<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HVIDE MARINE INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
FLORIDA 4424 65-0524593
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
2200 ELLER DRIVE, P.O. BOX 13038
FORT LAUDERDALE, FLORIDA 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:
<TABLE>
<S> <C>
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
</TABLE>
------------------------
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>
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED 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
$0.001 par value................ 6,900,000 shares $19.375 $133,687,500.00 $40,511.37
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 900,000 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.
------------------------
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> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 23, 1996
PROSPECTUS
, 1997
6,000,000 SHARES
HVIDE MARINE LOGO GRAPHIC
HVIDE MARINE INCORPORATED LOGO
CLASS A COMMON STOCK
Of the 6,000,000 shares of Class A Common Stock offered hereby (the
"Offering"), 3,822,728 are being sold by the Company and 2,177,272 are being
sold by the Selling Stockholders. See "Principal and Selling Stockholders" and
"Underwriting." The Company will not receive any of the proceeds from the sale
of shares by the Selling Stockholders.
The Class A Common Stock is traded on the Nasdaq National Market under the
symbol "HMAR." On December 18, 1996, the last reported sale price of the Class A
Common Stock was $20 5/8 per share. See "Price Range of The Class A Common
Stock" and "Dividend Policy."
The Company's issued and outstanding capital stock consists 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. The
shares of Class B Common Stock are freely convertible on a one for one basis
into shares of Class A Common Stock.
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."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
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.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.......................... $ $ $ $
Total(3)........................... $ $ $ $
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deduction of expenses payable by the Company estimated at
$ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
900,000 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,
and Proceeds to the Company 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 shares will be made in New York, New York, on or
about , 1997.
<TABLE>
<S> <C>
DONALDSON, LUFKIN & JENRETTE HOWARD, WEIL, LABOUISSE, FRIEDRICHS
SECURITIES CORPORATION INCORPORATED
</TABLE>
<PAGE> 3
[Pie Chart depicting revenue by segment for the nine months ended September 30,
1996]
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.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) AND THEIR AFFILIATES MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE CLASS A COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN
ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE
"UNDERWRITING."
2
<PAGE> 4
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 assumes (i)
the conversion of 1,650,470 shares of Class B Common Stock currently owned by
the Selling Stockholders into an equal number of shares of Class A Common Stock
in connection with the closing of the Offering and the issuance of 237,641
shares of Class A Common Stock to the Selling Stockholders in connection with
the termination of the CSI Agreement (as defined herein) at the time of the
closing of the Offering and the transfer to the Company of an equal number of
shares of Class B Common Stock by the Hvide Family (as defined herein) pursuant
to the Shareholders Agreement (as defined herein) and the sale of all shares of
Class A Common Stock held by the Selling Stockholders in the Offering, and (ii)
no exercise of the Underwriters' over-allotment option. The Pro Forma Condensed
Consolidated Financial Statements and other pro forma operating data included in
this Prospectus give effect to the IPO, the repayment of certain indebtedness
with proceeds of the IPO, and the acquisition of the OMI Chemical Carriers, the
Seal Fleet Vessels, and vessels from GBMS (as each such term is defined herein)
and one additional vessel but do not give effect to the Current Acquisitions (as
defined herein) or the Offering. 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" 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 represents
approximately 44% of the capacity of the 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 acquisitions, increasing
its marine support fleet from 20 vessels in 1993 to 74 vessels currently and its
marine transportation fleet from three vessels in 1993 to 29 vessels currently.
As a result, the Company's revenue increased 196% from $41.5 million in 1993 to
$123.0 million in 1995, on a pro forma basis. Over the same period, the
Company's EBITDA increased 181% from $11.3 million to $31.7 million and its
income from operations increased 186% from $6.6 million to $18.9 million, in
each case on a pro forma basis. For the nine months ended September 30, 1996,
the Company reported revenue, EBITDA, and operating income of $101.0 million,
$27.1 million, and $16.0 million, respectively, in each case on a pro forma
basis. For other measures of the Company's operating results as determined under
generally accepted accounting principles and its pro forma operating results,
see "Selected Historical and Pro Forma Consolidated Financial Data" and the
Company's consolidated financial statements.
The Company has recently acquired or entered into agreements to acquire an
aggregate of eight supply boats, five crew boats, one offshore anchor handling
tug, and two harbor tugs (the "Current Acquisitions"). The Current Acquisitions,
which will increase the Company's marine support fleet from 74 to 90 vessels,
will be funded in part with proceeds of the Offering. The $53.6 million
aggregate cost of the Current Acquisitions includes the estimated cost of
upgrading, refurbishing, and lengthening two of the supply boats to 225-foot,
4,300-hp dynamically positioned vessels for use in deepwater service. See "Use
of Proceeds" and "Business -- Current 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) utilize its demonstrated expertise
in acquiring vessels thereby further consolidating its niche markets, (ii)
emphasize U.S. domestic operations, (iii) develop and apply marine technology to
meet its customers' needs in an innovative and cost-effective
3
<PAGE> 5
manner, (iv) maintain and pursue long-term customer relationships that limit the
risk associated with the investments required for new vessels and mitigate the
effects of industry cyclicality, and (v) enhance its record of quality service
and safety.
MARINE SUPPORT SERVICES
Offshore Energy Support. The Company's fleet of 76 offshore energy support
vessels, giving effect to the Current Acquisitions, consists of 32 supply boats,
42 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
substantial consolidation and vessel attrition during the past decade. The
Company believes that industry fundamentals have improved, and expects continued
strong demand and further consolidation to result in increasing day rates and
utilization. The Current Acquisitions strengthen the Company's position as the
third largest operator of supply and crew boats in the Gulf of Mexico. This
strengthened position will, at the same time, make the Company's operations more
susceptible to fluctuations in oil and gas prices, which affect the level of
offshore exploration and development activity and thus the demand for the
services provided by the Company's offshore energy support vessels. In the past,
the Company has sought to mitigate the adverse effect of reduced demand through
cost reduction and relocation of support vessels to other markets. See "Risk
Factors -- Cyclical Industry Conditions" and "Business -- The Industry -- Marine
Support Services."
Offshore and Harbor Towing. The Company's 14 tugs, giving effect to the
Current Acquisitions, 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. In Port
Everglades and Port Canaveral, the Company is the sole franchisee providing
commercial tug services. The Company directed the design and construction of its
technologically advanced 5,100-hp tractor tug, the Broward, which is capable of
providing escort services to tankers and other large vessels and specialized
deepwater services to the offshore energy industry. In addition to these 14
tugs, the Company recently entered into one-year charters of two newly built
4,000-hp tugs with omni-directional propulsion systems, which are currently
being used by the Company to provide harbor services. The Company intends to
remove from service one tug currently engaged in harbor services in the second
quarter of 1997.
MARINE TRANSPORTATION SERVICES
Chemical Transportation. The total capacity of the Company's five chemical
carriers represents approximately 44% of the capacity of the 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 and chemical 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 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 for a total estimated cost of
up to $32.0 million (assuming exercise of the options before January 1, 1998).
The Company is supervising the construction of the vessels and will provide
operational management following delivery.
4
<PAGE> 6
OPA 90. OPA 90 requires, among other things, that existing single-hull
vessels be retired from domestic transportation of petroleum products between
1995 and 2015, depending upon vessel size and age, unless retrofitted with
double hulls. The Company's chemical carriers and its petroleum product carrier
will be required to cease transporting petroleum products at various dates from
2000 to 2015, and its fuel barges will cease transporting fuel in 2015. See
"Risk Factors -- Mandated Removal of Vessels from Jones Act Trade." The Company
currently has no specific plans concerning the retrofitting or replacement of
such vessels.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered:
By the Company................. 3,822,728 shares
By the Selling Stockholders.... 2,177,272 shares
------------------
Total.................. 6,000,000 shares
------------------
------------------
Common Stock to be Outstanding
After the Offering:
Class A Common Stock........ 13,358,630 shares(1)
Class B Common Stock........ 1,531,466 shares
------------------
Total.................. 14,890,096 shares
------------------
------------------
</TABLE>
Voting Rights................ The Company's outstanding capital stock consists
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 46.6% and 53.4% of the
voting power of the Common Stock, respectively.
See "Description of Capital Stock." J. Erik
Hvide, the Company's Chairman, together with
certain trusts of which he is the trustee (the
"Hvide Trusts"), will own shares representing
10.3% of the outstanding shares of Common Stock
(9.7% if the Underwriters' over-allotment option
is exercised in full) and 53.4% of the voting
power of all Common Stock (51.8% if the
Underwriters' over-allotment option is exercised
in full). See "Description of Capital
Stock -- Certain Provisions of Articles of
Incorporation and By-Laws" and "Risk
Factors -- Control by J. Erik Hvide."
Use of Proceeds to the
Company...................... To fund the balance of the cost of the Current
Acquisitions, to repay a portion of the Company's
indebtedness, and for general corporate purposes.
Nasdaq National Market
Symbol....................... HMAR
- ------------------------------------
(1) Excludes 806,000 shares of Class A Common Stock reserved for issuance upon
exercise of currently outstanding options and 500,000 shares reserved for
issuance under the Company's Employee Stock Purchase Plan. See
"Management -- Equity Ownership Plans."
5
<PAGE> 7
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
Carriers, the Seal Fleet Vessels, and GBMS, "Selected Historical and Pro Forma
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Pro Forma Condensed Consolidated
Financial Statements" included elsewhere in this Prospectus. The summary
unaudited pro forma statement of operations data for the year ended December 31,
1995 and the nine months ended September 30, 1996 give effect to the
acquisitions of the three OMI Chemical Carriers and the eight Seal Fleet Vessels
in August 1996, the acquisition of eight crew boats from GBMS in January 1996,
the acquisition of one vessel in February 1996, the August 1996 initial public
offering of the Company's Class A Common Stock (the "IPO"), and the repayment of
certain indebtedness, as if all such transactions had occurred on January 1,
1995 and January 1, 1996, respectively. 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 results of operations for any
future period or as of any future date. The summary unaudited pro forma
statements of operations data for the year ended December 31, 1995 and the nine
months ended September 30, 1996 do not give effect to the Current Acquisitions
or the Offering. The summary balance sheet data at September 30, 1996 have been
adjusted to give effect to the Offering and the use of the proceeds as
contemplated herein. The results for the nine months ended September 30, 1996
are not necessarily indicative of the results to be expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- -----------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995 1995 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE, VESSEL, AND OPERATING DATA)
STATEMENTS OF OPERATIONS DATA:
Revenue.......................................... $41,527 $ 49,792 $70,562 $122,985 $51,194 $72,130 $101,046
Income from operations........................... 6,584 5,838 11,072 18,925 7,854 12,877 16,010
Interest expense, net............................ 3,412 5,302 11,460 12,312 8,491 8,751 9,034
Income (loss) before provision for (benefit from)
income taxes, extraordinary item and cumulative
effect of a change in accounting principle..... 3,691 547 (362) 6,803 (581) 4,325 7,175
Income (loss) before extraordinary item and
cumulative effect of a change in accounting
principle...................................... 1,818 358 (360) 4,354 (581) 2,709 4,520
Loss on extinguishment of debt, net(1)........... -- -- -- -- -- 8,016 --
Cumulative effect of a change in accounting
principle...................................... 1,491 -- -- -- -- -- --
------- -------- ------- -------- ------- ------- --------
Net income (loss)................................ 3,309 358 (360) 4,354 (581) (5,307) 4,520
======= ======== ======= ======== ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before extraordinary item and
cumulative effect of a change in accounting
principle(2)................................... $ 0.26 $ 0.03 $ (0.14) $ 0.40 $ (0.23) $ 0.68 $ 0.41
Net income (loss)(2)............................. 0.50 0.03 (0.14) 0.40 (0.23) (1.32) 0.41
======= ======== ======= ======== ======= ======= ========
Weighted average number of common shares and
common share equivalents outstanding(3)........ 6,268 5,302 2,535 10,905 2,535 4,018 11,064
======= ======== ======= ======== ======= ======= ========
EARNINGS (LOSS) PER COMMON SHARE ASSUMING FULL
DILUTION:
Income before extraordinary item and cumulative
effect of a change in accounting
principle(2)................................... $ 0.26 $ 0.06 $ 0.12 $ 0.00 $ 0.64
Net income (loss)(2)............................. 0.50 0.06 0.12 0.00 (0.95)
======= ======== ======= ======= =======
Weighted average number of common shares and
common share equivalent outstanding(3)......... 6,268 5,616 3,779 3,779 5,049
======= ======== ======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(4)........................................ $11,319 $ 10,338 $17,380 $ 31,655 $12,545 $18,992 $ 27,135
======= ======== ======= ======== ======= ======= ========
NET CASH PROVIDED BY (USED IN):
Operating activities............................. $ 6,956 $ 2,858 $ 3,948 $ 71 $ 6,126
Investing activities............................. (2,247) (39,815) (8,066) (5,312) (61,738)
Financing activities............................. (6,158) 41,249 805 1,715 58,160
</TABLE>
6
<PAGE> 8
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
(IN THOUSANDS, EXCEPT PER SHARE,
VESSEL, AND OPERATING DATA)
<S> <C> <C> <C> <C> <C>
VESSEL DATA (AT END OF PERIOD):
Marine Support Services
Supply boats....................................................... 10 14 14 14 24
Crew boats(5)...................................................... -- 21 28 28 39
Tugs............................................................... 10 10 11 11 11
Marine Transportation Services
Chemical carriers.................................................. 2 2 2 2 5
Product carriers................................................... 1 1 1 1 1
Towboats and barges................................................ -- 18 23 23 23
------- -------- ------- ------- -------
Total.......................................................... 23 66 79 79 103
======= ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Supply boats:
Average vessel day rates(6)....................................... $ 2,696 $ 3,195 $ 3,023 $ 2,947 $ 4,276
Average vessel utilization(7)..................................... 98% 84% 81% 77% 95%
Crew boats:
Average vessel day rates(6)....................................... -- $ 1,421 $ 1,434 $ 1,426 $ 1,490
Average vessel utilization(7)..................................... -- 88% 85% 84% 93%
Tugs:
Total offshore and ship docking tug revenue (in thousands)........ $10,585 $11,140 $12,582 $ 9,204 $10,234
Total ship docking tug jobs....................................... 8,178 8,740 9,233 6,847 7,150
Chemical and product carriers:
Time charter equivalents(8)....................................... $24,765 $24,898 $26,034 $25,513 $25,567
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)..................................................................... $ (105) $ 7,223
Total assets.................................................................................. 254,616 309,726
Total debt.................................................................................... 134,317 117,206
Stockholders' and minority partners' equity................................................... 98,927 171,731
</TABLE>
- ------------------------------------
(1) Reflects the loss on the extinguishment of debt from a portion of the
proceeds of the IPO net of applicable income taxes of $1,405,000.
(2) 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."
(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. For the years ended 1994 and 1995 and the nine months
ended September 30, 1995 and 1996, shares outstanding assuming full dilution
reflects the assumed conversion of a portion of the Junior Notes (as defined
herein) into shares of Common Stock. The Junior Notes were issued in
September 1994 and converted into shares of Common Stock in September 1996.
Pro forma shares reflect the weighted average number of common shares giving
effect to the issuance of 7,159,000 shares of Class A Common Stock in the
IPO, 100,358 shares of Class A Common Stock in payment of services, 25,667
shares of Class A Common Stock in exchange for certain outstanding
indebtedness, and 1,244,002 shares of Class A and Class B Common Stock in
exchange for the principal amount of the Junior Notes remaining after the
application of the proceeds of the IPO, and exclude 806,000 shares of Class
A Common Stock reserved for issuance upon exercise of currently outstanding
options and 500,000 shares reserved for issuance under the Company's
Employee Stock Purchase Plan. See "Management -- Equity Ownership Plans."
(4) 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.
(5) For the years 1994 and 1995 and the nine months ended September 30, 1995 and
1996, the number of crew boats includes two utility boats.
(6) Average day rates are calculated based on vessels operating domestically by
dividing total vessel revenue by the total number of vessel days utilized.
(7) Utilization is based on vessels operating domestically and determined on the
basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
(8) 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> 9
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 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 could have a
material adverse effect on the Company. 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 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 Support." 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.
8
<PAGE> 10
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
regulations. 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
The Company will continue to have substantial indebtedness upon completion
of the Offering. After giving effect to the application of proceeds from the
Offering to repay certain indebtedness, the Company's total outstanding
indebtedness would have been $117.2 million as of September 30, 1996. 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." The Company's 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 the Company's Credit Facility (as
defined herein) (i) require the Company to maintain minimum levels of liquidity
and net worth and to meet specified financial ratios, (ii) limit the issuance of
debt by the Company and of debt or preferred stock by the Company's
subsidiaries, (iii) restrict the ability of its subsidiaries to pay dividends or
make distributions to the Company, (iv) restrict the Company's ability to pay
dividends, redeem capital stock or subordinated debt, 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,
and (v) limit certain corporate acts and transactions by the Company. Such
provisions could 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 -- Credit Facility."
MANDATED REMOVAL OF VESSELS FROM JONES ACT TRADE
OPA 90 establishes a phase-out schedule, depending upon vessel size and
age, for single-hull vessels carrying crude oil and petroleum products which, in
the case of the Company's petroleum products carrier (Seabulk Challenger) and
five chemical carriers (HMI Astrachem, Seabulk Magnachem, HMI Dynachem, HMI
Petrochem and Seabulk America), are the years 2003, 2000, 2007, 2011, 2011, and
2015 respectively; and in the case of its fuel barges is the year 2015. 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
9
<PAGE> 11
vessels or acquiring new or used vessels. See "Business -- Company
Operations -- Marine Transportation Services" and "-- Environmental and Other
Regulation."
RELIANCE ON SIGNIFICANT CUSTOMERS
Shell, Florida Power & Light Company ("FPL"), Amoco Corporation, Phillips
Petroleum Company, and Chevron Corporation each accounted for between 5% and 10%
of the Company's revenue for the year ended December 31, 1995 and the nine
months ended September 30, 1996, in each case on a pro forma basis. The loss of
any 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. 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. Any
such shortfalls could have a material adverse impact on the Company.
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 each of the Current Acquisitions will be completed or that the Current
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.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Financial Resources" and "Description of Certain
Indebtedness -- Credit Facility."
10
<PAGE> 12
LEGAL PROCEEDINGS
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 operates three offshore supply boats in Southeast Asia, and one
each in Egypt and Cameroon. The Current Acquisitions include one offshore supply
boat that operates in the Mexican Gulf. 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 and the occurrence
of any of which could have a material adverse effect on 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."
POSSIBLE VOLATILITY OF STOCK PRICE
There may be significant volatility in the market price for the Company's
Class A Common Stock. Quarterly operating results of the Company, changes in
general conditions in the economy, the financial markets, or the marine support
and transportation services industry, or other developments affecting the
Company or its competitors, could cause the market price of the Company's Class
A Common Stock to fluctuate substantially. In addition, in recent years, the
stock market and, in particular, the marine support and transportation services
industry segment, has experienced significant price and volume fluctuations.
This volatility has affected the market prices of securities issued by many
companies for reasons unrelated to their operating performance. In addition, the
Company's operating results in future periods may be below the expectations of
securities analysts and investors. In such event, the price of the Class A
Common Stock would likely decline, perhaps substantially.
CONTROL BY J. ERIK HVIDE; 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 and the Hvide Trusts will beneficially own all outstanding shares of Class
B Common Stock. Mr. Hvide (together with the Hvide Trusts) will therefore own
shares representing 10.3% of the outstanding shares of Common Stock (9.7% if the
Underwriters' over-allotment option is exercised in full) and 53.4% of the
voting power of all Common Stock (51.8% if the Underwriters' over-allotment
option is exercised in full). See "Principal and Selling Stockholders" and
"Description of Capital Stock." Accordingly, Mr. Hvide will be able to elect the
Company's directors and to determine the disposition of all matters submitted to
a vote of the Company's stockholders. Such control by Mr. Hvide 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 (see "Management") and,
consequently, it would likely require two annual meetings rather than one for
the stockholders to replace a majority of the Board of Directors.
11
<PAGE> 13
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Class A Common Stock in the public market,
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 for
90 days following the date of this Prospectus, all 1,531,466 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"). Certain directors, officers, and
employees of the Company hold options to purchase 806,000 shares of Class A
Common Stock at an exercise price of $12 per share. 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."
FORWARD-LOOKING INFORMATION
The Prospectus Summary, "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources," the
"Strategy" and "The Industry" sections of "Business," and the "Cyclical Industry
Conditions," "Mandated Removal of Vessels from Jones Act Trade," and
"Acquisition Strategy" sections of "Risk Factors" contain one or more
forward-looking statements or statements based upon the Company's beliefs, by
which the Company attempts to measure activity in, and to analyze the factors
affecting, the markets for its services. There can be no assurance that (i) the
Company has correctly measured or identified all of the factors affecting these
markets or the extent of their likely impact, (ii) the publicly available
information with respect to these factors on which the Company's analysis is
based is complete or accurate, (iii) the Company's analysis is correct, or (iv)
the Company's strategy, which is based in part on this analysis, will be
successful. Factors that could cause actual results to differ from those
reflected in the Company's forward-looking statements include a decline in oil
and gas prices, a shift in the supply and demand relationship for offshore
energy service vessels or chemical carriers, or other economic factors affecting
the markets for the Company's services.
12
<PAGE> 14
THE COMPANY
Hvide Marine Incorporated was incorporated in Florida in 1994 as Hvide
Corp., the holding company for its principal operating subsidiary. Immediately
prior to the August 1996 closing of the IPO, the principal operating subsidiary
was merged with and into Hvide Corp., the surviving entity, which was renamed
Hvide Marine Incorporated. The Company 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. These acquisitions were financed primarily through borrowings under a
Credit Agreement, dated as of September 28, 1994, by and among the Company,
Citibank, N.A., as Administrative Agent and Co-Agent, The First National Bank of
Boston, as Letter of Credit Agent and Co-Agent, and the lending banks parties
thereto (as amended, the "Credit Facility") and the issuance of debt and equity
securities of the Company to a group of investors (the "Investor Group") for
aggregate proceeds of $50.0 million. The Selling Stockholders are the Investor
Group. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources," "Certain
Transactions," "Principal and Selling Stockholders," and "Description of Capital
Stock -- Contingent Share Issuance Agreement."
Further substantial fleet expansions occurred in 1996. In January 1996, the
Company acquired eight crew boats from GBMS, and in August 1996, in transactions
with five different sellers (the "August 1996 Acquisitions"), it acquired three
chemical carriers, ten offshore supply boats, and one crew boat. The aggregate
purchase price of the August 1996 Acquisitions was $97.5 million, consisting of
$35.5 million in cash, funded primarily with proceeds of the IPO, and the
assumption or incurrence of $62.0 million of debt obligations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
The Company has recently acquired or entered into agreements to acquire an
aggregate of eight supply boats, five crew boats, one offshore anchor handing
tug, and two harbor tugs which constitute the Current Acquisitions. The Current
Acquisitions, which will increase the Company's marine support fleet from 74 to
90 vessels, will be funded with part of the proceeds of the Offering. The $53.6
million aggregate cost of the Current Acquisitions includes the estimated $6.9
million cost of upgrading, refurbishing, and lengthening two of the supply boats
to 225-foot, 4,300-hp dynamically positioned vessels for use in deepwater
service. See "Use of Proceeds" and "Business -- Current Acquisitions."
The Company's principal office is located at 2200 Eller Drive, Fort
Lauderdale, Florida 33316, and its telephone number is (954) 523-2200.
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Class A Common Stock
offered hereby, after deducting underwriting discounts and commissions and
estimated offering expenses, are estimated to be approximately $73.7 million
($91.3 million if the Underwriters' over-allotment option is exercised in full).
Of such net proceeds, (i) approximately $44.5 million will be used to fund the
balance of the aggregate $53.6 million purchase price for the Current
Acquisitions, which includes $6.9 million that will be used to upgrade,
refurbish, and lengthen two of the vessels included in the Current Acquisitions,
(ii) approximately $20.8 million will be used to repay certain outstanding
indebtedness as described below, and (iii) the balance of approximately $8.4
million will be used for general corporate purposes. For information concerning
the acquisitions to be funded with a portion of the proceeds of the Offering,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Current Acquisitions."
Of the $20.8 million to be used to repay outstanding indebtedness, (i)
$10.2 million will be used to repay $0.4 million of accrued interest on and $9.8
million of principal of the Senior Notes (as defined herein), which mature in
two equal installments in September 2003 and 2004 and bear interest at the rate
of 12% per annum, (ii) $8.0 million will be used to repay the amount outstanding
under the revolving line of credit under the Credit Facility, which line is due
in January 2001 and bears interest at a fluctuating rate (7.9% at September 30,
1996), (iii) $2.0 million will be used to repay accrued interest on and
outstanding principal 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% at
September 30, 1996), and (iv) $0.6 million will be used to repay interest on and
outstanding principal of the HOS Notes and the HCL Notes (each as defined
herein) which are due in 2004 and bear interest at 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 Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Certain Transactions."
To the extent that the Underwriters' over-allotment option is exercised,
the net proceeds therefrom will be used for general corporate purposes, which
may include the repayment of indebtedness, vessel acquisitions, and vessel
improvements. Pending the use of proceeds as described above, the Company
intends to place such net proceeds in interest-bearing accounts or invest such
proceeds in short-term, interest-bearing, investment-grade securities.
The Company will not receive any proceeds from the sale of Class A Common
Stock by the Selling Stockholders.
PRICE RANGE OF THE CLASS A COMMON STOCK
Since August 9, 1996, the Class A Common Stock has been traded on the
Nasdaq National Market under the symbol "HMAR." The following table sets forth
the high and low sale prices per share of the Class A Common Stock as reported
by the Nasdaq National Market for each calendar quarter since the commencement
of trading.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
1996
Third Quarter (commencing August 9)................. $ 13 7/8 $ 11
Fourth Quarter (through December 18)................ 24 1/4 12 7/8
</TABLE>
The last reported sale price of the Class A Common Stock, as reported by
the Nasdaq National Market on December 18, 1996, was $20 5/8 per share. As of
December 18, 1996, there were 53 holders of record of Class A Common Stock.
14
<PAGE> 16
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's ability to pay
dividends also 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 -- The Credit Facility."
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the actual consolidated capitalization of
the Company as of September 30, 1996 and as adjusted to give effect to the
conversion of 1,650,470 shares of Class B Common Stock currently owned by the
Selling Stockholders into an equal number of shares of Class A Common Stock in
connection with the closing of the Offering, the issuance of 237,641 shares of
Class A Common Stock to the Selling Stockholders in connection with the
termination of the CSI Agreement at the closing of the Offering and the transfer
to the Company of an equal number of shares of Class B Common Stock by the Hvide
Family pursuant to the Shareholders Agreement and the Offering and the
application of the net proceeds therefrom. 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>
SEPTEMBER 30, 1996
------------------------
ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt..................................... $ 20,173 $ 14,673
======== ========
Long-term debt (excluding current portion)(1)......................... $114,144 $ 102,533
Minority partners' equity in subsidiaries............................. 1,003 1,003
Stockholders' equity:
Class A Common Stock, par value $0.001; 100,000,000 shares
authorized; 7,644,291 shares issued and outstanding; 13,355,130
shares to be issued and outstanding(2)........................... 8 13
Class B Common Stock, par value $0.001; 5,000,000 shares authorized;
3,419,577 shares issued and outstanding and 1,531,466 shares to
be issued and outstanding(2)..................................... 3 2
Additional paid-in capital.......................................... 97,218 170,725
Retained earnings (accumulated deficit)(3).......................... 695 (12)
-------- --------
Total stockholders' equity....................................... 97,924 170,728
-------- --------
Total minority partners' equity in subsidiaries and stockholders'
equity.......................................................... 98,927 171,731
-------- --------
Total capitalization........................................ $213,071 $ 274,264
======== ========
</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. Shares to be issued
and outstanding exclude 806,000 shares of Class A Common Stock reserved for
issuance upon exercise of currently outstanding options and 500,000 shares
reserved for issuance under the Company's Employee Stock Purchase Plan. See
"Management -- Equity Ownership Plans."
(3) The adjusted amount reflects an extraordinary loss on the extinguishment of
the Senior Notes.
16
<PAGE> 18
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 Carrier
Group (the "OMI Chemical Carriers"), eight supply boats acquired from Seal Fleet
Inc. and certain of its affiliates, (the "Seal Fleet Vessels"), and Gulf Boat
Marine Services, Inc. and E&D Boat Rentals, Inc. (together "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
for the year ended December 31, 1995 and the nine months ended September 30,
1996 give effect to the acquisitions of the three OMI Chemical Carriers and the
eight Seal Fleet Vessels in August 1996, the acquisition of eight crew boats
from GBMS in January 1996, the acquisition of one vessel in February 1996, the
IPO, and the repayment of certain indebtedness, as if all such transactions had
occurred on January 1, 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 results of operations for any future period or
as of any future date. The selected unaudited pro forma statements of operations
for the year ended December 31, 1995 and the nine months ended September 30,
1996 do not give effect to the Current Acquisitions or the Offering. The results
for the nine months ended September 30, 1996 are not necessarily indicative of
the results to be expected for the full year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------------- -----------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995 1995 1996 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue......................... $45,120 $39,639 $41,527 $ 49,792 $ 70,562 $122,985 $51,194 $72,130 $101,046
------- ------- ------- -------- ------- -------- -------- -------- --------
Operating expenses.............. 28,165 24,602 24,032 29,873 40,664 76,311 29,482 42,089 61,689
Overhead expenses............... 7,150 6,778 6,176 9,581 12,518 15,019 9,167 11,049 12,222
Depreciation and amortization... 3,829 4,106 4,735 4,500 6,308 12,730 4,691 6,115 11,125
------- ------- ------- -------- ------- -------- -------- -------- --------
Income from operations.......... 5,976 4,153 6,584 5,838 11,072 18,925 7,854 12,877 16,010
Interest expense, net........... 5,024 3,993 3,412 5,302 11,460 12,312 8,491 8,751 9,034
Other income.................... 601 8 519 11 26 190 56 199 199
------- ------- ------- -------- ------- -------- -------- -------- --------
Income (loss) before provision
for (benefit from) income
taxes, extraordinary item and
cumulative effect of a change
in accounting principle....... 1,553 168 3,691 547 (362) 6,803 (581) 4,325 7,175
Provision for (benefit from)
income taxes.................. 601 158 1,873 189 (2) 2,449 -- 1,616 2,655
------- ------- ------- -------- ------- -------- -------- -------- --------
Income (loss) before
extraordinary item and
cumulative effect of a change
in accounting principle....... 952 10 1,818 358 (360) 4,354 (581) 2,709 4,520
Loss on extinguishment of debt,
net(1)........................ -- -- -- -- -- -- -- 8,016 --
Cumulative effect of a change in
accounting principle.......... -- -- 1,491 -- -- -- -- -- --
------- ------- ------- -------- ------- -------- -------- -------- --------
Net income (loss)............... $ 952 $ 10 $ 3,309 $ 358 $ (360) $ 4,354 $ (581) $(5,307) $ 4,520
======= ======= ======= ======== ======= ======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting
principle(2)................ $ 0.14 $ (0.01) $ 0.26 $ 0.03 $ (0.14) $ 0.40 $ (0.23) $ 0.68 $ 0.41
Net income (loss)(2).......... 0.14 (0.01) 0.50 0.03 (0.14) 0.40 (0.23) (1.32) 0.41
Weighted average number of
common shares and common
share equivalents
outstanding(3).............. 6,268 6,268 6,268 5,302 2,535 10,905 2,535 4,018 11,064
EARNINGS (LOSS) PER COMMON SHARE
ASSUMING FULL DILUTION:
Income (loss) before
extraordinary item and
cumulative effect of a
change in accounting
principle(2)................ $ 0.14 $ (0.01) $ 0.26 $ 0.06 $ 0.12 $ 0.00 $ 0.64
Net income (loss)(2).......... 0.14 (0.01) 0.50 0.06 0.12 0.00 (0.95)
======= ======= ======= ======== ======= ======== ========
Weighted average number of
shares and common share
equivalents outstanding(3).. 6,268 6,268 6,268 5,616 3,779 3,779 5,049
======= ======= ======= ======== ======= ======== ========
OTHER FINANCIAL DATA:
EBITDA(4)..................... $ 9,805 $ 8,259 $11,319 $ 10,338 $ 17,380 $ 31,655 $12,545 $18,992 $ 27,135
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------------------------------------------------
------------------
1991 1992 1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET CASH PROVIDED BY (USED IN):
Operating activities.................................. $ 8,584 $ (930) $ 6,956 $ 2,858 $ 3,948 $ 71 $ 6,126
Investing activities.................................. (3,633) (1,592) (2,247) (39,815) (8,066) (5,312) (61,738)
Financing activities.................................. 440 (2,473) (6,158) 41,249 805 1,715 58,160
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, AT SEPTEMBER 30, 1996
------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 ACTUAL AS ADJUSTED
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)......................... $ 3,330 $ 847 $ 2,640 $ 7,793 $ 4,315 $ (105) $ 7,223
Total assets...................................... 90,916 83,718 82,373 135,471 143,683 254,616 309,726
Total debt........................................ 59,394 57,011 51,273 104,281 109,051 134,317 117,206
Stockholders' and minority partners' equity....... 15,755 15,858 19,926 14,903 13,999 98,927 171,731
</TABLE>
- ------------------------------------
(1) Reflects the loss on the extinguishment of debt from a portion of the
proceeds of the IPO net of applicable income taxes of $1,405,000.
(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 1991, 1992, 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. For the years ended 1994 and 1995
and the nine months ended September 30, 1995 and 1996, shares outstanding
assuming full dilution reflects the assumed conversion of a portion of the
Junior Notes into shares of Common Stock. The Junior Notes were issued in
September 1994 and converted into shares of Common Stock in September 1996.
Pro forma shares reflect the weighted average number of common shares giving
effect to the issuance of 7,159,000 shares of Class A Common Stock in the
IPO, 100,358 shares of Class A Common Stock in payment of services, 25,667
shares of Class A Common Stock in exchange for certain outstanding
indebtedness, and 1,244,002 shares of Class A and Class B Common Stock in
exchange for the principal amount of the Junior Notes remaining after the
application of the proceeds of the IPO and exclude 806,000 shares of Class A
Common Stock reserved for issuance upon exercise of currently outstanding
options and 500,000 shares reserved for issuance under the Company's
Employee Stock Purchase Plan. See "Management -- Equity Ownership Plans."
(4) 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.
18
<PAGE> 20
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 GBMS and
the related notes thereto included elsewhere in this Prospectus.
HISTORICAL GROWTH
Since September 1994, the Company's operations have expanded through a
series of consolidating acquisitions which, excluding the Current Acquisitions,
aggregate 84 vessels. The following table sets forth certain information with
respect to these acquisitions.
<TABLE>
<CAPTION>
NUMBER OF VESSELS 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 6 10 supply boats
11 crew boats 40.6 million
Offshore and Harbor Towing................ 1994 1 1 tug $ 1.8 million
1995 1 1 tractor tug 6.4 million (1)
Chemical Transportation................... 1996 1 3 chemical carriers $64.7 million
Petroleum Product Transportation.......... 1994 1 10 tugs $13.9 million
8 barges
1995 1 5 barges 0.1 million
</TABLE>
- ------------------------------------
(1) The Company operates the tractor tug pursuant to a long-term operating
lease.
CURRENT ACQUISITIONS
Completion of the Current Acquisitions will add 16 marine support vessels
to the Company's fleet. The following table sets forth certain information with
respect to these acquisitions.
<TABLE>
<CAPTION>
AREA OF
EXPECTED INTENDED AGGREGATE
VESSELS DELIVERY DEPLOYMENT INVESTMENT
<S> <C> <C> <C>
Offshore Energy Support
2 supply boats(1)............................ 4th Qtr. 1996 U.S. Gulf $11.5 million
4 crew boats................................. 1st Qtr. 1997 U.S. Gulf 7.4 million
1 supply boat................................ 1st Qtr. 1997 Mexican Gulf 2.5 million
2 supply boats............................... 2nd Qtr. 1997 U.S. Gulf 11.3 million
3 supply boats............................... 2nd Qtr. 1997 U.S. Gulf 15.1 million
1 crew boat.................................. 2nd Qtr. 1997 U.S. Gulf 1.8 million
Offshore and Harbor Towing
1 offshore anchor handling tug............... 4th Qtr. 1996 U.S. Gulf $3.4 million
2 harbor tugs................................ 1st Qtr. 1997 Mobile and Port 0.6 million
Canaveral(2)
</TABLE>
- ------------------------------------
(1) These vessels are currently being upgraded, lengthened, and refurbished and
are expected to enter service during the second quarter of 1997. Aggregate
investment includes the estimated cost of such upgrading, lengthening, and
refurbishment.
(2) The deployment of one harbor tug at Mobile will allow one of the Company's
existing tugs to be redeployed in offshore towing operations in the U.S.
Gulf.
19
<PAGE> 21
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.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue:
Marine support services:
Offshore energy support................................ $ 4,518 $11,317 $23,217 $16,426 $28,226
Offshore and harbor towing............................. 10,585 11,140 12,582 9,205 10,234
------- ------- ------- ------- -------
15,103 22,457 35,799 25,631 38,460
Marine transportation services:
Chemical transportation................................ 17,337 16,886 18,632 13,728 19,230
Petroleum product transportation....................... 9,087 10,449 16,131 11,835 14,440
------- ------- ------- ------- -------
26,424 27,335 34,763 25,563 33,670
------- ------- ------- ------- -------
Total revenue..................................... 41,527 49,792 70,562 51,194 72,130
------- ------- ------- ------- -------
Operating expenses:
Marine support services:
Offshore energy support................................ 1,719 7,017 13,335 9,413 15,371
Offshore and harbor towing............................. 5,748 5,568 6,001 4,269 5,417
------- ------- ------- ------- -------
7,467 12,585 19,336 13,682 20,788
Marine transportation services:
Chemical transportation................................ 10,678 10,698 11,105 8,453 11,693
Petroleum product transportation....................... 5,887 6,590 10,223 7,347 9,608
------- ------- ------- ------- -------
16,565 17,288 21,328 15,800 21,301
------- ------- ------- ------- -------
Total operating expenses.......................... 24,032 29,873 40,664 29,482 42,089
Direct overhead expenses:
Marine support services:
Offshore energy support................................ 506 1,090 2,182 1,483 1,859
Offshore and harbor towing............................. 969 958 1,111 733 992
------- ------- ------- ------- -------
1,475 2,048 3,293 2,216 2,851
Marine transportation services:
Chemical transportation................................ 554 881 1,433 1,066 1,887
Petroleum product transportation....................... 150 264 738 524 684
------- ------- ------- ------- -------
704 1,145 2,171 1,590 2,571
------- ------- ------- ------- -------
Total direct overhead............................. 2,179 3,193 5,464 3,806 5,422
------- ------- ------- ------- -------
Fleet EBITDA(1):
Marine support services:
Offshore energy support................................ 2,293 3,210 7,700 5,530 10,996
Offshore and harbor towing............................. 3,868 4,614 5,470 4,203 3,825
------- ------- ------- ------- -------
6,161 7,824 13,170 9,733 14,821
Marine transportation services:
Chemical transportation................................ 6,105 5,307 6,094 4,209 5,650
Petroleum product transportation....................... 3,050 3,595 5,170 3,964 4,148
------- ------- ------- ------- -------
9,155 8,902 11,264 8,173 9,798
------- ------- ------- ------- -------
Total fleet EBITDA(1)............................. 15,316 16,726 24,434 17,906 24,619
Corporate overhead expenses................................ 3,997 6,388 7,054 5,361 5,627
------- ------- ------- ------- -------
EBITDA(1).................................................. 11,319 10,338 17,380 12,545 18,992
Depreciation and amortization expenses..................... 4,735 4,500 6,308 4,691 6,115
------- ------- ------- ------- -------
Income from operations..................................... $ 6,584 $ 5,838 $11,072 $ 7,854 $12,877
======= ======= ======= ======= =======
</TABLE>
- ------------------------------------
(1) EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interest and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's operations. Fleet EBITDA is EBITDA before corporate overhead
expenses. EBITDA and fleet EBITDA are not required by generally accepted
accounting principles and should not be considered as alternatives to net
income as indicators of the Company's operating performance, or as
alternatives to cash flows from operations as a measure of liquidity.
20
<PAGE> 22
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 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. 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 or operated 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 at
end of period............. 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(2)............ 100% 100% 100% 94% 94% 73% 80% 90%
Number of crew boats at end
of period(3)(4)........... -- -- -- -- -- -- 20 19
Average crew boat day
rates(1)(3)............... -- -- -- -- -- -- $1,405 $1,435
Average crew boat
utilization(2)(3)......... -- -- -- -- -- -- 87% 88%
</TABLE>
<TABLE>
<CAPTION>
1995 1996
--------------------------------------- ----------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of supply boats at
end of period............. 10 10 10 10 10 11 16
Average supply boat day rate
rates(1).................. $2,886 $2,843 $3,113 $3,244 $3,468 $4,095 $5,034
Average supply boat
utilization(2)............ 71% 76% 84% 93% 92% 100% 97%
Number of crew boats at end
of period(3)(4)........... 26 26 26 26 35 35 36
Average crew boat day
rates(1)(3)............... $1,444 $1,412 $1,422 $1,458 $1,460 $1,466 $1,528
Average crew boat
utilization(2)(3)......... 79% 81% 90% 91% 89% 93% 96%
</TABLE>
- ------------------------------------
(1) Average day rates are calculated by dividing total vessel revenue by the
total number of days the vessel worked.
(2) Utilization is 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.
21
<PAGE> 23
During the past five years, day rates and utilization in the Gulf of Mexico
were at their lowest during the summer of 1992 when the Company estimates
average offshore supply boat 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 Gulf, and Southeast Asia. The Company
relocated five supply boats to the Arabian Gulf (all of which have been returned
to the Gulf of Mexico) and two to Southeast Asia in September 1992. Day rates
and utilization 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 pipeline and production facilities 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.
Management believes that relocation of vessels to the Gulf of Mexico in early
1994 helped to depress rates and utilization until the end of the second quarter
of 1994. Industry day rates and utilization 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.
Management believes that the 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.
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 Everglades,
and three each in Port Canaveral and Mobile, although it has shifted tugs among
ports depending upon demand. Since the August 1995 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 following table summarizes certain operating information for the
Company's tugs.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Number of tugs at end of period(1).............. 10 10 11 11 11
Total ship docking tug jobs(2).................. 8,178 8,740 9,233 6,847 7,150
Total offshore and harbor towing revenue
(in thousands)................................ $10,585 $11,140 $12,582 $9,205 $10,234
</TABLE>
- ------------------------------------
(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 overall 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 until August 1996,
when the Company acquired OMI's interest in OSTC along with the three OMI
Chemical Carriers. Prior to the acquisition, the Company's chemical
transportation revenue consisted of distributions from OSTC attributable to the
Company's two chemical carriers marketed by OSTC based upon a formula that took
into account individual vessel performance characteristics applied to OSTC's
revenue (net of fuel costs, port charges, and overhead). Since the acquisition,
the Company continues to have OSTC market the five chemical carriers and
receives the revenue attributable to all five of the vessels. 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
22
<PAGE> 24
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. In the fourth quarter of
1996, the charter rate was renegotiated and reduced by approximately 6% to
reflect the lower current market rate. 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 OMI Chemical Carriers as
if such vessels were owned by the Company during the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Number of vessels................................ 6 6 6 6 6
Time charter equivalents(1)...................... $24,566 $24,752 $25,631 $25,334 $25,153
</TABLE>
- ------------------------------------
(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. The most significant expense categories are crew payroll and
benefits, depreciation and amortization, charter hire, maintenance and repairs,
fuel, and insurance.
The crews of Company-manned 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 offshore energy support vessels and certain
tugs and towboats are paid only for days worked.
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") and operating
lease payments on the tractor tug Broward. The Company also pays charter hire
when it charters harbor tugs to meet requirements in excess of its own tugs'
availability.
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 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, and the nine months ended
September 30, 1996 the Company drydocked five, 13, 42, and 17 vessels,
respectively, at an aggregate cost (exclusive of lost revenue) of $0.9 million,
$1.6 million, $2.0 million, and $0.6 million respectively. See "-- Liquidity and
Capital Resources" 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
23
<PAGE> 25
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.
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
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Revenue. Revenue increased 41% to $72.1 million for the nine months ended
September 30, 1996 from $51.2 million for the nine months ended September 30,
1995 primarily due to increased revenue in the Company's offshore energy
support, petroleum product transportation, and chemical transportation
operations.
Revenue from offshore energy operations increased 72% to $28.2 million for
the nine months ended September 30, 1996 from $16.4 million for the nine months
ended September 30, 1995 primarily due to acquisitions and greater utilization
of supply and crew boats and higher day rates resulting from increased offshore
exploration and production activity. During the 1996 period, day rates for
supply boats owned, operated, or managed by the Company increased 45% from the
1995 period, and day rates for crew boats owned, operated, or managed by the
Company increased 4% from the 1995 period. Utilization of supply boats increased
to 95% for the 1996 period from 77% for the 1995 period, and utilization of crew
boats increased to 93% for the 1996 period from 84% for the 1995 period.
Petroleum product transportation revenue increased 22% to $14.4 million for
the nine months ended September 30, 1996 from $11.8 million for the nine months
ended September 30, 1995 primarily due to increased movements of product by the
Company's towboat and barge fleet as a result of the cold winter and higher
natural gas prices.
Chemical transportation revenue increased 40% to $19.2 million for the nine
months ended September 30, 1996 from $13.7 million for the nine months ended
September 30, 1995 primarily due to the August 1996 acquisition of the OMI
Chemical Carriers and the remaining 50% interest in OSTC.
Revenue from offshore and harbor tug operations increased 11% to $10.2
million for the nine months ended September 30, 1996 from $9.2 million for the
nine months ended September 30, 1995 primarily as a result of increased tanker
and freighter traffic in Port Everglades. Revenue also increased in the port of
Mobile due to a tariff increase and an increase in port traffic.
Operating Expenses. Operating expenses increased 43% to $42.1 million for
the nine months ended September 30, 1996 from $29.5 million for the nine months
ended September 30, 1995 primarily due to increases in crew payroll and
benefits, maintenance and repair, and supplies and consumables resulting from
acquisitions and increased business activity. As a percentage of revenue,
operating expenses remained stable at 58% for both the nine months ended
September 30, 1996 and for the nine months ended September 30, 1995.
Overhead Expenses. Overhead expenses increased 21% to $11.0 million for the
nine months ended September 30, 1996 from $9.2 million for the nine months ended
September 30, 1995 primarily due to an increase in professional fees relating to
pending litigation. Additionally, salaries and benefits increased as a result of
an increase in staffing requirements due to acquisitions. As a percentage of
revenue, overhead
24
<PAGE> 26
expenses decreased to 15% for the nine months ended September 30, 1996 from 18%
for the nine months ended September 30, 1995.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 30% to $6.1 million for the nine months ended September 30,
1996 compared with $4.7 million for the nine months ended September 30, 1995 as
a result of an increase in fleet size due to acquisitions.
Income from Operations. Income from operations increased 64% to $12.9
million, or 18% of revenue, for the nine months ended September 30, 1996 from
$7.9 million, or 15% of revenue, for the nine months ended September 30, 1995 as
a result of the factors noted above.
Net Interest Expense. Net interest expense increased 3% to $8.8 million for
the nine months ended September 30, 1996 from $8.5 million for the nine months
ended September 30, 1995 primarily as a result of debt incurred in connection
with acquisitions. As a percentage of revenue, net interest expense decreased to
12% for the nine months ended September 30, 1996 from 17% for the nine months
ended September 30, 1995.
Net Income (Loss). The Company had a net loss of $5.3 million for the nine
months ended September 30, 1996 after incurring a net loss of $0.6 million for
the nine months ended September 30, 1995 primarily as a result of non-recurring
charges of $8.0 million, net of a $1.4 million income tax benefit, related to an
early extinguishment of debt in connection with the IPO.
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 the Company's
supply boats in 1995 from 1994, while average day rates for the Company's crew
boats remained relatively stable.
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 petroleum product 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 offshore and 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
25
<PAGE> 27
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 income from operations of
25% over 1994 as a result of an overall increase in traffic in Mobile, Port
Canaveral, and Port Everglades.
Net Interest Expense. 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, the Company's average Gulf of
Mexico supply boat day rates increased 19% in 1994 from an average of $2,696 per
day in 1993 to $3,195 per day in 1994, 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
petroleum product transportation increased 15% primarily due to the Sun State
acquisition in September 1994. Offshore and harbor tug 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 Gulf.
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.
Net Interest Expense. 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.
26
<PAGE> 28
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 and an approximate $1.5
million gain in 1993 resulting from a change in the Company's method of
accounting for drydocking.
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
product transportation during the months of February, March, and April.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements historically have arisen primarily from
its working capital needs, acquisition of marine vessels, improvements to
vessels, and debt service requirements. The Company's principal sources of cash
have been proceeds from borrowings, cash provided by operating activities, and
proceeds from the IPO in August 1996.
In September 1994, the Company entered into the Credit Facility which, as
amended, currently provides for a $60.5 million term loan, a $10.0 million
revolving line of credit, a $19.9 million vessel acquisition credit line which
decreases to $11.5 million over a four-year period, and a $5.6 million letter of
credit. Borrowings under the Credit Facility bear interest at prime or LIBOR, at
the Company's option, plus a margin based on the Company's compliance with
certain financial ratios. At September 30, 1996, borrowings outstanding under
the Credit Facility aggregated $70.2 million, consisting of $60.5 million under
the term loan, $5.5 million under the revolving line of credit, and $4.2 million
under the vessel acquisition credit line. The Company is currently seeking to
increase the amounts available under the revolving line of credit and the
acquisition credit line and other modifications to the Credit Facility. See
"Description of Certain Indebtedness -- Credit Facility." The Company intends to
repay all outstanding borrowings under the revolving line of credit with
proceeds of the Offering.
Also in September 1994, the Company issued $25.0 million of Senior Notes
and $25.0 million of Junior Notes at discounts resulting in proceeds of $23.1
million and $17.5 million, respectively. Borrowings under the Credit Facility,
the Senior Notes, and the Junior Notes were utilized primarily to repay other
indebtedness and to fund vessel acquisitions.
In August 1996, the Company completed the IPO, which resulted in net
proceeds to the Company of approximately $77.7 million. Of such net proceeds,
approximately $35.5 million was used to fund the cash portion of the $97.5
million aggregate purchase price of the August 1996 Acquisitions and
approximately $42.1 million was used to repay certain indebtedness. The balance
of the purchase price of the August 1996 Acquisitions was paid by the assumption
or incurrence of $62.0 million of debt obligations. The $0.1 million balance of
the proceeds of the IPO, together with general corporate funds, were used to
finance the acquisition of the Seabulk St. Frances from J. Erik Hvide and the
Investor Group. See "Certain Transactions." Indebtedness repaid with proceeds
from the IPO included $6.8 million under the Credit Facility, $15.9 million of
accrued interest and principal under the Senior Notes, and $15.1 million of
accrued interest and principal under the Junior Notes. The $13.9 million balance
of the outstanding principal under the Junior Notes was converted into Class A
and Class B Common Stock in September 1996. As of September 30, 1996, $10.2
million of accrued interest and principal under the Senior Notes was
outstanding. All outstanding borrowings under the Senior Notes will be repaid
using a portion of the proceeds of the Offering.
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 September 30, 1996, was approximately
$134.3 million. Debt service requirements for the fourth quarter of 1996 are
estimated to be approximately $4.0 million for principal and $2.7 million for
interest, and operating lease payments for the fourth quarter of 1996 are
estimated to total approximately $0.2 million. After giving effect to the
repayment of the Senior Notes, the Founder's Note and the HCL Notes and HOS
Notes (each as defined herein) with a portion of the proceeds of the Offering,
the Company's principal and interest
27
<PAGE> 29
payment obligations for 1997 are estimated to be approximately $14.9 and $8.5
million, respectively, and operating lease obligations for 1997 will be
approximately $3.9 million.
Capital requirements for vessel maintenance and improvement (excluding
improvements of $6.9 million associated with the Current Acquisitions) are
estimated to be $12.0 million for 1996, of which $9.1 million had been recorded
as either capital expenditures or construction in progress as of September 30,
1996, and $15.0 million for 1997.
The Company is planning to contract for the construction of two
ship-docking modules ("SDMs") at an estimated cost of approximately $9.0 million
with delivery expected in late 1997 or early 1998. The Company is also
considering the construction of five double-hull barges at an estimated cost of
approximately $9.0 million. The decision to proceed with the construction of
these barges will be based upon successful completion of negotiations of
long-term contracts with a customer concerning use of these vessels. These
negotiations are in a preliminary stage and there can be no assurance that the
construction of these barges will be undertaken.
The Company has also agreed to purchase for an estimated aggregate cost of
$7.4 million three 152-foot newly constructed crew boats scheduled for delivery
in January, May, and September 1998. Prior to delivery of the first of these
crew boats in January 1998, the Company's aggregate expenditures in connection
with such acquisitions are expected to be $190,000. The Company currently
intends to fund the aggregate cost of these SDMs, these crew boats, and, if
built, these barges from available working capital, borrowings under the Credit
Facility, lease financing, or a combination of such sources.
An integral part of the Company's strategy is to acquire additional
vessels, thereby further consolidating its niche markets. The Company regularly
engages in discussions regarding potential acquisitions. However, other than the
Current Acquisitions, and as described in the immediately preceding paragraph,
no acquisitions have been agreed upon or are the subject of a letter of intent.
The Company has a 2.4% equity interest in five 45,300 dwt double-hull
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 total estimated cost of exercising the Company's options is
up to $32.0 million (assuming the options are exercised prior to January 1,
1998). 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, and there can be no assurance that such financing will be available.
The Credit Facility 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 and $10.0 million of punitive damages, plus legal fees
and expenses. 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.
Of the estimated $73.7 million net proceeds from the Offering, $44.5
million will be used in connection with the Current Acquisitions, $20.8 million
will be used to repay indebtedness, and the balance of
28
<PAGE> 30
approximately $8.4 million will be available for general corporate purposes. See
"Use of Proceeds" and "Business -- Current Acquisitions."
At September 30, 1996, the Company had a working capital deficit of $0.1
million. The Company believes that proceeds of the Offering, 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 foreseeable future. The Company also believes that
such resources, together with the potential future use of debt or equity
financing, will allow the Company to pursue its strategy of growth through
acquisitions. However, since 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 Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") 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. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of 1996 and the effect of adoption was not material.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," for fiscal years beginning after December 15, 1995.
This statement establishes a fair-value based method of accounting for stock
compensation plans with employees and others. The Company continues to account
for its stock-based compensation plans under Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees", as permitted by SFAS No. 123
and will present the pro forma disclosures required under SFAS No. 123 in fiscal
year 1997 with no impact to the Company's results of operations.
29
<PAGE> 31
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 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 acquisitions, increasing
its marine support fleet from 20 vessels in 1993 to 74 vessels currently and its
marine transportation fleet from three vessels in 1993 to 29 vessels currently.
As a result, the Company's revenues increased 196% from $41.5 million in 1993 to
$123.0 million in 1995, on a pro forma basis. Over the same period, the
Company's EBITDA increased 181% from $11.3 million to $31.7 million and its
income from operations increased 186% from $6.6 million to $18.9 million, in
each case on a pro forma basis. For the nine months ended September 30, 1996,
the Company reported revenue, EBITDA, and operating income of $101.0 million,
$27.1 million, and $16.0 million, respectively, in each case on a pro forma
basis. For other measures of the Company's operating results as determined under
generally accepted accounting principles and its pro forma operating results,
see "Selected Historical and Pro Forma Consolidated Financial Data" and the
Company's consolidated financial statements.
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 22 years of experience in
the marine transportation industry, including an average of over 14 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 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 significant opportunities to make further
accretive acquisitions in its core businesses. Critical elements of the
Company's strategy include continuing to (i) utilize its demonstrated expertise
in acquiring vessels, thereby further consolidating its niche markets, (ii)
emphasize U.S. domestic trade operations, (iii) develop and apply marine
technology to meet its customers' needs in an innovative and cost-effective
manner, (iv) maintain and pursue long-term customer relationships that limit the
risk associated with the investments required for new vessels and mitigate the
effects of industry cyclicality, and (v) enhance its record of quality service
and safety.
Demonstrated Expertise in Acquiring and Consolidating in its Niche
Markets. 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, 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 U.S. Gulf offshore energy market, and given it a
30
<PAGE> 32
reputation as a successful consolidator in its niche markets. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Historical Growth" and "-- Current Acquisitions."
U.S. Domestic Market Emphasis. 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 to rise 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 demonstrated its
business innovation in the formation of what was, prior to completion of the
August 1996 Acquisitions, 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 double-hull 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 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.
As part of its continuing effort to maintain high standards of quality and
safety, the Company has obtained certification under the voluntary quality
assurance, safety, and environmental standards established under ISO 9002 and a
document of compliance with the International Ship Management Code, which
becomes mandatory in July 1998. 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 the last three years.
CURRENT ACQUISITIONS
The Current Acquisitions involve the acquisition of eight supply boats,
five crew boats, one offshore anchor handling tug, and two harbor tugs. The
aggregate cost of the Current Acquisitions is approximately $53.6 million,
including the cost of upgrading, refurbishing, and lengthening two of the supply
boats. Of such aggregate purchase price, $9.1 million had been paid as of
December 18, 1996 and the balance of $44.5 million
31
<PAGE> 33
will be funded with a portion of the proceeds from the Offering, either by
direct payment to the sellers or through repayment of borrowings made under the
Credit Facility for such purpose.
Supply Boats. In October and November 1996, the Company acquired two
supply boats from one seller for an aggregate purchase price of $4.6 million.
These supply boats are currently being upgraded, refurbished, and lengthened at
an estimated cost of $6.9 million and are expected to be placed in service
during the second quarter of 1997. In addition, the Company has entered into
agreements to acquire five additional supply boats in transactions scheduled to
close in January 1997 (one boat), in April 1997 (two boats), and no later than
June 1997 (two boats). The Company has also entered into a letter of intent to
acquire one supply boat in a transaction scheduled to close in February 1997.
The aggregate purchase price of these six additional supply boats is $28.9
million, against which the Company has made a $1.0 million deposit. The
following table sets forth certain information with respect to the eight supply
boats included in the Current Acquisitions.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/ AREA OF
SUPPLY BOAT NAME (FEET) REBUILT HORSEPOWER OPERATION
<S> <C> <C> <C> <C>
Seabulk New York(1)......................... 225 1975/1997 4,300 U.S. Gulf
Seabulk New Jersey(1)....................... 225 1975/1997 4,300 U.S. Gulf
Matagorda Island(2)(3)...................... 191 1980 3,900 U.S. Gulf
Drive Ocean V(2)(3)(4)...................... 190 1973/1995 5,750 Mexican Gulf
Jefferson(2)(3)............................. 185 1981 3,900 U.S. Gulf
Sabine(2)(3)................................ 185 1979 3,900 U.S. Gulf
Bolivar(2).................................. 180 1980 2,700 U.S. Gulf
Aransas(2).................................. 180 1980 1,950 U.S. Gulf
</TABLE>
- ------------------------------------
(1) Information reflects completion of planned upgrading, refurbishing, and
lengthening. These vessels will have dynamic-positioning capability.
Reflects name change that is currently in process.
(2) Vessel to be acquired.
(3) Vessel has anchor handling and towing equipment.
(4) Vessel is registered in Panama and, as a foreign flagged vessel, is
prohibited from operating in the U.S. domestic trade.
Crew Boats. The Company has entered into a memorandum of agreement to
purchase four crew boats in a transaction scheduled to close in January 1997,
for an aggregate purchase price of $7.4 million. In addition the Company has
entered into an agreement to purchase the crew boat Jopeye in a transaction
scheduled to close in April 1997 for an aggregate purchase price of $1.8
million. The following table sets forth certain information with respect to
these crew boats.
<TABLE>
<CAPTION>
LENGTH AREA OF
CREW BOAT NAME (FEET) YEAR BUILT HORSEPOWER OPERATION
<S> <C> <C> <C> <C>
Jopeye...................................... 135 1995 3,300 U.S. Gulf
Anna P...................................... 135 1993 3,056 U.S. Gulf
Capt. Evan.................................. 135 1991 3,056 U.S. Gulf
Capt. Rami.................................. 135 1991 3,056 U.S. Gulf
Rig Runner.................................. 135 1991 3,056 U.S. Gulf
</TABLE>
Tugs. The Company has also acquired an offshore anchor handling tug for
$3.4 million and has entered into an agreement to acquire two harbor tugs for an
aggregate of $0.6 million. The Company will take delivery of the two harbor tugs
in January 1997. The following table sets forth certain information with respect
to the three tugs.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/ AREA OF
VESSEL NAME HORSEPOWER (FEET) REBUILT OPERATION
<S> <C> <C> <C> <C>
Vigilant(1)............................ 4,600 120 1981/1994 Offshore
Delaware(2)............................ 4,000 107 1952/1990 Mobile
Mary Dee Sanders....................... 3,600 105 1941/1984 Port Canaveral
</TABLE>
- ------------------------------------
(1) Equipped for offshore towing.
(2) The acquisition of this tug will allow the Mobile Pride, which is currently
being operated in Mobile, to be redeployed in offshore towing activities.
32
<PAGE> 34
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 and one Panamanian-flag offshore supply boat to be
acquired in the Current Acquisitions.
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.
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 day rates and utilization 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 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 262 in September 1996.
Management estimates that during the same period, the number of companies
operating supply boats of at least 150 feet in length decreased from
approximately 40 to 16. Day rates declined in the mid-1980s and have since
improved from an average of $1,730 in 1987 to an average of $5,683 in the third
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 new construction of offshore supply vessels
33
<PAGE> 35
likely will be of larger, more capable vessels of approximately 220 feet which
would require sustained average day rates of approximately $10,000.
The Company estimates that there are currently approximately 11 crew boat
operators in the Gulf of Mexico operating a total of 200 vessels of at least 100
feet in length. There are approximately 39 crew boats greater than 120 feet in
length currently under construction (not all of which are expected to be
utilized in the U.S. Gulf), 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 boats.
The following table sets forth as of September 30, 1996, the Company's
estimate of the number of supply boats and crew boats operating in the Gulf of
Mexico giving effect, in the case of the Company, to the Current Acquisitions.
SUPPLY BOATS
<TABLE>
<CAPTION>
COMPANY TOTAL BOATS
<S> <C>
Tidewater, Inc. .......................................... 107
Seacor Holdings, Inc. .................................... 37
HVIDE MARINE INCORPORATED................................. 32
Trico Marine Services, Inc. .............................. 30
Ensco International Incorporated.......................... 29
Others.................................................... 70
</TABLE>
CREW BOATS
<TABLE>
<CAPTION>
COMPANY TOTAL BOATS
<S> <C>
Seacor Holdings, Inc. .................................... 70
HVIDE MARINE INCORPORATED................................. 42
Tidewater, Inc. .......................................... 25
Trico Marine Services, Inc. .............................. 16
Others.................................................... 51
</TABLE>
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, drilling rig day rates and utilization are influenced by 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.
<TABLE>
<CAPTION>
1993 1994
--------------------------------------- ---------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Natural gas prices(1)........ $ 1.92 $ 2.16 $ 2.20 $ 2.21 $ 2.42 $ 1.95 $ 1.70 $ 1.60
Competitive mobile rig
utilization(2)............. 71.6% 75.9% 78.5% 81.0% 75.5% 76.6% 76.7% 80.6%
Offshore service vessels(3)
Utilization.............. 83.9% 88.6% 89.0% 91.2% 88.6% 83.9% 91.6% 94.6%
Day rates................ $3,050 $3,233 $3,700 $4,050 $3,717 $3,200 $3,033 $3,258
Anchor handling tug/supply
vessels utilization(4)..... 71.0% 82.6% 82.6% 88.6% 85.0% 74.7% 76.3% 92.3%
</TABLE>
34
<PAGE> 36
<TABLE>
<CAPTION>
1995 1996
--------------------------------------- ----------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Natural gas prices(1)........ $ 1.51 $ 1.63 $ 1.54 $ 2.06 $ 3.44 $ 2.45 $ 2.18
Competitive mobile rig
utilization(2)............. 70.3% 73.6% 81.8% 85.2% 83.3% 87.5% 89.4%
Offshore service vessels(3)
Utilization.............. 84.2% 89.7% 91.7% 94.8% 95.3% 92.9% 94.5%
Day rates................ $2,917 $2,975 $3,307 $3,543 $3,793 $4,933 $5,683
Anchor handling tug/supply
vessels utilization(4)..... 86.0% 81.5% 92.6% 92.5% 94.9% 90.1% 94.4%
</TABLE>
- ---------------
(1) Average monthly natural gas cash price delivered at Henry Hub in $/MMBtu, as
reported in Natural Gas Week.
(2) 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.
(3) 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.
(4) 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).
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 a majority of the Company's tugs
operate -- grant non-exclusive 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 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. 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 11% (in terms of tonnage) of bulk
domestic chemical transportation is waterborne, with the remainder transported
by rail. 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
35
<PAGE> 37
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 (from transportation of petroleum products) 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. The retirement dates of others may be extended by reducing their
gross registered tonnage and cargo capacity.
<TABLE>
<CAPTION>
YEAR OPA 90
BUILT/ RETIREMENT DEADWEIGHT
VESSEL NAME OWNER/OPERATOR REBUILT DATE TONS (000'S)
<S> <C> <C> <C> <C>
Keystone Georgia(1)........ Keystone Shipping Co. 1964 2000(2) 25.9
HMI ASTRACHEM.............. HVIDE MARINE INCORPORATED 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 INCORPORATED 1977 2007 39.3
HMI DYNACHEM............... HVIDE MARINE INCORPORATED 1981 2011 50.9
HMI PETROCHEM.............. HVIDE MARINE INCORPORATED 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 INCORPORATED 1975/1990 2015 46.3
Chemical Pioneer(1)........ Marine Transport Lines 1968/1983 n/a(3) 34.9
-----
Total capacity........... 506.2
=====
</TABLE>
- ------------------------------------
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) Retirement date extended from 1998 as a result of reduction of vessel's
gross registered tonnage and cargo capacity.
(3) Double-hull vessel.
Although single-hull chemical carriers may be permitted to continue to
carry 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 augment chemical cargoes with 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.
36
<PAGE> 38
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, the 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:
OPA 90 RETIREMENT OF JONES ACT TANKERS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
80
75
70
65
60
55
50 (GRAPH)
Number
of 45
vessels(1)
40
35
30
25
20
15
10
5
0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Year 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tanker Vessels 71 67 71 65 62 62 56 52 49 45 45 44 42 41 35 30 22 21 20 20
</TABLE>
- ------------------------------------
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 three late 1950s-built
steam-powered single-hull product carriers being converted to double-hull
vessels for delivery in 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.
37
<PAGE> 39
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 January 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. In August 1996, the Company
acquired ten supply boats and one crew boat.
Supply Boats. The following table sets forth certain information concerning
the 24 supply boats currently owned and operated by the Company and the eight
supply boats included in the Current Acquisitions.
<TABLE>
<CAPTION>
YEAR
LENGTH BUILT/ AREA OF
SUPPLY BOAT NAME(1) (FEET) REBUILT HORSEPOWER OPERATION
<S> <C> <C> <C> <C>
Seabulk New York(2)(3).............................. 225 1975/1997 4,300 U.S. Gulf
Seabulk New Jersey(2)(3)............................ 225 1975/1997 4,300 U.S. Gulf
Seabulk Minnesota................................... 205 1976/1994 2,250 U.S. Gulf
Seabulk Montana(4).................................. 205 1974/1994 5,350 U.S. Gulf
Matagorda Island(3)................................. 191 1980 3,900 U.S. Gulf
Seabulk North Carolina(4)(5)........................ 190 1979/1993 4,000 U.S. Gulf
Drive Ocean V(3).................................... 190 1973/1995 5,750 Mexican Gulf
Seabulk Colorado.................................... 185 1982/1994 2,250 U.S. Gulf
Seabulk Missouri.................................... 185 1982 2,250 U.S. Gulf
Seabulk Arkansas.................................... 185 1982 2,250 U.S. Gulf
Jefferson(3)........................................ 185 1981 3,900 U.S. Gulf
Seabulk Wyoming..................................... 185 1979 2,250 Cameroon
Sabine(3)........................................... 185 1979 3,900 U.S. Gulf
Seabulk Hawaii...................................... 180 1979/1995 3,000 U.S. Gulf
Seabulk Georgia..................................... 180 1984 3,000 U.S. Gulf
Seamark South Carolina(4)(6)........................ 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(6).............................. 180 1982 2,250 SE Asia
Seabulk Texas....................................... 180 1982 2,250 U.S. Gulf
Seabulk Louisiana................................... 180 1982 2,250 U.S. Gulf
Bolivar(3).......................................... 180 1980 2,700 U.S. Gulf
Ross Seal........................................... 176 1977/1987 1,700 SE Asia
Aransas(3).......................................... 180 1980 1,950 U.S. Gulf
Seabulk Vermont..................................... 176 1977 1,700 Egypt
Seabulk Kentucky.................................... 175 1983 2,400 U.S. Gulf
Seabulk Tennessee................................... 175 1983 2,400 U.S. Gulf
Seabulk Oregon...................................... 175 1979 2,250 U.S. Gulf
Seabulk Washington.................................. 175 1978 2,250 U.S. Gulf
Seabulk Maryland(5)................................. 165 1980 1,860 U.S. Gulf
Seabulk Virginia(5)................................. 165 1979 1,860 U.S. Gulf
</TABLE>
- ------------------------------------
(1) Certain names reflect name changes that currently are in process.
(2) Vessel expected to be put into service during second quarter of 1997. Vessel
data reflects upgrading, refurbishment, and lengthening. See "-- Current
Acquisitions."
(3) Vessel included in Current Acquisitions. See "-- Current Acquisitions."
(4) Anchor handling tug/supply vessel.
(5) 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.
38
<PAGE> 40
(6) 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 has 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.
Crew Boats. The following table sets forth certain information concerning
the 37 crew and two utility boats currently owned or operated by the Company and
the five crew boats included in the Current Acquisitions.
<TABLE>
<CAPTION>
YEAR
LENGTH BUILT/
CREW BOAT NAME (FEET) REBUILT HORSEPOWER
<S> <C> <C> <C>
Seabulk St. Frances(1)............................................... 152 1996 4,400
Seabulk St. Charles(1)(2)............................................ 152 1993 3,820
Seabulk Winn......................................................... 135 1991 3,056
Seabulk Galveston.................................................... 135 1990 3,056
Seabulk Bossier...................................................... 135 1990 3,056
Sea Robin III........................................................ 135 1978 2,250
Jopeye(3)............................................................ 135 1995 3,300
Anna P(3)............................................................ 135 1993 3,056
Capt. Evan(3)........................................................ 135 1991 3,056
Capt. Rami(3)........................................................ 135 1991 3,056
Rig Runner(3)........................................................ 135 1991 3,056
Seabulk LaFourche.................................................... 130 1991 2,040
Seabulk Houston...................................................... 125 1985 2,600
Seabulk Lafayette.................................................... 125 1985 2,040
Seabulk Starr........................................................ 120 1984 2,040
ThunderU.S.A......................................................... 120 1984 2,040
Seabulk Lamar........................................................ 120 1980 2,040
Seabulk Liberty...................................................... 110 1985 2,040
Thunderplanet........................................................ 110 1982 2,040
Seabulk Mobile....................................................... 110 1982 2,040
Seabulk Evangeline................................................... 110 1981 2,040
Thunderwar........................................................... 110 1981 2,040
Seabulk Madison(1)................................................... 110 1980 2,040
Seabulk Bay(1)....................................................... 110 1980 2,040
Seabulk Beauregard................................................... 110 1980 2,040
Seabulk Jackson(1)................................................... 110 1980 2,100
David Jr.(4)......................................................... 110 1980 2,820
Seabulk Jasper(4).................................................... 110 1980 2,820
Seabulk Nassau....................................................... 110 1979 2,040
Seabulk Aransas...................................................... 110 1978 2,100
Ralph Thompson(4).................................................... 110 1978 2,820
Seabulk Albany(4).................................................... 110 1978 2,820
Seabulk Austin(5).................................................... 110 1978 1,080
Seabulk Baldwin(4)................................................... 110 1976 2,400
Seabulk Claiborne(4)................................................. 110 1975 2,400
Seabulk Baton Rouge(4)(5)............................................ 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
Seabulk Orleans...................................................... 100 1981 1,530
Seabulk Iberia....................................................... 100 1981 1,530
Rig Runner(4)........................................................ 90 1974 1,650
Seabulk Maverick..................................................... 85 1976 1,200
</TABLE>
- ------------------------------------
(1) Reflects name change that currently is in process.
(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) Vessel included in Current Acquisitions. See "-- Current Acquisitions."
(4) 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.
(5) Utility vessel.
39
<PAGE> 41
Offshore and Harbor Towing. The tugs currently owned or operated by the
Company 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. The
Company recently entered into one-year bareboat charters of two newly
constructed 4,000-hp tugs equipped with omni-directional propulsion units and
having some of the capabilities of tractor tugs. These tugs are serving as
harbor tugs in Mobile, enabling two of the Company's harbor tugs to be utilized
in offshore towing activities. As a result, the Company now operates three tugs
with offshore towing capabilities that conduct a variety of offshore towing
services in the U.S. Gulf and the Atlantic Ocean.
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, which has been operating in Port Everglades. The Broward was built at a
cost of $6.4 million by a third-party shipyard. The Company operates the Broward
pursuant to a long-term operating lease. 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 offers 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. 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.
40
<PAGE> 42
The following table sets forth certain information with respect to the 11
tugs owned or operated by the Company, the two tugs chartered by the Company,
and the three tugs included in the Current Acquisitions.
<TABLE>
<CAPTION>
LENGTH YEAR BUILT/
VESSEL NAME HORSEPOWER (FEET) REBUILT PORT
<S> <C> <C> <C> <C>
Broward(1).......................... 5,100 100 1995 Port Everglades
Vigilant(1)(2)...................... 4,600 120 1981/1994 Offshore
Ft. Lauderdale...................... 4,200 90 1971/1996 Port Everglades
Hollywood........................... 4,200 106 1985 Offshore
Mobile Power........................ 4,100 98 1957/1986 Mobile
Z-One(3)............................ 4,000 94 1996 Mobile
Z-Two(3)............................ 4,000 94 1996 Mobile
Delaware(2)......................... 4,000 107 1952/1990 Mobile
Mary Dee Sanders(2)................. 3,600 105 1941/1984 Port Canaveral
Mobile Pride(1)..................... 3,300 107 1969/1989 Offshore
Paragon(1).......................... 3,300 105 1978/1989/1996 Offshore
Mobile Persistence(4)............... 3,000 98 1940/1975 Port Canaveral
Brevard............................. 2,400 88 1945/1986/1996 Port Canaveral
Captain Brinn....................... 2,145 88 1960/1986 Port Canaveral
Everglades.......................... 2,145 88 1956/1984 Port Everglades
Manatee............................. 2,145 88 1959/1982 Port Everglades
</TABLE>
- ------------------------------------
(1) Equipped for offshore towing.
(2) Vessel included in Current Acquisitions. See "-- Current Acquisitions."
(3) Vessel operated under a one-year bareboat charter.
(4) Expected to be retired in the second quarter of 1997.
Ship-Docking Modules. The Company is planning to contract for the
construction of two ship-docking modules for delivery in late 1997 or early
1998. SDMs are innovative ship-docking vessels that are designed to be more
maneuverable, efficient, and flexible than harbor tugs. In addition, they are
expected to have lower operating costs than harbor tugs because they require
fewer crew members. Company personnel, working in conjunction with consulting
marine engineers and architects, prepared the conceptual design and detailed
specifications for the SDMs. The Company has filed a patent application on the
design. It is currently anticipated that one SDM will operate in Port Everglades
and one in Mobile and that their deployment will make one or two of the bareboat
chartered tugs available for alternative service or redelivery to their owner.
MARINE TRANSPORTATION SERVICES
Chemical Transportation.
The Company's chemical carriers are the 298,000-barrel, 39,300 dwt Seabulk
Magnachem, the 297,000-barrel, 46,300 dwt Seabulk America, the 360,000-barrel,
50,900 dwt HMI Dynachem, the 360,000-barrel, 50,900 dwt HMI Petrochem, and the
260,000-barrel, 37,100 dwt HMI Astrachem, which 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, and Stolt Tankers (U.S.A.), Inc. owns the
remaining 33% economic interest, in the Seabulk America.
The Seabulk Magnachem, the Seabulk America, the HMI Dynachem, and the HMI
Petrochem have full double bottoms (as distinct from double hulls) and the HMI
Astrachem has a partial double bottom. Double bottoms provide increased
protection over single hull vessels from a spill in the event of a mishap. The
chemical carriers have from 13 to 24 cargo segregations which are 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. Many of the
chemicals
41
<PAGE> 43
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 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, the HMI
Dynachem, the HMI Petrochem, and the 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, 2011, 2011, and
2007, respectively. The HMI Astrachem, which has a partial double bottom, cannot
be so utilized after 2000. 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 Company markets the five chemical carriers through its wholly-owned
subsidiary OSTC. The total capacity of the five carriers represents
approximately 44% of the capacity of the domestic specialty chemical carrier
fleet, and four of the five chemical carriers 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."
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 HMI Dynachem and HMI Astrachem are currently chartered
to major oil companies under charters that expire in August 1997 and November
1997, respectively. OSTC is often able to generate additional revenues by
chartering cargo space on competitors' vessels and by expanding the 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 1998 and January 1999 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.
42
<PAGE> 44
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 and
the nine months ended September 30, 1996 was derived from a fuel transportation
contract with FPL. The remainder of its revenue was derived from a fuel
transportation contract with another customer and its marine maintenance,
repair, and drydocking facility. See "-- Other Services." Under its contract
with FPL, which has 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:
<TABLE>
<CAPTION>
YEAR
LENGTH BUILT/
VESSEL NAME HORSEPOWER (FEET) REBUILT
<S> <C> <C> <C>
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
</TABLE>
43
<PAGE> 45
The Sun State barges are as follows:
<TABLE>
<CAPTION>
YEAR
BARGE LENGTH BUILT/
VESSEL NAME CAPACITY (FEET) REBUILT
<S> <C> <C> <C>
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
</TABLE>
OPA 90 requires all single-hull barges, including the Sun State barges, to
discontinue transporting fuel and other petroleum products in 2015.
The Company is considering the construction of five double-hull barges at
an estimated aggregate cost of approximately $9.0 million. The decision to
proceed with the construction of these barges will be based upon successful
completion of negotiations of long-term contracts with a customer concerning use
of these vessels. These negotiations are in a preliminary stage and there can be
no assurance that the construction of these barges will be undertaken.
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 Drydock Co. for delivery during 1998. 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. In 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. Subject to the
condition that the current owner of the 49.3% interest has not previously sold
such interest to a third party, the Company has an option, exercisable through
2002, to purchase the 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 the 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 total
estimated cost of exercising the Company's options is up to $32.0 million
(assuming the options are exercised prior to January 1, 1998). 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, and there
can be no assurance that such financing will be available.
The five double-hull 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 is serving as the construction
supervisor during the construction period. The construction project is currently
the subject of litigation. See "-- Legal Proceedings."
44
<PAGE> 46
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 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- or long-term time charters, voyage charters, contracts of
affreightment, or other transportation agreements tailored to the shipper's
requirements. Shell, the Company's largest single customer and the long-term
charterer of the Seabulk Challenger, FPL, the Company's second largest customer,
Amoco Corporation, a purchaser of the Company's offshore energy support
services, and Phillips Petroleum Company and Chevron Corporation, each of which
currently charter one of the Company's chemical carriers, each accounted for
between 5% and 10% of the Company's revenue for the year ended December 31, 1995
and the nine months ended September 30, 1996, in each case on a pro forma basis.
The loss of any of these customers could have a material adverse effect on the
Company.
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-
45
<PAGE> 47
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 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 United States 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
19 years, and its fuel barges will cease transporting fuel in 2015. The
retirement dates of certain tankers may be extended by reducing their gross
registered tonnage and cargo capacity. There can be no assurance that the useful
life of any of the Company's vessels will be so extended.
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
46
<PAGE> 48
Quality Insurance Syndicate, a syndicate of American insurance companies that
insures oil pollution liability risks.
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 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 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 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. territorial waters) to vessels
built in and documented under the laws of the United States (U.S. flag) and
owned and manned 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.
47
<PAGE> 49
Vessel Condition. The Company's chemical and petroleum products carriers,
offshore energy support vessels, five of its tugs, and the fuel barges are
subject to periodic inspection and survey by, and 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 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, liabilities, 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 in amounts that approximate
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 products 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 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,
48
<PAGE> 50
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 $20.0 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 costs of alleged delay and disruption, in addition to $2.4
million of the $5.9 million contract price that the Company has withheld. In
addition, the shipyard is seeking legal fees and expenses and $10.0 million of
punitive damages. 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
49
<PAGE> 51
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 legal actions
brought by Kirby Corporation ("Kirby"), an operator of vessels with which the
five new product carriers in which the Company has an interest will 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 actions are without merit, has supported the U.S.
Department of Justice in obtaining dismissal of one of the actions, is
continuing to support the Department in defending against Kirby's appeal from
that dismissal and in seeking dismissal of the remaining action. Both actions
are currently pending in the United States Court of Appeals for the Fifth
Circuit, as Kirby Corporation v. United States (No. 96-60154) and Kirby
Corporation v. Pena (No. 96-20582).
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 and Amelia, Louisiana, Mobile, Alabama,
and Port Canaveral and Green Cove Springs, Florida, to support its operations.
EMPLOYEES
As of September 30, 1996, the Company had approximately 972 employees.
Management considers relations with employees to be satisfactory. The officers
and crew of the Seabulk America, Seabulk Challenger, and Seabulk Magnachem are
subject to collective bargaining arrangements. In addition, the HMI Dynachem,
HMI Petrochem, and HMI Astrachem are manned by approximately 90 members of
national maritime labor unions pursuant to an agreement between the Company and
a third party employer.
50
<PAGE> 52
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITIONS
- -------------------------- ---- -------------------------------------------------------
<S> <C> <C>
J. Erik Hvide(1)(4)....... 48 Chairman of the Board, President, Chief Executive
Officer, and Director
John H. Blankley(1)(4).... 49 Executive Vice President, Chief Financial Officer, and
Director
Donald L. Caldera......... 61 Executive Vice President -- Development and Director
Eugene F. Sweeney(1)...... 53 Executive Vice President -- Operations and Director
Andrew W. Brauninger...... 50 Vice President -- Offshore Division and
President -- Seabulk Offshore, Ltd.
Leo T. Carey.............. 44 Vice President -- Ship Management
Gene Douglas.............. 49 Vice President -- Legal & General Counsel and Secretary
William R. Ludt........... 49 Vice President -- Inland Services Division and
President -- Sun State Marine Services, Inc.
John J. O'Connell, Jr..... 52 Vice President -- Corporate Communications
Robert A. Santos.......... 64 Vice President -- Offshore and Harbor Towing Operations
Christopher D. Strong..... 38 Treasurer
Robert B. Calhoun,
Jr.(3)(4)............... 54 Director
Gerald Farmer(2)(3)....... 51 Director
Jean Fitzgerald(1)(2)..... 70 Director
John Lee(2)............... 60 Director
Walter C. Mink(3)......... 70 Director
Robert Rice(3)............ 74 Director
Raymond B. Vickers(2)..... 47 Director
</TABLE>
- ------------------------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
(4) Member of the Special Acquisition 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
has been Executive Vice President -- Chief Financial Officer since September
1995. He previously served as a director and Chief Financial Officer of Harris
Chemical Group Inc., a chemical 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.
51
<PAGE> 53
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. 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 1989 to 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. CAREY has been Vice President -- Ship Management since November 1996.
He previously served as Director of Operations for the Company's fleet of
chemical and petroleum product carriers. He joined the Company in 1981 as
Superintendent Engineer. Prior to that, he served with El Paso Marine Co. as a
deck officer and maintenance manager.
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 1982 to September 1994. 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. O'CONNELL has been Vice President -- Corporate Communications since
August 1996, when he joined the Company. From September 1995 to August 1996 he
was an independent consultant. Previously, he served in a variety of management
positions with W.R. Grace & Co. for 20 years, most recently as Director of
Public Affairs. Mr. O'Connell was a member of the President's Private Sector on
Cost Control in the Federal Government from 1982-84.
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.
52
<PAGE> 54
MR. STRONG has been Treasurer of the Company since November 1996 and
Director of Finance since joining the Company in December 1994. From January
1990 to December 1994, he was Treasurer of the Port Everglades Authority. From
1986 to 1989, he served in several management positions with Kislak Mortgage
Corporation and Kislak National Bank including Vice President -- Finance and
Investment Officer. Mr. Strong previously served as an officer in the U.S. Navy.
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, and
Sterling Chemicals Holdings, Inc., a chemical producer. 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 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.
53
<PAGE> 55
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.
The Company's Board of Directors is 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. The three classes of the Board of
Directors are as follows: Class I, comprised of Messrs. Caldera, Vickers, and
Rice, who serve for a term expiring in 1997; Class II, comprised of Messrs.
Sweeney, Mink, Blankley, and Lee, who serve for a term expiring in 1998; and
Class III, comprised of Messrs. Hvide, Fitzgerald, Farmer, and Calhoun, who
serve for a term expiring in 1999. Under the terms of the Shareholders Agreement
(as defined herein), the Investor Group nominated three persons to the Company's
current 11-member Board of Directors and Mr. Hvide nominated eight persons to
the Board. See "Description of Capital Stock -- Shareholders Agreement" and
"-- Common Stock." Messrs. Calhoun, Lee, and Rice are currently the Investor
Group's nominees. The Shareholders Agreement and the right of the Investor Group
to nominate three persons to the Board will terminate upon consummation of the
Offering, following which it is expected that Mr. Lee will resign from the Board
and Messrs. Calhoun and Rice will continue to serve as directors until the end
of their respective terms.
BOARD COMMITTEES
The Company's Board of Directors has four committees: (i) the Executive
Committee; (ii) the Compensation Committee; (iii) the Audit Committee; and (iv)
the Special Acquisition 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 and as limited by the Company's bylaws.
Its current members are Messrs. Hvide (Chairman), Blankley, Fitzgerald, and
Sweeney.
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 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 appointment of independent public accountants for the ensuing
year; and to review the adequacy and effectiveness of the accounting and
financial controls of the Company. See "Certain Transactions." Its current
members are Messrs. Farmer (Chairman), Calhoun, Mink, and Rice.
The Special Acquisition Committee is authorized by the Board of Directors
to authorize officers of the Company to acquire additional offshore energy
support vessels, subject to an aggregate purchase price limit of $20.0 million
for all such acquisitions. Its current members are Messrs. Hvide (Chairman),
Blankley, and Calhoun.
54
<PAGE> 56
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the Chief Executive
Officer and each of the five most highly compensated executive officers whose
individual remuneration exceeded $100,000 for the year ended December 31, 1995
(the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ALL
NAME AND ANNUAL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) COMPENSATION(2)
- -------------------------------------------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
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 -- 9,871
Vice President -- Legal and General
Counsel
Andrew W. Brauninger........................ 110,000 20,000 659 10,674
Vice President -- Offshore Division
</TABLE>
- ------------------------------------
(1) Includes personal use of Company automobiles in the amounts of $4,286,
$3,399, $2,676, $709, and $659 for Messrs. Hvide, Farmer, Sweeney, Caldera,
and Brauninger, respectively.
(2) Consists of Company 401(k) contributions of $10,500 for each of Messrs.
Hvide, Farmer, Sweeney, Caldera, and Brauninger, and $8,890 for Mr. Douglas,
and Company life insurance premium payments of $1,091, $576, $540, $1,404,
$66, and $174 for Messrs. Hvide, Farmer, Sweeney, Caldera, Douglas, and
Brauninger, 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.
The following table contains information concerning stock options granted
to each of the Named Executives (other than Mr. Farmer) and Mr. Blankley in 1996
upon consummation of the IPO. All options were granted pursuant to the Hvide
Marine Incorporated Equity Ownership Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT ANNUAL RATES
TOTAL SHARES OF STOCK
SHARES UNDERLYING APPRECIATION FOR
UNDERLYING OPTIONS PER SHARE OPTION TERM(2)
OPTIONS GRANTED EXERCISE EXPIRATION ---------------------
NAME GRANTED(1) TO EMPLOYEES PRICE DATE 5% 10%
- -------------------------------- ---------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Erik Hvide................... 100,000 13.0 % $ 12.00 8/8/01 $331,538 $ 732,612
John H. Blankley................ 100,000 13.0 12.00 8/8/06 754,624 1,912,491
Eugene F. Sweeney............... 100,000 13.0 12.00 8/8/06 754,624 1,912,491
Donald L. Caldera............... 100,000 13.0 12.00 8/8/06 754,624 1,912,491
Gene Douglas.................... 28,000 3.6 12.00 8/8/06 211,309 535,497
Andrew W. Brauninger............ 25,000 3.2 12.00 8/8/06 188,668 478,123
</TABLE>
- ------------------------------------
(1) Options vest 25% per annum over four years.
(2) The dollar amounts are the result of calculations at specified rates of
appreciation and, therefore, are not intended to forecast possible future
appreciation.
55
<PAGE> 57
EQUITY OWNERSHIP PLANS
Long-Term Incentive Plan. The Company has reserved 1,000,000 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. Upon consummation of the IPO, options were granted to
63 employees to purchase 771,000 shares of Class A Common Stock at an exercise
price of $12 per share. Such options have ten-year terms, with the exception of
an option to purchase 100,000 shares which has a five-year term, and all such
options will vest 25% each year over four years.
Employee Stock Purchase Plan. The Company has reserved 500,000 shares of
Class A Common Stock for purchase over the next five years under its 1996
Employee Stock Purchase Plan. This plan permits employees to purchase stock at a
discount to market value and be eligible to receive favorable 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 granted to each
director who was not an employee 500 shares of Class A Common Stock per year
upon consummation of the IPO.
Additionally, the Company adopted a stock option plan for directors (the
"Directors Plan") and reserved 70,000 shares of Class A Common Stock for
issuance under that plan. In 1996, options to purchase 35,000 shares of Class A
Common Stock were issued under the Directors 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 granted to each director not employed
by the Company upon consummation of the IPO and pursuant to the Directors Plan,
an option to purchase 5,000 shares of Class A Common Stock at an exercise price
of $12 per share. Directors elected to the Board in the future will each be
granted an option to purchase 5,000 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 90 days after the date of the Prospectus without the written consent
of the Representatives.
56
<PAGE> 58
ANNUAL INCENTIVE PLAN
The Company has established an annual incentive plan under which key
members of management will be awarded cash payments based upon the achievement
of certain performance goals. Each year, the chief executive officer will
recommend to the Compensation Committee a list of participants and performance
goals for each proposed participant. The performance goals will consist of an
objective element, which will be based upon financial objectives relating to the
Company as a whole and/or a component of the Company, and a discretionary
element, which will be established by a participant's supervisor and may be
financial or non-financial in nature. Participants will be awarded cash payments
based upon the extent to which they have met or exceeded their performance
goals.
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
(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 only 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 for himself
and for his spouse, the use of an office and secretarial assistance, and a
payment of $2,000 per month 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.
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%), John Krumenacker (the Company's Controller) (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,
immediately prior to the IPO there remained outstanding $0.9 million principal
amount of HOS Notes, of which $0.3 million was repaid in cash with a portion of
the proceeds of the IPO and $0.2 million was exchanged for shares of Class A
57
<PAGE> 59
Common Stock valued at the IPO price. Accordingly, there remains outstanding a
$0.4 million balance on the HOS Notes which the Company intends to repay with a
portion of the proceeds of the Offering.
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. 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%), and Douglas (2.67%) were
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, immediately prior
to the IPO there remained outstanding $0.3 million principal amount of HCL
Notes, of which $0.1 million was repaid in cash with a portion of the proceeds
of the IPO. Accordingly, there remains outstanding a $0.2 million balance on the
HCL Notes which the Company intends to repay with a portion of the proceeds of
the Offering.
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 repaid $1.6 million of outstanding principal and accrued interest on the
Founder's Note with a portion of the proceeds from the IPO. Accordingly, there
remains a $2.0 million balance on the Founder's Note which the Company intends
to repay with a portion of the proceeds of the Offering.
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, were repaid upon the consummation of the IPO 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.
In September 1994, the Company issued to the Investor Group $25.0 million
aggregate principal amount of 12% Senior Notes due 2004 (the "Senior Notes") and
$25.0 million aggregate principal amount of 8% Junior Notes due 2014 (the
"Junior Notes") at discounts resulting in proceeds to the Company of
approximately $23.1 million and $17.5 million, respectively. In connection with
the issuance of the Senior Notes and the Junior Notes, the Company issued to
members of the Investor Group an aggregate of 452,518 shares of Class B Common
Stock and 313,215 shares of Class C Common Stock, and in connection with the
issuance of the Junior Notes agreed to issue to them up to 554,495 additional
shares of Common Stock (to be contributed by J. Erik Hvide and the Hvide Trusts)
to the extent necessary to earn a specified return on their investment. The
issuance of the Senior Notes and Common Stock issued in connection with the
Senior Notes resulted in total proceeds to the Company of $25.0 million, and the
issuance of Junior Notes and the Common Stock and CSIs (as defined herein)
issued in connection with the Junior Notes resulted in total proceeds to the
Company of $25.0 million. In addition, J. Erik Hvide and the Investor Group are
parties to an agreement
58
<PAGE> 60
granting them certain voting and approval rights, including the right to
nominate eight and three persons, respectively, to the Company's 11-member Board
of Directors. That agreement will terminate upon consummation of the Offering.
The Company repaid $0.7 million of accrued interest and $15.2 million of
principal of the Senior Notes with a portion of the proceeds of the IPO. The
outstanding principal amount of the Junior Notes not repaid with the proceeds of
the IPO was exchanged for shares of Class A Common Stock and Class B Common
Stock and certain shares of Class B Common Stock and all shares of Class C
Common Stock held by the Investor Group were converted into shares of Class A
Common Stock or Class B Common Stock. The Company made aggregate cash payments
on the Senior 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 for 1994. Following the IPO, the amount of the fee was reduced by the
compensation received by Messrs. Calhoun and Lee in their capacities as
directors of the Company. This fee arrangement will terminate upon consummation
of the Offering. For additional information concerning relationships and
transactions between the Company and the Investor Group, see
"Management -- Director Compensation and Options," "Description of Capital
Stock -- Shareholders Agreement," "-- Contingent Share Issuance Agreement," and
"-- Recapitalization Agreement."
The Investor Group is selling all of its shares of Common Stock (including
237,641 shares it will receive in connection with the termination of the CSI
Agreement) in the Offering. See "Principal and Selling Stockholders." In
addition, the remaining $10.2 million of accrued interest on and principal of
the Senior Notes, all of which are held by the Investor Group, will be repaid
with part of the proceeds of the Offering. See "Use of Proceeds."
Maritime Transport is the successor in interest to the entity which
developed and engineered and provides marketing services for 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 each of the years
ended December 31, 1993, 1994, and 1995, the Company made payments to Maritime
Transport of $0.2 million.
In November 1996, the Company took delivery of a 152-foot crew/supply boat,
named Seabulk St. Frances, which it purchased from J. Erik Hvide and the
Investor Group for a purchase price of approximately $2.2 million, which was
equal to their cost of the vessel.
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
currently 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.
59
<PAGE> 61
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock (i) immediately prior to the Offering after giving
effect to the conversion of 1,650,470 shares of Class B Common Stock currently
owned by the Selling Stockholders into an equal number of shares of Class A
Common Stock in connection with the closing of the Offering and the issuance of
237,641 shares of Class A Common Stock to the Selling Stockholders in connection
with the termination of the CSI Agreement at the closing of the Offering and the
transfer to the Company of an equal number of shares of Class B Common Stock by
the Hvide Family pursuant to the Shareholders Agreement and (ii) as adjusted to
give effect to the sale of 2,177,272 shares of Class A Common Stock by the
Selling Stockholders and the sale of 3,822,728 shares of Class A Common Stock by
the Company in the Offering, by (a) each Named Executive, (b) each director of
the Company, (c) 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, (d) each Selling Stockholder, and (e) 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, the provisions of the
Shareholders Agreement, and the information contained in the footnotes to the
table below.
<TABLE>
<CAPTION>
CLASS B
CLASS A COMMON STOCK COMMON STOCK COMMON STOCK
--------------------------------------------------- ------------ -------------------
SHARES
SHARES BENEFICIALLY PERCENTAGE
BENEFICIALLY OWNED NUMBER OWNED OF TOTAL
BEFORE OFFERING(1) OF AFTER OFFERING(1) VOTING POWER
-------------------- SHARES ------------------ SHARES -------------------
PERCENT BEING PERCENT BENEFICIALLY BEFORE AFTER
NAME NUMBER OF CLASS OFFERED NUMBER OF CLASS OWNED(1) OFFERING OFFERING
- ------------------------------------- --------- -------- --------- ------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J. Erik Hvide(2)..................... 2,000 * 2,000 * 1,531,466 61.6% 53.4%
Hvide Family Trust I(3).............. -- * -- -- * 1,259,108 50.7% 43.9%
Hvide Family Trust II(3)............. -- * -- -- * 95,410 3.8% 3.3%
Clipper/Park HMI, L.P.(4)............ 818,034 8.6% 818,034 -- * -- 3.3% *
Clipper/Hercules, L.P.(4)............ 456,107 4.8% 456,107 -- * -- 1.8% *
Clipper/Merban, L.P.(4).............. 327,214 3.4% 327,214 -- * -- 1.3% *
Clipper/Merchant HMI, L.P.(4)........ 399,034 4.2% 399,034 -- * -- 1.6% *
Clipper Capital Associates,
L.P.(4)............................ 2,037,856(5) 21.4% 37,467 -- * -- 8.2% *
Metropolitan Life Insurance
Company(4)......................... 71,820 * 71,820 -- * -- * *
Olympus Growth Fund II, L.P.(4)...... 67,596 * 67,596 -- * -- * *
John H. Blankley..................... 1,000 * -- 1,000 * -- * *
Eugene F. Sweeney.................... 8,098 * -- 8,098 * -- * *
Gene Douglas......................... 4,580 * -- 4,580 * -- * *
Donald L. Caldera.................... -- * -- -- * -- * *
Andrew W. Brauninger................. 7,895 * -- 7,895 * -- * *
Robert B. Calhoun, Jr................ 2,107,961(6) 22.1% -- 70,105 * -- 8.5% *
Gerald Farmer........................ 5,060 * -- 5,060 * -- * *
Jean Fitzgerald...................... 1,500 * -- 1,500 * -- * *
John Lee............................. 500 * -- 500 * -- * *
Walter C. Mink....................... 500 * -- 500 * -- * *
Robert Rice.......................... 2,500 * -- 2,500 * -- * *
Raymond B. Vickers................... 10,500 * -- 10,500 * -- * *
All executive officers and directors
as a group (18 persons)(5)......... 2,152,674 22.6% -- 114,818 * 1,531,466 70.3% 53.8%
</TABLE>
- ------------------------------------
* Less than one percent
(footnotes on following page)
60
<PAGE> 62
(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) Includes the shares held by Hvide Family Trust I and Hvide Family Trust II,
of which Mr. Hvide is the sole trustee.
(3) 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, Elsa Hvide Sowrey (now known
as Elsa Hvide Mumma), 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 Sowrey and her children, in which Mr. Hvide
has no economic interest.
(4) Member of the Investor Group, defined as the "Investor Shareholders" in the
Company's Articles of Incorporation. The Investor Group owns an aggregate of
359,266 shares of Class A Common Stock and 1,650,470 shares of Class B
Common Stock and will receive 237,641 shares of Class A Common Stock in
connection with the termination of the CSI Agreement at the time of the
closing of the Offering. Additionally, Mr. Calhoun will become the owner of
70,105 shares owned by the Investor Group. The address for Clipper Capital
Associates, L.P., Clipper/Hercules HMI, L.P., Clipper/Merban, L.P.,
Clipper/Merchant HMI, L.P., Clipper/Park HMI, L.P. is: c/o Clipper Capital
Associates, L.P., Eleven Madison Avenue, 26th Floor, New York, New York
10010. The address for Metropolitan Life Insurance Company is: 334 Madison
Avenue, P.O. Box 633, Convent Station, New Jersey 07961-0633. The address
for Olympus Growth Fund II, L.P. is: c/o Olympus Partners, Metro Center, One
Station Place, Stamford, Connecticut 06902.
(5) Consists of 37,467 shares owned by Clipper Capital Associates, L.P.
("Clipper Capital") and an aggregate of 2,000,389 shares held by
Clipper/Hercules, L.P., Clipper/Merban, L.P., Clipper/Merchant, L.P., and
Clipper/Park, L.P. (collectively, the "Clipper Limited Partnerships").
Clipper Capital is the general partner of the Clipper Limited Partnerships
and may be deemed to be the beneficial owner of the shares held by the
Clipper Limited Partnerships.
(6) Consists of 70,105 shares owned by the Investor Group to be distributed to
Mr. Calhoun prior to the completion of the Offering, 2,000,389 shares held
by the Clipper Limited Partnerships, and 37,467 shares held by Clipper
Capital. Mr. Calhoun is an officer, director, and stockholder of the
corporate general partner of Clipper Capital and may be deemed to be the
beneficial owner of the shares held by Clipper Capital and the Clipper
Limited Partnerships.
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. Copies of the definitive agreements setting forth
the terms of this indebtedness have been filed as exhibits to the Registration
Statement relating to the IPO. The following summaries of certain provisions 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.
THE CREDIT FACILITY
The Company's outstanding indebtedness under the Credit Facility was $70.2
million at September 30, 1996. The Credit Facility provides for a $60.5 million
term loan, a $10.0 million revolving line of credit, a $19.9 million vessel
acquisition credit line, 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. Advances under the vessel acquisition credit line are not
permitted to exceed either (i) 70% of the lesser of the purchase price or
appraised value of the vessel being acquired, or (ii) a multiple of six times
EBITDA of the acquisition, and the amount of available credit will decrease to
$11.5 million over a four-year period, during which time the Company will be
required to make quarterly installment payments equal to the reduction in the
available commitment.
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 approximately 8.5% at September 30, 1996.
Annual principal payments under the term loan will aggregate $2.0 million for
the remainder of 1996, $7.0 million in 1997, $9.0 million in 1998, $11.0 million
in 1999, $13.0 million in 2000, with the remaining $18.5 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.
61
<PAGE> 63
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, leverage ratios, levels of
liquidity, and cash flow ratios; (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. The limitation on mergers generally
prohibits mergers other than acquisitions funded by the Credit Facility or
otherwise meeting certain requirements for such acquisitions, including the
requirements described above.
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 or the inaccuracy of certain representations or warranties made under
the Credit Facility; (iii) 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 limits the Company's annual capital expenditures,
including capital expenditures respecting maintenance and improvements of
existing vessels, to $13.0 million without the consent of the lending banks.
This limitation excludes (i) acquisitions made with the $19.9 million vessel
acquisition credit line, (ii) additional indebtedness of $10.0 million that the
Company is permitted to incur outside the Credit Facility, (iii) acquisitions
financed with proceeds of the Offering, and (iv) the payment of amounts
necessary to retire the Senior Notes, the Junior Notes, and certain related
party notes.
The Company is currently seeking an amendment to the Credit Facility that
would, upon consummation of the Offering, (i) increase the amount available
under the revolving line of credit to $20.0 million, (ii) increase the amount
available under the vessel acquisition credit line to $50.0 million, (iii)
permit financing of 100% of the purchase price of a vessel with borrowings under
the vessel acquisition credit line, (iv) eliminate the limit on capital
expenditures, and (v) increase the limit on additional indebtedness to $30.0
million. There can be no assurance, however, that the banks will agree to an
amendment to the Credit Agreement on these or any other terms.
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
Magnachem, 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,
1996, the total remaining outstanding obligations of the Company under the
charters for the Seabulk Challenger and Seabulk Magnachem are $4.3 million and
$10.6 million, respectively. The Company's aggregate payments due under such
charters for 1997 and 1998 are $3.2 million and $3.3 million, respectively. 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 assumed 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 Title XI bonds 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
62
<PAGE> 64
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.
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.
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 relating to the IPO, 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.
The authorized capital stock of the Company consists of 100,000,000 shares
of Class A Common Stock, par value $.001 per share, of which 7,647,791 shares
are issued and outstanding, 5,000,000 shares of Class B Common Stock, par value
$.001 per share, of which 3,419,577 shares are issued and outstanding, and
10,000,000 shares of Preferred Stock, par value $1.00 per share, none of which
are issued and outstanding. In connection with the consummation of the Offering,
the Selling Stockholders will convert 1,650,470 shares of Class B Common Stock
into an equal number of shares of Class A Common Stock, and the Hvide Family
will contribute to the Company 237,641 shares of Class B Common Stock to replace
the 237,641 shares of Class A Common Stock to be issued by the Company to the
Investor Group in connection with the termination of the CSI Agreement at the
closing of the Offering. See "-- Contingent Share Issuance Agreement." Upon
consummation of the Offering, there will be issued and outstanding 13,358,630
shares of Class A Common Stock, 1,531,466 shares of Class B Common Stock, and no
shares of Preferred Stock. The Class A Common Stock and Class B 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.
63
<PAGE> 65
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" and
under "-- Certain Provisions of Articles of Incorporation and Bylaws," 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.
The Class B Common Stock can be owned only by (i) J. Erik Hvide and,
subject to certain limitations set forth in the Articles of Incorporation, any
person related to him by kinship or marriage, trusts or similar arrangements
established solely on the behalf of one or more of them, and partnerships and
other entities that are wholly owned by them (collectively, the "Hvide Family");
or (ii) the Investor Group and its affiliates. 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 will hold
100% of the outstanding Class B Common Stock. The Hvide Family will thus own
10.3% of the combined classes of Common Stock (9.7% if the Underwriters'
over-allotment option is exercised in full) and control 53.4% of the voting
power of such stock upon completion of the Offering (51.8% if the Underwriters'
over-allotment option is exercised in full) 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
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
64
<PAGE> 66
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. The Company may also issue
non-certificated shares through depositories if the Company determines such
depositories have established procedures that allow the Company to monitor the
ownership of Common Stock 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 title to not less than 75% of its stock is beneficially owned by and
vested in Citizens, free from any trust or fiduciary obligation in favor of
Non-Citizens, (c) of which not less than 75% of the voting power is vested in
Citizens, free from any contract or understanding through which it is arranged
that such voting power may be exercised directly or indirectly in behalf of
Non-Citizens, (d) of which there are no other means by which control is
conferred upon or permitted to be exercised by Non-Citizens, (e) whose president
or chief executive officer, chairman of the board of directors and all officers
authorized to act in their absence or disability are Citizens, and (f) of which
more than 50% of that number of its directors necessary to constitute 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 and controlled by, and vested in, Citizens, free and clear of
any trust or fiduciary obligation in favor of Non-Citizens; (iv) any association
(a) organized under the laws of the U.S., or a state, territory, district, or
possession thereof, (b) of which 100% of the members are Citizens, (c) whose
president, chief executive officer, or equivalent position, chairman of the
board of directors, or equivalent committee or body, and all persons authorized
to act in their absence or disability are Citizens, (d) of which not less than
75% of the voting power is beneficially owned by Citizens, free and clear of any
trust or fiduciary obligation in favor of Non-Citizens, and (e) of which more
than 50% of that number of its directors or equivalent persons necessary to
constitute a quorum are Citizens; (v) any 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 the membership interests
are beneficially owned by and vested in Citizens, free from any trust or
fiduciary obligation in favor of Non-Citizens, and the remaining membership
interests are beneficially owned by and vested in persons meeting the
requirements of 46 U.S.C. Sec.12102(a), (c) of which not less than 75% of the
voting power is vested in Citizens, free from any contract or understanding
through which it is arranged that such voting power may be exercised directly or
indirectly in behalf of Non-Citizens, (d) of which there are no other means by
which control is conferred upon or permitted to be exercised by Non-Citizens,
(e) whose president or other chief executive officer or equivalent position,
chairman of the board of directors or equivalent committee or body, managing
members (or equivalent), if any, and all persons authorized to act in their
absence or disability are citizens, free and clear of any trust or fiduciary
obligation in favor of any Non-Citizens, and (f) of which more than 50% of that
number of its directors or equivalent persons necessary to constitute a quorum
are Citizens; (vi) any joint venture, if not an association, corporation,
partnership, or limited liability company (a) organized under the laws of the
U.S., or a state, territory, district, or possession thereof, and (b) of which
100% of the equity is beneficially owned and vested in Citizens, free and clear
of any trust or fiduciary obligation in favor of any Non-Citizens; and (vii) 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, free and clear of any trust or fiduciary obligation in favor of any
Non-Citizens. The
65
<PAGE> 67
foregoing definition is applicable at all tiers of ownership and in both form
and substance at each tier of ownership.
Shares of Common Stock are transferable to Citizens at any time and are
transferable to Non-Citizens if, at the time of such transfer, the transfer
would not increase the aggregate 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 of 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.
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 stock certificates
representing shares of Common Stock (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 and, with respect to 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. Furthermore, as part of the dual stock
certificate system, depositories holding shares of the Company's Common Stock
will be required to maintain separate accounts for "Citizen" and "Non-Citizen"
shares. When the beneficial ownership of such shares is transferred, the
depositories' participants 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
66
<PAGE> 68
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 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.
67
<PAGE> 69
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, upon consummation of the Offering, the Hvide
Family, as the holder 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,"
the holders of the Class A Common Stock and Class B Common Stock vote together
as a class, with each share of Class A Common Stock entitled to one vote and
each share of Class B Common Stock entitled to ten votes. Neither class has
cumulative voting rights. As a result of its ownership of Class B Common Stock,
the Hvide Family will, upon consummation of the Offering, have the ability to
elect all of the members of the Company's Board of Directors. In addition,
pursuant to the Articles of Incorporation, the Board of Directors is 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 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.
68
<PAGE> 70
CERTAIN PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
Rights of Approval. So long as the Investor Group owns at least 5% of the
Company's outstanding Class B Common Stock, subject to the following exception,
the following actions must be approved by holders of at least 95% of the Class B
Common Stock: (i) engagement of the Company or its subsidiaries in any material
new business; (ii) a merger involving the Company or a sale of all or
substantially all of the Company's assets; (iii) a recapitalization or voluntary
bankruptcy filing; (iv) a capital investment, acquisition, or asset sale in
excess of $5 million; (v) borrowings or issuances of securities in excess of $5
million; or (vi) amendment to the Articles of Incorporation reducing or
delegating the authority of the Board of Directors or affecting the rights of
holders of shares of Class B Common Stock. After September 30, 1999, however, a
merger or sale of substantially all of the Company's assets no longer will
require the approval of holders of 95% of the Class B Common Stock. In addition,
so long as the Investor Group owns at least 25% of the Company's outstanding
Class B Common Stock, the appointment of a new chief executive officer must be
approved by the holders of at least 75% of the Class B Common Stock. As the
Investor Group will own no shares of Common Stock following the Offering, these
provisions will no longer have any effect.
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."
RECAPITALIZATION AGREEMENT
The Company, the Investor Group, J. Erik Hvide, and the Hvide Trusts
entered into a recapitalization agreement (the "Recapitalization Agreement")
simultaneously with the execution of the underwriting agreement relating to the
IPO. Under the Recapitalization Agreement, immediately prior to the IPO, 74,704
shares of the 452,518 Class B Common Stock owned by the Investor Group were
converted into 74,704 shares of Class A Common Stock, the 313,215 shares of
Class C Common Stock owned by the Investor Group were converted into 229,062
shares of Class A Common Stock and 84,153 shares of Class B Common Stock and the
663,415 shares of Class C Common Stock owned by J. Erik Hvide and the Hvide
Trusts were converted into 663,415 shares of Class B Common Stock. In addition,
under the Recapitalization Agreement, $31.0 million of the proceeds of the IPO
was used to repay $15.9 million of principal and accrued but unpaid interest on
the Senior Notes and $15.1 million of the principal and accrued but unpaid
interest on the Junior Notes. Under the Recapitalization Agreement, the $13.9
million of remaining outstanding principal amount of the Junior Notes following
application of the proceeds of the IPO was converted into an aggregate of 55,500
shares of Class A Common Stock and 1,188,502 shares of Class B Common Stock. The
parties are also parties
69
<PAGE> 71
to a shareholders agreement and a contingent share issuance agreement, each as
described below. These agreements will terminate following the Offering.
SHAREHOLDERS AGREEMENT
In connection with the September 30, 1994 issuance of the Senior Notes and
the Junior Notes the Company, J. Erik Hvide, the Hvide Trusts, and the Investor
Group entered into an agreement granting certain voting and approval rights to
the Investor Group and the Hvide Family. Immediately prior to the IPO, that
agreement was terminated and Mr. Hvide, the Hvide Trusts, and the Investor Group
entered into a new agreement (the "Shareholders Agreement") that currently
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. In addition, J. Erik Hvide and the Hvide Trusts must vote their
shares to elect the three Investor Group nominees. 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 Primary Economic Interest (as defined in the
Shareholders Agreement) 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.
Right of First Refusal. Mr. Hvide (together with the Hvide Trusts) and the
Investor Group, respectively, have granted a right of first refusal for each to
purchase the other's stock in certain circumstances.
Share Adjustment. The Investor Group has agreed that, if following the
issuance of the CSIs (as defined 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 one vote majority over the Investor Group.
The Shareholders Agreement will terminate upon consummation of the
Offering.
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 and restated pursuant to the Recapitalization Agreement
(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. Mr. Hvide and the Hvide Trusts 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 June 10, 1997 (300 days
following completion of the IPO). 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
70
<PAGE> 72
preceding June 10, 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.
Accordingly, as calculated pursuant to such formulas, the maximum number of
shares of Class A Common Stock issuable with respect to the first and second
series of CSIs is 237,641 and 316,855 shares, respectively.
The Investor Group and the Company have agreed that the Investor Group will
receive all 237,641 shares of Class A Common Stock issuable under the first
series of CSIs and no shares of Common Stock under the second series of CSIs. J.
Erik Hvide and the Hvide Trusts will contribute a like number of shares of Class
B Common Stock to the Company to replace such shares. All the shares of Class A
Common Stock received by the Investor Group pursuant to the CSI Agreement are
being sold in this Offering. The Contingent Share Issuance Agreement will
terminate upon consummation of the Offering.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, LLC, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, 13,358,630 shares of Class A Common Stock
and 1,531,466 shares of Class B Common Stock will be outstanding, of which the
6,000,000 shares of Class A Common Stock offered hereby (assuming the
Underwriters' over-allotment option is not exercised) and the 7,159,000 shares
sold in the IPO 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 1,646,284 shares of
Common Stock to be beneficially owned by the Company's executive officers and
directors following the completion of the Offering, 1,617,117 are currently
eligible for resale under Rule 144, subject to volume and other restrictions
under Rule 144.
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 intermediaries, controls, is controlled by, or is
under common control with, such issuer.
The Company's executive officers and directors, who collectively are the
beneficial owners of an aggregate of 114,818 shares of Class A Common Stock and
1,531,466 shares of Class B Common Stock in the aggregate (less than 1% of the
Class A Common Stock and 100.0% of the Class B Common Stock upon completion of
the Offering, or 53.8% 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 sell, or otherwise dispose
of, any of their shares of Common Stock for a period of 90 days after the date
of this Prospectus, without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation.
71
<PAGE> 73
The Company has filed a Registration Statement on Form S-8 covering an
aggregate of 1,570,000 shares of Class A Common Stock reserved for issuance
under the Company's Equity Ownership Plan, Employee Stock Purchase Plan, and
Directors Plan. Shares issued under such plans, or issued upon exercise of
options granted under such plans, will be eligible for sale by non-affiliates in
the public market without limitation and by affiliates subject to the provisions
of Rule 144, except for the holding period limitation of Rule 144, subject to
the terms of the lock-up agreements described above.
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."
72
<PAGE> 74
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholders, and
each of the underwriters named below (the "Underwriters"), the Company and the
Selling Stockholders have 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 and the Selling Stockholders an aggregate of 6,000,000 shares of
Class A Common Stock. The number of shares of Class A Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
---------------------------------------------------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......
Howard, Weil, Labouisse, Friedrichs Incorporated..........
------
Total........................................... 6,000,000
======
</TABLE>
The Underwriters are obligated 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.
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock are subject to certain conditions precedent.
The Representatives have advised the Company and the Selling Stockholders
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 $0.10 per share on sale to certain other
dealers. After the initial 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 900,000 additional shares of Class A Common
Stock, at the 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 bears to the total number of shares to be purchased
initially by the Underwriters.
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.
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.
73
<PAGE> 75
In connection with the Offering, the Company's officers and directors and
certain of its stockholders, have agreed that, during a period of 90 days from
the date of this Prospectus, such holders will not, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation, directly or
indirectly, offer, sell, grant any option with respect to, pledge, hypothecate,
or otherwise dispose of, any shares of Common Stock. In addition, the Company
has agreed that, during a period of 90 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 or Class
B 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." See "Shares Eligible for Future Sale."
In connection with the offering, certain Underwriters and selling group
members may engage in passive market making transactions in the Class A Common
Stock on the Nasdaq National Market immediately prior to the commencement of
sales, in accordance with Rule 10b-6A under the Exchange Act. Passive market
making consists of, among other things, displaying bids on the Nasdaq National
Market limited by the bid prices of independent market makers and purchases
limited by such prices and effected in response to order flow. Net purchases by
a passive market maker on each day are limited to a specified percentage of the
passive market maker's average daily trading volume in the Class A Common Stock
during a specified prior period, and all passive market making activity must be
discontinued when such limit is reached. Passive market may stabilize the market
price of the Class A Common Stock at a level above that which might otherwise
prevail and, if commenced, may be discontinued at any time.
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 PC, 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 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.
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.
74
<PAGE> 76
AVAILABLE 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 Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith files periodic
reports, proxy statements, and other information with the Commission relating to
its business, financial statements, and other matters. The Registration
Statement (including the exhibits and schedules thereto) as well as such
reports, proxy statements, and other information, 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. Such documents may also be obtained
through the website maintained by the Commission at http://www.sec.gov. In
addition, reports and other information concerning the Company are available for
inspection and copying at the offices of the Nasdaq Stock Market at 1735 K
Street, Washington, D.C., 20006-1506.
75
<PAGE> 77
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED):
Pro Forma Condensed Consolidated Statement of Operations for the Nine Months Ended
September 30, 1996 (unaudited)..................................................... F-2
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December
31, 1995 (unaudited)............................................................... F-5
HVIDE MARINE INCORPORATED AND SUBSIDIARIES:
Report of Independent Certified Public Accountants................................... F-8
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)........................................................................ F-9
Consolidated Statements of Operations for the Three Years Ended December 31, 1995 and
for the Nine Months Ended September 30, 1995 and 1996 (unaudited).................. F-10
Consolidated Statements of Stockholders' Equity for the Three Years Ended December
31, 1995 and for the Nine Months Ended September 30, 1996 (unaudited).............. F-11
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1995 and
for the Nine Months Ended September 30, 1995 and 1996 (unaudited).................. F-12
Notes to Consolidated Financial Statements........................................... F-13
OMI CHEMICAL CARRIER GROUP:
Independent Auditors' Report......................................................... F-26
Combined Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996
(unaudited)........................................................................ F-27
Combined Statements of Operations and Deficit for the Three Years Ended December 31,
1995 and for the Six Months Ended June 30, 1995 and June 30, 1996 (unaudited)...... F-28
Combined Statements of Cash Flows for the Three Years Ended December 31, 1995 and for
the Six Months Ended June 30, 1995 and June 30, 1996 (unaudited)................... F-29
Notes to Combined Financial Statements............................................... F-30
SEAL FLEET VESSELS:
Independent Auditors' Report......................................................... F-35
Combined Statements of Vessel Operations for the Three Years Ended December 31, 1995
and for the Six Months Ended June 30, 1995 and 1996 (unaudited).................... F-36
Notes to Combined Financial Statements............................................... F-37
Independent Auditors' Report......................................................... F-39
Statements of Assets to be Sold as of December 31, 1993, 1994, and 1995 and June 30,
1995 and 1996 (unaudited).......................................................... F-40
Statements of Vessel Operations for the Three Years Ended December 31, 1995 and for
the Six Months Ended June 30, 1995 and 1996 (unaudited)............................ F-41
Notes to Financial Statements........................................................ F-42
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.:
Report of Independent Certified Public Accountants................................... F-44
Statement of Assets to be Sold as of September 30, 1994 and 1995 and December 31,
1995 (unaudited)................................................................... F-45
Statements of Vessel Operations for the Two Years Ended September 30, 1995 and for
the Three Months Ended December 31, 1994 and 1995 (unaudited)...................... F-46
Notes to Financial Statements........................................................ F-47
</TABLE>
F-1
<PAGE> 78
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The pro forma condensed consolidated statements of operations for the year
ended December 31, 1995 and the nine months ended September 30, 1996 give effect
to the acquisitions of the three OMI Chemical Carriers and the eight Seal Fleet
Vessels in August 1996, the eight GBMS vessels in January 1996 and one vessel in
February 1996, and the IPO as if all such transactions had occurred on January
1, 1995 and 1996, respectively. The pro forma financial information is presented
for illustrative purposes only and does not purport to represent what the
Company's results actually would have been if such events had occurred at the
dates indicated, nor does such information purport to project the results of
operations for any future period or as of any future date. The pro forma
condensed consolidated financial information 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 "Business -- The
Current Acquisitions."
F-2
<PAGE> 79
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO COMPANY PRO
COMPANY OMI FORMA FORMA
AS CHEMICAL SEAL ROYAL ADJUST- CONDENSED
REPORTED CARRIERS(A) FLEET(A)(B) GBMS(C) RUNNER(C) OSTC(C) ELIMINATIONS MENTS CONSOLIDATED
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $ 72,130 $12,262 $ 5,021 $ 296 $57 $34,066 $(27,548)(1) $4,762 (2) $ 101,046
Operating
expenses....... 42,089 8,227 2,253 174 29 33,034 (27,548)(1) 3,431 (2) 61,689
Overhead
expenses....... 11,049... 414 44 674 41 (2) 12,222
Depreciation and
amortization... 6,115 2,560 196 14 110 2,130 (3) 11,125
---------- ------- ------ ---- --- ------- -------- ------ -------
Income (loss)
from
operations..... 12,877 1,061 2,572 64 28 248 (840) 16,010
Net interest..... 8,751.... 1,995 27 (1,739) (4) 9,034
Other income
(expense):
Minority
interest
and equity
in
subsidiaries... 721 721
Other........ (522) (522)
---------- ------- ------ ---- --- ------- -------- ------ -------
Total
other
income
(expense)... 199 199
---------- ------- ------ ---- --- ------- -------- ------ -------
Income before
income taxes... 4,325 (934) 2,572 64 28 221 899 7,175
Provision
(benefit) for
income taxes... 1,616.... (326) 54 1,311 (5) 2,655
---------- ------- ------ ---- --- ------- -------- ------ -------
Net income (loss)
before
non-recurring
items directly
attributable to
the
transaction.... $ 2,709 $ (608) $ 2,572 $ 64 $28 $ 167 $ $ (412) $ 4,520
========== ======= ====== ==== === ======= ======== ====== =======
Earnings per
common share
and common
share
equivalents.... $ 0.68 $ 0.41
========== =======
Weighted average
number of
common shares
and common
share
equivalents
outstanding.... 4,017,796 11,063,867
========== =======
</TABLE>
- ---------------
(a)Amounts represent the results of operations for the period January 1, 1996 to
June 30, 1996.
(b)Represents the combined statements of vessel operations of assets to be sold
for Seal Fleet, Inc. and the Seal Partners, (Indian Seal Partners, Ltd.,
Baffin Seal Partners, Ltd., Baltic Seal Partners, Ltd., Bengal Seal Partners,
Ltd., and Ross Seal Partners, Ltd.)
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------
SEAL FLEET, SEAL SEAL
INC. PARTNERS FLEET
<S> <C> <C> <C>
Revenues......................................................................... $ 1,806 $3,215 $5,021
Operating expenses............................................................... 909 1,344 2,253
Depreciation and amortization.................................................... 196 196
---- ------ ------
Income from operations........................................................... $ 701 $1,871 $2,572
==== ====== ======
</TABLE>
(c)Amounts represent the results of operations for the period January 1, 1996
through the date of acquisition of January 31, 1996 for GBMS, February 9,
1996 for Royal Runner, and August 14, 1996 for OSTC.
F-3
<PAGE> 80
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<S> <C> <C>
(1) Elimination of historical revenue and expense associated with OSTC charter hire of vessels from Hvide
and OMI............................................................................................... $27,548
=======
(2) Reflects the adjustments for the historical results of operations for the period from July 1, 1996 to August
14, 1996 for the OMI Chemical Carriers and the Seal Fleet Vessels. Historical operating and overhead expenses,
for the period January 1, 1996 through the acquisition dates, are adjusted for insurance expense based upon
quotations received from the Company's insurance underwriters; adjustments to drydocking expense to reflect the
Company's deferral method; elimination of operating lease expense on acquired OMI vessels financed by Hvide;
and adjustments to reflect incremental corporate overhead and employee salaries and benefits in accordance with
management's plans with respect to the Seal Fleet Vessels and reduction of historical overhead expenses related
to the integration of the OMI Chemical Carriers, and the GBMS vessels into the Company's operations.
</TABLE>
<TABLE>
<CAPTION>
OMI
CHEMICAL SEAL
CARRIERS FLEET GBMS TOTAL
<S> <C> <C> <C> <C>
Revenues:
Historical revenues................................................... $3,321 $1,441 $ $4,762
Operating Expenses:
Historical operating expenses......................................... $1,058 $1,306 $2,364
Insurance............................................................. (406) 24 30 (352)
Maintenance & Repair.................................................. 410 410
Drydocking............................................................ 1,764 1,764
Operating lease expense............................................... (755) (755)
------ ------ ---- ------
$2,071 $1,330 $30 $3,431
====== ====== ==== ======
Overhead Expenses:
Historical overhead expenses.......................................... $ 145 $ $ $ 145
Salaries and benefits................................................. 93 112 (19) 186
Other................................................................. (304) 31 (17) (290)
------ ------ ---- ------
$ (66) $ 143 $(36) $ 41
====== ====== ==== ======
(3) The adjustment to depreciation and amortization is comprised of:
Depreciation adjustment to reflect the historical depreciation for the period from July 1, 1996 to
August 14, 1996(a)..................................................................................... $ 754
Depreciation adjustment to reflect the Company's policies applied to the acquired cost of the vessels
of:
OMI.................................................................................................... 417
Seal Fleet............................................................................................. 971
GBMS (acquired January 31, 1996)....................................................................... 4
Royal Runner (acquired February 9, 1996)............................................................... 6
------
1,398
Amortization Adjustments related to the IPO:
Deferred loan costs amortization-Junior Notes.......................................................... (24)
Deferred loan costs amortization-Senior Notes.......................................................... (33)
New money fee for the Seal Fleet acquisition........................................................... 9
Commitment fee......................................................................................... 10
Revolver fee........................................................................................... 16
------
(22)
------
$2,130
======
</TABLE>
- ---------------
(a) Includes historical depreciation for OMI Chemical Carriers of $707,000
and Seal Fleet of $47,000.
<TABLE>
<S> <C> <C>
(4) The adjustment of net interest expense is comprised of:
Historical interest for the period from July 1, 1996 to August 14, 1996 for OMI....................... $ 2,146
Interest expense on additional borrowings pursuant to the OMI acquisition............................. 350
Interest expense on assumed Title XI debt from OMI.................................................... (2,352)
Interest expense on OMI Star debt..................................................................... 339
Interest expense on additional borrowings pursuant to the Seal Fleet acquisition...................... 393
Interest expense on additional borrowings pursuant to the GBMS acquisition............................ 23
Interest expense on Royal Runner debt................................................................. 11
Reduction of interest expense due to the repayment of Junior Notes.................................... (1,460)
Reduction of interest expense due to the repayment of Senior Notes.................................... (1,167)
Reduction of interest expense due to the repayment of other subordinated notes........................ (85)
Commitment fee on acquisition line of credit.......................................................... 63
-------
$(1,739)
=======
(5) Adjustment for historical income taxes for the period from July 1, 1996 to August 14, 1996............ $ (258)
To adjust pro forma income taxes to combined federal and state statutory rates........................ 1,569
-------
$ 1,311
=======
</TABLE>
F-4
<PAGE> 81
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------------------
COMPANY OMI PRO FORMA
AS CHEMICAL SEAL ROYAL ELIMINA- ADJUST-
REPORTED CARRIERS FLEET(A) GBMS RUNNER OSTC TIONS MENTS
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 70,562 $26,099 $8,650 $3,287 $651 $57,577 $(43,841)(1) $
Operating expenses................. 40,664 29,141 4,500 2,209 243 56,064 (43,841)(1) (12,669)(2)
Overhead expenses.................. 12,518 848 469 74 1,205 (95)(2)
Depreciation and amortization...... 6,308 3,355 498 195 145 166 2,063(3)
--------- ------- ------ ------ ---- ------- -------- --------
Income (loss) from operations...... 11,072 (7,245) 3,652 414 189 142 10,701
Net interest....................... 11,460 2,160 95 68 (1,471)(4)
Other income (expense):
Minority interest and equity in
subsidiaries................. 137
Other.......................... (111) 167 (3)
--------- ------- ------ ------ ---- ------- -------- --------
Total other income
(expense)................ 26 167 (3)
--------- ------- ------ ------ ---- ------- -------- --------
Income before income taxes......... (362) (9,238) 3,652 414 94 71 12,172
Provision (benefit) for income
taxes............................ (2) (3,234) 21 5,664(5)
--------- ------- ------ ------ ---- ------- -------- --------
Net income (loss) from continuing
operations before non-recurring
items directly attributable to
the transaction.................. $ (360) $(6,004) $3,652 $ 414 $ 94 $ 50 $ $ 6,508
========= ======= ====== ====== ==== ======= ======== ========
Earnings (loss) per common share... $ (0.14)
=========
Weighted average number of common
shares and common share
equivalents outstanding.......... 2,534,840
=========
COMPANY
PRO FORMA
CONDENSED
CONSOLIDATED
<S> <C>
Revenues........................... $ 122,985
Operating expenses................. 76,311
Overhead expenses.................. 15,019
Depreciation and amortization...... 12,730
----------
Income (loss) from operations...... 18,925
Net interest....................... 12,312
Other income (expense):
Minority interest and equity in
subsidiaries................. 137
Other.......................... 53
----------
Total other income
(expense)................ 190
----------
Income before income taxes......... 6,803
Provision (benefit) for income
taxes............................ 2,449
----------
Net income (loss) from continuing
operations before non-recurring
items directly attributable to
the transaction.................. $ 4,354
==========
Earnings (loss) per common share... $ 0.40
==========
Weighted average number of common
shares and common share
equivalents outstanding.......... 10,904,868
==========
</TABLE>
- ---------------
(a)Represents the combined statements of vessel operations of assets to be sold
for Seal Fleet, Inc. and the Seal Partners, (Indian Seal Partners, Ltd.,
Baffin Seal Partners, Ltd., Baltic Seal Partners, Ltd., Bengal Seal Partners,
Ltd., and Ross Seal Partners, Ltd.).
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------
SEAL SEAL SEAL
FLEET, INC. PARTNERS FLEET
<S> <C> <C> <C>
Revenues......................................................................... $ 3,267 $5,383 $8,650
Operating expenses............................................................... 1,723 2,777 4,500
Depreciation and amortization.................................................... 498 498
------ ------ ------
Income from operations........................................................... $ 1,046 $2,606 $3,652
====== ====== ======
</TABLE>
See notes to the pro forma condensed consolidated financial statements
F-5
<PAGE> 82
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<S> <C> <C>
(1) Elimination of historical revenue and expense associated with OSTC charter
hire of vessels from Hvide and OMI......................................... $43,841
=======
</TABLE>
(2) 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 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 vessel; 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
CARRIERS FLEET GMBS TOTAL
<S> <C> <C> <C> <C>
Operating Expenses:
Insurance...................................... $ (598) $ 8 $ (80) $ (670)
Drydocking..................................... (1,145) (1,145)
Operating lease expense........................ (7,557) (7,557)
Provision for lease penalties.................. (3,297) (3,297)
-------- ---- ----- --------
$(12,597) $ 8 $ (80) $(12,669)
======== ==== ===== ========
Overhead Expenses:
Salaries and benefits.......................... $ 247 $ 447 $(245) $ 449
Other.......................................... (544) 124 (124) (544)
-------- ---- ----- --------
$ (297) $ 571 $(369) $ (95)
======== ==== ===== ========
</TABLE>
(3) The adjustment to depreciation and amortization is comprised of:
<TABLE>
<S> <C>
Depreciation adjustment to reflect the Company's policies applied to the acquired
cost of the vessels of:
OMI(a).................................................................... $1,094
Seal Fleet................................................................ 1,009
GBMS...................................................................... 23
Royal Runner.............................................................. (70)
------
2,056
Amortization Adjustment:
Deferred loan costs amortization -- Junior Notes....................... (32)
Deferred loan costs amortization -- Senior Notes....................... (52)
New money fee for the Seal Fleet acquisition........................... 17
Commitment fee......................................................... 48
Revolver fee........................................................... 26
------
7
------
$2,063
======
</TABLE>
- ---------------
(a) Includes depreciation on an OMI vessel historically under an operating
lease.
F-6
<PAGE> 83
(4) The adjustment of net interest expense is comprised of:
<TABLE>
<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...................................................... 638
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............................................................ (1,775)
Reduction of interest expense due to the repayment of Credit
Facility......................................................... (63)
Reduction of interest expense due to the repayment of other
subordinated notes............................................... (665)
Commitment fee on acquisition line of credit....................... 130
-------
$(1,471)
=======
</TABLE>
-----------------------
(a) Reflects a full year of interest expense on Title XI debt that was
outstanding for a partial year for OMI.
<TABLE>
<S> <C> <C>
(5) To adjust pro forma income taxes to combined federal and state $5,664
statutory rates........................................................
</TABLE>
F-7
<PAGE> 84
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 second
paragraph of Note 10, as to which
the date is May 10, 1996.
F-8
<PAGE> 85
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
(UNAUDITED)
(IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $ 6,363 $ 3,050 $ 5,598
Escrow deposit............................................................... 500 -- --
Accounts receivable:
Trade, net............................................................... 7,862 9,602 15,469
Insurance claims and other............................................... 1,292 4,399 2,046
Due from affiliate........................................................... 547 101 --
Spare parts and supplies..................................................... 3,375 3,417 5,137
Prepaid expenses............................................................. 784 960 944
Deferred costs (net)......................................................... 1,523 2,550 4,440
-------- -------- --------
Total current assets..................................................... 22,246 24,079 33,634
Property:
Construction in progress..................................................... 1,646 1,387 4,250
Vessels and improvements..................................................... 110,542 122,198 222,719
Less accumulated depreciation............................................ (16,040) (20,585) (24,641)
Furniture and equipment...................................................... 2,054 2,601 3,494
Less accumulated depreciation............................................ (827) (998) (1,294)
-------- -------- --------
Net property............................................................. 97,375 104,603 204,528
Other assets:
Deferred costs (net)......................................................... 4,422 4,112 5,841
Due from affiliates.......................................................... 109 131 255
Investment in affiliates..................................................... 574 423 1,112
Goodwill (net)............................................................... 9,586 9,117 8,738
Long-term receivable (net)................................................... 785 831 45
Other........................................................................ 374 387 463
-------- -------- --------
Total other assets....................................................... 15,850 15,001 16,454
-------- -------- --------
Total.................................................................... $135,471 $143,683 $ 254,616
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt......................................... $ 4,779 $ 7,708 $ 17,108
Current obligations under capital leases..................................... 521 577 3,065
Accounts payable............................................................. 4,681 4,905 3,197
Charter hire and other liabilities........................................... 4,472 6,574 10,369
-------- -------- --------
Total current liabilities................................................ 14,453 19,764 33,739
Long-term liabilities:
Long-term debt............................................................... 93,700 96,014 100,533
Notes payable to related parties............................................. 1,302 1,302 177
Obligations under capital leases............................................. 3,979 3,450 13,434
Due to charterer............................................................. 547 547 891
Deferred income taxes........................................................ 4,319 4,317 3,477
Other........................................................................ 2,268 4,290 3,438
-------- -------- --------
Total long-term liabilities.............................................. 106,115 109,920 121,950
-------- -------- --------
Total liabilities........................................................ 120,568 129,684 155,689
Minority partners' equity in subsidiaries........................................ 2,198 1,654 1,003
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1.00 par value -- authorized 10,000,000 shares, issued and
outstanding, none.......................................................... -- -- --
Class A Common Stock -- $.001 par value, authorized 100,000,000 shares,
issued and outstanding, 0, 0, and 7,644,291................................ -- -- 8
Class B Common Stock -- $.001 par value, authorized 5,000,000 shares, issued
and outstanding, 1,558,210, 1,558,210 and 3,419,577........................ 1 1 3
Class C Common Stock -- $.001 par value, authorized 2,500,000 shares, issued
and outstanding, 976,630, 976,630, and 0................................... 1 1 --
Additional paid-in capital................................................... 6,341 6,341 97,218
Retained earnings............................................................ 6,362 6,002 695
-------- -------- --------
Total stockholders' equity............................................... 12,705 12,345 97,924
-------- -------- --------
Total minority partners' equity in subsidiaries and stockholders'
equity................................................................. 14,903 13,999 98,927
-------- -------- --------
Total.................................................................... $135,471 $143,683 $ 254,616
======== ======== ========
</TABLE>
See notes to consolidated financial statements
F-9
<PAGE> 86
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------- -----------------
1993 1994 1995 1995 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues................................................................ $41,527 $49,792 $70,562 $51,194 $72,130
Operating expenses:
Crew payroll and benefits........................................... 11,238 13,510 20,132 14,794 19,968
Charter hire and bond guarantee fee................................. 4,037 5,013 4,063 2,967 3,386
Repairs and maintenance............................................. 3,024 3,847 5,347 3,984 5,848
Insurance........................................................... 2,365 2,991 4,547 3,157 4,957
Consumables......................................................... 1,770 2,237 3,395 2,476 4,196
Other............................................................... 1,598 2,275 3,180 2,104 3,734
------- ------- ------- ------- -------
Total operating expenses........................................ 24,032 29,873 40,664 29,482 42,089
Selling, general and administrative expenses:
Salaries and benefits............................................... 3,202 4,649 6,856 5,130 5,903
Office expenses..................................................... 633 819 1,068 784 989
Professional fees................................................... 1,268 2,645 2,137 1,748 2,137
Other............................................................... 1,073 1,468 2,457 1,505 2,020
------- ------- ------- ------- -------
Total overhead expenses......................................... 6,176 9,581 12,518 9,167 11,049
Depreciation and amortization........................................... 4,735 4,500 6,308 4,691 6,115
------- ------- ------- ------- -------
Income from operations.................................................. 6,584 5,838 11,072 7,854 12,877
Interest:
Interest expense.................................................... 3,606 5,614 11,748 8,718 8,949
Interest income..................................................... (194) (312) (288) (227) (198)
------- ------- ------- ------- -------
Net interest.................................................... 3,412 5,302 11,460 8,491 8,751
Other income (expense):
Minority interest and equity in earnings of subsidiaries............ (960) (115) 137 153 721
Other............................................................... 1,479 126 (111) (97) (522)
------- ------- ------- ------- -------
Total other income (expense).................................... 519 11 26 56 199
------- ------- ------- ------- -------
Income (loss) before provision for (benefit from) income taxes,
extraordinary item and cumulative effect of a change in accounting
principle............................................................. 3,691 547 (362) (581) 4,325
Provision for (benefit from) income taxes............................... 1,873 189 (2) -- 1,616
------- ------- ------- ------- -------
Income (loss) before extraordinary item and cumulative effect of a
change in accounting principle........................................ 1,818 358 (360) (581) 2,709
------- ------- ------- ------- -------
Loss on early extinguishment of debt, net of applicable income taxes of
$1,405................................................................ -- -- -- -- 8,016
Cumulative effect (to January 1, 1993) of change in drydocking method... 1,491 -- -- -- --
------- ------- ------- ------- -------
Net income (loss)............................................... $ 3,309 $ 358 $ (360) $ (581) $(5,307)
======= ======= ======= ======= =======
Earnings (loss) per common and common equivalent share:
Income (loss) applicable to common shares before extraordinary item and
cumulative effect of a change in accounting principle................. $ 0.26 $ 0.03 $ (0.14) $ (0.23) $ 0.68
Loss on early extinguishment of debt.................................... -- -- -- -- (2.00)
Cumulative effect (to January 1, 1993) of change in drydocking method... 0.24 -- -- -- --
------- ------- ------- ------- -------
Net income (loss) applicable to common shares................... $ 0.50 $ 0.03 $ (0.14) $ (0.23) $ (1.32)
======= ======= ======= ======= =======
Earnings per common share -- assuming full dilution:
Income (loss) applicable to common shares before extraordinary item and
cumulative effect of a change in accounting principle................. $ 0.26 $ 0.06 $ 0.12 $ -- $ 0.64
Loss on early extinguishment of debt.................................... -- -- -- -- (1.59)
Cumulative effect (to January 1, 1993) of change in drydocking method... 0.24 -- -- -- --
------- ------- ------- ------- -------
Net income (loss) applicable to common shares................... $ 0.50 $ 0.06 $ 0.12 $ -- $ (0.95)
======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
F-10
<PAGE> 87
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CLASS C
11% 5% CLASS A CLASS B COMMON
CLASS A CLASS B COMMON STOCK COMMON STOCK STOCK
PREFERRED PREFERRED --------------------- ------------------- --------
STOCK STOCK SHARE AMOUNT SHARE AMOUNT SHARE
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
Balance at January 1, 1993 as previously
reported.................................. $ 2,669 $ 3,266 16,302,946 $ 19 -- $-- --
Effect of recapitalization (see Note 1)..... -- -- (16,302,946) (19) 1,105,692 1 633,415
--------- --------- ----------- ------ --------- ------ --------
Balance at January 1, 1993, as restated..... 2,669 3,266 -- -- 1,105,692 1 633,415
Net income.................................. -- -- -- -- -- -- --
Preferred stock cash dividends.............. -- -- -- -- -- -- --
--------- --------- ----------- ------ --------- ------ --------
Balance at December 31, 1993................ 2,669 3,266 -- -- 1,105,692 1 633,415
Net income.................................. -- -- -- -- -- -- --
Common stock issued, net of issuance
costs..................................... -- -- -- -- 452,518 -- 313,215
Redemption of preferred stock............... (2,669) (3,266) -- -- -- -- --
Acquisition of limited partnership
interests................................. -- -- -- -- -- -- --
Preferred stock cash dividends.............. -- -- -- -- -- -- --
--------- --------- ----------- ------ --------- ------ --------
Balance at December 31, 1994................ -- -- -- -- 1,558,210 1 976,630
Net loss.................................... -- -- -- -- -- -- --
--------- --------- ----------- ------ --------- ------ --------
Balance at December 31, 1995................ -- -- -- -- 1,558,210 1 976,630
Net loss.................................... -- -- -- -- -- -- --
Common Stock issued, net of issuance
costs..................................... -- -- 7,644,291 8 1,861,367 2 (976,630)
--------- --------- ----------- ------ --------- ------ --------
Balance at September 30, 1996 (unaudited)... $ -- $ -- 7,644,291 $ 8 3,419,577 $3 --
======= ======= =========== ====== ========= ====== ========
ADDITIONAL
PAID-IN RETAINED TREASURY
AMOUNT CAPITAL EARNINGS STOCK TOTAL
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993 as previously
reported.................................. $ -- $ 1,008 $ 9,381 $ (5,935) $10,408
Effect of recapitalization (see Note 1)..... 1 17 (5,935) 5,935 --
------ ---------- -------- -------- -------
Balance at January 1, 1993, as restated..... 1 1,025 3,446 -- 10,408
Net income.................................. 3,309 -- 3,309
Preferred stock cash dividends.............. (366) -- (366)
------ ---------- -------- -------- -------
Balance at December 31, 1993................ 1 1,025 6,389 -- 13,351
Net income.................................. -- -- 358 -- 358
Common stock issued, net of issuance
costs..................................... -- 8,640 -- -- 8,640
Redemption of preferred stock............... -- (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 6,341 6,362 -- 12,705
Net loss.................................... -- -- (360) -- (360)
------ ---------- -------- -------- -------
Balance at December 31, 1995................ 1 6,341 6,002 -- 12,345
Net loss.................................... -- -- (5,307) -- (5,307)
Common Stock issued, net of issuance
costs..................................... (1) 90,877 -- -- 90,886
------ ---------- -------- -------- -------
Balance at September 30, 1996 (unaudited)... $ -- $ 97,218 $ 695 $ -- $97,924
====== ======== ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-11
<PAGE> 88
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
----------------------------- ------------------
1993 1994 1995 1995 1996
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)....................................................... $ 3,309 $ 358 $ (360) $ (581) $(5,307)
Adjustments to reconcile income (loss) to net cash provided by operating
activities:
Loss on early extinguishment of debt, net........................... -- -- -- -- 8,016
Cumulative effect of change in drydocking method.................... (1,491) -- -- -- --
Depreciation and amortization....................................... 4,735 4,500 6,308 4,691 6,115
Provision for bad debts............................................. -- -- 114 -- 144
(Gain) loss on disposals of property................................ -- -- (73) (73) 12
Amortization of discount on long-term debt.......................... -- 52 201 147 148
Provision for (benefit from) deferred taxes......................... 1,402 189 (2) -- 564
Minority partners' equity in earnings (losses) of subsidiaries,
net............................................................... 1,179 184 (625) (588) (651)
Undistributed (earnings) losses of affiliates, net.................. (219) (69) 488 449 (87)
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable............................................. (790) (4,574) (5,056) (3,087) (1,696)
Due from affiliates............................................. (630) (235) (394) (282) (23)
Other assets.................................................... (819) (1,622) (1,317) (3,140) 718
Accounts payable and other liabilities.......................... 280 4,075 4,664 2,535 (1,827)
------- ------- ------- ------- -------
Net cash provided by operating activities.................................. 6,956 2,858 3,948 71 6,126
INVESTING ACTIVITIES:
Purchase of property.................................................... (1,917) (5,672) (6,312) (3,672) (5,941)
Proceeds from disposals of property..................................... -- -- 690 690 8
Capital contribution to affiliates...................................... (330) -- -- -- (602)
Deposit of funds in escrow.......................................... -- (500) -- -- --
Acquisitions, net of cash acquired of $106 in 1994, net of $500 escrow
deposit utilized in 1995 and net of cash acquired of $1,722 in 1996... -- (33,643) (2,444) (2,330) (55,203)
------- ------- ------- ------- -------
Net cash used in investing activities...................................... (2,247) (39,815) (8,066) (5,312) (61,738)
FINANCING ACTIVITIES:
Proceeds (repayment) of lines of credit, net............................ -- -- 7,500 6,000 (1,220)
Proceeds from long-term debt............................................ -- 90,580 -- -- 21,700
Proceeds from issuance of common stock, net............................. -- 8,640 -- -- 76,695
Principal payments of long-term debt.................................... (5,738) (51,700) (5,458) (3,700) (37,099)
Payment of debt and other financing costs............................... -- (3,478) (727) (211) (575)
Payment of obligations under capital leases............................. -- (34) (510) (374) (971)
Payment of notes payable to related parties............................. -- -- -- -- (370)
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 1,715 58,160
------- ------- ------- ------- -------
(Decrease) increase in cash and cash equivalents........................... (1,449) 4,292 (3,313) (3,526) 2,548
Cash and cash equivalents at beginning of period........................... 3,520 2,071 6,363 6,363 3,050
------- ------- ------- ------- -------
Cash and cash equivalents at end of period................................. $ 2,071 $ 6,363 $ 3,050 $ 2,837 $ 5,598
======= ======= ======= ======= =======
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 and equipment (see
Note 4)................................................................... $ -- $ 4,534 $ -- $ -- $13,443
======= ======= ======= ======= =======
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 $ -- $ -- $ --
======= ======= ======= ======= =======
Liabilities assumed for the acquisition of vessels (see Note 3)............ $ -- $ 279 $ -- $ -- $34,650
======= ======= ======= ======= =======
Capital stock issued for the redemption of notes payable to related
parties................................................................... $ -- $ -- $ -- $ -- $ 308
======= ======= ======= ======= =======
Capital stock issued for the repayment of debt............................. $ -- $ -- $ -- $ -- $13,883
======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements
F-12
<PAGE> 89
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(INFORMATION PERTAINING TO SEPTEMBER 30, 1996 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
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.
Investments in limited partnerships and less-than-majority-owned subsidiaries
are accounted for on the equity method.
On August 14, 1996, the Company completed the initial public offering (the
"IPO") of 7,000,000 shares of its Class A Common Stock at $12.00 per share. The
net proceeds to the Company were approximately $74,900,000, after deducting
underwriting commissions and other offering expenses. The net proceeds were used
primarily to repay certain indebtedness that was outstanding prior to the IPO
and for the cash portion of the purchase price of certain acquisitions
consummated simultaneously with and subsequent to the IPO. On September 12,
1996, the underwriters' over-allotment option was exercised in part pursuant to
which an additional 159,000 shares were issued. The net proceeds of
approximately $1,774,000 were used by the Company to repay certain outstanding
indebtedness. In addition, on August 14, 1996, the Company issued 182,000 and
1,188,000 shares of Class A and Class B Common Stock, respectively, in payment
of certain outstanding indebtedness.
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. Major renewals and improvements are capitalized and
replacements, maintenance and repairs which do not improve or extend the lives
of the assets are expensed. Depreciation is computed on the straight-line method
over the estimated useful lives of the assets. The estimated useful lives of
vessels and improvements other than tankers are 15 to 40 years and the estimated
useful lives of furniture and equipment are 3 to 10 years. Tankers and
F-13
<PAGE> 90
related improvements are depreciated over estimated useful lives, as determined
by the Oil Pollution Act of 1990 and other factors, ranging from 4 to 24 years.
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 and at September 30, 1996 are vessels under capital leases of approximately
$5,003,000, $5,229,000, and $18,147,000, net of accumulated amortization of
approximately $37,000, $149,000, and $556,000, respectively.
For the years ended December 31, 1993, 1994 and 1995, and the nine months
ended September 30, 1995 and 1996, depreciation and amortization of vessels,
improvements and equipment was approximately $3,020,000, $3,397,000, and
$4,770,000, and $3,590,000, and $4,963,000, 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:
<TABLE>
<CAPTION>
NET INCOME
PER COMMON
SHARE (PRIMARY
NET INCOME AND FULLY DILUTED)
<S> <C> <C>
As reported................................................ $3,309,000 $ 0.50
Pro Forma.................................................. 1,818,000 0.26
</TABLE>
At December 31, 1994 and 1995 and at September 30, 1996, deferred costs
include unamortized drydocking of approximately $1,938,000, $2,534,000, and
$7,572,000, 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 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 and at September 30, 1996, accumulated amortization of goodwill was
approximately $1,184,000, $1,689,000, and $2,067,000, 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
F-14
<PAGE> 91
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.
Recent 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 adopted Statement No. 121 in the first quarter of 1996 and the effect of
adoption was not material.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," for fiscal years beginning after December 15, 1995.
This Statement establishes a fair-value based method of accounting for stock
compensation plans with employees and others. The Company continues to account
for its stock-based compensation plans under Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees", as permitted by Statement No.
123 and will present the pro forma disclosures required under Statement No. 123
in fiscal year 1997 with no impact to the Company's results of operations.
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 and
outstanding stock options at September 30, 1996. Earnings (loss) per common
share-assuming full dilution includes the if-converted dilutive effect of a
portion of the convertible Junior Note through conversion in August 1996 (see
Note 3) and the incremental dilutive effect of outstanding common stock options
at September 30, 1996.
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 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 prior periods' consolidated
financial statements have been reclassified to conform with the current period's
presentation.
Interim Financial Information (Unaudited). The unaudited consolidated
interim financial statements for the nine-month periods ended September 30, 1995
and 1996 and as of September 30, 1996 have been prepared on a basis consistent
with that of the Company's audited consolidated financial statements as of and
for the three-year period ended December 31, 1995. In the opinion of management,
all adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the unaudited information shown have been included. The results
of operations for such interim periods are not necessarily indicative of the
results expected for the full year ending December 31, 1996.
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.
F-15
<PAGE> 92
3. DEBT
Long-term debt consisted of the following (in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
----------------- SEPTEMBER 30,
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
Lines of Credit........................................ $ -- $ 7,500 $ 7,433
Term Loan.............................................. 50,000 46,000 60,500
Acquisition Line....................................... -- -- 4,200
Senior Note............................................ 23,096 23,200 9,021
Junior Note............................................ 17,536 17,633 --
Title XI Debt.......................................... -- -- 33,388
Notes Payable.......................................... 7,447 9,389 3,099
Other.................................................. 400 -- --
------- ------- -------------
98,479 103,722 117,641
Less: Current maturities............................... (4,779) (7,708) (17,108)
------- ------- -------------
$93,700 $96,014 $ 100,533
======= ======= =============
</TABLE>
On September 28, 1994, the Company entered into an agreement, as amended on
May 15, 1995, March 26, 1996 and June 21, 1996, for a credit facility (the
"Credit Facility") with its principal banks.
The Credit Facility provides for a working capital credit line of
$7,500,000 through January 15, 2001 (the "Line") and a stand-by letter of credit
(the "Letter of Credit") of $5,600,000. Borrowings under the 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% and 8.1% at December 31, 1995 and September 30, 1996,
respectively), and are subject to an annual commitment fee of 0.50% of the
unused portion of the Line. Borrowings outstanding under the Line totaled
$7,500,000 and $5,500,000 at December 31, 1995 and September 30, 1996, of which
$5,500,000 is currently due. 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 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 or September 30, 1996.
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 and September 30, 1996, the
Term Loan was accruing interest at LIBOR +3.0% and LIBOR +2.5%, respectively
(approximately 8.9% and 8.5%, respectively).
The Credit Facility provided for automatic increases under the Line and
Term Loan and certain additional borrowings upon the successful completion of a
public offering. Accordingly, upon consummation of the IPO on August 14, 1996,
the Line increased to $10,000,000, the Term Loan increased to $60,500,000 and an
acquisition line of credit (the "Acquisition Line") of $19,900,000 became
available. On August 14, 1996, $4,200,000 was drawn under the Acquisition Line
which bears interest at LIBOR +2.5% (8.5% at September 30, 1996) and is due in
January, 2001.
The collateral for the Company's indebtedness under the Credit Facility
includes all Company-owned vessels, its 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
F-16
<PAGE> 93
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, $1,800,000 and
$789,000 at December 31, 1994 and 1995 and September 30, 1996, respectively)
which is being amortized as interest expense over the term of the Senior Note.
On August 14, 1996 and September 12, 1996, the Company repaid $13,490,000, and
$1,700,000, respectively, of the principal balance of the Senior Note with a
portion of the proceeds from the IPO and the exercise of the underwriters'
related over-allotment option. 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 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) was payable on the earlier of the IPO 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 was being amortized as interest expense over the term of the
Junior Note. Repayment of the Junior Note was 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.
In August 1996, the principal sum and all accrued and unpaid interest was repaid
with $15,115,000 of the proceeds from the IPO and the issuance of 1,244,002
shares of 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). On
August 14, 1996, the note was repaid with a portion of the proceeds from the
IPO.
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. On August 14,
1996, approximately $678,000 of the notes payable to related parties, was repaid
with $370,000 of the proceeds from the IPO and the issuance of 25,583 shares of
Common Stock.
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 and March 31, 1996). 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. On
August 14, 1996, approximately $1,548,000 was repaid with a portion of the
proceeds from the IPO.
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 note payable was repaid
in February 1996.
In connection with the acquisition of the outstanding common stock of its
previously unconsolidated 50%-owned affiliate Ocean Specialty Tankers
Corporation ("OSTC"), on August 14, 1996, the Company assumed OSTC's obligations
under a $2,000,000 revolving line of credit secured by the outstanding accounts
F-17
<PAGE> 94
receivables generated by three chemical carriers. The revolving line of credit
bears interest monthly at 7.0% of the outstanding amount. At September 30, 1996,
$1,933,000 was outstanding under the line of credit which is due currently.
On August 14, 1996, the Company assumed approximately $34,650,000 of Title
XI Debt in connection with the acquisitions of certain vessels (see note 12).
The Title XI Debt is collateralized by first preferred mortgages on certain
vessels and bears interest at rates ranging from 5.4% to 10.1%. The debt is due
in semiannual principal and interest payments through December 1, 2006.
The aggregate annual future payments due on debt and notes payable are as
follows (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1996
1995 (UNAUDITED)
<S> <C> <C>
1996....................................................... $ 7,708 $ 17,108
1997....................................................... 7,208 15,876
1998....................................................... 9,208 16,208
1999....................................................... 9,208 20,898
2000....................................................... 11,710 27,836
Thereafter................................................. 58,680 19,892
-------- --------
$103,722 $ 117,818
======== ========
</TABLE>
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 and approximately $8,206,295
and $12,953,011 for the nine months ended September 30, 1995 and 1996,
respectively.
4. CAPITAL LEASES
The Company owns certain vessels under leases that are classified as
capital leases. The following is a schedule of future minimum lease payments
under capital leases together with the present value of the net minimum lease
payments (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1996
1995 (UNAUDITED)
<S> <C> <C>
1996.................................................. $ 875 $ 4,304
1997.................................................. 875 4,273
1998.................................................. 875 6,047
1999.................................................. 863 1,860
2000.................................................. 863 1,773
Thereafter............................................ 683 1,678
------- -------
Total minimum lease payments.......................... 5,034 19,935
Less amount representing interest..................... (1,007) (3,436)
------- -------
Present value of minimum lease payments (including
current portion of $577 and $3,065, respectively)... $ 4,027 $16,499
======= =======
</TABLE>
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, and $2,355,000 and $2,388,000, for the years ended December 31,
1993, 1994 and 1995, and the nine months ended September 30, 1995 and 1996,
respectively. The Company's tractor tug Broward is
F-18
<PAGE> 95
bareboat chartered, through the year 2010. Charter hire expense on this vessel
was approximately $217,000 and $488,000 for the year ended December 31, 1995 and
the nine months ended September 30, 1996, respectively. The aggregate annual
future payments due under these charter agreements at December 31, 1995 for the
next five years are as follows (in thousands):
<TABLE>
<S> <C>
1996....................................................................... $ 3,795
1997....................................................................... 3,842
1998....................................................................... 3,893
1999....................................................................... 3,949
2000....................................................................... 2,592
-------
$18,071
=======
</TABLE>
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 was $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, and for
the nine months ended September 30, 1995 and 1996, was approximately $341,000,
$467,000 and $666,000 and $559,000 and $524,000, 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. In addition, the shipyard is
seeking $10,000,000 of punitive damages. Management believes the shipyard's
claim amounts are unsubstantiated and that recoveries upon the Company's
counterclaim, together with insurance coverage, will exceed amounts, if any,
which may be awarded to the shipyard. Management believes that the additional
costs incurred to complete the construction of the vessel exceeded the amounts
withheld (settlement of construction costs, if any, would generally be
capitalized and depreciated over future periods); however, the Company is unable
to predict the final outcome of this matter.
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; however, the Company is unable to
predict the final outcome of this matter.
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 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.
F-19
<PAGE> 96
The Company has guaranteed 50% of the outstanding line of credit borrowings
of 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. On August 14, 1996, the Company consummated the
agreement (See Note 12).
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-hull
petroleum product carriers. 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. 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.
In November and December 1996, the Company entered into agreements to
purchase 13 vessels for an aggregate amount of approximately $38,725,000.
Deposits aggregating $1,082,000 have been paid on these vessels.
In November 1996, the Company entered into an agreement to bareboat charter
two tugs for a one year period.
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 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 and marketing services related to the design of these vessels.
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, and for the nine months ended September 30,
1995 and 1996, was approximately $724,000, $834,000 and $1,047,000, and $796,000
and $998,000, respectively. Contributions under the plan are determined on the
basis of employee compensation.
F-20
<PAGE> 97
8. STOCK OPTIONS
On August 12, 1996, the Company granted options to purchase 35,000 and
771,000 shares of Class A Common Stock to members of the Company's board of
directors and certain executives, respectively. The exercise price of the
options was equal to the fair market value of the underlying common stock of
that date. The directors' options are 100% vested and all other options vest
ratably over a four-year period. For the period from August 13, 1996 to
September 30, 1996, there were no options granted, exercised or cancelled.
9. INCOME TAXES
The components of the provision for (benefit from) income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- -------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current........................................... $ 471 $ -- $ -- $ -- $1,052
Deferred.......................................... 1,402 189 (2) -- 564
------ ---- ---- ---- ----
$1,873 $189 $ (2) $ -- $1,616
====== ==== ==== ==== ====
</TABLE>
Income 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:
<TABLE>
<CAPTION>
1993 1994 1995
<S> <C> <C> <C>
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) %
==== ==== ====
</TABLE>
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:
<TABLE>
<CAPTION>
1994 1995
<S> <C> <C>
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
====== =======
</TABLE>
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. Due to the IPO, the
F-21
<PAGE> 98
utilization of the Company's NOL's are limited, based upon the value of the
Company prior to the IPO, to approximately $3,300,000 per year.
10. CAPITAL STOCK
On August 14, 1996 and September 12, 1996 the Company issued 7,000,000 and
159,000 shares of its Class A Common Stock, respectively, pursuant to the IPO
and related partial exercise of the underwriters' over-allotment option. Shares
of the Company's Class C Common Stock were exchanged for 304,000 and 673,000
shares of the Company's Class A and Class B Common Stock, respectively.
Additionally, 182,000 and 1,188,000 shares of the Company's Class A and Class B
Common Stock were, respectively, issued in repayment of a portion of the Junior
Notes and other certain outstanding indebtedness.
On May 10, 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.
Contemporaneous with the IPO, the Company's Board of Directors authorized the
retirement of the Company's Class C Common Stock.
On September 28, 1994, all the stock of the Predecessor Company was
exchanged for shares of the Company's stock (see Note 1). The fair value of the
Predecessor Company's common stock and the Company's common stock were
equivalent.
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 Note, the Company issued to
the note holders 765,733 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 Junior Note, shares of Class
A and Class C Common Stock and the CSIs were recorded based upon their estimated
fair values at the date of issuance. 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 CSIs 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 and certain trusts whereby
the principal stockholder and the trusts agreed to contribute pro rata a like
amount of shares of common stock to the Company concurrently with the issuance
of shares pursuant to the CSIs. Accordingly, issuance of shares pursuant to the
CSIs will not effect the Company's financial position or results of operations.
11. 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.
F-22
<PAGE> 99
12. 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.
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.
On March 8, 1995, the Company acquired seven crew boats for $5,875,000,
including cash of $2,875,000 and a $3,000,000 promissory note.
In January and February 1996, the Company acquired nine crew boats under
capital lease obligations.
On August 14, 1996, the Company purchased the remaining 50% of the
outstanding common stock of an entity and acquired three chemical tankers. The
aggregate purchase price of approximately $64,650,000 consisted of approximately
$15,500,000 paid in cash with a portion of the proceeds from the IPO and the
assumption of approximately $34,650,000 in mortgage obligations related to two
of the vessels acquired, $7,000,000 under the Term Loan and 7,500,000 under a
capital lease.
On August 14, 1996, the Company purchased eight supply boats. The aggregate
purchase price of $26,075,000 was paid in cash with $18,075,000 of the proceeds
from the IPO and $8,000,000 drawn under the Term Loan. The Company has agreed to
indemnify certain affiliates of the sellers against certain of one seller's
liabilities due to its creditors. The Company's maximum liability pursuant to
the guarantee and indemnification is $7,000,000.
On August 14, 1996, the Company acquired two supply boats and one crew
boat. The aggregate purchase price of $6,825,000 was paid in cash with
$1,950,000 of the proceeds from the IPO, $4,200,000 drawn under the Acquisition
Facility and the issuance of $675,000 of notes payable. The crew boat was
purchased from the Company's Chairman and the Investor Group for a purchase
price of approximately $2,200,000, which was equal to their cost of the vessel.
The operations of acquired vessels and assets are included in the
accompanying condensed consolidated statements of operations for the period
subsequent to their acquisition dates.
In October 1996, the Company purchased two supply boats for cash of
approximately $4,600,000.
In December 1996, the Company purchased a tug for cash of approximately
$3,400,000.
13. 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 at December 31, 1995 was 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.
F-23
<PAGE> 100
14. 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
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
(IN THOUSANDS)
<S> <C> <C>
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 due to wholly-owned
subsidiaries).......................................................... $ 215 $ 302
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
======= =======
</TABLE>
PARENT COMPANY--ONLY CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(SEPTEMBER 28,
1994) THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
1994 1995
(IN THOUSANDS)
<S> <C> <C>
Cost 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
======= =======
</TABLE>
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.
F-24
<PAGE> 101
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. 15. EXTRAORDINARY ITEM
On August 14, 1996, the Company utilized common stock and a portion of the
proceeds from the IPO to repay $25,000,000 and $15,190,000 of the Junior and
Senior Notes, respectively. Accordingly, the Company recorded a loss on
extinguishment of $8,016,000, net of a tax benefit of $1,405,000.
F-25
<PAGE> 102
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-26
<PAGE> 103
OMI CHEMICAL CARRIER GROUP
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER
------------------- JUNE 30,
1994 1995 1996
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Advances to masters................................................ $ 171 $ 102 $ 325
Receivables:
Due from OSTC (Notes 1, 3).................................... 638 544 401
Other......................................................... 40 52 59
Deferred income taxes (Note 4)..................................... 731 9,176 249
Prepaid expenses and other current assets.......................... 987 524 556
-------- -------- --------
Total current assets.......................................... 2,567 10,398 1,590
-------- -------- --------
Vessels (Notes 1, 3)................................................... 75,225 84,738 114,686
Less accumulated depreciation.......................................... (43,872) (47,066) (49,625)
-------- -------- --------
Vessels -- net..................................................... 31,353 37,672 65,061
-------- -------- --------
Due from parent (Notes 4, 6)........................................... 3,983 6,429
Other assets and deferred charges...................................... 1,537 1,094 957
-------- -------- --------
Total......................................................... $ 39,440 $ 49,164 $ 74,037
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................... $ 1,328 $ 389 $ 667
Accrued liabilities:
Voyage and vessel............................................. 2,524 2,273 3,347
Interest...................................................... 498 432 565
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 (Notes 2, 3)..................... 2,525 2,525 4,815
-------- -------- --------
Total current liabilities..................................... 9,100 31,375 9,394
-------- -------- --------
Long-term debt (Notes 2, 3)............................................ 17,488 14,963 29,835
Accrued loss on lease obligation (Note 5).............................. 18,313
Deferred income taxes (Note 4)......................................... 1,523 8,797 8,393
Due to parent (Notes 4, 6)............................................. 1,535
Advances from parent (Note 3).......................................... 9,623 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 1,059
Commitments and contingencies (Note 7)
Stockholder's equity (deficit):
Common stock.......................................................
Capital surplus (Note 3)........................................... 80,881 80,881 115,181
Deficit (Note 1)................................................... (92,836) (98,840) (99,448)
-------- -------- --------
Total stockholder's equity (deficit).......................... (11,955) (17,959) 15,733
-------- -------- --------
Total......................................................... $ 39,440 $ 49,164 $ 74,037
======== ======== ========
</TABLE>
See notes to combined financial statements
F-27
<PAGE> 104
OMI CHEMICAL CARRIER GROUP
COMBINED STATEMENTS OF OPERATIONS AND DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------- ---------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues...................................... $ 24,434 $ 26,564 $ 26,099 $ 13,245 $ 12,262
-------- -------- -------- -------- --------
Operating Expenses:
Vessel and voyage......................... 17,418 17,711 18,287 11,176 7,473
Depreciation and amortization............. 3,672 3,878 3,355 1,367 2,560
Operating lease (Note 3).................. 10,730 10,805 7,557 2,878 754
Provision for losses (Notes 3, 5):
Impaired value of vessel............. 14,798
Lease obligation..................... 19,800 3,297
General and administrative (Note 6)....... 827 854 848 427 414
-------- -------- -------- -------- --------
Total operating expenses......... 32,647 67,846 33,344 15,848 11,201
-------- -------- -------- -------- --------
Operating (loss) income....................... (8,213) (41,282) (7,245) (2,603) 1,061
-------- -------- -------- -------- --------
Other Income (Expense):
Gain on disposal of assets (Note 3)....... 334 333 167 167 --
Interest expense, net..................... (2,779) (2,148) (2,160) (944) (1,995)
-------- -------- -------- -------- --------
Net other expense................ (2,445) (1,815) (1,993) (777) (1,995)
-------- -------- -------- -------- --------
Loss before income taxes...................... (10,658) (43,097) (9,238) (3,380) (934)
Benefit for income taxes (Note 4)............. 3,293 15,084 3,234 1,183 326
-------- -------- -------- -------- --------
Net loss...................................... (7,365) (28,013) (6,004) (2,197) (608)
Deficit, beginning of period.................. (57,458) (64,823) (92,836) (92,836) (98,840)
-------- -------- -------- -------- --------
Deficit, end of period........................ $(64,823) $(92,836) $(98,840) $(95,033) $(99,448)
======== ======== ======== ======== ========
</TABLE>
See notes to combined financial statements
F-28
<PAGE> 105
OMI CHEMICAL CARRIER GROUP
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
FOR THE YEARS ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------- ----------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net loss............................... $(7,365) $(28,013) $ (6,004) $ (2,197) $ (608)
Adjustments to reconcile net loss to
cash provided by operating
activities:
(Decrease) increase in deferred
income taxes.................... (461) (13,629) (1,171) 305 8,523
Depreciation and amortization..... 3,672 3,878 3,355 1,367 2,560
Gain on disposal of assets--net... (334) (333) (167) (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 (585) (119)
(Decrease) increase in accounts
payable and accrued expenses.... (1,814) 2,614 (1,975) (522) 1,501
Decrease (increase) in due from
(to) parent..................... 8,346 3,654 5,518 3,319 (7,964)
Decrease (increase) in other
assets and deferred charges..... 260 (200) 443 147 137
Increase (decrease) in advance
time charter revenues and other
liabilities..................... 1,369 78 (617) 113 229
Other assets & liabilities--net... 1,257 133 (85)
------- -------- -------- -------- -------
Net cash provided by operating
activities.................. 5,065 2,276 3,426 1,695 4,259
------- -------- -------- -------- -------
CASH FLOWS (USED) PROVIDED BY INVESTING
ACTIVITIES:
Additions to vessels................... (3,040) (351) (10,524) (10,055) (1,851)
Proceeds received on note receivable... 500 1,500
------- -------- -------- -------- -------
Net cash (used) provided by
investing activities............ (2,540) 1,149 (10,524) (10,055) (1,851)
------- -------- -------- -------- -------
CASH FLOWS (USED) PROVIDED BY FINANCING
ACTIVITIES:
Payments on long-term debt............. (2,525) (3,425) (2,525) (1,263) (2,408)
Advances from parent................... 9,623 9,623
------- -------- -------- -------- -------
Net cash (used) provided by
financing activities............ (2,525) (3,425) 7,098 8,360 (2,408)
------- -------- -------- -------- -------
Net (decrease) increase in cash... $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======== =======
</TABLE>
See notes to combined financial statements
F-29
<PAGE> 106
OMI CHEMICAL CARRIER GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
AND (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
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 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 $99,000,000 at June 30, 1996. 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, OMI Hudson and OMI Dynachem and its interest in OSTC for
approximately $64,650,000, $30,000,000 in cash and the assumption of all
outstanding indebtedness relating to the vessels ($34,650,000 at June 30, 1996).
The agreement was amended April 30, 1996 to swap the OMI Dynachem for a
replacement vessel to be identified at a later date. Cash of $12,775,000 (of the
$30,000,000) was transferred to an escrow account at delivery until such vessel
is identified and delivered. The sale of these three vessels and the interest in
OSTC is contingent upon Hvide successfully completing its initial public
offering of common stock in 1996, which was accomplished on August 14, 1996.
Unaudited Financial Statements. In the opinion of management, the
unaudited combined financial statements reflect the adjustments (comprising only
normal recurring accruals) necessary for a fair presentation of financial
position at June 30, 1996 and results of operations and cash flows for the six
months ended June 30, 1995 and 1996.
Accounting Estimates. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and 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.
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-30
<PAGE> 107
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 to 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 and $130,000 and
$116,000 for the six months ended June 30, 1995 and 1996, respectively. 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.
During the six months ended June 30, 1995 and 1996 the Group paid interest of
$884,000 and $565,000, respectively.
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1994 1995 1996
<S> <C> <C> <C>
Bonds, secured by vessels, at 5.35% and 10.1%
payable in installments to 2006............... $20,013,000 $17,488,000 $34,650,000
Less: current portion of long-term debt......... 2,525,000 2,525,000 4,815,000
----------- ----------- -----------
Long-term debt.................................. $17,488,000 $14,963,000 $29,835,000
=========== =========== ===========
Fair value of long-term debt.................... $19,871,000 $18,926,000 $38,054,000
=========== =========== ===========
</TABLE>
The bonds are collateralized by a mortgage on the OMI Dynachem and OMI
Hudson and are guaranteed as to principal and interest by the U.S. Government
under the Title XI Program. At June 30, 1996, the vessels (net book values
aggregating $56,978,000) and investments of $9,857,000 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. and OMI Clover Transport, Inc. ("OMI Clover") from, among other
things, the withdrawal of capital, the payment of common stock dividends and the
extending of loans to affiliated parties.
F-31
<PAGE> 108
Subsequent to December 31, 1995, aggregate annual maturities of the bonds
during each of the next five years 1996 through 2000 were $2,525,000. Subsequent
to June 30, 1996, aggregate maturities for a twelve month period on such bonds
in the next five years through 2001 are $4,815,000.
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. Rent expense for the six months ended June 30, 1995 and 1996 was
$4,371,000 and $755,000, respectively.
OMI Clover has operated the vessel OMI Hudson under a long-term operating
lease requiring semi-annual payments through December 2006. In October 1995, OMI
Clover entered into an agreement with the owner/lessor of the OMI Hudson to
terminate the operating lease for $25,000,000 and subsequently purchase the
vessel for $30,000,000. The estimated loss on lease termination of $3,297,000
was reported as a separate item in the 1995 Combined Statement of Operations and
Deficit. In February 1996, OMI Clover terminated the operating lease on the
vessel for $22,000,000 cash and the issuance of a $3,000,000 Convertible Note by
OMI. In March 1996, OMI Clover purchased the vessel for cash of $9,300,000
($10,430,000 less reimbursement of a portion of the lease payment of $1,130,000
in accordance with the agreement) and assumption of debt of $19,570,000 (see
Note 2). The $31,300,000 cash paid by OMI on behalf of OMI Clover and the
$3,000,000 Convertible Note issued by OMI aggregating $34,300,000 to terminate
the lease and purchase the vessel was recorded as a capital contribution to OMI
Clover.
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.
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:
<TABLE>
<CAPTION>
FOR THE YEARS
ENDED DECEMBER 31,
----------------------------
1993 1994 1995
<S> <C> <C> <C>
Current benefit.......................................... $(2,542) $ (1,156) $(1,766)
Deferred tax benefit..................................... (461) (13,629) (1,171)
------ ------- ------
Benefit for income taxes as originally reported for
internal purposes...................................... (3,003) (14,785) (2,937)
Current benefit for allocated general and administrative
expenses (see Note 6).................................. (290) (299) (297)
------ ------- ------
Total.......................................... $(3,293) $(15,084) $(3,234)
====== ======= ======
</TABLE>
F-32
<PAGE> 109
Deferred income taxes are payable to OMI. The components of deferred
income taxes relate to tax effects of temporary differences as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1994 1995
<S> <C> <C>
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 -- net.............................. $ 792 $ (379)
======= =======
</TABLE>
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.
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.
6. TRANSACTIONS WITH PARENT
Due from (to) Parent represents tax benefits currently due from OMI reduced
by non-interest bearing advances from OMI to fund the Group's operations. OMI
maintains a centralized cash management system whereby it accepts and deposits
all cash receipts on behalf of its subsidiaries and pays all costs, expenses and
other obligations of such subsidiaries. These disbursements primarily represent
vessel and voyage expenses, lease payments, interest expense and required
payments of long-term debt. The average balances due from (to) OMI (based on
individual monthly balances outstanding) are as follows:
<TABLE>
<CAPTION>
FOR THE SIX
FOR THE YEARS MONTHS
ENDED DECEMBER 31, ENDED JUNE 30,
- ------------------------- --------------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C>
$11,957 $5,307 $1,535 $ 3,641 $ 631
</TABLE>
OMI provides all general and administrative services for the Group and has
not followed the practice of allocating general and administrative expenses
incurred by OMI to its various domestic subsidiaries although it does allocate
such costs to its various foreign subsidiaries. For purposes of the accompanying
financial
F-33
<PAGE> 110
statements, provision has been made during each period for the allocation of
general and administrative costs to the Group on a basis similar to that used by
OMI for allocation of such costs to foreign subsidiaries as follows:
<TABLE>
<CAPTION>
FOR THE
SIX MONTHS
FOR THE YEARS ENDED JUNE
ENDED DECEMBER 31, 30,
--------------------- -------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Allocated general and administrative costs....... $ 827 $ 854 $ 848 $ 427 $ 414
Benefit for income taxes (see Note 4)............ (290) (299) (297) (145) (145)
----- ----- ----- ----- -----
$ 537 $ 555 $ 551 $ 282 $ 269
===== ===== ===== ===== =====
</TABLE>
The method used allocates fixed annual amounts of costs on a per vessel
basis for financial accounting and vessel management activities and allocates
costs for general corporate activities based on 1.25 percent of revenues earned
by each vessel. Management of OMI believes that this allocation method is
reasonable.
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-34
<PAGE> 111
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, and amended
July 23, 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, except for the fourth paragraph of
Note 1, as to which the date is August 1, 1996
F-35
<PAGE> 112
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
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FOR THE YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Combined operating revenues.................... $4,402,220 $4,150,519 $5,383,398 $2,567,219 $3,215,100
Combined operating expenses
Groceries.................................. 16,742 30,490 49,741 24,602 26,441
Insurance claims........................... 115,252 77,907 62,543 19,837 33,620
Insurance premiums......................... 302,295 431,129 428,589 211,647 196,494
Medical.................................... 14,809 37,549 44,242 18,977 21,273
Payroll taxes.............................. 39,618 68,539 101,600 54,924 51,233
Repairs and maintenance.................... 286,373 417,341 422,016 211,661 185,531
Safety training............................ 18,792 30,163 34,919 20,587 17,087
Salaries -- crews.......................... 690,960 995,602 1,297,067 643,461 654,883
Supplies................................... 77,145 268,254 87,672 30,352 70,877
Taxes, licenses and miscellaneous.......... 42,910 168,467 154,769 52,570 44,878
Transportation -- crews.................... 133,148 84,888 93,453 46,685 41,587
---------- ---------- ---------- ---------- ----------
Total combined operating expenses..... 1,738,044 2,610,329 2,776,611 1,335,303 1,343,904
---------- ---------- ---------- ---------- ----------
Excess of combined operating revenues
over expenses....................... $2,664,176 $1,540,190 $2,606,787 $1,231,916 $1,871,196
========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements
F-36
<PAGE> 113
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
1 BASIS OF PRESENTATION
The accompanying combined financial statement includes certain accounts of:
<TABLE>
<CAPTION>
NAME OF ENTITY TYPE OF ENTITY NAME OF SHIP
<S> <C> <C>
Indian Seal Partners, Ltd. Limited Partnership Indian Seal -- 204 Feet
Baffin Seal Partners, Ltd. Limited Partnership Baffin Seal -- 185 Feet
Baltic Seal Partners, Ltd. Limited Partnership Baltic Seal -- 205 Feet
Bengal Seal Partners, Ltd. Limited Partnership Bengal Seal -- 185 Feet
Ross Seal Partners, Ltd. Limited Partnership Ross Seal -- 163 Feet
</TABLE>
Each of the five limited partnerships above (collectively "the Seal
Partners") owns an offshore service ship (collectively "the Seal Partners
Ships"). These entities have been combined because they have common partners and
have collectively entered into an Asset Purchase Agreement to sell certain
assets. There have been no significant intercompany transactions or interrelated
activities between these entities.
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, and amended July 23, 1996 the Seal Partners have committed to sell certain
assets which include the Seal Partners Ships and related improvements to Hvide
Marine Incorporated ("Hvide"). In accordance with the July 1996 amendment, Hvide
will purchase the assets for the price of $16.0 million.
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 omitted from
the statements as they do not directly relate to the 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, interest expense and
income taxes.
General and administrative expenses have been excluded since Seal Partners
have operations other than the vessel operations presented herein. Seal Partners
do not allocate general and administrative expenses among specific operations or
vessels.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operating revenues
All operating revenues are earned from time charters and recognized based
on contract day rates.
F-37
<PAGE> 114
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):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
<S> <C> <C> <C> <C> <C>
Vessels................. $10,761,504 $11,411,504 $11,411,504 $11,411,504 $11,411,504
Accumulated
depreciation.......... (7,445,096) (7,971,650) (8,514,471) (8,243,060) (8,785,883)
----------- ----------- ----------- ----------- -----------
Net........... $ 3,316,408 $ 3,439,854 $ 2,897,033 $ 3,168,444 $ 2,625,621
=========== =========== =========== =========== ===========
</TABLE>
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 and
$407,604 and $351,575 during the six months ended June 30, 1996 and 1995,
respectively. Additional costs of improvements were incurred during periods
prior to 1993.
Depreciation expense, based on useful lives of 7 to 32 years for the
vessels and approximately three years for the related improvements presented
herein, is approximately $2,093,000, $1,415,000 and $608,000 for the years ended
December 31, 1995, 1994 and 1993, respectively, and $1,121,000 and $1,047,000
for the six months ended June 30, 1996 and 1995, respectively.
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.
4 ALLOCATION OF PURCHASE PRICE (UNAUDITED)
In accordance with the Agreement, as amended, the purchase price of the
assets of $16.0 million will be allocated to the vessels.
Based upon Hvide's policies, the vessels will be depreciated on a straight
line basis over 8 to 26 years.
F-38
<PAGE> 115
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 Seal
Fleet, Inc. and Subsidiaries and Hvide Marine Incorporated dated March 29, 1996,
and amended July 23, 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, except for the second paragraph of Note 1,
as to which the date is August 1, 1996
F-39
<PAGE> 116
SEAL FLEET, INC. AND SUBSIDIARIES
STATEMENTS OF ASSETS TO BE SOLD
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------------------------------ -------------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Vessels............................ $9,922,088 $9,922,088 $9,922,088 $ 9,922,088 $ 9,922,088
Accumulated depreciation........... (6,320,197) (6,819,771) (7,319,309) (7,068,745) (7,515,017)
Deferred drydocking (net).......... 558,412 315,323 643,049 470,719 750,578
Inventory.......................... 125,652 125,652 49,127 49,127 49,127
----------- ----------- ----------- ----------- -----------
Total.................... $4,285,955 $3,543,292 $3,294,955 $ 3,373,189 $ 3,206,776
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements
F-40
<PAGE> 117
SEAL FLEET, INC. AND SUBSIDIARIES
STATEMENTS OF VESSEL OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating revenues................... $3,155,315 $3,333,704 $3,267,072 $1,583,855 $1,805,496
Operating expenses:
Depreciation.................... 498,140 498,144 498,139 248,974 195,708
Engineering allocation.......... 58,284 19,576 42,530 16,959 20,592
Groceries....................... 24,606 12,395 16,167 9,564 8,875
Insurance claims................ 41,886 43,481 12,589 12,076 25,822
Insurance premiums.............. 243,954 237,558 232,565 119,377 110,252
Medical......................... 20,479 14,259 19,423 8,096 11,158
Payroll taxes................... 48,637 50,326 65,934 35,956 33,683
Repairs and maintenance......... 416,337 412,302 471,493 257,429 264,985
Safety training................. 16,016 15,349 17,736 7,813 11,083
Salaries--crews................. 612,871 675,786 731,030 365,701 365,906
Supplies........................ 49,607 26,737 27,915 17,286 21,859
Taxes, licenses and
miscellaneous................. 81,118 34,964 40,668 21,831 23,527
Transportation--crews........... 17,379 64,731 45,255 25,581 11,518
---------- ---------- ---------- -------- --------
Total operating expenses... 2,129,314 2,105,608 2,221,444 1,146,643 1,104,968
---------- ---------- ---------- -------- --------
Excess of operating
revenues over expenses... $1,026,001 $1,228,096 $1,045,628 $ 437,212 $ 700,528
========== ========== ========== ======== ========
</TABLE>
See notes to financial statements
F-41
<PAGE> 118
SEAL FLEET, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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 accordance with an Asset Purchase Agreement with Hvide Marine
Incorporated ("Hvide"), dated March 29, 1996, and amended July 23, 1996 Seal
Fleet committed to sell the Seal Fleet Ships, related improvements, and
inventory to Hvide. In accordance with the July 1996 amendment, Hvide will
purchase the assets for the price of $9.6 million and provide the sum of
$475,000 to Seal Fleet for its use in downsizing its operations.
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 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 being sold 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 (ii) exclude general and administrative overhead allocations,
intercompany commissions allocated among Seal Fleet, Inc. and its Subsidiaries,
interest expense and income taxes.
General and administrative expenses have been excluded since Seal Fleet has
operations other than the vessel operations presented herein. Seal Fleet does
not allocate general and administrative expenses among specific operations or
vessels.
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 straight-line method using estimated useful lives of twenty
years. Major improvements are capitalized as deferred drydocking and are
amortized over the estimated period benefitted of eighteen months to four years
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.
F-42
<PAGE> 119
3 DEFERRED DRYDOCKING
The costs of major improvements to the vessels, which have been capitalized
as deferred drydocking, aggregated $659,780, $22,719 and $476,922 during the
years ended December 31, 1995, 1994 and 1993, respectively, and $296,278 and
$354,445 during the six months ended June 30, 1996 and 1995, respectively.
4 ALLOCATION OF PURCHASE PRICE (UNAUDITED)
In accordance with the Agreement, as amended, the following is the expected
allocation of the purchase price of the assets (in thousands):
<TABLE>
<S> <C>
Vessels.................................................................... $ 9,190
Deferred drydocking costs.................................................. 836
Spare parts and supplies................................................... 49
-------
$10,075
=======
</TABLE>
Based upon Hvide's policies, the vessels will be depreciated on a straight
line basis over 6 to 11 years and the drydocking costs will be amortized on a
straight line basis from the date purchased to the next required drydocking for
each vessel.
F-43
<PAGE> 120
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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-44
<PAGE> 121
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.
STATEMENTS OF ASSETS TO BE SOLD
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------- DECEMBER 31,
1994 1995 1995
(UNAUDITED)
<S> <C> <C> <C>
Vessels and improvements......................................... $8,864 $8,972 $8,999
Less accumulated depreciation.................................... 8,030 8,240 8,283
------ ------ ------
$ 834 $ 732 $ 716
====== ====== ======
</TABLE>
See accompanying notes
F-45
<PAGE> 122
GULF BOAT MARINE SERVICES, INC. AND E&D BOAT RENTALS, INC.
STATEMENTS OF VESSEL OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- -------------
1994 1995 1994 1995
(UNAUDITED)
<S> <C> <C> <C> <C>
Charter hire revenue..................................... $3,095 $3,252 $ 797 $ 832
Operating expenses:
Crew payroll and benefits........................... 1,137 1,113 276 276
Repairs, maintenance, fuel and supplies............. 584 565 126 166
Insurance........................................... 384 424 105 86
Depreciation........................................ 222 210 58 43
Other............................................... 37 60 -- 26
------ ------ ---- ----
Total operating expenses....................... 2,364 2,372 565 597
------ ------ ---- ----
Gross profit............................................. 731 880 232 235
Overhead expenses:
Salaries and benefits............................... 308 290 74 91
Office expenses..................................... 46 53 17 21
Professional fees................................... 26 30 3 10
Other............................................... 59 56 30 42
------ ------ ---- ----
Total overhead expenses........................ 439 429 124 164
------ ------ ---- ----
Income from vessel operations.................. $ 292 $ 451 $ 108 $ 71
====== ====== ==== ====
</TABLE>
See accompanying notes
F-46
<PAGE> 123
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. Overhead expenses of the Companies were allocated based upon
revenue by crew boat.
The accompanying statements are not intended to be complete financial
statements of the Companies.
2. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Unaudited Interim Financial Statements
The unaudited statement of assets to be sold at December 31, 1995 and the
unaudited statements of vessel operations for the three months ended December
31, 1994 and 1995 and the notes thereto have been prepared in accordance with
generally accepted accounting principles for interim financial information. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair statement have been included. The
results of vessel operations are not necessarily indicative of the results which
can be expected for full years.
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. During the years ending September 30, 1994 and
1995, there were five individual customers representing greater than 10% of
charter hire revenues, as follows:
<TABLE>
<CAPTION>
1994 1995
<S> <C>
34.1% 26.6%
23.5 23.9
14.2 13.9
13.5 13.8
13.9% 12.9%
</TABLE>
Revenue
Revenue from time charters are earned and recognized on a daily basis.
F-47
<PAGE> 124
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. Total salaries for these individuals for the three months
ended December 31, 1994 and 1995 were $76,000 and $92,000, respectively.
Approximately $43,000 and $52,000, respectively, of these salaries are included
in the accompanying statements of vessel operations for the quarters ended
December 31, 1994 and 1995 (unaudited).
F-48
<PAGE> 125
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.
Dynamically Positioned Vessel -- a vessel equipped with specialized
instrumentation and positioning gear enabling it to maintain a constant position
with respect to wellheads and other devices on the ocean floor.
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.
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.
OPA 90 -- the federal Oil Pollution Act of 1990.
Supply Boat or Vessel -- an offshore service vessel engaged in providing
supply services to the offshore energy industry.
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
A-1
<PAGE> 126
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> 127
------------------------------------------------------
------------------------------------------------------
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, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS, OR ANY OTHER
PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER OR A SOLICITATION OF AN OFFER TO BUY ANY 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 WHO IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary..................... 3
Risk Factors........................... 8
The Company............................ 13
Use of Proceeds........................ 14
Price Range of Common Stock............ 14
Dividend Policy........................ 15
Capitalization......................... 16
Selected Historical and Pro Forma
Consolidated Financial Data.......... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 19
Business............................... 30
Management............................. 51
Certain Transactions................... 57
Principal and Selling Stockholders..... 60
Description of Certain Indebtedness.... 61
Description of Capital Stock........... 63
Shares Eligible for Future Sale........ 71
Underwriting........................... 73
Legal Matters.......................... 74
Experts................................ 74
Available Information.................. 75
Index to Financial Statements.......... F-1
Glossary............................... A-1
</TABLE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
6,000,000 SHARES
HVIDE MARINE GRAPHIC
HVIDE MARINE INCORPORATED LOGO
CLASS A COMMON STOCK
--------------------
PROSPECTUS
--------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
HOWARD, WEIL, LABOUISSE, FRIEDRICHS
INCORPORATED
, 1997
------------------------------------------------------
------------------------------------------------------
<PAGE> 128
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.
<TABLE>
<CAPTION>
TO BE PAID BY
REGISTRANT
<S> <C>
Securities and Exchange Commission registration fee............ $ 40,511.37
NASD filing fee................................................ *
Nasdaq National Market 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......................................... *
--
Total................................................ *
==
</TABLE>
- ---------------
(*) 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.
(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
II-1
<PAGE> 129
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
(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
II-2
<PAGE> 130
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.
(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;
II-3
<PAGE> 131
(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;
(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 313,215 shares of Class C Common Stock to
members of the Investors Group. The proceeds of the issuances of the Senior
Notes and the Junior Notes were $23.1 million and $17.5 million, respectively,
and the proceeds of the issuances of the Class B Common Stock and the Class C
Common Stock to the Investor Group were $4.1 million and $2.9 million,
respectively.
In August 1996, the Company exchanged 74,704 shares of Class A Common Stock
for 74,704 shares of Class B Common Stock owned by the Investor Group, 229,062
shares of Class A Common Stock and 84,153 shares of Class B Common Stock for
313,215 shares of Class C common Stock owned by the Investor Group, and 663,415
shares of Class B Common Stock for 663,415 shares of Class C Common Stock owned
by the Hvide Family.
In September 1996, the Company exchanged 1,188,502 shares of Class B Common
Stock and 55,500 shares of Class A Common Stock for $13.9 million principal
amount of Junior Notes.
Each such issuance was made in reliance upon section 4(2) of the Act.
II-4
<PAGE> 132
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits furnished:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<C> <S>
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)
2.1(a) Amendment to Stock Purchase Agreement dated as of January 31, 1996, by and among
Hvide Marine Incorporated and OMI Corp.(2)
2.2 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)
2.2(a) Amendment No. 1 dated July 23, 1996, to 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.(5)
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.(2)
2.3(a) Amendment Number 1 dated July 23, 1996, to 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.(5)
2.4 Articles of Merger of Hvide Marine Incorporated, a Florida corporation into Hvide
Corp., a Florida corporation.(5)
3.1 Amended and Restated Articles of Incorporation.(5)
3.2 Bylaws of the Company, as amended.(5)
4.1 Form of Class A Common Stock Certificate (Domestic).(5)
4.2 Form of Class A Common Stock Certificate (Foreign).(5)
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.(2)
10.2 Consulting Agreement between Sun State Marine Services, Inc. and Frank V. Oliver,
Jr., dated September 30, 1994.(2)
10.3 Form of 1996 Annual Incentive Plan.(5)
10.4 Form of Stock Option Plan for Directors.(5)
10.4.1 1996 Employee Stock Purchase Plan.(5)
10.4.2 Equity Ownership Plan.(5)
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 Challenger/S.T.L. 3901.(1)
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.(1)
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.(1)
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.(1)
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.(1)
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.(1)
</TABLE>
II-5
<PAGE> 133
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<C> <S>
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.(1)
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.(1)
10.14 Franchise Agreement, dated as of January 8, 1975, by and between Canaveral Port
Authority and Port Everglades Towing, Inc.(1)
10.15 Non-Exclusive Franchise Agreement, dated as of March 7, 1991, by and between Port
Everglades Authority and Hvide Shipping, Incorporated.(1)
10.16* Contract for Fuel Transportation, dated as of February 18, 1993, by and between
Florida Power & Light Company and Sun State Marine, Incorporated.(1)
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.(2)
10.18 Post-Retirement Benefits Agreement between the Company and Hans J. Hvide, dated
September 28, 1994.(2)
10.19 Junior Subordinated Note and Common Stock Purchase Agreement dated September 30,
1994.(2)
10.20 Senior Subordinated Note and Common Stock Purchase Agreement dated September 30,
1994.(2)
10.21 Letter of Credit Agreement, dated as of September 29, 1994, between Hvide Shipping,
Inc. and Bank of Boston.(2)
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.(2)
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.(2)
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.(2)
10.22(c) Amended and Restated Credit Agreement dated as of June 21, 1996, by and among Hvide
Marine Incorporated, Citibank, N.A., The First National Bank of Boston, BNY
Financial Corporation, Hibernia National Bank, and Amsouth Bank of Florida.(5)
10.26 Amendment No. 2 to Charter of Seabulk Magnachem.(2)
10.27 Form of Recapitalization Agreement among Hvide Corp., Hvide Marine Incorporated,
the Junior Subordinated Noteholders, the Senior Subordinated Noteholders, J. Erik
Hvide, and certain trusts.(5)
10.28 Form of Registration Rights Agreement by and between Hvide Marine Incorporated and
certain shareholders.(5)
10.29 Form of Agreement Among Shareholders among certain shareholders.(5)
10.30 Form of Amended and Restated Contingent Share Issuance Agreement among Hvide Marine
Incorporated and certain purchasers.(5)
11 Computation of Earnings (Loss) per Share
21 List of Subsidiaries.(4)
23.1 Consents of Ernst & Young LLP.
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.
</TABLE>
- ---------------
+ To be filed by amendment.
II-6
<PAGE> 134
* Confidential treatment requested. The materials omitted from these documents
have been marked with an asterisk (*). The materials omitted have been
separately filed with the Commission pursuant to the confidential treatment
request.
(1) Incorporated herein by reference to Registration Statement on Form S-1
(Registration No. 33-78166) filed with the Commission on April 26, 1994.
(2) Incorporated herein by reference to Amendment No. 1 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on May 3, 1996.
(3) Incorporated herein by reference to Amendment No. 2 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on May 13, 1996.
(4) Incorporated herein by reference to Amendment No. 3 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on July 11, 1996.
(5) Incorporated herein by reference to Amendment No. 4 to Registration
Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
on August 5, 1996.
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) 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.
(2) 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-7
<PAGE> 135
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 20th day of December, 1996.
HVIDE MARINE INCORPORATED
By: /s/ J. ERIK HVIDE
------------------------------------
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ J. ERIK HVIDE
- ---------------------------------------- Chairman of the Board, December 20, 1996
(J. ERIK HVIDE) President, Chief Executive
Officer and Director (principal
executive officer)
/s/ JOHN H. BLANKLEY
- ---------------------------------------- Executive Vice December 20, 1996
(JOHN H. BLANKLEY) President -- Chief Financial
Officer and Director (principal
financial officer)
/s/ DONALD L. CALDERA
- ---------------------------------------- Executive Vice President and December 20, 1996
(DONALD L. CALDERA) Director
/s/ JOHN J. KRUMENACKER
- ---------------------------------------- Controller (principal accounting December 20, 1996
(JOHN J. KRUMENACKER) officer)
/s/ EUGENE F. SWEENEY
- ---------------------------------------- Director December 20, 1996
(EUGENE F. SWEENEY)
/s/ ROBERT B. CALHOUN, JR.
- ---------------------------------------- Director December 20, 1996
(ROBERT B. CALHOUN, JR.)
/s/ GERALD FARMER
- ---------------------------------------- Director December 20, 1996
(GERALD FARMER)
/s/ JEAN FITZGERALD
- ---------------------------------------- Director December 20, 1996
(JEAN FITZGERALD)
/s/ JOHN LEE
- ---------------------------------------- Director December 20, 1996
(JOHN LEE)
/s/ WALTER C. MINK
- ---------------------------------------- Director December 20, 1996
(WALTER C. MINK)
/s/ ROBERT RICE
- ---------------------------------------- Director December 20, 1996
(ROBERT RICE)
/s/ RAYMOND B. VICKERS
- ---------------------------------------- Director December 20, 1996
(RAYMOND B. VICKERS)
</TABLE>
II-8
<PAGE> 1
EXHIBIT 11
HVIDE MARINE INCORPORATED
COMPUTATION OF EARNINGS (LOSS) PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------- ----------------
1993 1994 1995 1995 1996
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Income (loss) before extraordinary item and
cumulative effect............................... $1,818 $ 358 $ (360) $ (581) $2,709
Less: Class A Preferred Stock cash dividends...... 203 222 -- -- --
----- ----- ----- ----- -----
Adjusted income (loss) applicable to common
shares - primary................................ 1,615 136 (360) (581) 2,709
Plus: Interest on Junior Note net of income tax
effect.......................................... -- 192 807 598 536
----- ----- ----- ----- -----
Adjusted income applicable to common
shares - fully diluted.......................... $1,615 $ 328 $ 447 $ 17 $3,245
===== ===== ===== ===== =====
Weighted average shares outstanding............... 1,769 1,962 2,535 2,535 4,012
If-converted dilutive effect of Convertible
Class B Preferred Stock...................... 4,499 3,340 -- -- --
Dilutive effect of outstanding stock options.... -- -- -- -- 6
----- ----- ----- ----- -----
Common shares used in earnings (loss) per share
calculation - primary........................... 6,268 5,302 2,535 2,535 4,018
If-converted dilutive effect of Junior Note....... -- 314 1,244 1,244 1,026
Incremental dilutive effect of outstanding stock
options......................................... -- -- -- -- 5
----- ----- ----- ----- -----
Common shares used in earnings per share
calculation - fully diluted..................... 6,268 5,616 3,779 3,779 5,049
===== ===== ===== ===== =====
</TABLE>
<PAGE> 1
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 the second paragraph of Note
10, as to which the date is May 10, 1996, in the Registration Statement Form S-1
and related Prospectus of Hvide Marine Incorporated for the Registration of
6,000,000 shares of its common stock.
ERNST & YOUNG LLP
Miami, Florida
December 19, 1996
<PAGE> 2
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 February 1, 1996, with respect to the statement 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 the Registration
Statement Form S-1 and related Prospectus of Hvide Marine Incorporated for the
Registration of 6,000,000 shares of its common stock.
ERNST & YOUNG LLP
New Orleans, Louisiana
December 19, 1996
<PAGE> 1
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
December 18, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-1 of
our reports dated April 12, 1996 (except for certain disclosures presented in
Footnote 1, as to which the date is August 1, 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., Baffin Seal Partners, Ltd., Baltic
Seal Partners, Ltd., Bengal Seal Partners, Ltd., and Ross Seal Partners, Ltd.
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to our firm under the caption 'Experts' in
such Prospectus.
PANNELL KERR FORSTER OF TEXAS, P.C.
Houston, Texas
December 20, 1996
