SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the quarterly period ended March 31, 1998
Commission File Number: 0-28732
HVIDE MARINE INCORPORATED
State of Incorporation: Florida I.R.S. Employer I.D. 65-0524593
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, Florida 33316
(954) 524-4200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
There were 12,399,758 and 2,906,465 shares of Class A Common Stock, per value
$0.001 per share, and Class B Common Stock, par value $0.001 per share,
respectively, outstanding at May 8, 1998.
<PAGE>
HVIDE MARINE INCORPORATED
Quarter ended March 31, 1998
Index
- --------------------------------------------------------------------------------
Page
Part I. Financial information
Item 1. Financial Statements...........................................1
Condensed Consolidated Balance Sheets as of
December 31, 1997 and March 31, 1998 (unaudited)...................2
Condensed Consolidated Income Statements for the three
months ended March 31, 1997 and 1998 (unaudited)..................4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1998 (unaudited).............5
Notes to Condensed Consolidated Financial Statements...............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................12
Part II. Other information
Item 6. Exhibits and Reports on Form 8-K................................23
Signature................................................................23
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The financial information included herein is unaudited. Certain
information and footnote disclosures normally included in the financial
statements have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission (the "Commission"), although the
Company believes that the disclosures made are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and related notes contained in the
Company's 1997 consolidated financial statements previously filed with the
Commission. Other than as indicated herein, there have been no significant
changes from the financial data published in said report. In the opinion of
Management, such unaudited information reflects all adjustments, consisting only
of normal recurring accruals, necessary for a fair presentation of the unaudited
information shown.
Results for the interim period presented herein are not necessarily
indicative of results expected for the full year.
1
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 14,952 $ 15,108
Accounts receivable:
Trade, net of allowance for doubtful accounts of $225
and $1,338, respectively............................................... 36,903 54,922
Insurance claims and other............................................... 3,234 3,614
Inventory, spare parts and supplies........................................ 8,162 15,205
Prepaid expenses........................................................... 3,085 3,558
Deferred costs, net........................................................ 4,516 9,344
------------ -----------
Total current assets................................................... 70,852 101,751
Property:
Construction in progress................................................... 42,010 49,680
Vessels and improvements................................................... 492,070 759,723
Less accumulated depreciation.......................................... (45,463) (55,635)
Furniture and equipment.................................................... 7,366 7,733
Less accumulated depreciation.......................................... (1,625) (1,898)
------------ -----------
Net property........................................................ 494,358 759,603
Other assets:
Deferred costs, net........................................................ 9,580 21,217
Investment in affiliates................................................... 1,627 1,813
Goodwill, net.............................................................. 25,361 85,302
Deposits and other......................................................... 2,783 2,782
------------ -----------
Total other assets..................................................... 39,351 111,114
------------ -----------
Total assets........................................................ $ 604,561 $ 972,468
============ ===========
</TABLE>
See accompanying notes.
2
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
------------- -----------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current maturities of long-term debt......................................... $ 7,534 $ 7,576
Current obligations under capital leases..................................... 1,714 1,742
Accounts payable............................................................. 17,187 11,016
Other ................................................................... 18,627 29,326
------------- -----------
Total current liabilities............................................. 45,062 49,660
Long-term liabilities:
Long-term debt............................................................... 177,573 510,769
Obligations under capital leases............................................. 10,726 10,302
Deferred income taxes........................................................ 25,649 28,229
Other ................................................................... 3,269 21,574
------------- -----------
Total long-term liabilities............................................... 217,217 570,874
------------- -----------
Total liabilities......................................................... 262,279 620,534
Company obligated manditorily redeemable preferred securities issued
by a consolidated subsidiary.............................................. 115,000 115,000
Minority partners' equity in subsidiaries....................................... 2,295 5,060
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, 12,382,435 and 12,398,091................. 12 12
Class B Common Stock--$.001 par value, authorized 5,000,000
shares, issued and outstanding, 2,906,465................................. 3 3
Additional paid-in capital................................................... 195,522 195,959
Retained earnings............................................................ 29,450 35,900
------------- -----------
Total stockholders' equity................................................ 224,987 231,874
------------- -----------
Total minority partners' equity in subsidiaries and
stockholders' equity.................................................. 227,282 236,934
------------- -----------
Total.............................................................. $ 604,561 $ 972,468
============= ===========
</TABLE>
See accompanying notes.
3
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Income Statements
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1998
------------ -----------
(In thousands,
except
per share data)
<S> <C> <C>
Revenues............................................................................ $ 39,652 $ 86,485
Operating Expenses:
Crew payroll and benefits........................................................ 9,819 19,087
Charter hire and bond guarantee fee.............................................. 1,503 3,629
Repairs and maintenance.......................................................... 3,121 6,645
Insurance........................................................................ 2,062 2,890
Consumables...................................................................... 2,185 6,729
Other............................................................................ 2,441 6,243
----------- ----------
Total operating expenses....................................................... 21,131 45,223
Selling, general and administrative
expenses....................................................................... 5,105 9,074
Depreciation and amortization....................................................... 3,679 11,625
----------- ----------
Income from operations........................................................... 9,737 20,563
Net interest........................................................................ 2,139 7,292
Other income (expense):
Minority interest and equity in earnings of subsidiaries......................... (69) (1,747)
Other............................................................................ (186) 63
----------- ---------
Total other expense............................................................ (255) (1,684)
----------- ---------
Income before provision for
income taxes and extraordinary item.............................................. 7,343 11,587
Provision for income taxes.......................................................... 2,717 4,403
----------- ----------
Income before extraordinary item.................................................... 4,626 7,184
Loss on early extinguishment of debt,
net of applicable income taxes of $1,030 and $413, respectively.................. 1,754 734
----------- ----------
Net income..................................................................... $ 2,872 $ 6,450
=========== ==========
Earnings (loss) per common share:
Income before extraordinary item.................................................... $ 0.34 $ 0.47
Loss on early extinguishment of debt................................................ (0.13) (0.05)
----------- ----------
Net income per common share..................................................... $ 0.21 $ 0.42
=========== ==========
Earnings (loss) per common share-assuming dilution:
Income before extraordinary item.................................................... $ 0.34 $ 0.43
Loss on early extinguishment of debt................................................ (0.13) (0.04)
----------- ----------
Net income per common share-assuming dilution.................................... $ 0.21 $ 0.39
=========== ==========
Weighted average common shares outstanding.......................................... 13,471 15,290
=========== ==========
Weighted average common and common equivalent shares
outstanding-assuming dilution.................................................... 13,711 19,520
=========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1998
(In thousands)
<S> <C> <C>
Operating Activities:
Net income........................................................................ $ 2,872 $ 6,450
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss on early extinguishment of debt, net...................................... 1,754 734
Depreciation and amortization.................................................. 3,679 11,625
Amortization of drydocking costs............................................... 1,245 2,205
Amortization of discount on long-term debt and financing costs................. 5 245
Provision for bad debts........................................................ 141 257
Provision for deferred taxes................................................... 2,612 3,403
Minority partners' equity in losses of subsidiaries, net....................... 12 27
Undistributed losses (income) of affiliates, net............................... 56 (149)
Other non-cash items........................................................... -- 42
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable............................................................ (1,265) (18,656)
Current and other assets....................................................... (1,555) (6,108)
Accounts payable and other liabilities......................................... (5,506) 3,738
--------- ---------
Net cash provided by operating activities.................................... 4,050 3,813
Investing Activities:
Purchase of property.............................................................. (3,540) (25,078)
Deposits for the purchase of property............................................. (568) --
Capital contribution to affiliates................................................ (62) (37)
Acquisitions, net of $639 escrow deposit utilized in 1997......................... (11,719) (303,935)
--------- ---------
Net cash used in investing activities........................................ (15,889) (329,050)
Financing Activities:
Repayments of short-term borrowings, net.......................................... (8,000) --
Proceeds from long-term debt...................................................... 3,710 311,700
Proceeds from issuance of senior notes, net of offering costs..................... -- 292,500
Repayments of long-term debt...................................................... (31,772) (278,462)
Payment of debt and other financing costs......................................... (513) (150)
Payment of obligations under capital leases....................................... (351) (396)
Payment of notes payable to related parties....................................... (166) --
Proceeds from issuance of common stock, net of offering costs..................... 93,520 201
--------- ---------
Net cash provided by financing activities...................................... 56,428 325,393
--------- ---------
Increase (decrease) in cash and cash equivalents..................................... 44,589 156
Cash and cash equivalents at beginning of period..................................... 9,617 14,952
--------- ---------
Cash and cash equivalents at end of period........................................... $ 54,206 $ 15,108
========= =========
</TABLE>
See accompanying notes.
5
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
(Unaudited)
1. Offerings of Equity Securities
On February 5, 1997, the Company completed its secondary public
offering (the "Second Offering") of 4,000,000 shares of its Class A Common Stock
at $24.875 per share. The net proceeds to the Company were approximately
$94,300,000, after deducting underwriting commissions. Of such amount,
approximately $36.2 million was used to repay certain indebtedness. Of the
balance of approximately $58.1 million, $5.5 million was used to fund vessel
acquisitions, $20.9 million was used to fund the remainder of the purchase price
of four supply boats and one crew boat acquired in the second quarter of 1997,
$1.8 million was designated to fund the purchase of one crew boat in the third
quarter of 1997, $6.9 million was designated to fund the refurbishment and
lengthening of two supply boats put into service during the fourth quarter of
1997, and the remaining $23.0 million was available for general corporate
purposes and to fund a portion of the costs of the vessels to be constructed.
On June 24, 1997, the Company completed a private offering (the
"Private Offering") of 2,300,000, 6 1/2% Trust Convertible Preferred Securities
(the "Preferred Securities"). The Preferred Securities were issued by Hvide
Capital Trust (the "Trust"), a 100% owned subsidiary of the Company. The Trust
exists for the sole purpose of issuing the Preferred Securities and investing
the proceeds from the issuance thereof in 6 1/2% Convertible Subordinated
Debentures due June 15, 2012 (the "Debentures") issued by the Company. The net
proceeds to the Company were approximately $111,550,000 after deducting
underwriting commissions. Of such amount, approximately $94.2 million was used
to repay principal and interest outstanding under the Company's existing credit
facility, and $6.0 million was used to repay other indebtedness. The remaining
$11.4 million was available for general corporate purposes.
Holders of the Preferred Securities are entitled to receive
preferential cumulative cash distribution from the Trust at an annual rate of 6
1/2% of the liquidation preference of $50 per Preferred Security accruing from
the date of the original issuance of the Preferred Securities and payable
quarterly in arrears on January 1, April 1, July 1 and October 1 of each year,
commencing on October 1, 1997. The distribution rate and the distribution and
other payment dates for the Preferred Securities correspond to the interest rate
and interest and other payment dates for the Debentures, which are the sole
assets of the Trust.
The Preferred Securities are convertible, beginning September 25, 1997
and prior to the maturity date of the Debentures or, in the case of Preferred
Securities called for redemption, prior to the close of business on the business
day prior to the redemption date, at the option of the holder into shares of
Hvide Class A Common Stock at the rate of 1.7544 shares of Hvide Class A Common
Stock for each Preferred Security (equivalent to a conversion price of $28.50
per share of Hvide Class A Common Stock), subject to adjustment in certain
circumstances.
6
<PAGE>
2. Debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- -------------
(Unaudited)
<S> <C> <C>
Borrowings outstanding under lines of credit $ 135,000 $ 20,000
Term Loan....................................................... -- 150,000
Senior Note..................................................... -- 300,000
Title XI Debt................................................... 42,162 40,900
Notes payable................................................... 7,945 7,445
-------------- -------------
185,107 518,345
Less: Current maturities....................................... (7,534) (7,576)
-------------- -------------
$ 177,573 $ 510,769
============== =============
</TABLE>
On February 19, 1998, the Company completed an offering of $300.0
million of senior notes. The net proceeds to the Company were $291.7 million,
after deducting underwriting commissions and other offering expenses. Of such
amount, $268.0 million was used to repay outstanding indebtedness and $23.7
million was used for general corporate purposes. Interest on the senior notes
accrues at the rate of 83/8% per annum, payable semi-annually in arrears
commencing on August 15, 1998. The senior notes mature on February 15, 2008 and
are redeemable, in whole or in part, at the option of the Company on or after
February 15, 2003.
On February 19, 1998, the Company entered into an Amended and Restated
Revolving Credit and Term Loan Agreement (the "Amended Credit Agreement"), upon
receipt by the Company of the proceeds from the senior notes. The Amended Credit
Agreement merged the Credit Agreement and the Term Loan Agreement, as defined
herein, into a single agreement consisting of a $175.0 million revolving line of
credit that matures February 12, 2003 and a $150.0 million term loan payable in
28 equal quarterly installments commencing June 30, 1998 and maturing on March
31, 2005. Borrowings under the Amended Credit Agreement are secured by
Company-owned vessels, having an appraised value of not less than $400.0
million, and certain other assets relating to such vessels, including accounts
receivable, spare parts, fuel and supplies. The Company's outstanding
indebtedness under the Amended Credit Agreement totaled $170.0 million at March
31, 1998.
On November 26, 1997, the Company entered into a term loan agreement
(the "Term Loan Agreement") that provided for a $300.0 million term loan to fund
the cash portion of qualifying future acquisitions, as defined. Advances under
the Term Loan Agreement could be drawn at any time prior to April 1, 1998 and
were payable in 28 quarterly installments from June 30, 1998 through March 31,
2005. Borrowings under the Term Loan Agreement, when drawn, bear interest based
on one of two calculations set forth in the Term Loan Agreement, at the
Company's option, plus a margin based on the Company's compliance with certain
financial ratios. One interest rate calculation was tied to the Eurodollar Rate
and the other calculation was tied to the higher of the base rate of the
administrative agent named in the Term Loan Agreement or the Federal Funds
Effective Rate (the "Base Rate"). The Term Loan Agreement allowed the Company to
convert its outstanding loans from Eurodollar Rate loans to Base Rate loans, and
vice versa, from time to time. The Term Loan Agreement was merged with the
Credit Agreement pursuant to the Amended Credit Agreement and terminated on
February 19, 1998.
7
<PAGE>
On September 30, 1997, the Company entered into a credit agreement (the
"Credit Agreement") that provided for a $175.0 million revolving line of credit
through September 30, 1999, at which time availability was to decrease by $6.0
million per quarter until September 30, 2002 (the "Maturity Date"). Borrowings
under the Credit Agreement bear interest based on one of two calculations set
forth in the Credit Agreement, at the Company's option, plus a margin based on
the Company's compliance with certain financial ratios. One interest rate
calculation is tied to the Eurodollar Rate and the other calculation is tied to
the higher of the base rate of the administrative agent named in the Credit
Agreement or the Base Rate. The Credit Agreement allowed the Company to convert
its revolving credit loans from Eurodollar Rate loans to Base Rate loans, and
vice versa, from time to time. The Credit Agreement was merged with the Term
Loan Agreement pursuant to the Amended Credit Agreement and terminated on
February 19, 1998.
3. Income Taxes
For the three months ended March 31, 1997 and 1998 the provision for
income taxes was computed using an estimated annual effective tax rate of 37%
and 38%, respectively, adjusted principally for depreciation on vessels built
with capital construction funds.
4. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share before extraordinary item (in thousands, except per share
amounts):
8
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1998
<S> <C> <C>
Numerator:
Income before extraordinary item............................................. $ 4,626 $ 7,184
----------- -----------
Numerator for basic earnings per share--income
available to common shareholders........................................... 4,626 7,184
Effect of dilutive securities:
Payments on convertible preferred securities................................. -- 1,159
----------- -----------
Numerator for diluted earnings per share--income
available to common shareholders after assumed
conversion................................................................... $ 4,626 $ 8,343
=========== ===========
Denominator:
Denominator for basic earnings per share--weighted
average shares............................................................. 13,471 15,290
Effect of dilutive securities:
Convertible preferred securities............................................. -- 4,035
Stock options................................................................ 240 195
----------- -----------
Dilutive potential common shares................................................ 240 4,230
Denominator for diluted earnings per share--adjusted.............................
weighted average shares and assumed conversions.............................. 13,711 19,520
=========== ===========
Earnings per share before extraordinary item.................................... $ 0.34 $ 0.47
=========== ===========
Earnings per share before extraordinary
item--assuming dilution....................................................... $ 0.34 $ 0.43
=========== ===========
</TABLE>
5. Acquisitions
In February 1998, the Company acquired a fleet of 37 offshore energy
support vessels, operating primarily offshore West Africa and offshore Southeast
Asia, which now operates as Seabulk Offshore Operators, Inc. ("SOOP"), for a
purchase price of $271.1 million. The Company is operating 11 of the vessels
pursuant to bareboat charters pending their acquisition pursuant to the exercise
of purchase options, which it expects to occur during the second quarter of
1998. The acquisition was accounted for under the purchase method and, based
upon a preliminary allocation of the purchase price, resulted in costs in excess
of net assets acquired of approximately $61.0 million, which is being amortized
on a straight-line basis over 20 years.
In March 1998, the Company acquired seven harbor tugs, two petroleum
product carriers, and a topside repair facility for a purchase price of $31.4
million.
On May 23, 1997, the Company acquired substantially all of the assets
of an entity, which now operates as Seabulk Offshore International, Inc.
("SOII") in a transaction accounted for as a purchase. The consideration, valued
at $58.7 million, consisted of $49.0 million cash, the issuance of a note
payable in the amount of $6.0 million and the issuance of 141,760 shares of
Class A Common Stock
9
<PAGE>
valued by the Company at approximately $3.7 million. The fair value of net
assets acquired approximated the purchase price paid by the Company.
On October 16, 1997, the Company acquired 100% of the outstanding
common stock of Bay Transportation Corporation ("Bay"). The Company effected
this transaction by acquiring 100% of the outstanding common stock of Kinsman
Lines, the 80% owner of Bay, and purchased the remaining 20% of Bay's
outstanding common stock from an individual. Consideration for the acquisition
consisted of $36.5 million cash and the assumption of approximately $20.6
million of debt. The purchase agreement provided for additional consideration
based on changes in the working capital of Bay, as defined, which totaled
approximately $500,000 and was paid in January 1998. The acquisition was
accounted for under the purchase method and, based upon a preliminary allocation
of the purchase price, resulted in costs in excess of net assets acquired of
approximately $17.4 million, which is being amortized on a straight-line basis
over 20 years.
The operations of the acquired vessels and businesses are included in
the accompanying condensed consolidated income statements for periods subsequent
to their acquisition dates.
The Company's unaudited pro forma condensed consolidated income
statements, assuming the acquisition of SOOP had occurred on January 1, 1997,
are summarized as follows (in millions, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1998
<S> <C> <C>
Revenues............................................................ $ 51.9 $ 94.1
Income (loss) before extraordinary item............................. (0.7) 7.2
Net income (loss)................................................... (2.5) 6.5
Diluted earnings (loss) per common share, before
extraordinary item................................................. (0.05) 0.43
Diluted earnings (loss) per common share............................ (0.18) 0.39
</TABLE>
This pro forma information does not purport to be indicative of the
results which may have been obtained had the acquisition been consummated at the
dates assumed.
6. Foreign Currency Contracts
Due to recent international acquisitions, the Company entered into
foreign exchange forward and option contracts to manage exposure to fluctuation
in foreign currency exchange rates for non-dollar denominated transactions. At
March 31, 1998, the Company owned forward contracts and options which allowed it
to buy 136.8 million Norwegian Kroner for $18.1 million U.S. dollars. The
contracts were purchased to complete the pending acquisition of 11 vessels being
operated pursuant to bareboat charters.
10
<PAGE>
7. Legal Proceedings
In 1990, the Company withheld approximately $2.4 million 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 $8.5
million for costs allegedly due the shipyard, and the Company asserted a
counterclaim for approximately $5.6 million against the shipyard. In addition,
the shipyard is seeking $10.0 million 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 mater.
8. Extraordinary Items
In February 1997 and 1998, the Company repaid $33.2 million and $268.0
million, respectively, of its outstanding debt and amended its existing credit
facility. As a result, the Company recorded extraordinary losses of
approximately $1.8 million and $0.7 million, respectively, for the write-off of
deferred financing costs associated with the early extinguishment of debt, net
of income tax benefits of $1.0 million and $0.4 million, respectively.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion and analysis of the Company's financial condition and
historical results of operations should be read in conjunction with the
Company's consolidated historical financial statements, and the related notes
thereto included.
Area of Operations Overview
The financial information presented on the following page represents
historical results by major areas of operations.
12
<PAGE>
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1997 1998
----------- ----------------
<S> <C> <C>
Revenues:
Marine Support Services:
Offshore Energy Support......................................................... $ 17,391 $ 56,376
Offshore & Harbor Towing........................................................ 3,731 9,467
----------- ----------------
Marine Support Services Revenues.............................................. 21,122 65,843
Marine Transportation Services:
Chemical Transportation......................................................... 14,203 15,267
Petroleum Product Transportation................................................ 4,327 5,375
----------- ----------------
Marine Transportation Services................................................ 18,530 20,642
----------- ----------------
Total Revenues..................................................................... $ 39,652 $ 86,485
----------- ----------------
Operating Costs:
Marine Support Services:
Offshore Energy Support......................................................... $ 7,389 $ 25,543
Offshore & Harbor Towing........................................................ 2,350 4,665
----------- ----------------
Marine Support Services Operating Costs....................................... 9,739 30,208
Marine Transportation Services:
Chemical Transportation......................................................... 8,703 11,306
Petroleum Product Transportation................................................ 2,689 3,709
----------- ----------------
Marine Transportation Operating Costs......................................... 11,392 15,015
----------- ----------------
Total Operating Costs.............................................................. $ 21,131 $ 45,223
----------- ----------------
Direct Overhead Expense:
Marine Support Services:
Offshore Energy Support......................................................... $ 840 $ 3,074
Offshore & Harbor Towing........................................................ 374 1,158
----------- ----------------
Marine Support Services Direct Overhead....................................... 1,214 4,232
Marine Transportation Services:
Chemical Transportation......................................................... 1,040 879
Petroleum Product Transportation................................................ 296 391
----------- ----------------
Marine Transportation Direct Overhead......................................... 1,336 1,270
----------- ----------------
Total Direct Overhead.............................................................. $ 2,550 $ 5,502
----------- ----------------
Fleet Operating EBITDA
Marine Support Services:
Offshore Energy Support......................................................... $ 9,162 $ 27,759
Offshore & Harbor Towing........................................................ 1,007 3,644
----------- ----------------
Marine Support Services Fleet EBITDA.......................................... 10,169 31,403
Marine Transportation Services:
Chemical Transportation......................................................... 4,460 3,082
Petroleum Product Transportation................................................ 1,342 1,275
----------- ----------------
Marine Transportation Fleet EBITDA............................................ 5,802 4,357
----------- ----------------
Total Fleet EBITDA................................................................. $ 15,971 $ 35,760
----------- ----------------
Corporate Overhead Expense......................................................... 2,555 3,572
----------- ----------------
EBITDA .......................................................................... 13,416 32,188
Depreciation and Amortization Expense.............................................. 3,679 11,625
----------- ----------------
Income from Operations............................................................. $ 9,737 $ 20,563
=========== ================
</TABLE>
13
<PAGE>
Historical Growth
Since December 31, 1994, when the Company's fleet consisted of 66
vessels, the Company has completed the acquisition of 203 vessels at an
aggregate cost of approximately $694.1 million, including 109 vessels that were
acquired between October 1, 1997 and March 16, 1998 at an aggregate cost of
$462.3 million. Of the 203 vessels, 168 are offshore energy support vessels and
the balance are employed in the Company's offshore and harbor towing operations
and marine transportation services. The Company believes the increased size of
its vessel fleet will enable it to take further advantage of the strong
worldwide demand for marine support and transportation services.
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 over the past several years as a result of
fundamental changes in the energy industry, including: (i) favorable oil and gas
prices, (ii) significant improvement in the financial condition of many oil and
gas companies in recent years, (iii) increased worldwide demand for
hydrocarbons, (iv) the potential for relatively large oil and gas discoveries in
various offshore areas, particularly previously unexplored deepwater areas, (v)
the opening of new offshore areas for foreign investment, including areas
offshore Brazil, China, and West Africa, and (vi) royalty relief granted by the
U.S. government for oil and gas produced from wells drilled in newly acquired
deepwater blocks in the U.S. Gulf of Mexico. These higher overall activity
levels have led to increased demand for the Company's offshore energy support
services and higher overall vessel day rates in the U.S. Gulf of Mexico. Day
rates offshore West Africa are at levels approaching those in the U.S. Gulf of
Mexico. Day rates in the Arabian Gulf and offshore Southeast Asia, which the
Company believes have been among the lowest in the world, have also been
gradually increasing as a result of increases in exploration and production
activity in these areas. 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 changes in market demand.
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
U.S. Gulf of Mexico and their average utilization for the periods indicated.
14
<PAGE>
<TABLE>
<CAPTION>
1997 1998
------------------------------------------ ---------
Q1 Q2 Q3 Q4 Q1
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Number of supply boats at end of period............ 19 21 25 26 28
Average supply boat day rates(1)................... $ 6,478 $ 7,176 $ 7,636 $ 8,032 $ 8,475
Average supply boat utilization(2)................. 87% 90% 91% 93% 86%
Number of crew boats at end of period(3)........... 39 39 39 39 39
Average crew boat day rates(1)(3).................. $ 1,777 $ 1,940 $ 2,119 $ 2,294 $ 2,419
Average crew boat utilization(2)(3)................ 95% 93% 95% 93% 89%
</TABLE>
(1) Average day rates are calculated based on vessels operating
domestically by dividing total vessel revenue by the total number of
days of vessel utilization.
(2) 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.
(3) Excludes utility boats.
International Operations. The Company derives substantial revenue from
international operations primarily under dollar denominated contracts with major
international oil companies. Foreign operations are primarily located in the
Arabian Gulf and to a lesser extent the waters offshore West Africa and
Southeast Asia, and other international locations. Foreign operations represent
35% and 29% of the Company's revenue and income from operations, respectively,
for the three months ended March 31, 1998.
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 five tugs in Port Everglades, three
tugs in Port Canaveral, three tugs in Mobile, and 11 tugs in Tampa, with five
additional tugs available to provide offshore towing services.
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 three chemical
carriers owned by OMI (the "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.
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 Oil Company. Under the current
charter, fuel and port costs are for the account of the charterer, charter hire
escalates based upon changes in the consumer price index, and charter hire is
suspended while the vessel is
15
<PAGE>
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 1997, 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 Florida Power & Light Company
("FPLC") 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.
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 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 are capitalized if
they 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. The Company accounts for its drydocking costs
under the deferral method. Under the deferral method, capitalized drydocking
costs are expensed over the period preceding the next scheduled drydocking. 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 from the date built
for its steel-hull offshore energy support vessels to 30 years from the date
built for aluminum-hull vessels, unless extended to give consideration to the
condition of vessels at acquisition date and the extent, if any, of significant
capital improvements which have been made to such vessels, the lesser of any
applicable lease term life or the OPA 90 life for its product and chemical
carriers, ten years from the acquisition date for its fuel barges, and 40 years
from the date built 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
16
<PAGE>
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
Three months ended March 31, 1998 compared with the three months ended March
31, 1997
Revenue. Revenue increased 118% to $86.5 million for the three months
ended March 31, 1998 from $39.7 million for the three months ended March 31,
1997 primarily due to increased revenue in the Company's offshore energy support
and offshore and harbor towing operations.
Revenue from offshore energy operations increased 224% for the three
months ended March 31, 1998 primarily due to acquisitions and higher domestic
day rates for supply boats and crew boats resulting from increased offshore
exploration and production activity. During the 1998 period, domestic day rates
for supply boats owned, operated, or managed by the Company increased 31% from
the 1997 period, while domestic day rates for crew boats owned, operated, or
managed by the Company increased 36% from the 1997 period. As the Company did
not have significant international operations during the 1997 period, a
period-to-period comparison of international day rates would not be meaningful.
Offshore and harbor towing revenue increased 154% to $9.5 million for
the three months ended March 31, 1998 from $3.7 million for the three months
ended March 31, 1997 primarily due to the October 1997 acquisition of Bay
Transportation and the March 1998 acquisition of seven harbor towing vessels
from Kirby Corporation.
Revenue from chemical transportation operations remained relatively
stable for the three months ended March 31, 1998 compared with the three months
ended March 31, 1997.
Petroleum product transportation revenue increased 24% to $5.4 million
for the three months ended March 31, 1998 from $4.3 million for the three months
ended March 31, 1997 primarily due to the March 1998 acquisition of two product
tankers from Kirby Corporation.
Operating Expenses. Operating expenses increased 114% to $45.2 million
for the three months ended March 31, 1998 from $21.1 million for the three
months ended March 31, 1997 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 decreased to 52% for the three months ended March 31, 1998
from 53% for the three months ended March 31, 1997 due to the increase in
revenues from higher day rates in the offshore energy segment.
Overhead Expenses. Overhead expenses increased 78% to $9.1 million for
the three months ended March 31, 1998 from $5.1 million for the three months
ended March 31, 1997 primarily due to increased staffing requirements due to
acquisitions. As a percentage of revenue, overhead expenses decreased to 11% for
the three months ended March 31, 1998 from 13% for the three months ended
17
<PAGE>
March 31, 1997 due to a significant increase in revenues from acquisitions with
a slightly less increase in overhead expenses.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 216% to $11.6 million for the three months ended March 31,
1998 compared with $3.7 million for the three months ended March 31, 1997 as a
result of an increase in fleet size due to acquisitions.
Income from Operations. Income from operations increased 112% to $20.6
million, or 24% of revenue, for the three months ended March 31, 1998 from $9.7
million, or 25% of revenue, for the three months ended March 31, 1997 as a
result of the factors noted above.
Net Interest Expense. Net interest expense increased 241% to $7.3
million, or 8% of revenue, for the three months ended March 31, 1998 from $2.1
million, or 5% of revenue, for the three months ended March 31, 1997 primarily
as a result of the February 1998 senior notes offering and debt incurred in
connection with acquisitions.
Other Income (Expense). Other expense increased to $(1.7) million for
the three months ended March 31, 1998 from $(0.3) million for the three months
ended March 31, 1997 primarily due to dividend payments relating to the trust
convertible preferred securities.
Net Income. The Company had net income of $6.5 million for the three
months ended March 31, 1998 compared to net income of $2.9 million for the three
months ended March 31, 1997 primarily as a result of the factors noted above.
Seasonality
The Company has experienced some slight seasonality in its overall
operations. The first half of the year is generally not as strong as the second
half due to lower activity in offshore energy support activity and petroleum
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 borrowings, cash provided by operating activities, and proceeds from
the initial public offering of its Class A Common Stock in August 1996 (the
"IPO"), a follow-on offering of Class A Common Stock in February 1997 (the
"Follow-on Offering"), an offering of 6 1/2% trust convertible preferred
securities in June 1997 (the "Trust Preferred Offering"), and an offering of
83/8% Senior Notes in February 1998 (the "Senior Note Offering").
In February 1997, the Company completed the Follow-on Offering, which
resulted in net proceeds to the Company of approximately $94.3 million. Of such
amount, approximately $36.2 million was used to repay outstanding indebtedness.
Of the balance of approximately $58.1 million, $5.5 million was used to fund
vessel acquisitions, $20.9 million was used to fund the remainder of the
purchase price of four supply boats and one crew boat acquired in the second
quarter of 1997, $1.8 million was used to fund the purchase of one crew boat in
the third quarter of 1997, $6.9 million was designated to fund the refurbishment
and lengthening of two supply boats which were put into service during the
fourth
18
<PAGE>
quarter of 1997 and the remaining $23.0 million was available for general
corporate purposes and to fund a portion of the costs of the vessels being
constructed.
In May 1997, the Company acquired 35 offshore energy support vessels
operating primarily in the Arabian Gulf for consideration of $58.7 million,
consisting of cash of $49.0 million, a note payable in the amount of $6.0
million, and 141,760 shares of Class A Common Stock valued by the Company at
$3.7 million. Of the cash portion of the purchase price, $10.5 million was
funded from the Company's available cash and $38.5 million was drawn under the
Credit Facility.
In June 1997, the Company completed the Trust Preferred Offering, which
resulted in net proceeds to the Company of approximately $111.6 million. Of that
amount, approximately $94.2 million was used to repay amounts outstanding under
its bank credit facility and $6.0 million was used to repay the $6.0 million
note issued in the May 1997 acquisition of 35 offshore energy support vessels.
The remaining $11.4 million was used for general corporate purposes.
In October 1997, the Company completed the acquisition of a fleet of 35
offshore energy support vessels operating primarily in the Arabian Gulf, a
topside vessel repair facility, and certain related assets for cash of $36.0
million, which was funded with borrowings under the Company's bank credit
facility. In October 1997, the Company also acquired all of the outstanding
stock of a harbor towing company that operates a fleet of six tractor tugs and
eight conventional harbor tugs, primarily in the port of Tampa, Florida. The
aggregate purchase price for the acquisition was $57.6 million, consisting of
cash of $37.0 million, which was funded with borrowings under the Company's bank
credit facility, and the assumption of approximately $20.6 million of debt, of
which $5.5 million was repaid with borrowings under the Company's bank credit
facility.
In December 1997, the Company acquired a fleet of 14 offshore energy
support vessels, operating primarily in the Arabian Gulf, and certain related
assets for cash of $20.5 million, which was funded with borrowings under the
Company's bank credit facility.
In February 1998, the Company completed the Senior Note Offering, which
resulted in net proceeds to the Company of approximately $291.7 million. Of that
amount, $268.0 was used to repay outstanding indebtedness and the balance was
available for general corporate purposes.
In February 1998, the Company entered into an amended and restated
revolving credit and term loan agreement (the "Amended Credit Agreement") with
Citibank, N.A., as Administrative Agent, and BankBoston, N.A. and BancBoston
Securities Inc., as Documentation Agent and Syndication Agent, respectively. The
Amended Credit Agreement merged the Company's revolving line of credit and term
loan under one agreement and requires that aggregate borrowings thereunder be
secured with a portion of the Company's assets, primarily vessels and subsidiary
stock, initially having an appraised value of approximately $400.0 million. The
Amended Credit Agreement provides for (i) a $175.0 million revolving credit
facility that matures February 12, 2003, and (ii) a $150.0 million term loan
that matures March 31, 2005, and that is payable in 28 equal quarterly
installments commencing on June 30, 1998 and ending on the maturity date.
Borrowings under the Amended Credit Agreement bear interest based on a rate tied
to the Eurodollar or the higher of (i) the base rate of the Administrative
Agent, or (ii) the Federal Funds rate plus 0.5%, at the Company's option, plus a
margin based upon the ratio of the Company's consolidated debt to EBITDAR. The
effective interest rate under the Amended Credit Agreement was 6.6875% at May 4,
1998. Pursuant to the Amended Credit Agreement, the Company is required to meet
certain financial tests and is subject to certain covenants.
19
<PAGE>
In March 1998, the Company completed the acquisition of two petroleum
product tankers and seven tugs operating in the U.S. domestic trade, a topside
repair facility and certain related assets for cash of $31.4 million. The
purchase price was funded with proceeds of the Senior Note Offering and
borrowings under the Amended Credit Agreement.
The Company's future capital needs are expected to relate primarily to
debt service obligations, maintenance and improvements of its fleet, and
acquisitions. The Company's outstanding indebtedness under the Amended Credit
Agreement at May 4, 1998, was $201.0 million. The Company's principal and
interest payment obligations for 1998 are estimated to be approximately $63.8
million, and operating lease obligations for 1998 are estimated to be
approximately $4.9 million.
Capital requirements for vessel maintenance and improvements, including
scheduled drydockings, were approximately $20.0 million for 1997, and are
expected to be approximately $50.0 million for 1998.
During 1997, the Company constructed one SDM(TM) at a cost of $5.0
million, one double-hull barge at a cost of $1.0 million, and purchased four
additional double-hull barges for an aggregate cost of $2.4 million. These four
barges are currently being refurbished for an estimated aggregate cost of $2.6
million and will be deployed in Sun State's operations. In January 1998, the
Company completed construction of one supply boat at a cost of $8.2 million. In
April 1998, the Company took delivery of two tugs at a cost of $9.1 million, one
SDM(TM) at a cost of $5.0 million, and one crew boat at a cost of $2.5 million,
and acquired one geophysical vessel for $4.0 million. The Company has contracted
for the construction of one additional SDM(TM) at an estimated aggregate cost of
approximately $5.0 million with delivery expected in June 1998. The Company has
also contracted for the construction of five additional supply boats for
delivery in 1998 and 1999 at an estimated aggregate cost of $45.0 million and
the construction of a double-skin barge at an estimated cost of $1.2 million for
delivery in 1998. The Company has also agreed to purchase for an estimated
aggregate cost of $12.6 million, four newly constructed 152-foot crew boats
scheduled for delivery in 1998 and 1999. During 1997, the Company formed a joint
venture with Aker Marine Contractors, Inc. ("Aker") to construct and operate a
279-foot construction/anchor handling tug/supply vessel. The Company's capital
expenditure obligation with respect to such joint venture is currently estimated
to be approximately $21.6 million, of which $1.6 million was expended in 1997.
The Company expended $4.5 million during the first quarter of 1998 and expects
to spend $14.7 million during the remainder of 1998 and $0.8 million in 1999.
The Company intends to fund the aggregate cost of the SDM(TM) , the crew boats,
the supply boats, the barges, and the construction/anchor handling tug/supply
vessel from available working capital, borrowings under the Amended Credit
Agreement, lease financing, or a combination of such sources.
The Company has an 0.8% equity interest in four 45,300 dwt double-hull
product carriers that are currently under construction. The aggregate cost of
the four carriers is estimated to be $200.0 million, of which a substantial
portion is being financed with the proceeds of government-guaranteed Title XI
ship financing bonds issued in March 1996. The Company has agreed to purchase an
additional 25.0% interest during the first half of 1998 at an estimated cost of
$12.0 million and has an exclusive option to purchase the remaining 74.2%
interest at an estimated cost of $27.4 million.
In May 1997, the Company's board of directors authorized the repurchase
of up to 1,000,000 shares of the Company's Class A Common Stock. The amount of
funds required to repurchase Class A Common Stock will depend upon the actual
number of shares repurchased and the market price paid by the Company for those
shares. The Company has not repurchased any shares of Class A Common Stock under
this authorization.
20
<PAGE>
The Company believes that the remaining proceeds of the cash generated
from operations and amounts available under the Amended Credit Agreement 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.
Forward-Looking Information
The Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical fact included in the
MD&A, including statements regarding the Company's operating strategy, plans,
objectives and beliefs of management for future operations, planned capital
expenditures and vessel acquisition and construction are forward-looking
statements. Although the Company believes the expectations and beliefs reflected
in such forward-looking statements are reasonable, it can give no assurance that
they will prove to have been correct.
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.
Prospective Accounting Changes
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. This Statement supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," and amends SFAS No.
94, "Consolidation of all Majority-Owned Subsidiaries." This Statement requires
annual financial statements to disclose information about products and services,
geographic areas and major customers based on a management approach, along with
interim reports. The management
21
<PAGE>
approach requires disclosing financial and descriptive information about an
enterprise's reportable operating segments based on reporting information the
way management organizes the segments for making business decisions and
assessing performance. It also eliminates the requirement to disclose additional
information about subsidiaries that were not consolidated. This new management
approach may result in more information being disclosed than presently presented
and require new interim information not previously presented. The Company plans
to adopt SFAS No. 131 in 1998 with impact only to the Company's disclosure
information and not its results of operations.
Impact of Year 2000
Some of the Company's older computer programs were written using two
digits rather than four to define the applicable year. As a result, those
computer programs have time-sensitive software that recognize a date using "00"
as the year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities.
The Company has completed an assessment of their domestic computer
systems and is currently completing the installation of a management information
system that is year 2000 compliant. The Company is currently assessing the
information systems at overseas locations acquired during 1997 and believes it
will have to modify or replace portions of its software so that overseas
computer systems will function properly with respect to dates in the year 2000
and thereafter. The total expected cost to ensure overseas systems are year 2000
compliant is estimated to range from $3.0 million to $3.5 million.
The overseas project is estimated to be completed not later than
December 31, 1998, which is prior to any anticipated impact on its operating
systems. The Company believes that with modifications to existing software and
conversions to new software, the year 2000 issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made, or are not completed timely, the year 2000 issue
could have a material impact on the operations of the Company.
The costs of the project and the date on which the Company believes it
will complete the year 2000 modifications are based on management's best
estimates, which were derived utilizing numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no guarantee that these estimates will be achieved and
actual results could differ materially from those anticipated. Specific factors
that might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
22
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
27 - Financial Data Schedule
b. Reports on Form 8-K.
The Company's Current Report on Form 8-K dated February 13, 1998
reporting on the acquisition of offshore energy support vessels from
Care Offshore, Inc., filed with the Securities and Exchange Commission
on February 25, 1998.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HVIDE MARINE INCORPORATED
/s/ JOHN J. KRUMENACKER
- -----------------------------------------------------
John J. Krumenacker
Controller and Chief Accounting Officer
Date: May 15, 1998
23
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 15,108
<SECURITIES> 0
<RECEIVABLES> 54,922
<ALLOWANCES> 0
<INVENTORY> 15,205
<CURRENT-ASSETS> 101,751
<PP&E> 817,136
<DEPRECIATION> 57,533
<TOTAL-ASSETS> 972,468
<CURRENT-LIABILITIES> 49,660
<BONDS> 0
115,000
0
<COMMON> 15
<OTHER-SE> 231,859
<TOTAL-LIABILITY-AND-EQUITY> 972,859
<SALES> 0
<TOTAL-REVENUES> 86,485
<CGS> 0
<TOTAL-COSTS> 65,922
<OTHER-EXPENSES> 1,684
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,292
<INCOME-PRETAX> 11,587
<INCOME-TAX> 4,403
<INCOME-CONTINUING> 7,184
<DISCONTINUED> 0
<EXTRAORDINARY> 734
<CHANGES> 0
<NET-INCOME> 6,450
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.39
</TABLE>
