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 June 30, 1999
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) 523-2200
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, and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
There were 12,997,939 and 2,547,064 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 August 9, 1999.
<PAGE>
HVIDE MARINE INCORPORATED
Quarter ended June 30, 1999
Index
Page
Part I. Financial Information
Item 1. Financial Statements............................................ 1
Condensed Consolidated Balance Sheets at
December 31, 1998 and June 30, 1999 (Unaudited)....................... 2
Condensed Consolidated Statements of Operations for the
three and six months ended June 30, 1998 and 1999 (Unaudited)......... 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1998 and 1999 (Unaudited).................... 5
Notes to Condensed Consolidated Financial Statements................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................19
Part II. Other Information
Item 1. Legal Proceedings................................................32
Item 3. Defaults Upon Senior Securities..................................33
Item 5. Other Information................................................33
Item 6. Exhibits and Reports on Form 8-K.................................33
Signature.................................................................34
As used in this Report, the term "Parent" means Hvide Marine Incorporated, and
the term "Company" means the Parent and/or one or more of its subsidiaries.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
--------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................ $ 9,177 $ 13,247
Accounts receivable:
Trade, net of allowance for doubtful accounts of $2,169
and $2,416, respectively............................................... 67,961 55,864
Insurance claims and other............................................. 11,915 7,997
Escrow deposit and other................................................. -- 31,799
Inventory, spare parts and supplies...................................... 17,455 18,993
Prepaid expenses......................................................... 4,342 2,734
Deferred costs, net...................................................... 10,482 8,492
-------------- --------------
Total current assets................................................. 121,332 139,126
Property:
Construction in progress................................................. 39,455 6,575
Vessels and improvements................................................. 889,903 880,819
Less accumulated depreciation.......................................... (91,309) (118,807)
Furniture and equipment.................................................. 17,297 22,254
Less accumulated depreciation.......................................... (3,540) (4,996)
-------------- --------------
Net property......................................................... 851,806 785,845
Other assets:
Deferred costs, net...................................................... 20,978 19,939
Investment in affiliates................................................. 23,421 25,515
Goodwill, net............................................................ 86,955 85,347
Other.................................................................... 4,333 4,030
-------------- --------------
Total other assets..................................................... 135,687 134,831
-------------- --------------
Total assets......................................................... $ 1,108,825 $ 1,059,802
============== ==============
</TABLE>
See accompanying notes.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
--------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................... $ 25,822 $ 13,280
Current maturities of long-term debt................................... 9,011 30,427
Current obligations under capital leases............................... 2,991 3,218
Debt subject to acceleration........................................... 252,954 244,901
Accrued interest....................................................... 9,864 10,400
Other.................................................................. 25,716 25,232
-------------- -------------
Total current liabilities............................................ 326,358 327,458
Long-term liabilities:
Long-term debt......................................................... 33,564 43,641
Obligations under capital leases....................................... 36,983 35,635
Senior Notes........................................................... 300,000 300,000
Deferred income taxes.................................................. 32,721 16,122
Other.................................................................. 5,551 4,758
-------------- -------------
Total long-term liabilities.......................................... 408,819 400,156
-------------- -------------
Total liabilities.................................................. 735,177 727,614
Company obligated manditorily redeemable preferred securities of a
subsidiary trust holding solely debentures issued by the Company.......... 115,000 115,000
Minority partners' equity in subsidiaries................................... 10,613 1,356
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $1.00 par value, authorized 10,000 shares
issued and outstanding, none...........................................
Class A Common Stock -- $.001 par value, authorized 100,000,000
shares, issued and outstanding 12,872,629 and 12,985,815............... 13 13
Class B Common Stock -- $.001 par value, authorized 5,000,000
shares, issued and outstanding, 2,547,064.............................. 2 2
Additional paid-in capital............................................... 196,822 197,176
Retained earnings........................................................ 51,198 18,640
-------------- -------------
Total stockholders' equity............................................. 248,035 215,832
Total minority partners' equity in subsidiaries
and stockholders' equity............................................. 258,648 217,188
-------------- -------------
Total................................................................ $ 1,108,825 $ 1,059,802
============== =============
</TABLE>
See accompanying notes.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -------------------------------
1998 1999 1998 1999
-------------- ------------ -------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues..................................................... $ 109,332 $ 78,316 $ 195,817 $ 160,529
Operating Expenses:
Crew payroll and benefits............................... 23,461 20,525 42,548 42,975
Charter hire and bond guarantee fee..................... 4,837 4,961 8,466 8,522
Repairs and maintenance................................. 8,030 10,389 14,675 19,769
Insurance............................................... 3,465 2,977 6,355 6,245
Consumables............................................. 8,502 7,513 15,231 15,702
Other................................................... 9,448 6,031 15,691 12,708
---------- ---------- ---------- ---------
Total operating expenses.............................. 57,743 52,396 102,966 105,921
Selling, general and administrative expenses................. 11,222 11,169 20,296 21,883
Depreciation and amortization................................ 12,246 16,680 23,871 32,439
---------- ---------- ---------- ---------
Income (loss) from operations........................... 28,121 (1,929) 48,684 286
Interest, net................................................ 11,088 17,008 18,380 31,009
Other income (expense):
Minority interest and equity in
earnings of subsidiaries.............................. (1,678) (2,111) (3,425) (5,156)
Loss on disposal of assets.............................. (78) (14,318) (15) (14,136)
----------- ---------- ---------- ---------
Total other income (expense).......................... (1,756) (16,429) (3,440) (19,202)
---------- ---------- ---------- ---------
Income (loss) before provision for (benefit from)
income taxes and extraordinary item..................... 15,277 (35,366) 26,864 (50,015)
Provision for (benefit from) income taxes.................... 5,805 (11,649) 10,208 (17,230)
---------- ---------- ---------- ---------
Income (loss) before extraordinary item...................... 9,472 (23,717) 16,656 (32,785)
Loss on early extinguishment of debt,
net of income tax benefit of $413....................... -- -- 734 --
---------- ---------- ---------- ---------
Net income (loss)..................................... $ 9,472 $ (23,717) $ 15,922 $ (32,785)
========== ========== ========== =========
Earnings (loss) per common share - basic:
Income (loss) before extraordinary item................. $ 0.62 $ (1.53) $ 1.09 $ (2.12)
Loss on early extinguishment of debt.................... -- -- (0.05) --
--------- --------- ---------- --------
Net income (loss) per common share - basic............ $ 0.62 $ (1.53) $ 1.04 $ (2.12)
========= ========= ========= ========
Earnings (loss) per common share-assuming dilution:
Income (loss) before extraordinary item................. $ 0.55 $ (1.53) $ 0.97 $ (2.12)
Loss on early extinguishment of debt.................... -- -- (0.04) --
--------- ---------- --------- ---------
Net income (loss) per common share -
assuming dilution................................... $ 0.55 $ (1.53) $ 0.93 $ (2.12)
========= ========= ========= ========
Weighted average common shares outstanding - basic........... 15,308 15,497 15,299 15,461
========= ========= ========= =========
Weighted average common and common equivalent shares
outstanding - assuming dilution......................... 19,475 15,497 19,503 15,461
========= ========= ========= =========
</TABLE>
See accompanying notes.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1999
-------------- -------------
(In thousands)
<S> <C> <C>
Operating Activities:
Net income (loss)............................................................. $ 15,922 $ (32,785)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Loss on early extinguishment of debt, net................................. 734 --
Depreciation and amortization............................................. 23,871 32,440
Provision for bad debts................................................... 546 471
Loss on disposal of property.............................................. -- 14,130
Amortization of drydocking costs.......................................... 5,738 6,048
Amortization of discount on long-term debt and financing costs............ 555 892
Provision for (benefit from) deferred taxes............................... 7,156 (17,230)
Minority partners' equity in earnings of subsidiaries, net................ 52 293
Undistributed losses (earnings) of affiliates, net........................ (366) 1,124
Other non-cash items...................................................... 82 104
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable....................................................... (33,713) 15,543
Current and other assets.................................................. (10,720) (3,436)
Accounts payable and other liabilities.................................... 16,089 (12,548)
----------- -----------
Net cash provided by operating activities............................... 25,946 5,046
Investing Activities:
Purchase of property........................................................ (51,735) (15,282)
Payments on vessels under construction...................................... -- (5,102)
Capital contribution to affiliates.......................................... (18,537) (3,164)
Cash paid for acquisitions.................................................. (337,635) --
----------- -----------
Net cash used in investing activities................................... (407,907) (23,548)
Financing Activities:
Proceeds from short-term borrowings......................................... -- 5,000
Proceeds from long-term borrowings.......................................... 383,700 45,479
Proceeds from issuance of Senior Notes, net of offering costs............... 292,500 --
Repayment of long-term borrowings........................................... (285,801) (21,768)
Payment of debt and other financing costs................................... (247) --
Payment of obligations under capital leases................................. (880) (1,391)
Proceeds from issuance of common stock...................................... 387 252
Repayment of short-term debt................................................ -- (5,000)
----------- -----------
Net cash provided by (used in) financing activities....................... 389,659 22,572
----------- -----------
Increase in cash and cash equivalents............................................ 7,698 4,070
Cash and cash equivalents at beginning of period................................. 14,952 9,177
----------- -----------
Cash and cash equivalents at end of period....................................... $ 22,650 $ 13,247
=========== ===========
Supplemental Cash Flow Disclosure:
Interest paid............................................................... $ 9,564 $ 29,681
=========== ===========
Capital leases assumed in the acquisition of vessels........................ $ 10,025 $ --
=========== ===========
Proceeds from disposal of property placed in escrow....................... $ -- $ 31,799
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999
(Unaudited)
1. Basis of Presentation
The interim consolidated financial statements in this Report are
unaudited. In accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission"), certain information and footnote
disclosures have been condensed or omitted; therefore, such financial statements
should be read in conjunction with the consolidated financial statements in the
Parent's Annual Report on Form 10-K for the year ended December 31, 1998 (the
"1998 Form 10-K"). The interim consolidated financial statements in this Report
reflect all adjustments and accruals that, in the opinion of management, are
necessary for a fair presentation of the results of the interim periods
presented; all such adjustments were of a normal recurring nature. The results
of operations for the three and six-month interim periods ended June 30, 1999
are not necessarily indicative of the results of operations for the fiscal year
ending December 31, 1999.
2. Liquidity and Management's Plans
The Company has experienced a severe downturn in offshore energy
support vessel day rates and utilization, which has resulted in declines in
revenue and operating cash flow. Due to the deterioration of its financial
position, the Company was not in compliance with certain covenants under the
Credit Facility as of March 31 and June 30, 1999. The Company's bank lenders
have waived the Company's noncompliance through August 20, 1999 (see Note 3).
There can be no assurance that the current waiver will be extended or as to the
terms of any extension.
In addition to negotiating with its bank lenders to obtain waivers or
amendments of the Credit Facility, the Company has taken various actions to
increase liquidity, including (i) reducing operating and overhead expenses; (ii)
disposing of assets to increase available cash; (iii) reducing and deferring
capital expenditures, consistent with safety and operational needs; and (iv)
deferring dividend payments on the Trust Convertible Preferred Securities.
The Company has no additional borrowing capacity. While the Company is
in active discussions with representatives of certain major creditors concerning
a possible restructuring plan, there can be no assurance as to whether or when
the Company will agree to the terms of a plan or will be in a position to
implement such a plan. Should the Company not reach agreement as to the terms of
such a plan, it will likely exhaust its available cash and would be forced to
seek bankruptcy protection.
The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that may result from
this uncertainty.
3. Senior Notes and Other Debt
The Company has $300.0 million of 8.375% Senior Notes due 2008 (the
"Senior Notes") outstanding. Interest on the Senior Notes is payable
semi-annually in arrears on February 15 and August 15, and they mature on
February 15, 2008. The Senior Notes are guaranteed by certain of the Company's
subsidiaries (see Note 8).
<PAGE>
Other long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31 June 30,
1998 1999
---------------- ---------------
<S> <C> <C>
Lines of Credit.................................................... $ 135,000 $ 157,008
Term Loan.......................................................... 117,954 109,321
Title XI Debt...................................................... 36,701 33,970
Notes Payable 5,874 18,669
--------------- ---------------
295,529 318,968
Less: Current maturities and debt subject to acceleration......... 261,965 275,327
--------------- ---------------
$ 33,564 $ 43,641
=============== ===============
</TABLE>
Current maturities of long-term debt include $252.9 million at December
31, 1998 and $266.3 million at June 30, 1999 of borrowings under the Company's
Amended and Restated Revolving Credit and Term Loan Agreement with a group of
banks (such Agreement, as amended, the "Credit Facility"). At June 30, 1999, the
Company's outstanding indebtedness under the revolving credit portion of the
Credit Facility was approximately $157.0 million and approximately $109.3
million was outstanding under the term loan portion of the Credit Facility.
Interest rates on borrowings under the Credit Facility was 12.75% at June 30,
1999.
During and subsequent to the quarter ended June 30, 1999, the Company
entered into amendments to the Credit Facility that provided, among other
things, for (1) increased commitment fees and/or the payment of certain other
fees; (2) increased interest on borrowings; and (3) waiver of noncompliance with
certain covenants in the Credit Facility. The most recent amendment, dated as of
July 30, 1999, provides for a waiver of such noncompliance to August 20, 1999;
it also provides for an increase in the rate of interest on borrowings to the
"Base Rate" plus 7% per annum (to be increased to 10% if the borrowings under
the Credit Facility are not repaid by August 20, 1999) and for a $500,000
"extension" fee that will be refunded if the borrowings under the Credit
Facility are repaid by August 20, 1999. No assurance can be given that the
Company and the bank lenders will reach agreement concerning a further extension
of the above waiver or as to the terms of such an extension.
At June 30, 1999, the Company had approximately $34.0 million of Title
XI debt that 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
semi-annual principal and interest payments through June 1, 2021. Under the
terms of the Title XI debt, the Company is required to maintain a minimum level
of working capital, as defined, and comply with certain other financial
covenants.
The Company has outstanding notes payable that bear interest at rates
ranging from 7.92% to 8.5% and mature at various dates through November 2011.
The notes payable are collateralized by certain vessels.
At June 30, 1999, the Company also had letters of credit outstanding in
the amount of approximately $3.2 million which expire on various dates through
December 2002. These letters of credit are not secured by any collateral.
<PAGE>
4. Redeemable Preferred Securities
At June 30, 1999, Hvide Capital Trust, a wholly owned consolidated
subsidiary of the Company (the "Trust"), had outstanding 2,300,000 6 1/2% Trust
Convertible Preferred Securities (the "Preferred Securities") with a principal
amount of $115.0 million and 71,134 6 1/2% Trust Convertible Common Securities
with a principal amount of $3.6 million. The proceeds of the issuance of these
securities in June 1997 were invested by the Trust in $118.6 aggregate principal
amount of the Company's 6 1/2% Convertible Subordinated Debentures due June 15,
2012 (the "Debentures"). The Debentures represent the sole assets of the Trust
and constitute a full and unconditional guarantee by the Company of the Trust's
obligations under the Preferred Securities. Pursuant to the terms of the
agreement, the Company has deferred the payment of dividends on these securities
during 1999. Accordingly, $3.7 million of preferred distributions are included
in other liabilities on the accompanying June 30, 1999 consolidated balance
sheet.
5. Equity Investment in Affiliate
During 1998, the paid $18.5 million to increase its equity interest in
five double-hull carriers (collectively the Lightship Tankers) from 0.8% to
50.8%. Three of these carriers were delivered in 1998 and the final two were
delivered in 1999. At the time of the increase in its equity interest, the
Company intended, and it still intends, to reduce its equity interest to less
than 50%. Accordingly, the Company has accounted for this temporary investment
under the equity method and has been actively marketing a portion of the
investment. There can be no assurance that the Company will be successful in
reducing the investment. Should the Company be unable to reduce its investment,
the Lightship Tankers will be consolidated with the Company in its September 30,
1999 consolidated financial statements.
Summary financial information for the Lightship Tankers as of and for
the periods ended December 31, 1998 and June 30, 1999 is as follows (in
thousands):
December 31, June 30,
1998 1999
------------- -------------
Current assets................ $ 10,652 $ 14,982
Vessels and other assets...... 254,220 257,424
Current liabilities........... 6,579 5,918
Long term debt................ 221,373 231,014
Revenues...................... 3,185 20,045
Loss from operations.......... (37) 3,892
Net loss...................... (130) (2,213)
6. Loss on Disposal of Assets
During the quarter ended June 30, 1999, the Company sold or entered
into agreements to sell eight vessels (excluding vessels under construction) for
net cash proceeds of approximately $32.3 million. Under the terms of the Credit
Facility, a portion of the proceeds has been used to permanently reduce
borrowings thereunder. Accordingly, $25.3 million of amounts paid and
<PAGE>
receivable pursuant to vessel sales are included in Escrow Deposits and Other on
the accompanying balance sheet, pending the use of such funds to reduce
borrowings under the Credit Facility. The remaining proceeds may be used for
general working capital purposes, subject to certain conditions as outlined in
the Credit Facility, as amended.
7. Income Taxes
For the six months ended June 30, 1998 and 1999, the provision for
(benefit from) income taxes was computed using estimated annual effective tax
rate of 38% and 34%, respectively, adjusted principally for depreciation on
vessels built with capital construction funds.
<PAGE>
8. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted
earnings (loss) per share before extraordinary item (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1998 1999 1998 1999
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Numerator:
Income (loss) before extraordinary item.................. $ 9,472 $ (23,717) $ 16,656 $ (32,785)
------------ ----------- ------------ -----------
Numerator for basic earnings (loss) per share
Income (loss) applicable to common shareholders.......... 9,472 (23,717) 16,656 (32,785)
Effect of dilutive securities:
Dividend on Trust Convertible Preferred Securities 1,159 --(1) 2,317 --(1)
------------ ----------- ------------ -----------
Numerator for diluted earnings (loss) per share
income (loss) applicable to common shareholders
after assumed conversion................................. $ 10,631 $ (23,717) $ 18,973 $ (32,785)
============ =========== ============ ===========
Denominator:
Denominator for basic earnings per
weighted average shares................................ 15,308 15,497 15,299 15,461
Effect of dilutive securities:
Trust Convertible Preferred Securities................... 4,035 --(1) 4,035 --(1)
Deferred compensation.................................... 13 56 7 38
Stock options............................................ 119 --(2) 162 --(2)
------------ ------------- ------------ -----------
Dilutive potential common shares............................ 4,167 56 4,204 38
Denominator for diluted earnings (loss) per share
adjusted weighted average shares and assumed
conversions.............................................. 19,475 15,553 19,503 15,499
============ =========== ============ ===========
Earnings (loss) per share before extraordinary item......... $ 0.62 $ (1.53) $ 1.09 $ (2.12)
============ =========== ============ ==========
Earnings (loss) per share before extraordinary item -
assuming dilution........................................ $ 0.55 $ (1.53) $ 0.97 $ (2.12)
============ =========== ============ ==========
</TABLE>
(1) Excludes the assumed conversion of the Trust Convertible Preferred
Securities as the effect is anti-dilutive for the period.
(2) Excludes the assumed exercise of stock options as the effect is
anti-dilutive for the period.
9. Segment and Geographic Data
The Company organizes its business principally into three segments. The
Company does not have significant intersegment transactions.
Revenues by segment and geographic area consist only of services
provided to external customers, as reported in the Statement of Operations.
Income from operations by geographic area represents net revenues less
applicable costs and expenses related to those revenues. Unallocated expenses
are primarily comprised of general and administrative expenses of a corporate
nature. Identifiable assets represent those assets used in the operations of
each segment or geographic area and unallocated assets include corporate assets
and intercompany eliminations.
<PAGE>
The following schedule presents information about the Company's
operations in its three business segments (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1999 1998 1999
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Offshore energy support................................... $ 67,533 $ 39,097 $ 123,909 $ 84,835
Offshore and harbor towing................................ 11,824 11,414 21,291 22,768
Marine transportation services............................ 29,975 27,805 50,617 52,926
----------- ----------- ---------- ----------
Consolidated revenues.......................................... $ 109,332 $ 78,316 $ 195,817 $ 160,529
========== ========== ========= =========
Operating expenses
Offshore energy support................................... $ 29,733 $ 27,362 $ 55,277 $ 57,051
Offshore and harbor towing................................ 6,375 5,621 11,041 11,387
Marine transportation services............................ 21,634 19,413 36,649 37,483
----------- ----------- ---------- ----------
Consolidated operating expenses................................ $ 57,742 $ 52,396 $ 102,967 $ 105,921
========== ========== ========== =========
Selling, general and administrative expenses
Offshore energy support................................... $ 3,905 $ 4,238 $ 6,979 $ 8,517
Offshore and harbor towing................................ 1,442 1,116 2,599 2,517
Marine transportation services............................ 1,807 1,070 3,214 2,641
General corporate......................................... 4,068 4,745 7,503 8,208
----------- ----------- ----------- ----------
Consolidated selling, general and administrative expenses...... $ 11,222 $ 11,169 $ 20,295 $ 21,883
========== ========== ========== =========
Depreciation and amortization
Offshore energy support................................... $ 8,347 $ 11,612 $ 16,717 $ 22,503
Offshore and harbor towing................................ 816 1,074 1,750 2,159
Marine transportation services............................ 2,810 3,519 5,024 7,024
General corporate......................................... 273 475 379 753
----------- ----------- ----------- ----------
Consolidated depreciation and amortization..................... $ 12,246 $ 16,680 $ 23,870 $ 32,439
========== ========== ========== =========
Income (loss) from operations
Offshore energy support................................... $ 25,548 $ (4,115) $ 44,936 $ (3,236)
Offshore and harbor towing................................ 3,191 3,603 5,901 6,705
Marine transportation services............................ 3,724 3,803 5,730 5,778
General corporate......................................... (4,341) (5,220) (7,882) (8,961)
----------- ----------- ----------- ----------
Consolidated income (loss) from operations..................... $ 28,122 $ (1,929) $ 48,685 $ 286
========== ========== ========== =========
Income (loss) before provision for (benefit from)
income taxes and extraordinary item
Offshore energy support................................... $ 25,765 $ (16,927) $ 45,256 $ (17,092)
Offshore and harbor towing................................ 3,093 3,984 5,887 7,101
Marine transportation services............................ 3,675 3,651 5,658 4,537
General corporate......................................... (17,255) (26,074) (29,936) (44,561)
----------- ----------- ----------- ----------
Consolidated income (loss) before provision for
(benefit from income taxes and extraordinary item............ $ 15,278 $ (35,366) $ 26,865 $ (50,015)
========== =========== ========== =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
December 31, June 30,
1998 1999
------------- -------------
<S> <C> <C>
Identifiable assets
Offshore energy support........................................... $ 653,687 $ 598,248
Offshore and harbor towing........................................ 116,381 142,354
Marine transportation services.................................... 333,138 306,465
Unallocated....................................................... 5,619 12,735
------------ -------------
$ 1,108,825 $ 1,059,802
============ =============
Capital expenditures
Offshore energy support........................................... $ 304,387 $ 19,283
Offshore and harbor towing........................................ 27,525 275
Marine transportation services.................................... 23,240 286
Unallocated....................................................... 50,057 --
------------ -------------
$ 405,209 $ 19,844
============ =============
</TABLE>
The Company is engaged in providing marine support and transportation
services in the United States and foreign locations. The Company's foreign
operations are primarily conducted in the Arabian Gulf, West Africa, Southeast
Asia and Mexico. These operations are subject to risks inherent in operating in
such locations.
The following table presents selected financial information pertaining
to the Company's geographic operations (in thousands):
Six Months Ended
June 30,
1998 1999
------------ --------------
Revenues
Domestic............................... $ 124,375 $ 103,172
Foreign................................ 71,442 57,357
------------ -------------
Consolidated revenues $ 195,817 $ 160,529
============ =============
Income from operations
Domestic............................... $ 34,332 $ 12,593
Foreign................................ 22,235 (3,346)
Unallocated expenses................... (7,882) (8,961)
------------ -------------
Consolidated income from operations $ 48,685 $ 286
============ =============
Identifiable assets
Domestic............................... $ 590,473 $ 693,056
Foreign................................ 512,733 354,011
Unallocated expenses................... 5,619 12,735
------------ -------------
Consolidated identifiable assets $ 1,108,825 $ 1,059,802
============ =============
<PAGE>
10. Supplemental Condensed Consolidating Financial Information
The Senior Notes referred to in Note 3 are fully and unconditionally
guaranteed on a joint and several basis by substantially all of the Company's
consolidated subsidiaries. A substantial portion of the Company's cash flows are
generated by its subsidiaries. As a result, the funds necessary to meet the
Company's obligations are provided in substantial part by distributions or
advances from its subsidiaries. Under certain circumstances, contractual or
legal restrictions, as well as the financial and operating requirements of the
Company's subsidiaries, could limit the Company's ability to obtain cash from
its subsidiaries for the purpose of meeting its obligations, including the
payments of principal and interest on the Senior Notes.
The following is summarized condensed consolidating financial
information for the Company, segregating the Parent, the combined wholly owned
guarantor subsidiaries, the combined foreign subsidiary guarantors, the combined
mostly owned guarantors, the combined non-guarantor subsidiaries and
eliminations. Two of the guarantor subsidiaries, Seabulk America Partnership,
Ltd. and Seabulk Transmarine Partnership, Ltd. are 81.59%-owned and 67.33%-owned
by the Company, and have been presented separately from the wholly owned
guarantors. The foreign guarantor subsidiaries are also presented separately
from the wholly owned guarantors. Separate financial statements of the wholly
owned guarantor subsidiaries are not presented because management believes that
these financial statements would not be material to holders of Senior Notes.
Separate audited financial statements of the non-wholly owned guarantor
subsidiaries for the year ended December 31, 1998 have been filed with the
Commission.
<PAGE>
Condensed Consolidating Balance Sheet (in thousands)
<TABLE>
<CAPTION>
December 31, 1998
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents.... $ 1,401 $ 2,118 $ 3,460 $ 31 $ 2,167 $ -- $ 9,177
Accounts receivable:
Trade, net................. 5,337 26,769 33,954 -- 2,573 (672) 67,961
Insurance claims and other. 4,874 3,698 3,282 (33) 94 -- 11,915
Inventory, spare parts and
supplies .................. 2,707 3,093 9,726 1,320 886 (277) 17,455
Prepaid expenses............. 1,373 1,463 1,050 63 393 -- 4,342
Deferred costs, net.......... 3,881 4,255 1,865 241 414 (174) 10,482
------------ ---------- ----------- ------------- ------------- ------------- ------------
Total current assets....... 19,573 41,396 53,337 1,622 6,527 (1,123) 121,332
Property, net.................. 113,688 285,974 366,885 37,319 50,785 (2,845) 851,806
Other assets:
Deferred costs, net.......... 11,761 3,556 1,639 160 3,974 (112) 20,978
Due from affiliates.......... 167,216 (2,443) (128,038) (30,681) (5,629) -- 425
Investments in affiliates.... 695,479 582,135 -- 3,143 40,840 (1,298,176) 23,421
Goodwill, net................ 114 24,505 62,257 -- 79 -- 86,955
Other........................ 1,526 362 2,006 -- 118,571(1) (118,557) 3,908
------------ ---------- ----------- ------------- ------------- ------------ ------------
Total other assets......... 876,096 608,115 (62,136) (27,378) 157,835 (1,416,845) 135,687
------------ ---------- ----------- ------------- ------------- ------------ ------------
Total.................... $ 1,009,357 $ 935,485 $ 358,086 $ 11,563 $ 215,147 $ (1,420,813) $ 1,108,825
============ ========== =========== ============= ============= ============ ============
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable............. $ 6,190 $ 9,635 $ 9,525 $ 19 $ 453 $ -- $ 25,822
Current maturities of long-term
debt....................... 8,152 859 -- -- -- -- 9,011
Current obligations under capital
leases..................... 630 2,361 -- -- -- -- 2,991
Debt subject to acceleration 252,954 __ __ __ __ __ 252,954
Other ....................... 14,854 6,521 9,712 3,844 1,371 (722) 35,580
------------ ---------- ----------- ------------- ------------- ------------ ------------
Total current liabilities.. 282,780 19,376 19,237 3,863 1,824 (722) 326,358
Long-term liabilities:
Long-term debt............... 436,355 15,766 -- -- -- (118,557) 333,564
Obligations under capital leases 14,186 22,797 -- -- -- -- 36,983
Deferred income taxes........ 25,649 7,072 -- -- -- -- 32,721
Other long term obligations.. 2,352 1,200 1,885 114 -- -- 5,551
------------ ---------- ----------- ------------- ------------- ------------- ------------
Total long-term liabilities 478,542 46,835 1,885 114 -- (118,557) 408,819
------------ ---------- ----------- ------------- ------------- ------------- ------------
Total liabilities.............. 761,322 66,211 21,122 3,977 1,824 (119,279) 735,177
Company-obligated mandatorily
redeemable preferred securities
issued by a subsidiary trust
holding solely debentures issued
by the Company............... -- -- -- -- 115,000 -- 115,000
Minority partners' equity in sub-
sidiaries.................... -- -- -- -- -- 10,613 10,613
Stockholders' equity 248,035 869,274 336,964 7,586 98,323 (1,312,147) 248,035
------------ ---------- ----------- ------------- ------------- ------------ ------------
$ 1,009,357 $ 935,485 $ 358,086 $ 11,563 $ 215,147 $ (1,420,813) $ 1,108,825
============ ========== =========== ============= ============= ============ ============
</TABLE>
(1) Primarily represents receivable for debentures of the Company held by the
Trust.
<PAGE>
Condensed Consolidating Balance Sheet (unaudited)
(In thousands)
<TABLE>
<CAPTION>
June 30, 1999
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantors Non-guarantor Condensed
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,162 $ 3,823 $ 7,956 $ 62 $ 244 $ $ 13,247
Accounts receivable:
Trade, net 2,211 28,620 25,707 5 (678) 55,865
Insurance claims and other 2,662 1,575 3,755 (13) 18 7,997
Escrow deposits & other 28,302 3,497 0 31,799
Inventory, spare parts and supplies 2,728 5,510 10,305 1,320 0 (870) 18,993
Prepaid expenses 765 633 1,128 45 164 2,735
Deferred costs (net) 2,454 4,528 1,444 240 0 (174) 8,492
Total current assets 40,284 48,186 50,295 1,654 431 (1,722) 139,128
Property (net) 98,622 280,581 371,654 36,491 748 (2,251) 785,845
Other assets:
Deferred costs (net) 10,501 3,763 2,368 40 3,379 (112) 19,939
Due from affiliates 140,864 8,452 (119,802) (32,713) 3,366 167
Investment in affiliates 675,979 595,049 0 3,533 1,200 (1,250,246) 25,515
Goodwill (net) 111 24,076 61,160 0 85,347
Other 876 958 2,001 12 118,571 (118,557) 3,861
Total other assets 828,331 632,298 (54,273) (29,128) 126,516 (1,368,915) 134,829
Total $ 967,237 $ 961,065 $ 367,676 $ 9,017 $ 127,695 $ (1,372,888) $ 1,059,802
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-
term debt $ 28,584 $ 1,842 $ 0 $ $ 0 $ $ 30,426
Debt subject to acceleration 244,901 0 244,901
Current obligations under
capital leases 534 2,684 0 0 3,218
Accounts payable 3,156 4,022 5,772 330 13,280
Other 14,879 8,899 8,810 37 3,739 (728) 35,636
Total current liabilities 292,054 17,447 14,582 37 4,069 (728) 327,461
Long-term liabilities:
Long-term debt 433,840 28,358 0 0 (118,557) 343,641
Obligations under capital leases 13,965 21,670 0 0 35,635
Deferred income taxes 9,049 7,072 0 0 16,121
Other 2,527 1,247 894 89 0 4,757
Total long-term liabilities 459,381 58,347 894 89 0 (118,557) 400,154
Total liabilities 751,435 75,794 15,476 126 4,069 (119,285) 727,615
Company-obligated mandatorily
redeemable preferred securities issued
by a consolidated subsidiary 0 115,000 115,000
Minority partners' equity in subsidiaries 0 0 1,356 1,356
Stockholders' equity 215,802 885,271 352,200 8,891 8,626 (1,254,959) 215,831
Total $ 967,237 $ 961,065 $ 367,676 $ 9,017 $ 127,695 $ (1,372,888) $ 1,059,802
</TABLE>
<PAGE>
Condensed Consolidating Statements of Operations (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1998
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantor Non-Guarantor Condensed
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 19,990 $ 56,693 $ 61,700 $ 2,791 $ 5,069 $ (36,911) $ 109,332
Operating expenses:
Crew payroll and benefits 5,635 8,721 7,637 718 936 (186) 23,461
Charter hire and bond guarantee fee 827 18,346 - - 161 (14,497) 4,837
Repairs and maintenance 2,356 1,463 2,647 225 1,339 - 8,030
Insurance 541 1,308 1,381 86 149 - 3,465
Consumables 1,962 2,653 3,580 89 372 (154) 8,502
Other 2,525 2,997 3,908 136 162 (280) 9,448
Total operating expenses 13,846 35,488 19,153 1,254 3,119 (15,117) 57,743
Selling, general and administrative
expense 4,749 3,843 3,353 532 21 (1,276) 11,222
Depreciation and amortization 2,184 3,805 5,682 358 217 - 12,246
Income from operations (789) 13,557 33,512 647 1,712 (20,518) 28,121
Net interest 12,376 5 - 569 (1,862) - 11,088
Other income (expense):
Minority interest and equity earnings
of subsidiaries 28,435 32,673 - 35 (1,865) (60,956) (1,678)
Other 10 (1,357) (20,246) 1,275 20,240 (78)
Total other income (expense) 28,445 31,316 (20,246) 35 (590) (40,716) (1,756)
Income (loss) before provision for
(benefit from) income taxes and
extraordinary item 15,280 44,868 13,266 113 2,984 (61,234) 15,277
Provision for (benefit from)
income taxes 5,805 - - - - - 5,805
Net income (loss) $ 9,475 $ 44,868 $ 13,266 $ 113 $ 2,984 $ (61,234) $ 9,472
</TABLE>
<PAGE>
Condensed Consolidating Statements of Operations (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantors Non-Guarantor Condensed
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 12,656 $ 47,507 $ 29,008 $ 2,608 $ 11 $ (13,474) $ 78,316
Operating expenses:
Crew payroll and benefits 4,492 8,122 7,267 614 44 (14) 20,525
Charter hire and bond guarantee fee 486 15,167 (8) - 9 (10,693) 4,961
Repairs and maintenance 1,368 3,153 5,725 144 13 (14) 10,389
Insurance 324 1,445 1,142 50 16 - 2,977
Consumables 1,118 3,441 2,982 83 14 (125) 7,513
Other 333 4,119 1,972 (23) 8 (378) 6,031
Total operating expenses 8,121 35,447 19,080 868 104 (11,224) 52,396
Selling, general and administrative
expense 4,956 2,942 4,565 235 34 (1,563) 11,169
Depreciation and amortization 2,780 5,074 8,412 414 - - 16,680
Income from operations (3,201) 4,044 (3,049) 1,091 (127) (687) (1,929)
Net interest 18,222 (116) - 648 (1,746) - 17,008
Other income (expense):
Minority interest and equity earnings
of subsidiaries (11,968) (14,659) (6,460) 194 (1,681) 32,463 (2,111)
Other (1,975) (8,049) (4,978) - (2) 686 (14,318)
Total other income (expense) (13,943) (22,708) (11,438) 194 (1,683) 33,149 (16,429)
Income (loss) before provision for
(benfit from) income taxes and (35,366) (18,548) (14,487) 637 (64) 32,462 (35,366)
extraordinary item
Provision for (benefit from)
income taxes (11,649) - - - - - (11,649)
Net income (loss) $ (23,717) $ (18,548) $ (14,487) $ 637 $ (64) $ 34,462 $ (23,717)
</TABLE>
<PAGE>
Condensed Consolidating Statements of Operations (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1998
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantors Non-Guarantor Condensed
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 33,359 $ 109,059 $ 105,134 $ 5,215 $ 6,861 $ (63,811) $ 195,817
Operating expenses:
Crew payroll and benefits 9,893 16,648 13,553 1,397 1,243 (186) 42,548
Charter hire and bond guarantee fee 1,787 33,035 - - 215 (26,571) 8,466
Repairs and maintenance 4,298 5,054 4,571 358 394 - 14,675
Insurance 1,027 2,742 2,220 195 171 - 6,355
Consumables 2,695 5,120 6,947 153 513 (197) 15,231
Other 3,019 5,888 6,596 244 231 (287) 15,691
Total operating expenses 22,719 68,487 33,887 2,347 2,767 (27,241) 102,966
Selling, general and administrative
expense 9,055 5,781 6,535 978 551 (2,604) 20,296
Depreciation and amortization 3,804 7,019 11,757 715 576 - 23,871
Income from operations (2,219) 27,772 52,955 1,175 2,967 (33,966) 48,684
Net interest 21,079 12 - 1,012 (3,723) - 18,380
Other income (expense):
Minority interest and equity
earnings (loss)
of subsidiaries 50,139 68,714 - 69 (3,728) (118,619) (3,425)
Other 23 1,798 (33,689) - (1,828) 33,681 (15)
Total other income (expense) 50,162 70,512 (33,689) 69 (5,556) (84,938) (3,440)
Income (loss) before provision for
(benefit from) income taxes and 26,864 98,272 19,266 232 1,134 (118,904) 26,864
extraordinary item
Provision for (benefit from)
income taxes 10,208 - - - - - 10,208
Income (loss) before extraordinary
item 16,656 98,272.00 19,266 232 1,134 (118,904) 16,656
Loss on early extinguishment of debt 734 - - - - - 734
Net income (loss) $ 15,922 $ 98,272 $ 19,266 $ 232 $ 1,134 $ (118,904) $ 15,922
</TABLE>
<PAGE>
Condensed Consolidating Statements of Operations (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantor Non-Guarantor Condensed
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 25,794 $ 97,114 $ 64,713 $ 5,226 $ 1,549 $ (33,867) $ 160,529
Operating expenses:
Crew payroll and benefits 9,127 17,106 15,441 1,278 44 (22) 42,974
Charter hire and bond guarantee fee 957 31,890 (458) - 459 (24,326) 8,522
Repairs and maintenance 2,648 6,494 10,421 221 13 (29) 19,768
Insurance 743 3,058 2,293 127 25 - 6,246
Consumables 2,123 6,479 7,220 127 14 (261) 15,702
Other 1,262 8,676 3,513 64 8 (814) 12,709
Total operating expenses 16,860 73,703 38,430 1,817 563 (25,452) 105,921
Selling, general and administrative
expense 8,906 6,634 7,928 435 1,024 (3,044) 21,883
Depreciation and amortization 5,385 10,032 16,149 828 45 - 32,439
Income from operations (5,357) 6,745 2,206 2,146 (83) (5,371) 286
Net interest 33,501 (116) 4 1,231 (3,611) - 31,009
Other income (expense):
Minority interest and equity
earnings (loss)
of subsidiaries (10,292) (15,088) (5,995) 390 (3,908) 29,738 (5,155)
Other (865) (8,013) (10,612) - (18) 5,371 (14,137)
Total other income (expense) (11,157) (23,101) (16,607) 390 (3,926) 35,109 (19,292)
Income (loss) before provision
for (benefit from) income taxes (50,015) (16,240) (14,405) 1,305 (398) 29,738 (50,015)
Provision for (benefit from)
income taxes (17,230) - - - - - (17,230)
Net income (loss) $ (32,785) $ (16,240) $ (14,405) $ 1,305 $ (398) $ 29,738 $ (32,785)
</TABLE>
<PAGE>
Condensed Consolidated Statement of Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended June 30, 1998
Wholly owned Foreign Mostly owned Non Condensed
Guarantor Guarantor Guarantor Guarantor
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries EliminationsTotal
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net Income (loss) $ 15,922 $ 98,272 19,266 232 $ 1,134 $ (118,904)$ 15,922
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss on extinguishment of debt 734 - - - - - 734
Depreciation and amortization 3,803 7,019 11,758 715 576 - 23,871
Provision for bad debts 33 513 - - - - 546
Amortization of drydocking costs 1,815 1,689 2,032 120 82 - 5,738
Amortization discount on long-term
debt and financing costs 425 - - - 130 - 555
Provision for (benefit from) deferred taxes 7,156 - - - - - 7,156
Minority partners' equity in earnings
of subsidiaries, net - - - - - 52 52
Undistributed (earnings) losses of
affiliates, net (50,183) (68,745) - - (11) 118,573 (366)
Other non-cash items 82 - - - - - 82
Changes in operating assets and liabilities:
Accounts receivable (3,378) (6,116) (22,393) 72 (1,904) 6 (33,713)
Current and other assets (12,891) 610 2,482 (1,066) (422) 567 (10,720)
Accounts payable and other liabilities 8,448 (3,556) 8,138 1 3,062 (4) 16,089
Net cash provided by (used in)
operating activities (28,034) 29,686 21,283 74 2,647 290 25,946
Investing Activities:
Purchase of property (8,710) (14,025) (24,563) - (6,906) 2,469 (51,735)
Capital contribution to affiliates (22,070) - - - (23,508) 27,041 (18,537)
Acquisitions (331,177) (16,526) 10,068 - - - (337,635)
Net cash used in investing activities (361,957) (30,551) (14,495) - (30,414) 29,510 (407,907)
Financing Activities:
Proceeds from long-term debt 383,700 - - - - - 383,700
Proceeds from issuance of senior notes,
net of offering costs 292,500 - - - - - 292,500
Repayments of long term debt (285,385) (416) - - - - (285,801)
Repayment of debt and other financing costs (247) - - - - - (247)
Payment of obligations under capital leases (211) (669) - - - - (880)
Capital contributed from partners - 10 - - 29,790 (29,800) -
Proceeds from issuance of common stock,
net of offering costs 387 - - - - - 387
Net cash provided by (used in)
financing activities 390,744 (1,075) - - 29,790 (29,800) 389,659
Increase (decrease) in cash and cash equivalents 753 (1,940) 6,788 74 2,023 - 7,698
Cash and cash equivalents at beginning of period 2,510 8,240 4,185 17 - - 14,952
Cash and cash equivalents at end of period $ 3,263 $ 6,300 10,973 91 $ 2,023 $ - $ 22,650
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
Wholly Owned Foreign Mostly Owned
Guarantor Guarantor Guarantor Non-guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)............ $ (32,785) $ (16,240) $ (14,405) $ 1,305 $ (398) $29,738 $ (32,785)
Adjustments to reconcile
net income
(loss) to net cash
provided by
operating activities:
Depreciation and amortization of
property................... 5,380 9,508 15,050 828 45 -- 30,811
Amortization of drydocking costs 1,532 2,389 2,007 120 -- -- 6,048
Amortization of intangible assets 6 527 1,096 -- -- -- 1,629
Amortization of financing costs 892 -- -- -- -- -- 892
Provision for bad debts...... 19 452 -- -- -- -- 471
Loss (gain) on disposal
of property 2,715 8,090 3,325 -- -- -- 14,130
Provision for deferred taxes. (17,230) -- -- -- -- -- (17,230)
Minority partners' equity
in losses of
subsidiaries, net.......... -- -- -- -- -- 293 293
Undistributed (earnings)
losses of
affiliates, net............ 10,292 1,124 -- (390) (343) (9,559) 1,124
Other non-cash items......... 104 -- -- -- -- -- 104
Changes in operating
assets and
liabilities:
Accounts receivable.......... 5,319 1,197 8,680 (20) 360 7 15,543
Other assets................. 27,965 (14,105) (16,245) 2,038 (3,692) 603 (3,436)
Accounts payable and other
liabilities................ (2,092) (3,860) (5,806) (3,850) 3,077 (17) (12,548)
-------------- -------------- -------------- ---------- ------------- --------- ------------
Net cash provided by
(used in) operat-
ing activities............. 2,117 (10,918) (6,298) 31 (951) 21,065 5,046
Investing activities:
Purchase of property......... (21,332) 2,919 (8,547) -- (10,254) 21,932 (15,282)
Capital contribution
to affiliates 9,177 (1,872) 8,662 -- (9,307) (9,824) (3,164)
Payments on vessels under
construction............... -- (5,102) -- -- -- -- (5,102)
-------------- -------------- -------------- ---------- -------------- --------- -----------
Net cash used in
investing activities (12,155) (4,055) 115 (19,561) 12,108 (23,598)
Financing activities:
Proceeds from short-term
borrowings................. -- 5,000 -- -- -- -- 5,000
Principal payments of short-term
borrowings................. -- (5,000) -- -- -- -- (5,000)
Proceeds from long-term debt. 31,008 14,471 -- -- -- -- 45,479
Proceeds from issuance of common
stock, net................. 252 -- -- -- -- -- 252
Principal payments of
long-term debt (21,144) (624) -- -- -- -- (21,768)
Payment of financing costs... -- -- -- -- -- -- --
Payment of obligations under capital
leases..................... (317) (1,074) -- -- -- -- (1,391)
Capital contributions from parent/
partners................... -- 3,905 10,679 -- 18,589 (33,173) --
-------------- ------------- -------------- ---------- ------------- --------- ------------
Net cash provided by
(used in)
financing activities....... 9,799 16,678 10,679 -- 18,589 (33,173) 22,572
Increase (decrease) in cash
and cash
equivalents................ (239) 1,705 4,496 31 (1,923) -- 4,070
Cash and cash equivalents
at beginning
of period.................. 1,401 2,118 3,460 31 2,167 -- 9,177
-------------- ------------- -------------- ---------- ------------- --------- ------------
Cash and cash equivalents
at end of
period..................... $ 1,162 $ 3,823 $ 7,956 $ 62 $ 244 $ -- $ 13,247
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") should be read in conjunction with
the condensed consolidated financial statements and the related notes thereto
included elsewhere in this Report and the 1998 Form 10-K as well as the
Management's Discussion and Analysis of Financial Condition and Results of
Operations in the 1998 Form 10-K.
The MD&A contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact, included in the MD&A are forward-looking
statements. Although the Company believes that the expectations and beliefs
reflected in such forward-looking statements are reasonable, it can give no
assurance that they will prove correct. For information regarding the risks and
uncertainties that could cause such forward-looking statements to prove
incorrect, see "Projections and Other Forward-Looking Information" in Item 1 of
the 1998 Form 10-K.
<PAGE>
Area of Operations Overview
The financial information presented below represents historical results
by major area of operations.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- -------------------------------
1998 1999 1998 1999
--------------- --------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Marine support services
Offshore energy support $ 67,533 $ 39,097 $ 123,909 $ 84,835
Offshore & harbor towing 11,824 11,414 21,291 22,768
------------ ----------- ------------ ------------
79,357 50,511 145,200 107,603
Marine transportation services 29,975 27,805 50,617 52,926
------------ ----------- ------------ ------------
Total revenues 109,332 78,316 195,817 160,529
Operating expenses:
Marine support service:
Offshore energy support 29,733 27,362 55,276 57,051
Offshore & harbor towing 6,376 5,621 11,041 68,438
------------ ----------- ------------ ------------
36,109 32,903 66,317 125,489
Marine transportation services 21,634 19,413 36,649 37,483
------------ ----------- ------------ ------------
Total operating expenses 57,743 52,396 102,966 105,921
Direct overhead expense:
Marine support services:
Offshore energy support 3,906 4,237 6,980 8,517
Offshore & harbor towing 1,441 1,116 2,599 2,517
------------ ----------- ------------ ------------
5,347 5,252 9,579 11,034
Marine transportation services 1,669 932 2,939 2,366
-------------- ------------- -------------- --------------
Total direct overhead expenses 7,016 6,285 12,518 13,400
Fleet Operating EBITDA(1) Marine support services:
Offshore energy support 33,894 7,498 61,653 19,267
Offshore & harbor towing 4,007 4,677 7,651 8,864
-------------- ------------- -------------- --------------
37,901 12,175 69,304 28,131
Marine transportation services 6,672 7,460 11,029 13,077
------------ ----------- ------------ ------------
Total fleet EBITDA(1) 44,573 19,635 80,333 41,208
Corporate overhead expense 4,206 4,884 7,778 8,483
------------ ----------- ------------ ------------
EBITDA(1) 40,367 14,751 72,555 32,725
Depreciation and amortization expense 12,246 16,680 23,871 32,439
------------ ----------- ------------ ------------
Income (loss) from operations $ 28,121 $ (1,929) $ 48,684 $ 286
============ =========== ============ ============
</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 recognized by generally accepted
accounting principles, 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, and
do not represent funds available for management's use. Further, the
Company's EBITDA may not be comparable to similarly named measures reported
by other companies.
<PAGE>
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, which are in turn heavily dependent upon the price of
crude oil. Further, in many areas where the Company conducts offshore energy
support operations (particularly the U.S. 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, companies engaged in offshore energy support operations (including the
Company) 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.
<TABLE>
<CAPTION>
1998 1999
----------------------------------------------- ---------------------
Q1 Q2 Q3 Q4 Q1 Q2
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Number of supply boats at end of period (1).. 28 29 27 24 21 21
Average supply boat day rates (2) ........... $ 8,475 $ 8,214 6,505 $ 5,191 $ 4,530 $ 4,049
Average supply boat utilization (3).......... 86% 80% 55% 72% 70% 69%
Number of crew boats at end of period (4).... 39 40 38 37 33 33
Average crew boat day rates (2)(4)........... $ 2,419 $ 2,477 $ 2,375 $ 2,383 $ 2,097 $ 1,864
Average crew boat utilization (3)(4)......... 89% 91% 77% 83% 69% 72%
</TABLE>
(1) The decline in the number of supply boats in the third and fourth quarters
of 1998 and first quarter of 1999 primarily reflects bareboat chartering
and the redeployment of boats to other global regions in response to
declines in utilization and day rates in the U.S. Gulf of Mexico.
(2) Average day rates are calculated based on vessels operating domestically by
dividing total vessel revenue by the total number of days of vessel
utilization.
(3) 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.
(4) Excludes utility boats. The decline in the number of crew boats in the
third and fourth quarters of 1998 and first quarter of 1999 primarily
reflects the redeployment of boats to other global regions in response to
declines in utilization and day rates in the U.S. Gulf of Mexico.
As indicated in the above table, average supply boat day rates began to
decline in the second quarter of 1998 and continued to decline for the balance
of the year and in 1999. Supply boat utilization declined sharply in the second
and third quarters of 1998, improving in the fourth quarter due to the
redeployment of idle vessels from the U.S. Gulf of Mexico to international
markets. At August 9, 1999, supply boat day rates averaged approximately $3,500
per day. The current low level of supply boat day rates is expected to continue
until energy exploration and production activities return to higher levels,
which in turn is dependent upon a sustained improvement in energy prices.
<PAGE>
At August 9, 1999, crew boat day rates averaged approximately $1,700
per day. As is the case with supply boat rates, no substantial improvement in
crew boat rates is anticipated until energy exploration and production
activities return to higher levels.
The following table shows rate and utilization information for foreign
operations:
<TABLE>
<CAPTION>
1998 1999
---------------------------------------------- ---------------------
Q1 Q2 Q3 Q4 Q1 Q2
---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Number of anchor handling tug/supply boats........... 66 67 66 69 67 69
Average anchor/handling tug/supply boat day rates(1) $ 5,505 $ 6,008 5,914 $ 5,727 $ 4,817 $ 5,433
Average anchor handling tug/supply boat
utilization(1)(2)................................. 75% 77% 77% 77% 61% 49%
Number of crew/utility boats......................... 32 33 31 36 38 39
Average crew/utility boat day rates(2)............... $ 1,549 $ 1,544 $ 1,588 $ 1,616 $ 1,543 $ 1,559
Average crew/utility boat utilization(3)............. 75% 76% 72% 67% 65% 48%
</TABLE>
- --------------------
(1) Includes anchor handling tug boats.
(2) Average day rates are calculated based on vessels operating internationally
by dividing total vessel revenue by the total number of days of vessel
utilization.
(3) Utilization is based on vessels operating internationally and determined on
the basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
As indicated in the above table, foreign anchor handling tugs/supply
boats experienced stable utilization rates during 1998, moderate declines in day
rates during the second half of the year, and a sharp decline in the first
quarter of 1999 with some improvement in the second quarter. Foreign
crew/utility boats experienced a slight increase in day rates over the full
year, with declines in utilization rates during the second half in 1999. In
general, both types of operations remained steady in 1998 as compared to
declines in the comparable U.S. markets. However, foreign rates continued to
decline sharply in 1999. At August 9, 1999, day rates averaged approximately
$4,500 per day for foreign anchor handling tugs/supply boats and approximately
$1,600 for foreign crew/utility boats.
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.
Marine Transportation Services
Generally, demand for industrial petrochemical transportation services
coincides with overall economic activity.
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 principal
contract with FPL expired in September 1998. The Company has since entered into
a new contract, expiring in September 2002, to provide similar services to FPL
at similar rates. However, the extent of the services to be provided under the
new contract is substantially less than under the prior contract.
<PAGE>
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, charter hire, maintenance and repairs, fuel, and insurance. For
general information concerning these categories of operating expenses as well as
capital expenditures, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Area of Operations Overview -- Overview
of Operating Expenses and Capital Expenditures" in the 1998 Form 10-K.
Beginning in the first quarter of 1999, the Company implemented a plan
to reduce operating and overhead expenses as well as capital expenditures (see
"Liquidity and Capital Resources" below). These expense reductions are not fully
reflected in the comparisons below since, (1) such reductions were implemented
during or subsequent to the 1999 first quarter and (2) expenses in the 1999
quarter increased over those of the 1998 quarter, reflecting the substantial
increase in the size of the Company.
Results of Operations
Three months ended June 30, 1999 compared with the three months ended June 30,
1998
Revenue. Revenue decreased 28% to $78.3 million for the three months
ended June 30, 1999, from $109.3 million for the three months ended June 30,
1998, primarily due to lower revenue from the Company's offshore energy support
operations.
Revenue from offshore energy operations decreased 42% for the three
months ended June 30, 1999, compared to the 1998 period, primarily due to lower
utilization and day rates for supply boats and crew boats resulting from the
decline in offshore exploration and production activity. During the 1999 period,
domestic day rates for supply boats owned, operated, or managed by the company
declined 51% from the 1998 period, while domestic day rates for crew boats
owned, operated, or managed by the Company fell 25% from the 1998 period.
Internationally, day rates for anchor handling tug/supply boats fell 10% to
$5,433 from $6,008, while day rates for crew/utility boats increased 1% from
$1,544 to $1,559.
Offshore and harbor towing revenue decreased 3% to $11.4 million for
the three months ended June 30, 1999 from $11.8 million for the three months
ended June 30, 1999, primarily due to the decline in the Company's harbor towing
operations in Mexico.
Marine transportation revenue decreased 7% to $27.8 million for the
three months ended June 30, 1999 from $30.0 million for the three months ended
June 30, 1998, primarily due to the Seabulk Magnachem's regularly scheduled
drydocking.
Operating Expenses. Operating expenses decreased 9% to $52.4 million
for the three months ended June 30, 1999 from $57.7 million for the three months
ended June 30, 1998, primarily due to decreases in crew payroll and benefits,
maintenance and repair, and supplies and consumables resulting from decreased
business activity. As a percentage of revenue, operating expenses increased to
67% for the three months ended June 30, 1999 from 53% for the three months ended
June 30, 1998, due to the decline in revenues from lower day rates in the
offshore energy segments.
<PAGE>
Overhead Expenses. Overhead expenses were unchanged at $11.2 million
for the three months ended June 30, 1999 from the three months ended June 30,
1998, primarily due to increased professional and other fees under the Credit
Facility and other fees resulting from the Company's financial condition,
partially offset by a reduction in overhead expenses. As a percentage of
revenue, overhead expenses increased to 14% for the three months ended June 30,
1999 from 10% for the three months ended June 30, 1998, due to the
above-mentioned fees and the decrease in revenues from lower day rates and
utilization in the offshore energy support segment.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 36% to $16.7 million for the three months ended June 30, 1999,
compared with $12.2 million for the three months ended June 30, 1998 as a result
of an increase in fleet size due to vessel construction in prior periods.
Income (Loss) from Operations. Operations resulted in a loss of $1.9
million for the three months ended June 30, 1999 versus income of $28.1 million,
or 26% of revenue, for the three months ended June 30, 1998 as a result of the
factors noted above.
Net Interest Expense. Net interest expense increased 53% to $17.0
million, or 22% of revenue, for the three months ended June 30, 1999 from $11.1
million, or 10% of revenue, for the three months ended June 30, 1998, primarily
as a result of debt incurred in connection with acquisitions and increased
interest on borrowings under the Credit Facility.
Other Income (Expense). Other expense increased to $16.4 million for
the three months ended June 30, 1999 from $1.8 million for the three months
ended June 30, 1998, primarily due to losses from the sale of certain assets.
Net Income (Loss). The Company had a net loss of $23.7 million for the
three months ended June 30, 1999, compared to net income of $9.5 million for the
three months ended June 30, 1998, primarily as a result of the factors noted
above.
Six months ended June 30, 1999 compared with the six months ended June 30, 1998
Revenue. Revenue decreased 18% to $160.5 million for the six months
ended June 30, 1999 from $195.8 million for the six months ended June 30, 1998,
primarily due to lower revenue from the Company's offshore energy support
operations.
Revenue from offshore energy operations fell 32% for the six months
ended June 30, 1999 compared to the 1998 period, primarily due to lower
utilization and day rates for supply boats and crew boats resulting from the
decline in offshore exploration and production activity. During the 1999 period,
domestic day rates for supply boats owned, operated, or managed by the Company
declined 49% from the 1998 period, while domestic day rates for crew boats
owned, operated, or managed by the Company fell 20% from the 1998 period.
Internationally, day rates for anchor handling tug/supply boats fell 11% to
$5,125 from $5,757, while day rates for crew/utility boats increased 0.3% from
$1,551 to $1,547.
<PAGE>
Offshore and harbor towing revenue increased 7% to $22.8 million for
the six months ended June 30, 1999 from $21.3 million for the six months ended
June 30, 1998, primarily due to the acquisition of seven harbor towing vessels
in March 1998.
Marine transportation revenue increased 5% to $52.9 million for the six
months ended June 30, 1999 from $50.6 million for the six months ended June 30,
1998, primarily due to additional revenues earned by marketing vessels owned by
third parties and the acquisition of two product carriers in March 1998.
Operating Expenses. Operating expenses increased 3% to $105.9 million
for the six months ended June 30, 1999 from $103.0 million for the six months
ended June 30, 1998, primarily due to increases in crew payroll and benefits,
maintenance and repair, and supplies and consumables resulting largely from
acquisitions completed in 1998. As a percentage of revenue, operating expenses
increased to 66% for the six months ended June 30, 1999 from 53% for six months
ended June 30, 1998 due to the increase in fleet size and the decline in
revenues from lower day rates in the offshore energy support segment.
Overhead Expenses. Overhead expenses increased 8% to $21.9 million for
the six months ended June 30, 1999 from $20.3 million for the six months ended
June 30, 1998, primarily due to increased professional and other fees under the
Credit Facility and other fees resulting from the Company's financial condition,
partially offset by a reduction in certain overhead expenses. As a percentage of
revenue, overhead expenses increased to 14% for the three months ended June 30,
1999 from 10% for the six months ended June 30, 1998 due to the decline in
revenues and the increase in fees.
Depreciation and Amortization Expense. Depreciation and amortization
expense increased 36% to $32.4 million for the six months ended June 30, 1999
compared with $23.9 million for the six months ended June 30, 1998 as a result
of an increase in fleet size due to 1998 acquisitions and vessel construction.
Income (Loss) from Operations. Income from operations decreased 99% to
$0.3 million, or 0.2% of revenue, for the six months ended June 30, 1999 from
$48.7 million, or 25% of revenue, for the six months ended June 30, 1998 as a
result of the factors noted above.
Net Interest Expense. Net interest expense increased 69% to $31.0
million, or 19% of revenue, for the six months ended June 30, 1999 from $18.4
million, or 9% of revenue, for the six months ended June 30, 1998, primarily as
a result of debt incurred in connection with acquisitions and increased interest
on borrowings under the Credit Facility.
Other Income (Expense). Other expense increased to $19.3 million for
the six months ended June 30, 1999 from $1.7 million for the six months ended
June 30, 1998, primarily due to equity losses from the sale of certain assets.
Net Income (Loss). The Company had a net loss of $32.8 million for the
six months ended June 30, 1999 compared to net income of $15.9 million for the
six months ended June 30, 1998 primarily as a result of the factors noted above.
<PAGE>
Liquidity and Capital Resources
During the first six months of 1999, the Company generated $5.0 million
of cash from operations, primarily reflecting the net loss for the period, after
elimination of noncash items. Cash used in investing activities was
approximately $23.5 million for the period, primarily reflecting the disposal of
vessels, offset by the costs of construction of and capital improvements to
other vessels. Cash generated by financing activities was approximately $22.6
million, consisting primarily of payments under the Credit Facility, offset by
borrowings.
Background; Liquidity Concerns. As reported in the 1998 Form 10-K and
elsewhere in this Report, there has been a severe downturn in offshore oil and
gas exploration, development and production activities in the Gulf of Mexico
since mid-1998. A similar downturn began in late 1998 in international markets.
These downturns resulted primarily from a worldwide decline in oil and gas
prices and have caused substantial declines in offshore energy support vessel
day rates and utilization, adversely affecting the Company's operating results.
For supply boats operated by the Company in the Gulf of Mexico, average day
rates declined from $8,214 during the second quarter of 1998 to $4,049 in the
second quarter of 1999, and utilization declined from 80% to 69%. For anchor
handling tug/supply boats operated by the Company in foreign waters, average day
rates declined from $6,008 in the 1998 second quarter to $5,433 in the second
quarter of 1999, and utilization declined from 77% to 50%. As a result, the
Company experienced a decline in revenue from $109.3 million for the second
quarter of 1998 to $78.3 million for the second quarter of 1999 and a decline in
EBITDA from $40.4 million to $14.7 million for the same periods. The Company
reported a net loss of $23.7 million for the second quarter of 1999 (including a
loss of $14.1 million on the sale of assets) as compared to net income of $9.5
million for the 1998 quarter. See "Results of Operations" above for additional
information.
As a result of these declines, the Company has not been in compliance,
since March 31, 1999, with certain covenants contained in the Credit Facility.
The Company's bank lenders have waived the Company's noncompliance on several
occasions, most recently until August 20, 1999. However, these waivers have
resulted in the payment of additional interest and substantial fees. In
obtaining the current waiver, the Company agreed to pay interest at the rate of
7% over the "base rate" of Citibank, N.A. (for a total annual interest rate of
15.0% at July 30, 1999); however, if the Company does not repay the borrowings
under the Credit Facility by August 20, 1999, the Company will be obligated to
pay an additional 3% of interest on borrowings outstanding from July 30, 1999.
In addition, in obtaining the current waiver, the Company agreed to pay an
"extension fee" of $500,000 that will be refunded to the Company only if it
repays the borrowings under the Credit Facility by August 20, 1999. There can be
no assurance that the current waiver will be further extended, or as to the
terms of any such extension, should the Company be unable to repay its
borrowings under the Credit Facility by August 20, 1999 (see "Restructuring
Discussions" below for additional information). The Company's outstanding
indebtedness under the Credit Facility was $266.3 million at June 30, 1999 and
$241.0 million at August 9, 1999.
Further, at August 9, 1999, the Company had available cash and cash
equivalents totaling approximately $9.5 million and approximately $7.0 million
available for use under the Credit Facility. Because of its current financial
condition and the covenants in the Credit Facility and other debt instruments,
the Company does not have any additional borrowing capacity and does not expect
to have any such capacity unless the possible restructuring plan discussed below
is consummated. Once the
<PAGE>
Company uses its available cash and cash equivalents and exhausts the amount
available for use under the Credit Facility, it will be unable to meet its cash
requirements and will be required to seek protection from its creditors under
applicable bankruptcy laws. Based on current estimates, the Company anticipates
that it will exhaust its available cash and borrowing capacity during the third
week of August 1999.
In addition, an interest payment of approximately $12.5 million is due
on the Senior Notes on August 16, 1999. The Company does not have sufficient
funds to make this payment. If this payment is not made by September 15, 1999
and the possible restructuring plan discussed below is not consummated, the
Company will be in default under the Senior Notes, and payment thereof could be
accelerated. This would likely have the effect of requiring the Company to seek
protection from its creditors under applicable bankruptcy laws.
Recent Actions. In June and July 1999, the Company sold eight vessels
(excluding vessels under construction) for net cash proceeds approximating $32.3
million. Under the terms of the Credit Facility, approximately $25.3 million of
these proceeds were used to permanently reduce borrowings under the Credit
Facility. The remaining $7.0 million of net cash proceeds are available to the
Company for general corporate purposes. The Company is also considering the sale
of additional assets in order to raise cash. However, it is not actively
negotiating any such sales and does not expect any sales to be completed in an
amount, or in sufficient time, to address its near-term cash requirements.
The Company has also curtailed or deferred certain capital
expenditures. Among other things, the Company has deferred certain scheduled
drydockings of vessels, consistent with safety and operational considerations,
has canceled the construction of certain vessels and has disposed of other
vessels under construction. The Company is also considering other actions to
cancel the construction and/or to dispose of the remaining three vessels
currently under construction. Such actions could result in claims against the
Company for the costs of construction and, possibly, other amounts; however, the
Company has not yet determined whether or the extent to which it may be subject
to such claims. The estimated future cost of completing the vessels currently
under construction was $13.3 million at August 9, 1999; this amount does not
reflect any actions that may be taken by the Company to cancel construction
and/or dispose of these vessels or any claims that may result from those
actions.
Further, the Company has reduced operating and overhead expenses. These
reductions are estimated to generate annual savings of $11.5 million; however,
these reductions have been substantially offset by increased interest on
borrowings under the Credit Facility, professional and other fees under the
Credit Facility, and other fees and costs resulting from the Company's financial
condition. The Company has also improved its working capital position by, among
other things, strengthening its efforts to collect receivables.
Restructuring Discussions. The Company previously reported on a
proposed offering of secured notes, the proceeds from which were to have been
used to purchase the outstanding indebtedness under the Credit Facility (see the
Parent's Current Report on Form 8-K dated July 8, 1999). At the same time, the
Company also reported that it was seeking additional means of financing and was
in discussions with respect thereto.
<PAGE>
In July 1999, the Company determined not to proceed with the above
offering. However, the Company is in active discussions with representatives of
certain major creditors concerning a possible restructuring plan in which (a)
the Company's general creditors would be paid in full; (b) the Company's
borrowings under the Credit Facility would be refinanced; (c) the holders of the
Senior Notes would exchange their Senior Notes for new debt securities and
common equity of the Company; and (d) the holders of the Trust Convertible
Preferred Securities and the Common Stock would also receive such common equity
and warrants to purchase additional common equity. Implementation of such plan
would result in substantial dilution to the Company's current stockholders. In
addition, the Company is in discussions with potential lenders regarding the
refinancing of the Credit Facility. The Company's ability to reach agreement as
to the terms of any such plan, as well as the actions contemplated by and in
connection with any such plan, are subject to numerous conditions and
uncertainties, including the need to obtain various consents from and reach
agreement with third parties (including the potential lenders referred to
above). Accordingly, there can be no assurance as to whether or when the Company
will agree on the terms of such a plan or will be in a position to implement
such a plan. In particular, the Company can give no assurance that it will be in
a position to refinance the Credit Facility by August 20, 1999 (see "Background;
Liquidity Concerns" above). Should the Company not reach agreement as to the
terms of such a plan, it will likely exhaust its available cash and borrowing
capacity in late August or September 1999 and would thereafter be subject to a
voluntary (or, possibly, an involuntary) bankruptcy proceeding. Either type of
proceeding would have a material adverse effect on the Company's operations.
Additional information regarding the Company's liquidity and related
matters is set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the 1998 10-K and in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1999.
Impact of the "Year 2000 Issue"
The "Year 2000 Issue" is the result of the use by certain computer
software of a two-digit dating convention rather than a four-digit dating
convention (i.e., "00" rather than "2000"), causing a computer or similar
technology to recognize a date using "00" as the year 1900 rather than the year
2000. This could result in a system failure or in other errors that could cause
disruptions of normal business activities.
The Company has implemented a program designed to assess the likely
impact of the Year 2000 Issue on the Company and to develop and implement
measures designed to minimize its impact. The program covers not only the
Company's computer equipment and software systems, but also other systems
containing so-called "embedded" technology, such as alarm systems, elevators and
fax machines.
The Company's Year 2000 program has focused on the two major components
of the Company's operations - land-based systems and vessel-based systems - with
separate teams for computer operations/information systems, facilities
management, and vessel operations. Each team is implementing the program in the
following four phases:
o Assessment, including taking physical inventories of all computer-based
equipment and software, as well as digital and analog control systems;
establishing testing procedures for checking Year 2000 readiness;
carrying out those testing procedures; and communicating with
third-party suppliers and customers to determine whether and to what
extent the Company may face disruptions in supplies or services (such
as ports and utilities) provided by suppliers or cessation of
operations by customers. This phase has been completed for both
land-based and vessel-based systems.
<PAGE>
o Remediation of all land-based and vessel-based issues identified in the
assessment phase. Land-based remediation activities have been completed
and vessel-based remediation efforts have been approximately 90%
completed and are expected to be completed during the 1999 third
quarter. The Company does not anticipate any material obstacles to
completing any remaining remediation activities during the third
quarter of 1999.
o Compliance certification, including re-testing to assure that
remediation efforts have been successful. Compliance certification is
expected to be completed shortly after the completion of remediation
efforts in the 1999 third quarter.
o Maintenance, including ongoing testing and remediation. This phase
commenced during the first half of 1999 and is expected to continue
until early 2000.
The Company expects each of the above phases to be substantially
completed by the times indicated above. However, the Company cannot predict
whether or to what extent the completion of these phases may be delayed for
various reasons. Further, the completion of the Company's Year 2000 program
could be adversely affected by the unavailability of replacement components and
equipment.
The Company estimates that its total cost for new systems and equipment
and related services will approximate $[8.4] million, of which approximately
$8.1 million had been expended through the first half of 1999. However, these
amounts include the costs of new systems and equipment that, while "Year 2000
compliant," were not acquired in connection with or as a result of the Year 2000
Issue. Further, these amounts do not include the Company's internal costs in
connection with the Year 2000 Issue (consisting primarily of payroll costs for
employees working on the Company's Year 2000 program), as the Company does not
separately track such costs. Consequently, it is not possible to determine the
precise amount expended by the Company directly in connection with the Year 2000
Issue. These expenditures are not expected to affect other expenditures by the
Company relating to information technology and systems.
The Company faces numerous potential risks in connection with the Year
2000 Issue. For the Company's land-based systems, these risks include the
possible loss of network integrity; failures with regard to accounting, finance
and other functions; potential damage to equipment; and possible loss of
communications. In addition, systems containing embedded technology could result
in the loss of building management control systems (including elevators, air
conditioning and generators); failure of fire and emergency and safety systems;
potential damage to equipment; and loss of power. In its vessel-based
operations, the Year 2000 Issue could result in vessel delays or stoppages;
damage to vessels and other equipment; risk of injury to crew members and
others; failure of navigation and/or communications equipment; and cargo
handling failures. It is not possible to determine whether or to what extent any
or all of these risks are likely to occur or the costs involved in any such
occurrence. However, such costs could be material.
The Company has developed a number of contingency plans to address the
Year 2000 Issue. Some of these plans will be implemented regardless of the
Company's expectations as to the likely
<PAGE>
impact of the Year 2000 Issue, while others will be implemented only if the
Company believes that it is likely to be seriously affected by the Year 2000
Issue. These contingency plans include maintaining backup systems with pre-2000
dates (including backups of all critical systems); advance testing of critical
systems; printing paper copies of all critical data; establishing emergency
response teams; and manually overriding all mechanical systems. In addition, the
Company may suspend cargo operations; instruct vessels at sea to be in open sea,
well away from shore or shallows; instruct vessels in port to remain alongside
or at anchor; insure that all ships are fully provisioned with stores and fuel;
and restrict crew changes. In addition, as 2000 approaches, the Company will
conduct safety drills, cargo handling drills, and backup vessel handling drills.
The above discussion of the Year 2000 Issue is a "Year 2000 Readiness
Disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act. However, such Act does not protect the Company against
proceedings under the federal securities laws, including enforcement proceedings
by the Commission arising out of material misstatements in and omissions from
the above discussion.
Euro Conversion Issues
On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") adopted a common currency, the "Euro." For a three-year
transition period, both the Euro and individual participants' currencies will
remain in circulation; after January 1, 2002, the Euro will be the sole legal
tender for EMU countries. The adoption of the Euro affects numerous financial
systems and business applications.
While the Company does business in many countries around the world,
substantially all of such business is U.S. dollar-denominated. Thus, while the
Company is reviewing the impact of the introduction of the Euro on various
aspects of its business (including information systems, currency exchange rate
risk, taxation, contracts, competitive position and pricing), such introduction
is not expected to have a material impact on the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Item 3 of the 1998 Form 10-K for information concerning a
proceeding brought against the Corporation in the Swiss courts claiming
commissions (plus interest and costs) in connection with a 1998 acquisition. In
July 1999, this proceeding was settled for $400,000, and three of the Company's
offshore energy support vessels arrested in the Republic of South Africa in
connection with the proceeding were released.
One of the Company's product carriers, the Seabulk America, is owned by
a limited partnership in which the Company is the general partner and owns the
majority equity interest and an unaffiliated limited partner owns the minority
equity interest. The vessel is subject to a mortgage collateralizing borrowings
under the Credit Facility, and the limited partnership is one of the subsidiary
guarantors that have guaranteed repayment of such borrowings. In July 1999, the
limited partner commenced an arbitration proceeding against the Company,
alleging that the Company, as general partner, did not have authority to grant
the mortgage or the guarantee and seeking unspecified damages and removal of the
Company as general partner. The Company believes it had authority to grant the
mortgage and guarantee, that the limited partner has suffered no damages as a
result of the mortgage and guarantee, and that there are no valid grounds for
the removal of the Company as general partner. The Company intends to defend the
allegations and to oppose such relief.
<PAGE>
Item 3. Defaults Upon Senior Securities.
As of March 31 and June 30, 1999, the Company was not in compliance with
certain covenants contained in the Credit Facility. The Company has entered into
several amendments and waivers of the Credit Facility, including Amendment No. 6
and Interim Waiver, dated as of July 30, 1999, in which the Company's bank
lenders have agreed to waive such noncompliance until August 20, 1999. For
additional information, see Note 2 to the financial statements in this Report
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" in this Report.
Item 5. Other Information.
In June 1999, the Company sold (a) its interest in a construction anchor
handling tug under construction for a cash purchase price of $15.6 million, and
(b) a towboat for a cash purchase price of $116,000.
In July 1999, the Company sold (a) six offshore energy support vessels
(including three vessels under construction) for $22 million, including the
assumption by the buyer of the Company's remaining obligations for the vessels
under construction, and (b) three harbor tugs for a cash purchase price of $4.6
million.
A substantial portion of the cash proceeds from the above transactions
was used to repay borrowings under the Credit Facility. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" in this Report for additional information.
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
21 - Subsidiaries of Hvide Marine Incorporated
27 - Financial Data Schedule
b. Reports on Form 8-K.
During the second quarter of 1999, the Company filed the following
Current Reports on Form 8-K:
(a) a Current Report on Form 8-K dated May 27, 1999, reporting (under
Item 5, "Other Events") the execution and delivery of Amendment
No. 4 and Interim Waiver of the Credit Facility; and
<PAGE>
(b) a Current Report on Form 8-K dated June 3, 1999, reporting (under
Item 5, "Other Events") the resignation of the Company's former
Chairman, President and Chief Executive Officer and the election
of a new Chairman, President and Chief Executive Officer.
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: August 16, 1999
Exhibit 21
Name of Direct or Jurisdiction of Incorporation
IndirectSubsidiary of Organization
HMI Cayman Holdings, Inc. Cayman Islands
HMI Operators, Inc. Florida
Hvide Capital Trust Delaware
Hvide Marine de Venezuela, S.R.L. Venezuela
Hvide Marine International, Inc. Florida
Hvide Marine Towing de Mexico, S.A. de C.V. Mexico
Hvide Marine Towing Services, Inc. Florida
Hvide Marine Towing, Inc. Delaware
Hvide Marine Transport, Incorporated Florida
Hvide Partners, L.P. Delaware
Kinsman Lines, Inc. Delaware
Lightship Limited Partner Holdings, LLC Delaware
Lightship Partners, L.P. Delaware
Lightship Tanker Holdings, LLC Delaware
Lightship Tankers I, LLC Delaware
Lightship Tankers II, LLC Delaware
Lightship Tankers III, LLC Delaware
Lightship Tankers IV, LLC Delaware
Lightship Tankers V, LLC Delaware
Lone Star Marine Services, Inc. Florida
Maranta S.A. Argentina
Ocean Specialty Tankers Corporation Delaware
Offshore Marine Management International, Inc. Liberia
Seabulk Albany, Inc. Marshall Islands
Seabulk Alkatar, Inc. Marshall Islands
Seabulk America Partnership, Ltd. Florida
Seabulk Arabian, Inc. Marshall Islands
Seabulk Arctic Express, Inc. Marshall Islands
Seabulk Aries II, Inc. Marshall Islands
Seabulk Arzanah, Inc. Marshall Islands
Seabulk Barracuda, Inc. Marshall Islands
Seabulk Baton Rouge, Inc. Marshall Islands
Seabulk Becky, Inc. Marshall Islands
Seabulk Betsy, Inc. Marshall Islands
Seabulk Bravo, Inc. Marshall Islands
Seabulk Bul Hanin, Inc. Marshall Islands
Seabulk Capricorn, Inc. Marshall Islands
Seabulk Cardinal, Inc. Marshall Islands
Seabulk Carol, Inc. Marshall Islands
Seabulk Carolyn, Inc. Marshall Islands
Seabulk Champ, Inc. Marshall Islands
Seabulk Chemical Carriers, Inc. Florida
Seabulk Christopher, Inc. Marshall Islands
Seabulk Claiborne, Inc. Marshall Islands
Seabulk Clipper, Inc. Marshall Islands
Seabulk Command, Inc. Marshall Islands
Seabulk Condor, Inc. Marshall Islands
Seabulk Constructor, Inc. Marshall Islands
Seabulk Coot I, Inc. Marshall Islands
Seabulk Coot II, Inc. Marshall Islands
Seabulk Cormorant, Inc. Marshall Islands
Seabulk Cygnet I, Inc. Marshall Islands
Seabulk Cygnet II, Inc. Marshall Islands
Seabulk Danah, Inc. Marshall Islands
Seabulk Dayna, Inc. Marshall Islands
Seabulk Debbie, Inc. Marshall Islands
Seabulk Debora Ann, Inc. Marshall Islands
Seabulk Defender, Inc. Marshall Islands
Seabulk Diana, Inc. Marshall Islands
Seabulk Discovery, Inc. Marshall Islands
Seabulk Duke, Inc. Marshall Islands
Seabulk Eagle II, Inc. Marshall Islands
Seabulk Eagle, Inc. Marshall Islands
Seabulk Emerald, Inc. Marshall Islands
Seabulk Energy, Inc. Marshall Islands
Seabulk Explorer, Inc. Marshall Islands
Seabulk Falcon II, Inc. Marshall Islands
Seabulk Falcon, Inc. Marshall Islands
Seabulk Freedom, Inc. Marshall Islands
Seabulk Fulmar, Inc. Marshall Islands
Seabulk Gabrielle, Inc. Marshall Islands
Seabulk Gannet I, Inc. Marshall Islands
Seabulk Gannet II, Inc. Marshall Islands
Seabulk Gazelle, Inc. Marshall Islands
Seabulk Giant, Inc. Marshall Islands
Seabulk Grebe, Inc. Marshall Islands
Seabulk Habara, Inc. Marshall Islands
Seabulk Hamour, Inc. Marshall Islands
Seabulk Harrier, Inc. Marshall Islands
Seabulk Hatta, Inc. Marshall Islands
Seabulk Hawaii, Inc. Marshall Islands
Seabulk Hawk, Inc. Marshall Islands
Seabulk Hercules, Inc. Marshall Islands
Seabulk Heron, Inc. Marshall Islands
Seabulk Horizon, Inc. Marshall Islands
Seabulk Houbare, Inc. Marshall Islands
Seabulk Hunter, Inc. Marshall Islands
Seabulk Ibex, Inc. Marshall Islands
Seabulk Isabel, Inc. Marshall Islands
Seabulk Jasper, Inc. Marshall Islands
Seabulk Jebel Ali, Inc. Marshall Islands
Seabulk Katie, Inc. Marshall Islands
Seabulk Kestrel, Inc. Marshall Islands
Seabulk King, Inc. Marshall Islands
Seabulk Knight, Inc. Marshall Islands
Seabulk Lake Express, Inc. Marshall Islands
Seabulk Lara, Inc. Marshall Islands
Seabulk Lark, Inc. Marshall Islands
Seabulk Liberty, Inc. Marshall Islands
Seabulk Lincoln, Inc. Marshall Islands
Seabulk Lulu, Inc. Marshall Islands
Seabulk Maintainer, Inc. Marshall Islands
Seabulk Mallard, Inc. Marshall Islands
Seabulk Marlene, Inc. Marshall Islands
Seabulk Martin I, Inc. Marshall Islands
Seabulk Martin II, Inc. Marshall Islands
Seabulk Master, Inc. Marshall Islands
Seabulk Merlin, Inc. Marshall Islands
Seabulk Missouri, Inc. Marshall Islands
Seabulk Mubarrak, Inc. Marshall Islands
Seabulk Nada, Inc. Marshall Islands
Seabulk Neptune, Inc. Marshall Islands
Seabulk Niddy, Inc. Marshall Islands
Seabulk Ocean Systems Corporation Florida
Seabulk Ocean Systems Holdings Corporation Florida
Seabulk Offshore Abu Dhabi, Inc. Florida
Seabulk Offshore Chartering Holdings, Inc. Marshall Islands
Seabulk Offshore Chartering, Inc. Marshall Islands
Seabulk Offshore de Mexico S.A. de CV Mexico
Seabulk Offshore Dubai, Inc. Florida
Seabulk Offshore Dubai, L.L.C. United Arab Emirates
Seabulk Offshore Global Holdings, Inc. Marshall Islands
Seabulk Offshore Holdings, Inc. Marshall Islands
Seabulk Offshore International, Inc. Florida
Seabulk Offshore Operators Nigeria Limited Nigeria
Seabulk Offshore Operators Trinidad Limited Trinidad
Seabulk Offshore Operators, Inc. Florida
Seabulk Offshore UK Limited England
Seabulk Offshore, Ltd. Florida
Seabulk Offshore, S.A. Switzerland
Seabulk Oregon, Inc. Marshall Islands
Seabulk Oryx, Inc. Marshall Islands
Seabulk Osprey, Inc. Marshall Islands
Seabulk Pelican, Inc. Marshall Islands
Seabulk Penguin I, Inc. Marshall Islands
Seabulk Penguin II, Inc. Marshall Islands
Seabulk Penny, Inc. Marshall Islands
Seabulk Persistence, Inc. Marshall Islands
Seabulk Petrel, Inc. Marshall Islands
Seabulk Plover, Inc. Marshall Islands
Seabulk Power, Inc. Marshall Islands
Seabulk Pride, Inc. Marshall Islands
Seabulk Prince, Inc. Marshall Islands
Seabulk Princess, Inc. Marshall Islands
Seabulk Puffin, Inc. Marshall Islands
Seabulk Queen, Inc. Marshall Islands
Seabulk Raven, Inc. Marshall Islands
Seabulk Red Tern Limited Cyprus
Seabulk Rooster, Inc. Marshall Islands
Seabulk Ruby, Inc. Marshall Islands
Seabulk Sabine, Inc. Marshall Islands
Seabulk Salihu, Inc. Marshall Islands
Seabulk Sapphire, Inc. Marshall Islands
Seabulk Sara, Inc. Marshall Islands
Seabulk Seahorse, Inc. Marshall Islands
Seabulk Sengali, Inc. Marshall Islands
Seabulk Service, Inc. Marshall Islands
Seabulk Shari, Inc. Marshall Islands
Seabulk Shindaga, Inc. Marshall Islands
Seabulk Skua I, Inc. Marshall Islands
Seabulk Snipe, Inc. Marshall Islands
Seabulk St. Tammany, Inc. Louisiana
Seabulk Star, Inc. Marshall Islands
Seabulk Suhail, Inc. Marshall Islands
Seabulk Swan, Inc. Marshall Islands
Seabulk Swift, Inc. Marshall Islands
Seabulk Tankers, Ltd. Florida
Seabulk Taurus, Inc. Marshall Islands
Seabulk Tender, Inc. Marshall Islands
Seabulk Tern, Inc. Marshall Islands
Seabulk Tims I, Inc. Marshall Islands
Seabulk Titan, Inc. Marshall Islands
Seabulk Toota, Inc. Marshall Islands
Seabulk Toucan, Inc. Marshall Islands
Seabulk Trader, Inc. Marshall Islands
Seabulk Transmarine II, Inc. Florida
Seabulk Transmarine Partnership, Ltd. Florida
Seabulk Treasure Island, Inc. Marshall Islands
Seabulk Umm Shaif, Inc. Marshall Islands
Seabulk Veritas, Inc. Marshall Islands
Seabulk Virgo I, Inc. Marshall Islands
Seabulk Voyager, Inc. Marshall Islands
Seabulk Zakum, Inc. Marshall Islands
Seamark Ltd. Panama
Sun State Marine Services, Inc. Florida
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 13,247
<SECURITIES> 0
<RECEIVABLES> 55,864
<ALLOWANCES> 2,416
<INVENTORY> 18,993
<CURRENT-ASSETS> 139,126
<PP&E> 909,648
<DEPRECIATION> 123,803
<TOTAL-ASSETS> 1,059,802
<CURRENT-LIABILITIES> 327,458
<BONDS> 379,276
115,000
0
<COMMON> 15
<OTHER-SE> 215,831
<TOTAL-LIABILITY-AND-EQUITY> 1,059,802
<SALES> 0
<TOTAL-REVENUES> 160,529
<CGS> 0
<TOTAL-COSTS> 105,921
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 471
<INTEREST-EXPENSE> 32,439
<INCOME-PRETAX> (50,015)
<INCOME-TAX> (17,230)
<INCOME-CONTINUING> (32,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,785)
<EPS-BASIC> (2.12)
<EPS-DILUTED> (2.12)
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