taxes of the Group by $438,000 to comply with the provisions of the
Act.
F-39
<PAGE>
OMI CHEMICAL CARRIER GROUP
Notes to Combined Financial Statements -- concluded
5. IMPAIRMENT AND PROVISION FOR LOSS ON VESSEL LEASE OBLIGATION
As part of the periodic review of the recoverability of the investment
in vessels, in 1994 management determined that the carrying value of
the OMI Dynachem exceeded the undiscounted forecasted future net cash
flows from its operations. This indicated that an impairment loss for
this vessel should be recognized. This loss was measured by the excess
of the carrying value of the vessel over its estimated fair value which
was based on values provided by two shipbrokers. The carrying value
was reduced by $14,798,000, which is reported as a separate item in the
1994 Combined Statement of Operations and Deficit.
As part of this periodic review, it also was determined that a similar
loss should be recognized for the forecasted loss from operations of
the OMI Hudson which is chartered-in on an operating lease through
2006. The amount of the loss was estimated based on forecasted
undiscounted cash flows, excluding from rent expense an amount
representative of the interest component of the lease agreement,
through the lease expiration date. This loss, estimated as
$19,800,000, is also reported as a separate item in the 1994 Combined
Statement of Operations and Deficit.
In October 1995, OMI Clover Transport, Inc. entered into an agreement
with the owner/lessor of the OMI Hudson to terminate the operating
lease and cause the sale of the vessel to a designated purchaser
(presently Hvide) for $30,000,000. The transaction is expected to be
completed in the first quarter of 1996 and will require a lease
termination payment of $25,000,000. The estimated loss on lease
termination of $3,297,000 has been reported as a separate item in the
1995 Combined Statement of Operations and Deficit. In the event Hvide
does not purchase the vessel, OMI Clover Transport, Inc. is obligated
to do so.
6. TRANSACTIONS WITH PARENT
Due from Parent represents tax benefits currently due from OMI reduced
by non-interest bearing advances from OMI to fund the Group's
operations.
OMI provides all general and administrative services for the Group and
does not allocate any such expenses to the subsidiary level.
Additionally, OMI has not allocated management fees for technical or
commercial services for these three vessels.
7. CONTINGENT LIABILITIES
Companies in the Group are defendants in various legal actions from
shipping operations. Such actions are covered by insurance or, in the
opinion of management after review with counsel, are of such a nature
that the ultimate liability, if any, would not have a material adverse
effect on the combined financial statements.
F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
Partners of
Indian Seal Partners, Ltd.,
Baffin Seal Partners, Ltd.,
Baltic Seal Partners, Ltd.,
Bengal Seal Partners, Ltd., and
Ross Seal Partners, Ltd.
We have audited the accompanying Combined Statements of Vessel Operations of
Indian Seal Partners, Ltd., Baffin Seal Partners, Ltd., Baltic Seal
Partners, Ltd., Bengal Seal Partners, Ltd., and Ross Seal Partners, Ltd.
(collectively "the Seal Partners") for the years ended December 31, 1995,
1994 and 1993. These financial statements are the responsibility of the
management of the Seal Partners. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1, the combined financial statements referred to above
have been prepared in accordance with the Asset Purchase Agreement between
the Seal Partners and Hvide Marine Incorporated, dated March 29, 1996, for
the sale of certain assets and operations to Hvide Marine Incorporated (the
"Agreement") and are not intended to be complete presentations of the Seal
Partners' revenues and expenses.
In our opinion, the combined statements referred to above present fairly, in
all material respects, the combined vessel operations of the Seal Partners
for the years ended December 31, 1995, 1994, and 1993, pursuant to the
Agreement described in Note 1, in conformity with generally accepted
accounting principles.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
April 12, 1996
F-41
<PAGE>
Indian Seal Partners, Ltd.
Baffin Seal Partners, Ltd.
Baltic Seal Partners, Ltd.
Bengal Seal Partners, Ltd.
Ross Seal Partners, Ltd.
Combined Statements of Vessel Operations
For the Year Ended December 31,
-------------------------------------
1993 1994 1995
Combined operating revenues . $ 4,402,220 $ 4,150,519 $ 5,383,398
Combined operating expenses
Groceries . . . . . . . . 16,742 30,490 49,741
Insurance claims . . . . . 115,252 77,907 62,543
Insurance premiums . . . . 302,295 431,129 428,589
Medical . . . . . . . . . 14,809 37,549 44,242
Payroll taxes . . . . . . 39,618 68,539 101,600
Repairs and maintenance . 286,373 417,341 422,016
Safety training . . . . . 18,792 30,163 34,919
Salaries - crews . . . . . 690,960 995,602 1,297,067
Supplies . . . . . . . . . 77,145 268,254 87,672
Taxes, licenses and miscellaneous 42,910 168,467 154,769
Transportation - crews . . 133,148 84,888 93,453
----------- ----------- -----------
Total combined operating
expenses . . . . . . . 1,738,044 2,610,329 2,776,611
----------- ----------- -----------
Excess of combined operating
revenues over expenses $ 2,664,176 $ 1,540,190 $ 2,606,787
=========== =========== ===========
See notes to financial statements.
F-42
<PAGE>
Indian Seal Partners, Ltd.
Baffin Seal Partners, Ltd.
Baltic Seal Partners, Ltd.
Bengal Seal Partners, Ltd.
Ross Seal Partners, Ltd.
Notes to Combined Financial Statements
Note 1 - Basis of Presentation
Each of five separate limited partnerships owns an offshore service
ship which is managed by Seal Fleet, Inc. and Subsidiaries (related
parties). The five ships (the "Seal Partners Ships") and limited
partnerships (collectively "the Seal Partners") are as follows:
Indian Seal - 204 Feet Indian Seal Partners, Ltd.
Baffin Seal - 185 Feet Baffin Seal Partners, Ltd.
Baltic Seal - 205 Feet Baltic Seal Partners, Ltd.
Bengal Seal - 185 Feet Bengal Seal Partners, Ltd.
Ross Seal - 163 Feet Ross Seal Partners, Ltd.
The Baltic Seal was purchased by Baltic Seal Partners, Ltd. in February
1994 and was placed in service in August 1994 after a period of
drydocking.
According to the terms of the Asset Purchase Agreement dated March 29,
1996, the Seal Partners have committed to sell certain assets which
include the Seal Partners Ships and related improvements to Hvide
Marine Incorporated ("Hvide") (see Note 3).
The accompanying combined statements of vessel operations include only
operating revenues and direct expenses related solely to the assets to
be acquired by Hvide. Other operating results of the Seal Partners are
assets being sold to Hvide.
The accompanying combined statements of vessel operations (i) include
the operating revenues and operating expenses directly related to the
operations of the Seal Partners Ships, and (ii) exclude depreciation,
general and administrative overhead allocations, management fees to
Seal Fleet, Inc. and Subsidiaries, interest expense and income taxes.
Note 2 - Summary of Significant Accounting Policies
Operating revenues
------------------
All operating revenues are earned from time charters and recognized
based on contract day rates.
Note 3 - Assets to be Sold by the Seal Partners (UNAUDITED)
The following presents the combined historical costs of acquisition and
accumulated depreciation of the assets to be sold to Hvide which have
been recorded by the Seal Partners (unaudited):
F-43
<PAGE>
Indian Seal Partners, Ltd.
Baffin Seal Partners, Ltd.
Baltic Seal Partners, Ltd.
Bengal Seal Partners, Ltd.
Ross Seal Partners, Ltd.
Notes to Combined Financial Statements
December 31,
-------------------------------------------
1993 1994 1995
Vessels . . . . . . $ 10,761,504 $ 11,411,504 $ 11,411,504
Accumulated depreciation (7,445,096) (7,971,650) (8,514,471)
------------ ------------ ------------
Net . . . . . . . . $ 3,316,408 $ 3,439,854 $ 2,897,033
============ ============ ============
The costs of major improvements to the vessels which have been made by
the Seal Partners have not been capitalized and depreciated, are
excluded from the above unaudited schedule, and aggregated $481,765,
$3,487,435 and $922,475 during the years ended December 31, 1995, 1994,
and 1993, respectively. Additional costs of improvements were incurred
during periods prior to 1993.
The assets of the Seal Partners that are not being sold to Hvide have
been excluded from the table above. No liabilities of the Seal
Partners are to be assumed in connection with the Agreement.
F-44
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors of
Seal Fleet, Inc.
We have audited the accompanying Statements of Assets to be Sold of Seal
Fleet, Inc. and Subsidiaries as of December 31, 1995, 1994 and 1993 and the
related Statements of Vessel Operations for the years then ended. These
financial statements are the responsibility of the management of Seal Fleet,
Inc. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1, the financial statements referred to above have been
prepared in accordance with the Asset Purchase Agreement between the Seal
Fleet, Inc. and Subsidiaries and Hvide Marine Incorporated dated March 29,
1996 for the sale of certain assets and operations to Hvide Marine
Incorporated (the "Agreement") and are not intended to be complete
presentations of Seal Fleet, Inc. and Subsidiaries' assets, liabilities,
revenues and expenses.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets to be sold of Seal Fleet, Inc. and
Subsidiaries as of December 31, 1995, 1994 and 1993 and the related vessel
operations for the years then ended, pursuant to the Agreement described in
Note 1, in conformity with generally accepted accounting principles.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
April 12, 1996
F-45
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Statements of Assets to be Sold
December 31,
----------------------------------------
1993 1994 1995
Vessels . . . . . . . . $ 9,922,088 $ 9,922,088 $ 9,922,088
Accumulated depreciation (6,320,197) (6,819,771) (7,319,309)
Deferred drydocking (net) 617,094 323,706 649,748
Inventory . . . . . . . 128,462 128,462 51,937
----------- ----------- -----------
Total . . . . . . . . . $ 4,347,447 $ 3,554,485 $ 3,304,464
=========== =========== ===========
See notes to financial statements.
F-46
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Statements of Vessel Operations
For the Year Ended December 31,
---------------------------------------
1993 1994 1995
Operating revenues . . . $ 3,929,427 $ 4,135,103 $ 4,082,121
Operating expenses
Charter hire . . . . . 76,182 152,091 141,273
Depreciation . . . . . 498,140 498,144 498,139
Engineering allocation 76,028 26,012 50,987
Groceries . . . . . . 35,453 19,320 33,714
Insurance claims . . . 59,774 54,534 89,370
Insurance premiums . . 311,290 313,344 305,843
Medical . . . . . . . 26,765 21,617 25,994
Payroll taxes . . . . 63,635 65,871 80,351
Repairs and maintenance 493,848 532,940 544,309
Safety training . . . 22,548 19,167 25,857
Salaries - crews . . . 783,587 860,155 906,003
Supplies . . . . . . . 64,754 13,390 42,238
Taxes, licenses and
miscellaneous . . . 92,267 41,945 52,522
Transportation - crews 24,019 71,271 55,932
----------- ----------- -----------
Total operating expenses 2,628,290 2,689,801 2,852,532
----------- ----------- -----------
Excess of operating
revenues over expenses $ 1,301,137 $ 1,445,302 $ 1,229,589
=========== =========== ===========
See notes to financial statements.
F-47
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Financial Statements
Note 1 - Basis of Presentation
Seal Fleet, Inc. and Subsidiaries ("Seal Fleet") own and manage the
following three offshore service ships (the "Seal Fleet Ships").
China Seal - 176 Feet
Hawke Seal - 185 Feet
Pegasus Seal - 185 Feet
In addition, Seal Fleet manages a bareboat charter of the State
Flamingo, acquired in January 1996 by an entity owned by two employees
of Seal Fleet and an unaffiliated third party and renamed Sabine Seal.
In accordance with an Asset Purchase Agreement with Hvide Marine
Incorporated ("Hvide"), dated March 29, 1996, Seal Fleet committed to
assign the charter of the Sabine Seal, to the extent it is assignable,
and to sell the Seal Fleet Ships, related improvements, and inventory
to Hvide.
The accompanying statements of assets include only those assets to be
sold. They are presented at their historical cost, less any
accumulated depreciation and amortization.
The assets and liabilities of Seal Fleet which are not being sold to or
assumed by Hvide, are omitted from the accompanying statements of
assets, as such statements are not intended to be complete financial
statements of Seal Fleet.
The accompanying statements of vessel operations include only operating
revenues and direct expenses related solely to the assets and the
bareboat charter to be acquired by Hvide. Other operating results of
Seal Fleet are omitted from the statements as they do not directly
relate to the assets and charters being sold or assigned to Hvide.
The accompanying statements of vessel operations (i) include the
operating revenues and operating expenses directly related to the
operations of the Seal Fleet Ships and the Sabine Seal, and (ii)
exclude general and administrative overhead allocations, intercompany
commissions allocated among Seal Fleet, Inc. and its Subsidiaries,
interest expense and income taxes.
F-48
<PAGE>
Seal Fleet, Inc. and Subsidiaries
Notes to Financial Statements
Note 2 - Summary of Significant Accounting Policies
Vessels and Improvements
------------------------
Vessels and improvements include two seismic ships and one supply
service ship and are stated at cost less accumulated depreciation.
Depreciation is computed on the straightline method using estimated
useful lives of twenty years. Major improvements are capitalized as
deferred drydocking while replacements, maintenance and repairs which
do not improve or extend the lives of the assets are expensed as
incurred. The costs of annual drydocking and inspections of the ships
are expensed as incurred.
Operating revenues
------------------
Operating revenues are earned from time charters and are recognized
based on contract day rates for the Seal Fleet Ships and the Sabine
Seal.
Charter hire
------------
Charter hire expenses comprise fees charged by the vessel owner for the
use of the Sabine Seal. In January 1996, the vessel was acquired by an
entity owned by two employees of Seal Fleet and an unaffiliated third
party.
F-49
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Hvide Marine Incorporated
We have audited the accompanying statements of assets to be sold of Gulf
Boat Marine Services, Inc. and E&D Boat Rentals, Inc. (the Companies) as of
September 30, 1994 and 1995, and the related statements of vessel operations
for the years then ended. These statements of assets to be sold and the
related statements of vessel operations are the responsibility of the
management of the Companies. Our responsibility is to express an opinion on
the statements of assets to be sold and the related statements of vessel
operations based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statements of assets to be
sold and the related statements of vessel operations are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements of assets to be
sold and the related statements of vessel operations. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the
statements of assets to be sold and the related statements of vessel
operations. We believe that our audits provide a reasonable basis for our
opinion.
As described in Note 1, the statements of assets to be sold and the related
statements of vessel operations referred to above have been prepared in
accordance with the Asset Purchase Agreement between the Companies and Hvide
Marine Incorporated dated January 15, 1996 for the sale of certain assets to
Hvide Marine Incorporated, and is not intended to be a complete presentation
of the Companies' assets, liabilities, revenue and expenses.
In our opinion, the statements of assets to be sold and the related
statements of vessel operations referred to above present fairly, in all
material respects, the assets to be sold of the Companies at September 30,
1994 and 1995, and its vessel operations for each of the years then ended,
pursuant to the Sale and Purchase Agreement described in Note 1, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New Orleans, Louisiana
February 1, 1996
F-50
<PAGE>
Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc.
Statements of Assets to be Sold
(In Thousands)
September 30
--------------------
1994 1995
Vessels and improvements . . . . . $ 8,864 $ 8,972
Less accumulated depreciation . . 8,030 8,240
--------- ---------
$ 834 $ 732
========= =========
See accompanying notes.
F-51
<PAGE>
Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc.
Statements of Vessel Operations
(In Thousands)
Year ended
September 30
1994 1995
Charter hire revenue . . . . . . . $ 3,095 $ 3,252
Operating expenses:
Crew payroll and benefits . . . 1,137 1,113
Repairs, maintenance, fuel
and supplies . . . . . . . . 584 565
Insurance . . . . . . . . . . . 384 424
Depreciation . . . . . . . . . 222 210
Other . . . . . . . . . . . . . 37 60
Total operating expenses . . . . . 2,364 2,372
--------- ---------
Gross profit . . . . . . . . . . . 731 880
--------- ---------
Overhead expenses:
Salaries and benefits . . . . . 308 290
Office expenses . . . . . . . . 46 53
Professional fees . . . . . . . 26 30
Other . . . . . . . . . . . . . 59 56
--------- ---------
Total overhead expenses . . . . . 439 429
--------- ---------
Income from vessel operations . . $ 292 $ 451
========= =========
See accompanying notes.
F-52
<PAGE>
Gulf Boat Marine Services, Inc. and E&D Boat Rentals, Inc.
Notes to Financial Statements
September 30, 1994 and 1995
1. Basis of Presentation
Under the terms of an Asset Purchase Agreement (the Agreement) dated
January 15, 1996, Gulf Boat Marine Services, Inc. and E&D Boat Rentals,
Inc. (the Companies) have agreed to sell eight crew boats to Hvide Marine
Incorporated (Hvide) for $3,350,000. On January 31, 1996, Hvide assigned
its rights under the terms of the Agreement to Lawrence Bedrosian (d/b/a
Steel Style Marine C.C.F. Fund) and the sale was completed.
The accompanying statements of assets to be sold presents the historical
cost and accumulated depreciation of these eight crew boats which were
owned and operated by the Companies.
The accompanying statements of vessel operations include the revenue,
operating expenses and overhead expenses directly related to the operations
of these eight crew boats. Items excluded are the revenue, operating
expenses and overhead expenses associated with the operations of six other
crew boats not being sold to Hvide, along with the Companies' interest
income and expense, and income taxes.
The accompanying statements are not intended to be complete financial
statements of the Companies.
2. Summary of Significant Accounting and Reporting Policies
Operations
The principal operations of the Companies consist of short-term vessel time
charters of its crew boats. The crew boats are used primarily in the Gulf
of Mexico by operators drilling oil and gas wells. During the years ended
September 30, 1994 and 1995, five major customers accounted for 91% and
88%, respectively, of its charter hire revenue.
Revenue
Revenue from time charters is earned and recognized on a daily basis.
Vessels and Improvements
Vessels and improvements are stated at cost less accumulated depreciation.
Depreciation is computed on the straight-line method over 5 years for
improvements and 12 to 24 years for vessels, the estimated useful life of
the assets. Major renewals and betterments are capitalized, while
replacements, maintenance, and repairs which do not improve or extend the
life of the assets are expensed.
3. Related Parties
The Companies are owned by four individuals. Total salaries for these
individuals for the years ended September 30, 1994 and 1995 were $311,000
and $298,000, respectively. Approximately $178,000 and $170,000,
respectively, of these salaries are included in the accompanying 1994 and
1995 statements of vessel operations.
F-53
<PAGE>
GLOSSARY
The following is a set of definitions for shipping terms that are used
throughout this Prospectus:
American Bureau of Shipping (or "ABS"): a vessel classification society.
Bareboat Charter: the rental or lease of an empty ship, without crew, stores or
provisions; the charterer (lessee) has the responsibility of operating the
vessel as though it were his own.
Certificate of Financial Responsibility (Water Pollution) or "COFR": means a
certificate issued by the U.S. Coast Guard that evidences a vessel owner or
operator's compliance with the statutory requirement to provide evidence of the
financial ability to meet liability for discharges of oil and hazardous
substances under the federal Water Pollution Control Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, and OPA 90.
Classification Societies: classification societies hold records of the class
maintenance of each ship registered or classed with them; these records are
deposited for the personal and confidential information and guidance of the
owner of the vessel.
Crew boat or Vessel: an offshore supply vessel generally employed to transport
crew and supplies between ports and offshore drilling or production facilities.
Day Rate: the price paid under a bareboat charter for one day's operation.
Double Bottom: compartments at the bottom of a vessel between the skin of the
vessel and its inner compartments containing cargo tanks and machinery spaces;
double bottom spaces can be used as void spaces or as ballast, water, or fuel
tanks.
Double Hull: hull construction technique by which a ship has an inner and outer
hull separated by void space, usually several feet in width.
Drydocking: the process by which a vessel is taken out of the water to
accomplish underwater repairs.
DWT: deadweight ton; a measurement of the carrying capacity of a vessel,
generally equal to the difference between the amount of water displaced by the
unloaded vessel and that displaced by the fully loaded vessel.
Escort Tug: a tugboat employed as an escort for a larger vessel usually in
dangerous or constricted waters.
Gross Ton: enclosed space of a ship measured in cubic feet divided by 100; thus
100 cubic feet of such capacity is equivalent to one gross ton.
A-1
<PAGE>
Integrated tug/barge or "ITB": a large barge integrated from the stern onto the
bow of a tug constructed to push the barge.
ISO 9002: one of three generic standards for quality management and quality
assurance intended to instill confidence in customers that a business will
provide satisfactory service on a consistent basis.
Jones Act: the portions of the federal Merchant Marine Act, 1920 restricting
U.S. domestic trade to U.S. owned and constructed U.S.-flag vessels.
Offshore Supply Boat or Vessel: a boat or vessel engaged in providing supply
services to the offshore energy industry.
OPA 90: the federal Oil Pollution Act of 1990.
Time Charter: the hire of a fully operational ship for a specified period of
time; the shipowner provides the ship with crew, stores and provisions, ready
in all aspects to load cargo and proceed on a voyage as instructed by the
charterer. The charterer pays for fuel and all voyage-related expenses
including canal tolls and port charges.
Tractor Tug: a tugboat able to apply force in all directions which can
generally perform certain maneuvers more quickly and efficiently than
conventional tugs.
Utility Boat or Vessel: an offshore supply vessel generally employed to
transport crew and supplies between ports and offshore drilling or production
facilities.
Voyage Charter: contract of carriage in which the charterer pays for the use of
a ship's cargo capacity for one, or sometimes more than one, voyage; under this
type of charter, the shipowner pays all the operating costs of the ship
(including fuel, canal and port charges, pilotage, towage and ship's agency)
while payment for port and cargo handling charges are subject to agreement
between the parties; freight is generally paid per unit of cargo, such as a ton,
based on an agreed quantity, or as a lump sum irrespective of the quantity
loaded.
A-2
<PAGE>
Description of Picture: The Seabulk California
at an offshore location.
Caption: One of the Company's 180-foot supply boats
offloading drilling fluids, fuel, and other supplies
at an offshore Gulf of Mexico drilling location.
<PAGE>
No person has been authorized to
give any information or to make any
representations, other than those
contained in this Prospectus, in
connection with the offering made
hereby, and, if given or made, such in-
formation or representations must not be 7,000,000 Shares
relied upon as having been authorized by
the Company, the Underwriters, or any
other person. Neither the delivery of [logo]
this Prospectus nor any sale made
hereunder shall under any circumstances
create any implication that there has HVIDE MARINE
been no change in the affairs of the INCORPORATED
Company since the date hereof. This
Prospectus does not constitute an offer
or a solicitation of an offer to buy any Class A Common Stock
securities by anyone in any jurisdiction
in which such offer or solicitation is
not authorized or in which the person
making such offer or solicitation is not
qualified to do so or to any person to
whom it is unlawful to make such offer
or solicitation.
-------------------------
TABLE OF CONTENTS PROSPECTUS
Page
---- -------------------------
Prospectus Summary . . . . . . . .
Risk Factors . . . . . . . . . . .
The Company . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . .
Dividend Policy . . . . . . . . . .
Dilution . . . . . . . . . . . . .
Capitalization . . . . . . . . . .
Selected Historical and Pro Forma
Financial Data . . . . . . . . .
Management's Discussion and Donaldson, Lufkin & Jenrette
Analysis of Results of Securities Corporation
Operations and
Financial Condition . . . . . .
Business . . . . . . . . . . . . . Howard, Weil, Labouisse, Friedrichs
Management . . . . . . . . . . . . Incorporated
Certain Transactions . . . . . . .
Security Ownership of Principal
Stockholders and Management . .
Description of Certain Indebtedness
Description of Capital Stock . . .
Shares Eligible for Future Sale . .
Underwriting . . . . . . . . . . .
Legal Matters . . . . . . . . . . .
Experts . . . . . . . . . . . . . .
Additional Information . . . . . .
Index to Financial Statements F-1
Glossary . . . . . . . . . . . . . A-1
-------------------------
Until , 1996 (25 days
after the commencement of the Offering)
all dealers effecting transactions in
the Common Stock, whether or not
participating in this distribution, may
be required to deliver a Prospectus.
This delivery requirement is in addition
to the obligation of dealers to deliver
a Prospectus when acting as Underwriters
and with respect to their unsold , 1996
allotments or subscriptions.
================================================================================
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses payable in connection with the
registration of the Common Stock that is the subject of this Registration
Statement, all of which shall be borne by the Company. All the amounts shown
are estimates except for the registration fee, and the NASD listing and filing
fees.
To Be Paid By
Registrant
------------
Securities and Exchange Commission registration fee $38,862.07
NASD filing fee . . . . . . . . . . . . . . . . . . . . 7,745.00
NASDAQ/NMS listing fees . . . . . . . . . . . . . . . . *
Printing and engraving expenses . . . . . . . . . . . . *
Legal fees and expenses . . . . . . . . . . . . . . . . *
Accounting fees and expenses . . . . . . . . . . . . . *
Blue sky fees and expenses . . . . . . . . . . . . . . *
Transfer Agent and Registrar fees . . . . . . . . . . . *
Miscellaneous expenses and expenses (including counsel fees) *
----------
Total . . . . . . . . . . . . . . . . . . . . . . . *
- --------------------------
* To be supplied.
Item 14. Indemnification of Directors and Officers.
The Company's Articles of Incorporation provides that the Company shall
indemnify each director and officer of the Company to the fullest extent
permitted from time to time by the laws of the State of Florida or any other
applicable laws as presently or hereafter in effect. Section 607.0850 of the
Florida Business Corporation Act currently provides as follows:
(1) A corporation shall have power to indemnify any person who
was or is a party to any proceeding (other than an action by, or in
the right of, the corporation), by reason of the fact that he is or
was a director, officer, employee, or agent of the corporation or is
or was serving at the request of the corporation as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against liability incurred in
connection with such proceeding, including any appeal thereof, if he
acted in good faith and in a manner he reasonably believed to be in,
or not opposed to, the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction or upon a
plea of nolo contendere or its equivalent shall not, of itself, create
a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the
best interests of the corporation or, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
II - 1
<PAGE>
(2) A corporation shall have power to indemnify any person, who
was or is a party to any proceeding by or in the right of the
corporation to procure a judgment in its favor by reason of the fact
that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as
a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise, against
expenses and amounts paid in settlement not exceeding, in the judgment
of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in
connection with the defense or settlement of such proceeding,
including any appeal thereof. Such indemnification shall be
authorized if such person acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of
the corporation, except that no indemnification shall be made under
this subsection in respect of any claim, issue, or matter as to which
such person shall have been adjudged to be liable unless, and only to
the extent that, the court in which such proceeding was brought, or
any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of
all circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem
proper.
(3) To the extent that a director, officer, employee, or agent
of a corporation has been successful on the merits or otherwise in
defense of any proceeding referred to in subsection (1) or subsection
(2), or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses actually and reasonably incurred by him
in connection therewith.
(4) Any indemnification under subsection (1) or subsection (2),
unless pursuant to a determination by a court, shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee,
or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsection (1) or
subsection (2). Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable,
by majority vote of a committee duly designated by the board of
directors (in which directors who are parties may participate)
consisting solely of two or more directors not at the time parties to
the proceeding;
(c) By independent legal counsel:
1. Selected by the board of directors prescribed in paragraph
(a) or the committee prescribed in paragraph (b); or
2. If a quorum of the directors cannot be obtained for paragraph
(a) and the committee cannot be designated under paragraph (b),
selected by majority vote of the full board of directors (in which
directors who are parties may participate); or
II - 2
<PAGE>
(d) By the stockholders by a majority vote of a quorum
consisting of stockholders who were not parties to such proceeding or,
if no such quorum is obtainable, by a majority vote of stockholders
who were not parties to such proceeding.
(5) Evaluation of the reasonableness of expenses and
authorization of indemnification shall be made in the same manner as
the determination that indemnification is permissible. However, if
the determination of permissibility is made by independent legal
counsel, persons specified by paragraph (4)(c) shall evaluate the
reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a
civil or criminal proceeding may be paid by the corporation in advance
of the final disposition of such proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if he is ultimately found not to be entitled to indemnification
by the corporation pursuant to this section. Expenses incurred by
other employees and agents may be paid in advance upon such terms or
conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided
pursuant to this section are not exclusive, and a corporation may make
any other or further indemnification or advancement of expenses of any
of its directors, officers, employees, or agents, under any bylaw,
agreement, vote of stockholders or disinterested directors, or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office. However,
indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or
other final adjudication establishes that his actions, or omissions to
act, were material to the cause of action so adjudicated and
constitute:
(a) A violation of the criminal law, unless the director,
officer, employee, or agent had reasonable cause to believe his
conduct was lawful or had no reasonable cause to believe his conduct
was unlawful;
(b) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of s. 607.0834 are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by
or in the right of a stockholder.
(8) Indemnification and advancement of expenses as provided in
this section shall continue as, unless otherwise provided when
authorized or ratified, to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the
heirs, executors, and administrators of such a person, unless
otherwise provided when authorized or ratified.
II - 3
<PAGE>
(9) Unless the corporation's articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board
or of the stockholders in the specific case, a director, officer,
employee, or agent of the corporation who is or was a party to a
proceeding may apply for indemnification or advancement of expenses,
or both, to the court conducting the proceeding, to the circuit court,
or to another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice that it considers
necessary, may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification
or advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent is entitled to
mandatory indemnification under subsection (3), in which case the
court shall also order the corporation to pay the director reasonable
expenses incurred in obtaining court-ordered indemnification or
advancement of expenses;
(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the
exercise by the corporation of its power pursuant to subsection (7);
or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or
both, in view of all the relevant circumstances, regardless of whether
such person met the standard of conduct set forth in subsection (1),
subsection (2), or subsection (7).
(10) For purposes of this section, the term "corporation"
includes, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director,
officer, employee, or agent of a constituent corporation, or is or was
serving at the request of a constituent corporation as a director,
officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, is in the same position under
this section with respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation if its
separate existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit
plans;
(b) The term "expenses" includes counsel fees, including those
for appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to any employee benefit plan), and expenses actually and
reasonably incurred with respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit, or other type of proceeding, whether civil,
criminal, administrative, or investigative, and whether formal or
informal;
II - 4
<PAGE>
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation"
includes any service as a director, officer, employee, or agent of the
corporation that imposes duties on such persons, including duties
relating to an employee benefit plan and its participants or
beneficiaries; and
(g) The term "not opposed to the best interest of the
corporation" describes the actions of a person who acts in good faith
and in a manner he reasonably believes to be in the best interests of
the participants and beneficiaries of an employee benefit plan.
(12) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was director, officer,
employee, or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other
enterprise against any liability asserted against him and incurred by
him in any such capacity or arising out of his status as such, whether
or not the corporation would have the power to indemnify him against
such liability under the provisions of this section.
The Underwriting Agreement (Exhibit 1) provides for indemnification by the
Underwriters of the Registrant, its directors and executive officers and by the
Registrant of the Underwriters for certain liabilities, including liabilities
arising under the Securities Act of 1933, as amended (the "Act") and affords
certain rights of contribution with respect thereto.
The Registrant has purchased an insurance policy that provides for
indemnification of the Registrant's executive officers and directors for
liability resulting from their negligence, error, omission or breach of duty
while acting in their capacities as executive officers and directors on any
matter claimed against them by reason of their being executive officers and
directors.
Item 15. Recent Sales of Unregistered Securities.
In September 1994, the Company exchanged 1,105,962 shares of Class B
Common Stock and 663,415 shares of Class C Common Stock for all of the
outstanding common stock of its predecessor. Also in September 1994, in
connection with the issuance of the Senior Notes and the Junior Notes,
the Company issued 452,518 shares of Class B Common Stock and 211,236
shares of Class C Common Stock to members of the Investors Group. Such
issuances were made in reliance upon section 4(2) of the Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) The following is a list of exhibits furnished:
Exhibit
Number Exhibit
------ -------
1# Form of Underwriting Agreement.
II - 5
<PAGE>
2.1+ Stock Purchase Agreement dated as of October 12, 1995 by and
between Hvide Marine Incorporated and OMI Corp.
2.1(a)+ Amendment to Stock Purchase Agreement dated as of January 31, 1996,
by and among Hvide Marine Incorporated and OMI Corp.
2.2+ Asset Purchase Agreement dated as of March 29, 1996, by and among
Hvide Marine Incorporated, Seal Fleet, Inc., Sealcraft Operators,
Inc., Seal GP, Inc., South Corporation, and Thomas M. Ferguson.
2.3+ Asset Purchase Agreement dated as of March 29, 1996, by and among
Hvide Marine Incorporated, Ross Seal Partners, Ltd., Bengal Seal
Partners, Ltd., Indian Seal Partners, Ltd., Baffin Seal Partners,
Ltd., Baltic Seal Partners, Ltd., and Irwin M. Herz, Jr., as
trustee under certain trusts.
3.1# Articles of Incorporation, as amended.
3.2# Amended and Restated Bylaws of the Company.
4.1+ Form of Class A Common Stock Certificate (Domestic).
4.2+ Form of Class A Common Stock Certificate (Foreign).
5# Opinion of Counsel as to the legality of the securities
being registered.
10.1+ Non-Compete Agreement, between the Company and Hans J.
Hvide, dated September 28, 1994.
10.2+ Consulting Agreement between Sun State Marine Services, Inc. and
Frank V. Oliver, Jr., dated September 30, 1994.
10.3+ Form of 1995 Annual Incentive Plan.
10.4+ Form of Directors Stock Option Plan.
10.5+ Security Agreement, dated December 14, 1973, relating to United
States Government Ship Financing Bonds, between The Provident Bank
and The United States of America, with respect to Seabulk Chal-
lenger/S.T.L. 3901.
10.6*+ Bareboat Charter, dated as of December 14, 1973, by and between The
Provident Bank and Seabulk Tankers, Ltd., with respect to Seabulk
Challenger/S.T.L. 3901.
10.7*+ Time Charter Party, dated as of December 20, 1989, between Seabulk
Tankers, Ltd., and Shell Oil Company with respect to Seabulk
Challenger/S.T.L. 3901, as amended.
10.8+ Security Agreement, dated August 20, 1975, by and among Port
Everglades Towing, Inc., Central National Bank of Cleveland and The
United States of America, with respect to the Seabulk
Magnachem/S.C.C. 3902, as amended.
II - 6
<PAGE>
10.9*+ Bareboat Charter, dated February 24, 1977, by and between Central
National Bank of Cleveland and Seabulk Chemical Carriers, Inc.,
with respect to Seabulk Magnachem/S.C.C. 3902, as amended.
10.10+ Sub-Bareboat Charter, dated January 16, 1988, between Seabulk
Chemical Carriers, Inc., and Hvide Shipping, Incorporated, with
respect to Seabulk Magnachem/S.C.C. 3902, as amended.
10.11*+ Participation Agreement, dated as of December 15, 1989, by and
among OMI Corp., OMI Clover Transport, Inc., OMI Hudson Transport,
Inc., Hvide Shipping, Incorporated, Seabulk Transmarine
Partnership, Ltd., Seabulk Ocean Systems Corporation, Ocean
Specialty Tankers Corporation, Craig H. Stevenson, Jr., and L.S.
Willrich, with respect to the Seabulk Magnachem/S.C.C. 3902,
Seabulk America and certain other vessels owned by OMI Corp., as
amended.
10.12*+ Tanker Time Charter Party, dated December 15, 1989, between Seabulk
Ocean Systems Corporation and Ocean Specialty Tankers Corporation,
with respect with to Seabulk Magnachem/S.C.C. 3902, as amended.
10.13*+ Tanker Time Charter Party, dated December 15, 1989, between Seabulk
Transmarine Partnership, Ltd., and Ocean Specialty Tankers
Corporation, with respect to Seabulk America.
10.14+ Franchise Agreement, dated as of January 8, 1975, by and between
Canaveral Port Authority and Port Everglades Towing, Inc.
10.15+ Non-Exclusive Franchise Agreement, dated as of March 7, 1991, by
and between Port Everglades Authority and Hvide Shipping,
Incorporated.
10.16*+ Contract for Fuel Transportation, dated as of February 18, 1993, by
and between Florida Power & Light Company and Sun State Marine,
Incorporated.
10.17+ Sale and Purchase Agreement between the Company and certain
officers, directors and employees relating to the purchase of
partnership interests, dated September 30, 1994.
10.18+ Post-Retirement Benefits Agreement between the Company and Hans J.
Hvide, dated September 28, 1994.
10.19+ Junior Subordinated Note and Common Stock Purchase Agreement dated
September 30, 1994.
10.20+ Senior Subordinated Note and Common Stock Purchase Agreement dated
September 30, 1994.
10.21+ Letter of Credit Agreement, dated as of September 29, 1994, between
Hvide Shipping, Inc. and Bank of Boston.
II - 7
<PAGE>
10.22+ Credit Agreement, dated as of September 28, 1994, among Hvide
Marine Incorporated, Citibank, N.A., The First National Bank of
Boston, and Citibank, N.A.
10.22(a)+ Amendment No. 1 dated as of May 15, 1995, to the Credit Agreement
dated as of September 28, 1994, by and among Hvide Marine
Incorporated, Citibank, N.A., The First National Bank of Boston,
and others.
10.22(b)+ Amendment No. 2 dated as of March 26, 1996, to the Credit Agreement
dated as of September 28, 1994, by and among Hvide Marine
Incorporated, Citibank, N.A., The First National Bank of Boston,
and others.
10.23*+ Charter of OMI Hudson, as amended January 1, 1995.
10.24*+ Charter of OMI Star, as amended January 1, 1995.
10.25*+ Charter of OMI Dynachem, as amended January 1, 1995.
10.26+ Amendment No. 2 to Charter of Seabulk Magnachem.
21 List of Subsidiaries.
23.1 Consents of Ernst & Young.
23.2# Consent of Counsel (included as part of Exhibit 5).
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Pannell Kerr Forster of Texas, P.C.
24.1 Powers of Attorney.
24.2 Certificate of Secretary.
27 Financial Data Schedule
- --------------------------------------
+ Previously filed.
* Confidential treatment requested.
# To be filed by amendment.
II - 8
<PAGE>
Schedules not listed above have been omitted because they are not
applicable or because required information is included in the financial
statements or notes thereto.
Item 17. Undertakings.
(1) The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(3) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of the registration statement as of the time it was declared
effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II - 9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Fort Lauderdale,
Florida on the 13th day of May, 1996.
HVIDE MARINE INCORPORATED
By: *
----------------------------------------------
J. Erik Hvide
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
*
- ------------------------- Chairman of the Board, May 13, 1996
J. Erik Hvide President, Chief Executive
Officer and Director (principal
executive officer)
*
- ------------------------- Executive Vice President --Chief May 13, 1996
John H. Blankley Financial Officer, Treasurer
and Director
*
- ------------------------- Executive Vice President and May 13, 1996
Donald L. Caldera Director
*
- ------------------------- Controller (principal accounting May 13, 1996
John J. Krumenacker officer)
*
- ------------------------- Executive Vice President and May 13, 1996
Eugene F. Sweeney Director
II - 10
<PAGE>
*
- ------------------------- Director May 13, 1996
Robert B. Calhoun, Jr.
*
- ------------------------- Director May 13, 1996
Gerald Farmer
*
- ------------------------- Director May 13, 1996
Jean Fitzgerald
- ------------------------- Director May , 1996
John Lee
*
- ------------------------- Director May 13, 1996
Walter C. Mink
*
- ------------------------- Director May 13, 1996
Robert Rice
- ------------------------- Director May , 1996
Raymond B. Vickers
*By: /s/ Michael Joseph
------------------
Michael Joseph
Attorney-in-Fact
II - 11
<PAGE>
INDEX TO EXHBITS
Exhibit
Number Exhibit
------ -------
1# Form of Underwriting Agreement.
2.1+ Stock Purchase Agreement dated as of October 12, 1995 by and
between Hvide Marine Incorporated and OMI Corp.
2.1(a)+ Amendment to Stock Purchase Agreement dated as of January 31, 1996,
by and among Hvide Marine Incorporated and OMI Corp.
2.2+ Asset Purchase Agreement dated as of March 29, 1996, by and among
Hvide Marine Incorporated, Seal Fleet, Inc., Sealcraft Operators,
Inc., Seal GP, Inc., South Corporation, and Thomas M. Ferguson.
2.3+ Asset Purchase Agreement dated as of March 29, 1996, by and among
Hvide Marine Incorporated, Ross Seal Partners, Ltd., Bengal Seal
Partners, Ltd., Indian Seal Partners, Ltd., Baffin Seal Partners,
Ltd., Baltic Seal Partners, Ltd., and Irwin M. Herz, Jr., as
trustee under certain trusts.
3.1# Articles of Incorporation, as amended.
3.2# Amended and Restated Bylaws of the Company.
4.1+ Form of Class A Common Stock Certificate (Domestic).
4.2+ Form of Class A Common Stock Certificate (Foreign).
5# Opinion of Counsel as to the legality of the securities
being registered.
10.1+ Non-Compete Agreement, between the Company and Hans J.
Hvide, dated September 28, 1994.
10.2+ Consulting Agreement between Sun State Marine Services, Inc. and
Frank V. Oliver, Jr., dated September 30, 1994.
10.3+ Form of 1995 Annual Incentive Plan.
10.4+ Form of Directors Stock Option Plan.
10.5+ Security Agreement, dated December 14, 1973, relating to United
States Government Ship Financing Bonds, between The Provident Bank
and The United States of America, with respect to Seabulk Chal-
lenger/S.T.L. 3901.
10.6*+ Bareboat Charter, dated as of December 14, 1973, by and between The
Provident Bank and Seabulk Tankers, Ltd., with respect to Seabulk
Challenger/S.T.L. 3901.
10.7*+ Time Charter Party, dated as of December 20, 1989, between Seabulk
Tankers, Ltd., and Shell Oil Company with respect to Seabulk
Challenger/S.T.L. 3901, as amended.
10.8+ Security Agreement, dated August 20, 1975, by and among Port
Everglades Towing, Inc., Central National Bank of Cleveland and The
United States of America, with respect to the Seabulk
Magnachem/S.C.C. 3902, as amended.
10.9*+ Bareboat Charter, dated February 24, 1977, by and between Central
National Bank of Cleveland and Seabulk Chemical Carriers, Inc.,
with respect to Seabulk Magnachem/S.C.C. 3902, as amended.
10.10+ Sub-Bareboat Charter, dated January 16, 1988, between Seabulk
Chemical Carriers, Inc., and Hvide Shipping, Incorporated, with
respect to Seabulk Magnachem/S.C.C. 3902, as amended.
10.11*+ Participation Agreement, dated as of December 15, 1989, by and
among OMI Corp., OMI Clover Transport, Inc., OMI Hudson Transport,
Inc., Hvide Shipping, Incorporated, Seabulk Transmarine
Partnership, Ltd., Seabulk Ocean Systems Corporation, Ocean
Specialty Tankers Corporation, Craig H. Stevenson, Jr., and L.S.
Willrich, with respect to the Seabulk Magnachem/S.C.C. 3902,
Seabulk America and certain other vessels owned by OMI Corp., as
amended.
10.12*+ Tanker Time Charter Party, dated December 15, 1989, between Seabulk
Ocean Systems Corporation and Ocean Specialty Tankers Corporation,
with respect with to Seabulk Magnachem/S.C.C. 3902, as amended.
10.13*+ Tanker Time Charter Party, dated December 15, 1989, between Seabulk
Transmarine Partnership, Ltd., and Ocean Specialty Tankers
Corporation, with respect to Seabulk America.
10.14+ Franchise Agreement, dated as of January 8, 1975, by and between
Canaveral Port Authority and Port Everglades Towing, Inc.
10.15+ Non-Exclusive Franchise Agreement, dated as of March 7, 1991, by
and between Port Everglades Authority and Hvide Shipping,
Incorporated.
10.16*+ Contract for Fuel Transportation, dated as of February 18, 1993, by
and between Florida Power & Light Company and Sun State Marine,
Incorporated.
10.17+ Sale and Purchase Agreement between the Company and certain
officers, directors and employees relating to the purchase of
partnership interests, dated September 30, 1994.
10.18+ Post-Retirement Benefits Agreement between the Company and Hans J.
Hvide, dated September 28, 1994.
10.19+ Junior Subordinated Note and Common Stock Purchase Agreement dated
September 30, 1994.
10.20+ Senior Subordinated Note and Common Stock Purchase Agreement dated
September 30, 1994.
10.21+ Letter of Credit Agreement, dated as of September 29, 1994, between
Hvide Shipping, Inc. and Bank of Boston.
10.22+ Credit Agreement, dated as of September 28, 1994, among Hvide
Marine Incorporated, Citibank, N.A., The First National Bank of
Boston, and Citibank, N.A.
10.22(a)+ Amendment No. 1 dated as of May 15, 1995, to the Credit Agreement
dated as of September 28, 1994, by and among Hvide Marine
Incorporated, Citibank, N.A., The First National Bank of Boston,
and others.
10.22(b)+ Amendment No. 2 dated as of March 26, 1996, to the Credit Agreement
dated as of September 28, 1994, by and among Hvide Marine
Incorporated, Citibank, N.A., The First National Bank of Boston,
and others.
10.23*+ Charter of OMI Hudson, as amended January 1, 1995.
10.24*+ Charter of OMI Star, as amended January 1, 1995.
10.25*+ Charter of OMI Dynachem, as amended January 1, 1995.
10.26+ Amendment No. 2 to Charter of Seabulk Magnachem.
21 List of Subsidiaries.
23.1 Consents of Ernst & Young.
23.2# Consent of Counsel (included as part of Exhibit 5).
23.3 Consent of Deloitte & Touche LLP.
23.4 Consent of Pannell Kerr Forster of Texas, P.C.
24.1 Powers of Attorney.
24.2 Certificate of Secretary.
27 Financial Data Schedule
- --------------------------------------
+ Previously filed.
* Confidential treatment requested.
# To be filed by amendment.
EXHIBIT 21
LIST OF SUBSIDIARIES AND AFFILIATES
OF
HVIDE MARINE INCORPORATED
Name Jurisdiction of Organization
- ---- ----------------------------
Hvide Chartering, Ltd.* Florida
Hvide Corp. Florida
Hvide Marine International, Inc. Florida
Hvide Marine Transport, Incorporated Florida
Ocean Specialty Tankers Corporation Delaware
Seabulk America Partnership, Ltd.* Florida
Seabulk Chemical Carriers, Inc. Florida
Seabulk Ocean Systems Corporation Florida
Seabulk Ocean Systems Holdings Corp. Florida
Seabulk Offshore, Ltd.* Florida
Seabulk Tankers, Ltd.* Florida
Seabulk Transmarine Partnership, Ltd.* Florida
Seabulk Transmarine II, Inc. Florida
Sun State Marine Services, Inc. Florida
_________________
* Organized as a limited partnership.
EXHIBIT 23.1
Consent of Independent Certified Public Accountants
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 28, 1996 (except for the third paragraph of Note
13, as to which the date is May 13, 1996), in Amendment No. 2 to the
Registration Statement (Form S-1 No. 33-78166) and related Prospectus of Hvide
Marine Incorporated for the registration of 7,000,000 shares of its common
stock.
Ernst & Young L.L.P.
Miami, Florida
May 13, 1996
<PAGE>
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 1, 1996, with respect to the statements of
assets to be sold and the related statements of vessel operations of Gulf Boat
Marine Services, Inc. and E & D Boat Rentals, Inc. included in Amendment No. 2
to the Registration Statement (Form S-1 No. 33-78166) and related Prospectus of
Hvide Marine Incorporated for the registration of 5,700,000 shares of its common
stock.
Ernst & Young L.L.P.
New Orleans, Louisiana
May 13, 1996
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Hvide Marine
Incorporated on Form S-1 of our report dated January 26, 1996 (relating to the
financial statements of the OMI Chemical Carrier Group presented separately
herein) appearing in the Prospectus, which is part of this Registration
Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
May 10, 1996
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
33-78166) of our reports dated April 12, 1996, on our audits of (i) the
statements of assets to be sold and related statements of vessel operations of
Seal Fleet, Inc. and Subsidiaries and (ii) the combined statements of vessel
operations of Indian Seal Partners, Ltd., and Ross Seal Partners, Ltd. We also
consent to the reference to our firm under the caption "Experts."
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
May 10, 1996
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Hvide Marine Incorporated, a
corporation organized under the laws of the State of Florida (the
"Corporation"), and the undersigned officers and directors of the Corporation,
individually and in their respective capacities indicated below, hereby make,
constitute and appoint Michael Joseph and John F. Kearney its and their true and
lawful attorneys, their separate or joint signatures sufficient to bind, with
power of substitution, to execute, deliver and file in its or their behalf, and
in each person's respective capacity or capacities as shown below, a
registration statement on Form S-1 under the Securities Act of 1933, any and all
documents in support of or supplemental to said registration statement and any
and all amendments thereto with respect to the initial public offering of shares
of Class A Common Stock by the Corporation; and the Corporation and each said
person hereby grant to said attorneys full power and authority to do and perform
each and every act and thing whatsoever as any one of said attorneys may deem
necessary or advisable to carry out the full intent of this Power of Attorney to
the same extent and with the same effect as the Corporation or the undersigned
officers and directors of the Corporation might or could do personally in its or
their capacity or capacities as aforesaid; and the Corporation and each of said
persons hereby ratify, confirm and approve all acts and things that any one of
said attorneys may do or cause to be done by virtue of this Power of Attorney
and its signature or their signatures as the same may be signed by any one of
said attorneys to said registration statement and any and all documents in
support of or supplemental to said registration statement and any and all
amendments thereto.
Dated as of May 13, 1996
Hvide Marine Incorporated
Attest: /s/ Gene Douglas By: /s/ J. Erik Hvide
_____________________________ _________________________________
Gene Douglas J. Erik Hvide
Secretary Chairman, President, and Chief
Executive Officer
/s/ J. Erik Hvide /s/ John H. Blankley
_____________________________________ _____________________________________
J. Erik Hvide John H. Blankley
Chairman of the Board of Directors, Executive Vice President -- Chief
President, Chief Executive Officer and Financial Officer, Treasurer and
Director Director
(Principal Executive Officer)
/s/ Donald L. Caldera /s/ John Krumenacker
_____________________________________ _____________________________________
Donald L. Caldera John Krumenacker
Executive Vice President and Director Controller
(Principal Accounting Officer)
/s/ Eugene F. Sweeney /s/ Robert B. Calhoun
_____________________________________ _____________________________________
Eugene F. Sweeney Robert B. Calhoun, Jr.
Executive Vice President and Director Director
<PAGE>
EXHIBIT 24.1 cont.
/s/ Gerald Farmer /s/ Jean Fitzgerald
_____________________________________ _____________________________________
Gerald Farmer Jean Fitzgerald
Director Director
/s/ Walter C. Mink
_____________________________________ _____________________________________
John Lee Walter C. Mink
Director Director
_____________________________________ _____________________________________
Robert Rice Raymond B. Vickers
Director Director
EXHIBIT 24.2
CERTIFICATE OF SECRETARY
The undersigned, Gene Douglas, Secretary of Hvide Marine Incorporated, a
Florida corporation (the "Corporation"), hereby certifies that on May 10, 1996,
the Board of Directors of the Corporation duly adopted the resolution set forth
below:
RESOLVED, that the Chief Executive Officer of the Corporation be, and
he hereby is, authorized to grant, on behalf of the Corporation, a
power of attorney to Michael Joseph and John F. Kearney, their
separate or joint signatures sufficient to bind, with power of
substitution, to execute on behalf of the Corporation, by signing the
name of the Chief Executive Officer as acting for the Corporation, a
registration statement on Form S-1 under the Securities Act of 1933,
any and all documents in support of or supplemental to such
registration statement and any and all amendments thereto with respect
to the public offering of shares of the Class A Common Stock of the
Corporation; that each of them are granted full power and authority to
do and perform each and every act and thing whatsoever as any one of
said attorneys may deem necessary or advisable to carry out the full
intent of this resolution to the same extent and with the same effect
as the Corporation might or could do personally in its capacity; and
that all acts and things that any one of said attorneys may do or
cause to be done by virtue of power of attorney granted by this
resolution and its signature as the same may be signed by any one of
said attorneys to such registration statement and any and all
documents in support of or supplemental to such registration statement
and any and all amendments thereto are hereby ratified, confirmed and
approved;
Such resolution has not been amended, rescinded or otherwise modified and is in
full force and effect on the date hereof.
IN WITNESS WHEREOF, I have executed this Certificate this 10th day of May,
1996.
/s/ Gene Douglas
_________________________
Gene Douglas
Secretary
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