SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 8, 1999
HVIDE MARINE INCORPORATED
(Exact name of registrant as specified in its charter)
Florida 0-28732 65-0524593
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
2200 Eller Drive, P.O. Box 13038, Fort Lauderdale, Florida 33316
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 954.524.4200
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Item 5. Other Events.
HMI Finance Co. ("HMI"), a limited-purpose corporation, intends to make
a private offering of First Priority Senior Secured Notes due 2004 and Second
Priority Senior Secured Discount Notes due 2004. If the offering is successfully
completed, HMI will use the proceeds to purchase the Registrant's outstanding
indebtedness under its bank credit facility, which will be amended to reflect
generally the terms of such notes. The following discussion summarizes the
events leading to the offering, the purpose of the offering and other matters
relating to the Registrant's lack of liquidity.
Since mid-1998, there has been a severe downturn in offshore oil and
gas exploration, development and production activities in the Gulf of Mexico. A
similar downturn began in late 1998 in international markets. These downturns
are primarily a result of a worldwide decline in oil and gas prices. This has
resulted in a substantial decline in offshore energy support vessel day rates
and utilization, which has adversely affected the Registrant's operating
results. For supply boats operated by the Registrant in the Gulf of Mexico,
average day rates declined from $8,475 during the first quarter of 1998 to
$4,530 in the first quarter of 1999, while utilization declined from 86% to 70%.
For anchor handling tug/supply boats operated by the Registrant in foreign
waters, average day rates declined from $5,505 in the first quarter of 1998 to
$4,817 in the first quarter of 1999, while utilization declined from 75% to 61%.
As a result, the Registrant experienced a decline in revenue from $86.5 million
for the first quarter of 1998 to $82.2 million for the first quarter of 1999 and
a decline in EBITDA from $32.2 million to $18.0 million for the same periods.
The Registrant reported a net loss of $9.1 million for the first quarter of 1999
as compared to net income of $6.5 million for the same period in 1998. The
Registrant experienced further declines in vessel day rates and utilization in
some of its operating sectors during the second quarter of 1999.
For the nine months ending December 31, 1999, the Registrant estimates
that, in addition to working capital requirements, its cash requirements will be
approximately $104.8 million, consisting of approximately $73.1 million for
principal and interest payments on its debt (at current rates), approximately
$10.0 million for vessel construction (or up to approximately $19.2 million if
pending sales are not consummated), approximately $19.5 million for vessel
maintenance and improvements, and approximately $2.2 million for vessel
operating lease obligations. Assuming that industry conditions do not improve
significantly, the Registrant's cash flow from operations and cash on hand will
not be sufficient to satisfy its short-term working capital needs, capital
expenditures, debt service requirements and lease and other payment obligations.
Further, as a result of the decline in the Registrant's revenue, the
Registrant has not been in compliance since March 31, 1999, with certain
covenants contained in its bank credit facility. The lenders have waived this
noncompliance until July 30, 1999. The Registrant's independent auditors have
qualified their report accompanying the Registrant's financial statements,
stating that the Registrant's reduction in revenues and noncompliance with such
covenants raise substantial doubt about the Registrant's ability to continue as
a going concern.
The private offering described above is intended to reduce the
Registrant's near-term cash requirements. It is anticipated that the notes to be
issued in the offering will require no amortization of
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principal, and that interest on a portion of the notes will not be payable for a
period of three years. Because the amended credit facility will reflect these
terms of the notes, the Registrant will no longer be required to make quarterly
payments of principal under the term loan portion of the credit facility and
will not be required for three years to make cash payments of interest on a
portion of the indebtedness outstanding under such facility. The Registrant
estimates that this will result in a reduction of its cash payments of principal
and interest of $45.5 million for the nine months ending December 31, 1999 and
$43.1 million for 2000. There is no assurance, however, that the offering will
be successfully completed. Moreover, even if successfully completed, the
offering will not be sufficient to satisfy the Registrant's near-term cash
needs. Accordingly, the Registrant will continue to pursue the plan it initiated
in the fourth quarter of 1998 to improve its liquidity.
This plan includes: (i) selling six vessels and three vessels under
construction for estimated gross cash proceeds of $17.4 million (and a $9.2
million reduction in future vessel construction payment obligations), which
sales are anticipated to be completed by the end of July 1999, provided that all
conditions to such sales have been satisfied; (ii) identifying other vessels
that may be sold for cash; (iii) curtailing or deferring certain capital
expenditures such as drydocking (consistent with safety and operational
considerations); (iv) seeking to cancel construction of three new vessels; (v)
reducing operating and overhead expenses through the implementation of salary
reductions, a hiring freeze and selected layoffs; (vi) strengthening efforts to
collect receivables; and (vii) electing to defer interest payments under the
Registrant's Trust Preferred Securities. The Registrant is also seeking
additional means of financing and is in discussions with respect thereto.
The Registrant believes that the amendments to its bank credit facility
contemplated by the private offering, together with the plan outlined above,
will better position the Registrant to meet its near-term cash requirements.
However, because various factors, including conditions in the offshore energy
support industry, general economic conditions and the cooperation of third
parties, are beyond the Registrant's control, there can be no assurance that
these measures will succeed in remedying the Registrant's lack of liquidity. If
the Registrant is unable to meet its cash requirements, it will likely be
required to seek protection from its creditors under applicable bankruptcy laws.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
HVIDE MARINE INCORPORATED
(Registrant)
By s/ John H. Blankley
John H. Blankley
Executive Vice President and
Chief Financial Officer
Dated: July 9, 1999
