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 September 30, 2000
Commission File Number: 0-28732
HVIDE MARINE INCORPORATED
State of Incorporation: Delaware I.R.S. Employer I.D. 65-0966399
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 10,116,949 shares of Common Stock, par value $0.01 per share
outstanding at October 15, 2000.
<PAGE>
HVIDE MARINE INCORPORATED
Quarter ended September 30, 2000
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)................................................ 1
Condensed Consolidated Balance Sheets at December 31, 1999 and September 30, 2000........................... 1
Condensed Consolidated Statements of Operations for the three and nine months ended September
30, 1999 (Predecessor Company) and 2000 (Successor Company)............................................... 3
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1999
(Predecessor Company) and 2000 (Successor Company)......................................................... 4
Notes to Condensed Consolidated Financial Statements......................................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................20
Part II. Other Information
Item 1. Legal Proceedings.......................................................................................30
Item 2. Changes in Securities and Use of Proceeds...............................................................30
Item 4. Submission of Matters to a Vote of Security Holders.....................................................30
Item 6. Exhibits and Reports on Form 8-K........................................................................30
Signature........................................................................................................30
</TABLE>
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 consolidated
subsidiaries.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Hvide Marine Incorporated
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
-------------- ------------
(Note 1)
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................................................... $ 19,046 $ 20,174
Restricted cash................................................................... 15,217 6,005
Accounts receivable:
Trade, net of allowance for doubtful accounts of $5,799 and
$5,564, respectively.......................................................... 47,555 49,238
Insurance claims and other...................................................... 6,775 6,811
Marine operating supplies......................................................... 10,632 9,422
Prepaid expenses.................................................................. 4,013 3,664
-------- ---------
Total current assets.......................................................... 103,238 95,314
Property:
Construction-in-progress.......................................................... 1,345 2,064
Vessels and improvements.......................................................... 698,979 691,098
Furniture and equipment........................................................... 11,643 11,646
Less accumulated depreciation..................................................... (22,087) (52,942)
--------- ---------
Net property.................................................................. 689,880 651,866
Deferred costs, net.................................................................. 29,464 34,349
Vessels held for sale................................................................ -- 2,809
Restricted investments............................................................... 3,752 876
Other assets......................................................................... 4,406 5,579
--------- ---------
$ 830,740 $ 790,793
========= =========
</TABLE>
Continued.
<PAGE>
Hvide Marine Incorporated
Condensed Consolidated Balance Sheets (Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1999 2000
------------- ------------
(Note 1)
(in thousands, except par value)
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................................................................... $ 10,895 $ 11,655
Current maturities of long-term debt............................................... 17,775 24,593
Current obligations under capital leases........................................... 3,332 3,674
Accrued interest................................................................... 3,102 6,220
Accrued liabilities and other...................................................... 37,489 34,070
--------- ----------
Total current liabilities........................................................ 72,593 80,212
Long-term debt........................................................................ 465,769 436,022
Obligations under capital leases...................................................... 33,934 36,296
Senior notes.......................................................................... 76,709 78,517
Other liabilities..................................................................... 5,952 4,637
Minority interest..................................................................... 10,457 8,964
Commitments and contingencies
Stockholders' equity:
Class A Common Stock-- $0.01 par value, 20,000 shares authorized,
10,000 and 10,117 shares issued and outstanding, respectively.................... 100 101
Additional paid-in capital......................................................... 166,791 166,911
Accumulated deficit................................................................ (1,565) (20,867)
--------- ----------
Total stockholders' equity....................................................... 165,326 146,145
--------- ----------
$ 830,740 $ 790,793
========= =========
</TABLE>
See accompanying notes.
<PAGE>
Hvide Marine Incorporated
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
Predecessor Successor Predecessor Successor
Company Company Company Company
-------------- -------------- -------------- --------------
1999 2000 1999 2000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues.................................................... $ 85,989 $ 81,623 $ 265,393 $ 240,441
Operating expenses:
Crew payroll and benefits................................ 23,741 22,315 71,944 68,030
Charter hire and bond guarantee fee...................... 4,753 3,520 13,275 10,947
Repairs and maintenance.................................. 6,227 6,113 20,187 18,291
Insurance................................................ 3,593 3,088 10,352 9,283
Fuel..................................................... 7,714 5,673 15,660 20,331
Consumables.............................................. 2,529 3,596 12,135 11,219
Rent and utilities....................................... 8,565 6,630 24,824 19,585
------------- ------------- ------------- -------------
Total operating expenses............................... 57,122 50,935 168,377 157,686
Overhead expenses:
Salaries and benefits.................................... 4,756 4,959 14,384 15,321
Office................................................... 1,642 1,561 5,189 4,635
Professional fees........................................ 1,663 1,394 6,557 4,150
Other.................................................... 1,832 1,310 6,008 4,753
------------- ------------- ------------- -------------
Total overhead expenses................................ 9,893 9,224 32,138 28,859
Depreciation, amortization and drydocking................... 20,821 12,157 62,548 36,600
------------- ------------- ------------- -------------
Income (loss) from operations............................... (1,847) 9,307 2,330 17,296
Other income (expense):
Interest expense......................................... (21,310) (15,904) (58,915) (46,792)
Interest income.......................................... 278 103 768 546
Reorganization items..................................... (4,328) -- (4,328) --
Minority interest ....................................... (1,552) 429 (4,492) 1,493
Gain (loss) on asset sales............................... (3,518) 4,185 (17,648) 4,828
Other.................................................... (357) (179) (364) 6,517
------------- ------------- ------------- -------------
Total other expense, net............................... (30,787) (11,366) (84,979) (33,408)
------------- ------------- ------------- -------------
Loss before provision for (benefit from) income taxes....... (32,634) (2,059) (82,649) (16,112)
Provision for (benefit from) income taxes................... (12,524) 1,083 (29,754) 3,190
------------- ------------- ------------- -------------
Net loss............................................... $ (20,110) $ (3,142) $ (52,895) $ (19,302)
============= ============= ============= =============
Net loss per common share - basic and diluted............... * $ (0.31) * $ (1.93)
============= ============= ============= =============
Weighted average common shares outstanding - basic and
diluted ................................................. * 10,039 * 10,014
============= ============= ============= =============
</TABLE>
* Earnings per share is not presented for the three and nine month periods ended
September 30, 1999 because such presentation would not be meaningful. The
Company's previous common stock was canceled and new common stock was issued on
December 15, 1999, pursuant to the Plan.
See accompanying notes.
<PAGE>
Hvide Marine Incorporated
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
Predecessor Successor
Company Company
1999 2000
----------- ----------
<S> <C> <C>
Operating activities:
Net loss................................................................ $ (52,895) $ (19,302)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization of property........................... 51,035 31,858
Amortization of drydocking costs.................................... 8,941 4,742
Amortization of goodwill............................................ 2,572 --
Accretion of original issue discount and
amortization of financing costs................................... 1,110 4,235
Provision for bad debts............................................. 421 195
Loss (gain) on asset sales.......................................... 17,648 (4,828)
Deferred income tax benefit......................................... (29,754) --
Minority interest................................................... (678) (1,493)
Other non-cash items................................................ 130 885
Changes in operating assets and liabilities:
Accounts receivable............................................... 18,625 (2,118)
Other current and long-term assets................................ (9,355) (6,592)
Payment of reorganization items................................... -- (4,494)
Accounts payable and other liabilities............................ (4,926) 4,002
------------- --------------
Net cash provided by operating activities....................... 2,874 7,088
Investing activities:
Purchases of property................................................. (44,505) (9,678)
Proceeds from disposal of property.................................... 31,799 22,249
Payments on vessels under construction................................ (5,102) --
Redemption of restricted investments.................................. 19,592 2,888
------------- --------------
Net cash provided by investing activities........................... 1,784 15,459
Financing activities:
Proceeds from short-term borrowings................................... 5,000 --
Proceeds from DIP Credit Facility, net................................ 9,860 --
Proceeds from revolving credit facility............................... -- 23,203
Repayment of revolving credit facility................................ -- (17,003)
Proceeds from long-term borrowings.................................... 44,923 --
Repayment of long-term borrowings..................................... (51,715) (27,924)
Proceeds from issuance of Title XI bonds, net of offering costs....... 6,600 --
Repayment of Title XI bonds........................................... (616) (5,874)
Redemption of restricted cash......................................... -- 9,402
Payment of financing costs............................................ (1,358) (596)
Proceeds from sale leaseback.......................................... 271 --
Payment of obligations under capital leases........................... (2,469) (2,628)
Proceeds from issuance of common stock................................ 253 1
Repayment of short-term debt.......................................... (5,000) --
------------- --------------
Net cash provided by (used in) financing activities................. 5,749 (21,419)
------------- ---------------
Change in cash and cash equivalents........................................ 10,407 1,128
Cash and cash equivalents at beginning of period........................... 10,106 19,046
------------- --------------
Cash and cash equivalents at end of period................................. $ 20,513 $ 20,174
============= ==============
</TABLE>
See accompanying notes.
<PAGE>
HVIDE MARINE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
All adjustments which, in the opinion of management, are considered necessary
for a fair presentation of the results of operations for the periods shown are
of a normal recurring nature and have been reflected in the unaudited condensed
consolidated financial statements. The results of operations for the periods
presented are not necessarily indicative of the results expected for the full
fiscal year or for any future period. The information included in these
unaudited condensed consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in this report and the consolidated financial
statements and accompanying notes included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1999, as amended on Form 10-K/A
(the "1999 Form 10-K").
The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
The Company and substantially all of its wholly-owned subsidiaries
filed voluntary petitions for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware on September 8, 1999. The Bankruptcy Court confirmed the Company's
Joint Plan of Reorganization (the "Plan") on December 9, 1999, and the Plan
became effective on December 15, 1999 (the "Effective Date"). The Company
emerged from bankruptcy on December 15, 1999 (see Note 3 for additional
information).
The unaudited consolidated financial statements as of and for the
periods after the Effective Date reflect accounting principles and practices set
forth in the American Institute of Certified Public Accountants Statement of
Position ("SOP") 90-7, Financial Reporting by Entities in Reorganization under
the Bankruptcy Code, which provides guidance for financial reporting by entities
that have filed voluntary petitions for relief under, and have reorganized in
accordance with the Bankruptcy Code. In accordance with SOP 90-7, the Company
adopted "fresh start reporting" as of December 15, 1999. The Company's emergence
from its Chapter 11 proceedings resulted in a new reporting entity. The assets
and liabilities of the Company were restated as of December 15, 1999, in
accordance with SOP 90-7, and therefore the accompanying condensed consolidated
statements of operations and cash flows for periods prior to the Company's
emergence from bankruptcy (the "Predecessor Company") are not comparable to the
results of operations and cash flows of the Company subsequent to emergence from
bankruptcy and the adoption of fresh-start reporting (the "Successor Company").
Certain amounts in the 1999 condensed consolidated financial statements
have been reclassified to conform with the 2000 presentation. These
reclassifications had no effect on the Company's net income.
2. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the condensed consolidated
financial statements and accompanying notes. While the Company believes that
such estimates are fair when considered in conjunction with the condensed
consolidated financial position and results of operations taken as a whole, the
actual amount of such estimates, when known, will vary from these estimates.
3. Issues Affecting Liquidity
As a result of an April 2000 amendment to its Credit Facility, the
Company was required to repay $60.0 million of the term loan portion of the
facility prior to January 1, 2001, subject to additional repayment obligations
if certain financial targets were not achieved. On August 30, 2000, the Company
entered into a further amendment to the Credit Facility that reduced the
repayment obligation to $40.0 million and eliminated the target-based
obligation. Through October 31, 2000, the Company satisfied approximately $27.2
million of this obligation, of which $22.7 million was obtained from the sale of
29 vessels.
The Company believes that operating cash flow, amounts available under
its revolving credit facility and anticipated proceeds from the sale of
additional vessels will be sufficient to meet its debt service obligations,
apart from the term loan repayments described above, and other capital
requirements through 2000. While it is uncertain whether proceeds from the sale
of assets will be sufficient to enable it to satisfy the term loan repayment
obligation as currently scheduled, the Company has the ability to use the
revolving credit portion of the facility to satisfy the obligation, and
currently has sufficient availability to do so. As the Company's operating cash
flow is dependent on factors beyond the Company's control, however, including
general economic conditions and conditions in the markets the Company serves,
there can be no assurance that actual operating cash flow will meet
expectations.
4. Plan of Reorganization
In September 1999, the Company filed the Plan with the Bankruptcy Court
which set forth a plan for repaying or otherwise compensating the Company's
creditors in order of relative seniority of their respective claims while
seeking to maintain the Company as a going concern. The Plan specifically
provided for the conversion of the Company's previously outstanding senior notes
and preferred securities into equity interests in the Successor Company and
cancellation of all of the pre-petition equity interests, as more fully
described in the Plan. Substantially all of the Company's other pre- and post-
petition unsecured liabilities were unaffected by the Plan.
5. Long-Term Debt
The Company's senior notes have not received the rating from the rating
agencies required by the note indenture. As a result, on April 15, 2000, the
interest rate on the senior notes increased from 12 1/2% to 13 1/2%,
retroactively applied to December 15, 1999. The additional interest is payable
in the form of additional senior notes, of which notes in the principal amount
of $514,517 and $238,786 were issued on June 30, 2000 and September 30, 2000,
respectively. The Company is currently seeking the ratings necessary to return
the interest rate to 12 1/2%.
6. Income Taxes
For the nine months ended September 30, 2000, the deferred provision
for income taxes was computed using a net estimated annual effective tax rate of
0%. For the nine months ended September 30, 2000, a gross deferred benefit was
computed using an estimated annual effective tax rate of 36%. Management has
determined that a tax valuation allowance is necessary at September 30, 2000 to
reduce the deferred tax assets to the amount that will more likely be realized.
After application of the valuation allowance, the Company's net deferred tax
assets and liabilities are zero. The current provision for income taxes
represents taxes withheld on foreign source revenue. For the nine months ended
September 30, 1999, the benefit for income taxes was computed using an estimated
annual effective tax rate of 36%, adjusted principally for depreciation on
vessels built with capital construction funds.
7. Comprehensive Income
The Company has no material components of comprehensive (income) loss
except net loss.
8. Earnings Per Share
Pursuant to the Plan, 10,000,000 new shares of common stock were issued
at the Effective Date. In the nine months ended September 30, 2000, 27,800
shares of restricted common stock were granted to certain employees of the
Company and warrants to purchase 89,149 shares of common stock were exercised.
Common stock equivalents outstanding during the period ending September 30,
2000, which consist principally of warrants and employee stock options, have not
been included in the computation of diluted loss per share, as their effect is
antidilutive.
9. Segment Information
The Company organizes its business principally into three segments. The
Company does not have significant intersegment transactions. These segments and
their respective operations are as follows:
Harbor Towing - Harbor towing services are provided by tugs to vessels
utilizing the ports in which the tugs operate and to vessels at sea to the
extent required by environmental regulations, casualty or other emergency.
Marine Transportation Services - Marine transportation services include
oceangoing and inland-waterway vessels used to transport chemicals, fuel and
other petroleum products, primarily from chemical manufacturing plants,
refineries and storage facilities along the U.S. Gulf of Mexico coast to
industrial users and distribution facilities in and around the Gulf of Mexico,
Atlantic and Pacific coast ports and inland rivers.
Offshore Energy Support - Offshore energy support includes vessels,
operating in U.S. and foreign locations used primarily to transport materials,
supplies, equipment and personnel to drilling rigs and to support the
construction, positioning and ongoing operations of oil and gas production
platforms.
The Company evaluates performance by operating segment. Resources are
allocated primarily based on segment profit or loss, before taxes. Revenues by
segment and geographic area consist only of services provided to external
customers, as reported in the Statements of Operations. Income from operations
represents net revenues less applicable costs and expenses related to those
revenues, and income (loss) before income taxes includes the operating results
primarily adjusted by allocated net interest expense and gains (losses) on the
disposal of vessels. Unallocated expenses are primarily comprised of general and
administrative expenses of a corporate nature.
The following schedule presents information about the Company's
operations in its three segments (in thousands):
<TABLE>
<CAPTION>
Predecessor Successor Predecessor Successor
Company Company Company Company
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- ----------------------------
1999 2000 1999 2000
-------------- -------------- -------------- ---------
<S> <C> <C> <C> <C>
Revenues:
Harbor towing..................................... 10,824 7,965 33,225 25,011
Marine transportation services.................... 42,985 34,591 115,153 104,634
--------------- --------------- --------------- ---------------
Offshore energy support.......................... $ 32,180 $ 39,067 $ 117,015 $ 110,796
Consolidated revenues............................... $ 85,989 $ 81,623 $ 265,393 $ 240,441
=============== =============== =============== ===============
Income (loss) from operations:
Harbor towing..................................... 3,209 1,093 9,547 4,056
Marine transportation services.................... 6,515 6,225 16,551 17,211
Offshore energy support........................... $ (8,074) $ 4,577 $ (11,309) $ 5,587
General corporate................................. (3,497) (2,588) (12,459) (9,558)
--------------- --------------- --------------- ---------------
Consolidated income (loss) from operations $ (1,847) $ 9,307 $ 2,330 $ 17,296
=============== =============== =============== ===============
Income (loss) before income taxes:
Harbor towing..................................... 686 3,071 4,493 3,459
Marine transportation services.................... (6,138) 2,217 (6,656) 4,569
Offshore energy support........................... $ (20,225) $ (5,957) $ (63,739) $ (24,322)
General corporate................................. (6,957) (1,390) (16,747) 182
--------------- --------------- --------------- ---------------
Consolidated loss before income taxes............... $ (32,634) $ (2,059) $ (82,649) $ (16,112)
=============== =============== =============== ===============
</TABLE>
<PAGE>
10. Supplemental Condensed Consolidated Financial Information
The senior notes are fully and unconditionally guaranteed on a joint
and several basis by certain of the Company's wholly owned consolidated
subsidiaries. A substantial portion of the Company's cash flows are generated by
these subsidiaries. As a result, the funds necessary to meet the Company's
obligations are provided in substantial part by distributions or advances from
these 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
these subsidiaries for the purpose of meeting its obligations, including the
payments of principal and interest on the Senior Notes. The Company has not
presented separate financial statements or other discussions concerning the
guarantor subsidiaries because management has determined that such information
is not material to investors.
The following is condensed consolidating financial information for the
Company, segregating the parent, the combined domestic guarantor subsidiaries,
the combined foreign guarantor subsidiaries, the combined non-guarantor
subsidiaries and eliminations.
<PAGE>
Condensed Consolidating Balance Sheet (unaudited)
(in thousands)
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.............. $ 4,830 $ 2,908 $ 7,816 $ 3,492 $ -- $ 19,046
Restricted cash........................ 15,027 190 -- -- -- 15,217
Accounts receivable:
Trade, net.......................... 1,804 23,728 17,579 5,132 (688) 47,555
Insurance claims and other.......... 1,866 2,150 3,028 516 (785) 6,775
Marine operating supplies.............. (465) 2,481 3,810 4,806 -- 10,632
Prepaid expenses....................... 933 918 1,675 487 -- 4,013
-------- ------- -------- -------- --------- ------------
Total current assets................ 23,995 32,375 33,908 14,433 (1,473) 103,238
Property:
Construction-in-progress............... -- 541 664 140 -- 1,345
Vessels and improvements............... 9,292 177,938 206,764 304,985 -- 698,979
Furniture and equipment................ 5,822 3,051 2,135 635 -- 11,643
Less accumulated depreciation.......... (196) (533) (671) (20,687) -- (22,087)
-------- -------- -------- -------- --------- ------------
Net property........................ 14,918 180,997 208,892 285,073 -- 689,880
Other assets:
Deferred costs, net.................... 14,962 4,615 1,454 8,433 -- 29,464
Restricted investments................. -- -- -- 3,752 -- 3,752
Other.................................. 455,560 406,592 70,888 8,303 (936,937) 4,406
-------- -------- -------- -------- --------- ------------
$509,435 $624,579 $315,142 $319,994 $(938,410) $ 830,740
======== ======== ======== ======== ========= ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable....................... $ 1,383 $ 4,236 $ 4,329 $ 947 $ -- $ 10,895
Current maturities of long-term debt... 12,065 1,891 -- 3,820 (1) 17,775
Current obligations under capital
leases.............................. 555 2,777 -- -- -- 3,332
Accrued interest....................... 2,418 -- -- 684 -- 3,102
Accrued liabilities and other.......... 18,685 7,579 9,635 3,063 (1,473) 37,489
-------- -------- -------- -------- --------- ------------
Total current liabilities........... 35,106 16,483 13,964 8,514 (1,474) 72,593
Long-term debt........................... 214,212 27,410 -- 224,147 -- 465,769
Obligations under capital leases......... 13,662 20,272 -- -- -- 33,934
Senior notes............................. 76,709 -- -- -- -- 76,709
Other.................................... 4,425 559 740 226 2 5,952
Minority interest........................ -- -- -- -- 10,457 10,457
Commitments and contingencies
Stockholders' equity:
Common stock........................... 100 -- -- -- -- 100
Additional paid-in capital............. 166,786 332,837 301,148 11,143 (645,123) 166,791
Retained earnings (accumulated deficit).. (1,565) 227,018 (710) 75,964 (302,272) (1,565)
-------- -------- -------- -------- --------- ------------
Total stockholders' equity.......... 165,321 559,855 300,438 87,107 (947,395) 165,326
-------- -------- -------- -------- --------- ------------
$509,435 $624,579 $315,142 $319,994 $(938,410) $ 830,740
======== ======== ======== ======== ========= ============
</TABLE>
<PAGE>
Condensed Consolidating Balance Sheet (unaudited)
(in thousands)
<TABLE>
<CAPTION>
September 30, 2000
---------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents............. $ 327 $ (532) $ 6,443 $ 13,936 $ -- $ 20,174
Restricted cash....................... 6,005 -- -- -- -- 6,005
Accounts receivable:
Trade, net......................... 926 21,101 25,005 2,412 (206) 49,238
Insurance claims and other......... 549 3,122 2,928 212 -- 6,811
Marine operating supplies............. (574) 1,968 3,692 4,480 (144) 9,422
Prepaid expenses...................... 755 618 1,149 1,142 3,664
------------ --------- ------------ ------------ --------- ------------
Total current assets............... 7,988 26,277 39,217 22,182 (350) 95,314
Property:
Construction-in-progress.............. 3 323 1,217 377 144 2,064
Vessels and improvements.............. 5,914 171,223 205,493 308,468 -- 691,098
Furniture and equipment............... 5,831 3,324 2,066 425 -- 11,646
Less accumulated depreciation......... (1,961) (10,002) (12,722) (28,257) -- (52,942)
------------ --------- ------------ ------------ --------- ------------
Net property....................... 9,787 164,868 196,054 281,013 144 651,866
Other assets:
Deferred costs, net................... 19,226 4,980 1,649 8,494 -- 34,349
Vessels held for sale................. -- 1,957 852 -- -- 2,809
Restricted investments................ -- -- -- 876 -- 876
Other................................. 405,426 410,358 66,945 (464) (876,686) 5,579
------------ --------- ------------ ------------ --------- ------------
$ 442,427 $ 608,440 $ 304,717 $ 312,101 $(876,892) $ 790,793
============ ========= ============ ============ ========= ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................... $ 591 $ 3,868 $ 6,345 $ 850 $ -- $ 11,654
Current maturities of long-term debt.. 18,670 1,975 -- 3,949 -- 24,594
Current obligations under capital
leases.............................. 16 3,658 -- -- -- 3,674
Accrued interest...................... 840 714 -- 4,666 -- 6,220
Accrued liabilities and other......... 7,153 6,283 15,540 5,300 (206) 34,070
------------ --------- ------------ ------------ --------- ------------
Total current liabilities.......... 27,270 16,498 21,885 14,765 (206) 80,212
Long-term debt......................... 187,918 25,963 -- 222,141 -- 436,022
Obligations under capital leases....... -- 36,296 -- -- -- 36,296
Senior notes........................... 78,517 -- -- -- -- 78,517
Other.................................. 2,746 818 884 189 -- 4,637
Minority interest...................... -- -- -- -- 8,964 8,964
Commitments and contingencies
Stockholders' equity:
Common stock.......................... 100 21 -- -- (20) 101
Additional paid-in capital............ 166,744 314,126 301,311 10,756 (626,026) 166,911
Retained earnings (accumulated deficit) (20,868) 214,718 (19,363) 64,250 (259,604) (20,867)
------------ --------- ------------ ------------ --------- ------------
Total stockholders' equity......... 145,976 528,865 281,948 75,006 (885,650) 146,145
------------ --------- ------------ ------------ --------- ------------
$ 442,427 $ 608,440 $ 304,717 $ 312,101 $(876,892) $ 790,793
============ ========= ============ ============ ========= ============
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
---------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Predecessor Company
Revenues................................ $ 12,852 $ 48,082 $ 21,117 $ 19,408 $ (15,470) $ 85,989
Operating expenses:
Crew payroll and benefits............. 4,792 8,322 6,100 4,650 (123) 23,741
Charter hire and bond guarantee fee... 491 17,221 -- -- (12,959) 4,753
Repairs and maintenance............... 448 2,221 3,380 248 (70) 6,227
Insurance............................. 486 1,650 1,039 418 -- 3,593
Fuel............................... 707 4,189 1,555 1,263 -- 7,714
Consumables........................ 364 1,271 1,847 228 (1,181) 2,529
Rent and utilities................. 855 3,925 1,757 3,400 (1,372) 8,565
------------ ------------ ------------ ------------ ---------- ----------
Total operating expenses.......... 8,143 38,799 15,678 10,207 (15,705) 57,122
Overhead expenses:
Salaries and benefits................. 1,416 1,192 1,484 664 -- 4,756
Office................................ 658 495 488 1 -- 1,642
Professional fees..................... 821 177 486 179 -- 1,663
Other................................. 528 (315) 2,227 503 (1,111) 1,832
------------ ------------ ------------ ------------ ---------- ----------
Total overhead expenses............ 3,423 1,549 4,685 1,347 (1,111) 9,893
Depreciation, amortization and
drydocking............................ 2,834 6,682 8,628 2,681 (4) 20,821
------------ ------------ ------------ ------------ ---------- ----------
Income (loss) from operations........... (1,548) 1,052 (7,874) 5,173 1,350 (1,847)
Other income (expense):
Interest expense...................... (1,945) (3,990) (12,621) (4,932) 2,178 (21,310)
Interest income....................... 839 1,538 -- 79 (2,178) 278
Reorganization items.................. (4,328) -- -- -- -- (4,328)
Minority interest .................... (22,056) (7,446) -- (1,729) 29,679 (1,552)
Net (loss) gain on asset sales........ (3,540) 22 -- -- -- (3,518)
Other................................. (56) 1,517 -- (345) (1,473) (357)
------------ ------------ ------------ ------------ ---------- ----------
Total other expense, net.......... (31,086) (8,359) (12,621) (6,927) 28,206 (30,787)
------------ ------------ ------------ ------------- ---------- ----------
Loss before income taxes................ (32,634) (7,307) (20,495) (1,754) 29,556 (32,634)
Benefit from income taxes............... (12,524) -- -- -- -- (12,524)
------------ ------------ ------------ ------------ ---------- ----------
Net loss................................ $ (20,110) $ (7,307) $ (20,495) $ (1,754) $ 29,556 $ (20,110)
============ ============ ============ ============ ========== ==========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
--------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Successor Company
Revenues................................ $ 8,846 $ 39,724 $ 27,463 $ 19,615 $ (14,025) $ 81,623
Operating expenses:
Crew payroll and benefits............. 3,778 7,199 5,831 5,567 (60) 22,315
Charter hire and bond guarantee fee... 502 12,733 (1) -- (9,714) 3,520
Repairs and maintenance............... 489 1,378 3,359 889 (2) 6,113
Insurance............................. 331 1,560 961 236 -- 3,088
Fuel.................................. 614 2,683 1,253 1,123 -- 5,673
Consumables........................... 299 1,165 2,003 503 (374) 3,596
Rent and utilities.................... 853 2,571 1,813 2,658 (1,265) 6,630
-------- --------- -------- --------- --------- ---------
Total operating expenses........... 6,866 29,289 15,219 10,976 (11,415) 50,935
Overhead expenses:
Salaries and benefits................. 1,596 1,445 1,322 596 -- 4,959
Office................................ 543 475 566 (23) -- 1,561
Professional fees..................... 357 408 375 254 -- 1,394
Other................................. 427 (38) 1,289 691 (1,059) 1,310
-------- --------- -------- --------- --------- ---------
Total overhead expenses............ 2,923 2,290 3,552 1,518 (1,059) 9,224
Depreciation, amortization
and drydocking.......................... 817 3,233 4,773 3,334 -- 12,157
-------- --------- -------- --------- --------- ---------
Income (loss) from operations........... (1,760) 4,912 3,919 3,787 (1,551) 9,307
Other income (expense):
Interest expense...................... (448) (3,854) (6,763) (5,454) 615 (15,904)
Interest income....................... 704 -- -- 14 (615) 103
Minority interest ................. (2,350) (176) -- (1,584) 4,539 429
Net gain on asset sales............... 710 3,387 88 -- -- 4,185
Other................................. 1,085 (124) (2,683) (7) 1,550 (179)
-------- --------- -------- --------- --------- ---------
Total other expense, net.......... (299) (767) (9,358) (7,031) 6,089 (11,366)
-------- --------- -------- --------- --------- ---------
Income (loss) before income taxes....... (2,059) 4,145 (5,439) (3,244) 4,538 (2,059)
Provision for income taxes.............. 1,083 -- -- -- -- 1,083
-------- --------- -------- --------- --------- ---------
Net income (loss)....................... $ (3,142) $ 4,145 $ (5,439) $ (3,244) $ 4,538 $ (3,142)
======== ========= ======== ========= ========= =========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
--------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Predecessor Company
Revenues................................ $ 38,646 $ 143,750 $ 86,900 $ 46,604 $ (50,507) $ 265,393
Operating expenses:
Crew payroll and benefits............. 13,919 25,461 21,545 11,164 (145) 71,944
Charter hire and bond guarantee fee... 1,448 49,112 -- -- (37,285) 13,275
Repairs and maintenance............... 1,564 6,354 11,780 588 (99) 20,187
Insurance............................. 1,230 4,739 3,315 1,068 -- 10,352
Fuel.................................. 2,082 6,803 4,067 2,708 -- 15,660
Consumables........................... 1,111 5,223 6,480 763 (1,442) 12,135
Rent and utilities.................... 2,117 12,720 5,155 7,968 (3,136) 24,824
--------- --------- --------- --------- --------- -------------
Total operating expenses.......... 23,471 110,412 52,342 24,259 (42,107) 168,377
Overhead expenses:
Salaries and benefits................. 4,471 3,618 4,311 1,984 -- 14,384
Office................................ 2,032 1,079 1,656 422 -- 5,189
Professional fees..................... 3,982 1,341 692 542 -- 6,557
Other................................. 1,844 409 6,925 1,205 (4,375) 6,008
--------- --------- --------- --------- --------- -------------
Total overhead expenses............ 12,329 6,447 13,584 4,153 (4,375) 32,138
Depreciation, amortization and drydocking 9,751 19,289 26,527 6,985 (4) 62,548
--------- --------- --------- --------- --------- -------------
Income (loss) from operations........... (6,905) 7,602 (5,553) 11,207 (4,021) 2,330
Other income (expense):
Interest expense...................... (2,630) (21,212) (29,796) (12,634) 7,357 (58,915)
Interest income....................... 2,174 5,503 -- 448 (7,357) 768
Reorganization items.................. (4,328) -- -- -- -- (4,328)
Minority interest .................... (66,498) (32,100) -- (1,123) 95,229 (4,492)
Net loss on asset sales............... (6,255) (8,071) (3,322) -- -- (17,648)
Other................................. 1,793 1,620 (7,306) (369) 3,898 (364)
--------- --------- --------- --------- --------- -------------
Total other expense, net.......... (75,744) (54,260) (40,424) (13,678) 99,127 (84,979)
--------- --------- --------- --------- --------- -------------
Loss before income taxes................ (82,649) (46,658) (45,977) (2,471) 95,106 (82,649)
Benefit from income taxes............... (29,754) -- -- -- -- (29,754)
--------- --------- --------- --------- --------- -------------
Net loss................................ $ (52,895) $ (46,658) $ (45,977) $ (2,471) $ 95,106 $ (52,895)
========= ========= ========= ========= ========= =============
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000
--------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Successor Company
Revenues................................ $ 28,390 $ 119,027 $ 76,944 $ 52,834 $ (36,754) $ 240,441
Operating expenses:
Crew payroll and benefits............. 11,886 24,442 17,515 14,268 (81) 68,030
Charter hire and bond guarantee fee... 1,491 36,494 48 1,000 (28,086) 10,947
Repairs and maintenance............... 1,267 4,959 10,019 2,063 (17) 18,291
Insurance............................. 991 4,430 2,896 966 -- 9,283
Fuel.................................. 2,881 8,567 4,575 4,308 -- 20,331
Consumables........................... 958 4,278 5,486 1,009 (512) 11,219
Rent and utilities.................... 1,827 7,484 5,452 8,407 (3,585) 19,585
--------- ------------ ------------ ------------ ---------- ----------
Total operating expenses............ 21,301 90,654 45,991 32,021 (32,281) 157,686
Overhead expenses:
Salaries and benefits.................. 4,760 4,109 4,512 1,940 -- 15,321
Office................................. 1,545 1,073 1,697 320 -- 4,635
Professional fees...................... 2,130 933 694 393 -- 4,150
Other.................................. 1,251 904 4,728 1,330 (3,460) 4,753
--------- ------------ ------------ ------------ ---------- ----------
Total overhead expenses............... 9,686 7,019 11,631 3,983 (3,460) 28,859
Depreciation, amortization and
drydocking............................ 2,281 11,841 14,411 8,067 -- 36,600
--------- ------------ ------------ ------------ ---------- ----------
Income (loss) from operations........... (4,878) 9,513 4,911 8,763 (1,013) 17,296
Other income (expense):
Interest expense...................... (1,708) (13,063) (19,407) (14,426) 1,812 (46,792)
Interest income....................... 2,262 9 -- 87 (1,812) 546
Minority interest ................. (22,227) (14,190) -- (4,757) 42,668 1,494
Net gain (loss) on asset sales........ 710 4,163 (45) -- -- 4,828
Other................................. 9,729 (108) (4,113) (5) 1,013 6,516
--------- ------------ ------------ ------------ ---------- ----------
Total other expense, net.......... (11,234) (23,189) (23,565) (19,101) 43,681 (33,408)
--------- ------------ ------------ ------------ ---------- ----------
Loss before income taxes................ (16,112) (13,676) (18,654) (10,338) 42,668 (16,112)
Provision for income taxes.............. 3,190 -- -- -- -- 3,190
--------- ------------ ------------ ------------ ---------- ----------
Net loss................................ $ (19,302) $ (13,676) $ (18,654) $ (10,338) $ 42,668 $ (19,302)
========= ============ ============ ============ ========== ==========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
--------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Predecessor Company
Operating activities:
Net income (loss)................................ $ (52,895) $ (46,658) $ (45,977) $ (2,471) $ 95,106 $ (52,895)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization............... 7,542 15,580 23,680 6,805 -- 53,607
Amortization of drydocking costs............ 2,209 3,709 2,847 180 (4) 8,941
Amortization of discount on long-term debt
and financing costs......................... 1,110 -- -- -- -- 1,110
Provision for bad debts..................... 29 148 244 -- -- 421
Loss (gain) on asset sales.................. 6,255 8,071 3,322 -- -- 17,648
Deferred income tax benefit................. (29,754) -- -- -- -- (29,754)
Minority interest........................... -- -- -- -- (678) (678)
Undistributed earnings of affiliates........ 66,498 32,100 -- 1,123 (99,721) --
Other non-cash items........................ 130 -- -- -- -- 130
Changes in operating assets and liabilities:
Accounts receivable....................... 6,748 3,154 12,212 (3,019) (470) 18,625
Other current and long-term assets........ (32,412) (10,901) 14,055 (13,333) 33,236 (9,355)
Accounts payable and other liabilities.... 3,403 (1,813) (9,326) (723) 3,533 (4,926)
--------- ----------- ----------- ------------ -------- ------------
Net cash provided by (used in)
operating activities................... (21,137) 3,390 1,057 (11,438) 31,002 2,874
Investing activities:
Purchases of property.......................... (21,558) (11,546) (330) (13,658) 2,587 (44,505)
Proceeds from disposal of property............. 28,302 3,497 -- -- -- 31,799
Payments on vessels under construction......... -- (5,102) -- -- -- (5,102)
Capital contribution to affiliates............. 25,000 1,203 1,364 6,022 (33,589) --
Redemption of restricted investments........... -- -- -- 19,592 -- 19,592
--------- ----------- ----------- ----------- -------- ------------
Net cash provided by (used in)
investing activities...................... 31,744 (11,948) 1,034 11,956 (31,002) 1,784
Financing activities:
Proceeds from short-term borrowings............ -- 5,000 -- -- -- 5,000
Proceeds from DIP Credit Facility, net......... 9,860 -- -- -- -- 9,860
Proceeds from long-term borrowings............. 30,723 14,200 -- -- -- 44,923
Repayment of long-term borrowings.............. (50,695) (1,020) -- -- -- (51,715)
Proceeds from issuance of Title XI bonds, net
of offering costs............................ -- -- -- 6,600 -- 6,600
Repayment of Title XI debt..................... -- -- -- (616) -- (616)
Payment of financing costs..................... (1,358) -- -- -- -- (1,358)
Proceeds from sale leaseback................... -- 271 -- -- -- 271
Payment of obligations under capital leases.... (744) (1,725) -- -- -- (2,469)
Proceeds from option exercise & ESPP........... 253 -- -- -- -- 253
Repayments of short-term borrowings............ -- (5,000) -- -- -- (5,000)
--------- ----------- ----------- ----------- -------- ------------
Net cash provided by (used in)
financing activities........................ (11,961) 11,726 -- 5,984 -- 5,749
--------- ----------- ----------- ----------- -------- ------------
Change in cash and cash equivalents.............. (1,354) 3,168 2,091 6,502 -- 10,407
Cash and cash equivalents at beginning of period. 1,402 2,100 5,001 1,603 -- 10,106
--------- ----------- ----------- ----------- -------- ------------
Cash and cash equivalents at end of period....... $ 48 $ 5,268 $ 7,092 $ 8,105 $ -- $ 20,513
========= =========== =========== =========== ======== ============
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 2000
------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Successor Company
Operating activities:
Net loss......................................... $(19,302) $(13,676) $ (18,654) $ (10,338) $ 42,668 $ (19,302)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization of property... 1,632 9,326 13,191 7,709 -- 31,858
Amortization of drydocking costs............ 649 2,515 1,220 358 -- 4,742
Amortization of discount on long-term
debt and financing costs.................... 3,705 29 -- 501 -- 4,235
Provision for bad debts........................ (201) 56 120 220 -- 195
Gain (loss) on disposal of assets.............. (710) (4,163) 45 -- -- (4,828)
Minority interest.............................. 22,227 14,190 -- 4,757 (42,668) (1,494)
Other non-cash items........................... 721 -- 163 -- -- 884
Changes in operating assets and liabilities:
Accounts receivable......................... 2,192 1,600 (7,445) 2,802 (1,267) (2,118)
Other current and long-term assets.......... 7,564 (20,157) 3,172 2,685 144 (6,592)
Payment of reorganization items............. (4,494) -- -- -- -- (4,494)
Accounts payable and other liabilities...... (10,723) (691) 8,065 6,084 1,267 4,002
-------- -------- ----------- ------------ ------------ ------------
Net cash provided by (used in)
operating activities...................... 3,260 (10,971) (123) 14,778 144 7,088
Investing activity:
Purchases of property.......................... 8,541 (11,828) (2,664) (3,583) (144) (9,678)
Proceeds from disposal of property............. -- 20,835 1,414 -- -- 22,249
Capital contribution to affiliate.............. -- 1,763 -- (1,763) -- --
Redemption of restricted investments........... -- -- -- 2,888 -- 2,888
-------- -------- ----------- ------------ ------------ ------------
Net cash provided by (used in) investing
activity 8,541 10,770 (1,250) (2,458) (144) 15,459
Financing activities:
Proceeds from revolving credit facility........ 23,203 -- -- -- -- 23,203
Repayment of revolving credit facility......... (17,003) -- -- -- -- (17,003)
Repayment of long-term borrowings.............. (26,884) (1,040) -- -- -- (27,924)
Repayment of Title XI bonds.................... (3,675) (323) -- (1,876) -- (5,874)
Redemption of restricted cash.................. 9,213 189 -- -- -- 9,402
Payment of financing costs..................... (596) -- -- -- -- (596)
Payment of obligations under capital leases.... (563) (2,065) -- -- -- (2,628)
Proceeds from issuance of common stock......... 1 -- -- -- -- 1
-------- -------- ----------- ------------ ------------ ------------
Net cash used in financing activities....... (16,304) (3,239) -- (1,876) -- (21,419)
-------- -------- ----------- ------------ ------------ ------------
Change in cash and cash equivalents.............. (4,503) (3,440) (1,373) 10,444 -- 1,128
Cash and cash equivalents at beginning of period. 4,830 2,908 7,816 3,492 -- 19,046
-------- -------- ----------- ------------ ------------ ------------
Cash and cash equivalents at end of period....... $ 327 $ (532) $ 6,443 $ 13,936 $ -- $ 20,174
======== ======== =========== ============ ============ ============
</TABLE>
<PAGE>
11. Contingencies
Under United States law, "United States persons" are prohibited from
performing contracts in support of an industrial, commercial, public utility or
governmental project in the Republic of Sudan, or facilitating such activities.
During 1999, two vessels owned by subsidiaries of the Company performed services
for third parties in support of energy exploration activities in Sudan; one of
these vessels continued to perform such services until January 31, 2000. The
Company has reported these activities to the Office of Foreign Assets Control of
the United States Department of the Treasury and to the Bureau of Export
Administration of the United States Department of Commerce. Should either of the
agencies determine that these activities constituted violations of the laws or
regulations administered by them, civil and/or criminal penalties, including
fines, could be assessed against the Company and/or certain individuals who
knowingly participated in such activities. The Company cannot predict whether
any such penalties will be imposed or the nature or extent of any such
penalties.
In J. Erik Hvide and Betsy Hvide v. Hvide Marine Incorporated, No.
00-5640-02, a civil action filed in March 2000 in the Circuit Court of Broward
County, Florida, the Company's former chief executive officer and his wife
allege that the Company breached an agreement to provide Mr. Hvide with
severance benefits valued at approximately $1.0 million. Mr. Hvide seeks
compensatory and consequential damages exceeding $4.0 million. Mr. Hvide further
alleges that the Company fraudulently induced him to enter into the agreement by
making false representations concerning its intention to provide him with
benefits. In connection with his fraud claim, Mr. Hvide also seeks unspecified
punitive damages. The Company believes that it never reached any agreement with
Mr. Hvide concerning compensation relating to his severance, that it did not
make any false representations to Mr. Hvide, and that the suit has no merit. The
Company intends to vigorously defend the suit.
Equal Employment Opportunity Commission Notice of Charge of
Discrimination No. 150A024Q. On April 6, 2000, J. Erik Hvide, the Company's
former chief executive officer, filed a complaint with the Florida Commission of
Human Relations alleging that he was forced to resign from the Company because
he is disabled with post-polio syndrome. The complaint was transferred to the
Equal Employment Opportunity Commission on May 15, 2000, for administrative
reasons. The Company believes that Mr. Hvide was not forced to resign because of
his affliction with post-polio syndrome and that his claim has no merit. The
Company intends to vigorously defend the claim.
As anticipated in the Company's quarterly report for the three months
ended June 30, 2000, the parent of the holder of voting and disposition rights
with respect to approximately 60% of the Company's outstanding common stock was
acquired by a French company on October 30, 2000. Based upon information
received from the holder concerning the structure of the acquisition and the
holder and other matters, the Company believes that the acquisition did not
result in a transfer of the holder's voting and disposition rights to the French
company and thus did not affect the Company's coastwise eligibility or result in
a change of control under the debt instruments. The U.S. Coast Guard, which
enforces the laws establishing coastwise eligibility, has concurred with the
Company's view that the acquisition did not affect its coastwise eligibility.
From time to time the Company is also party to litigation arising in
the ordinary course of its business, most of which is covered by insurance.
12. Recent Accounting Pronouncements
In December 1999, the SEC issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes
the requirements that must be met in order to recognize revenue and provides
guidance for disclosure of revenue recognition policies. In June 2000, the SEC
issued SAB No. 101B which delays the implementation date of SAB 101 until no
later than the fourth quarter of fiscal 2000. The Company has assessed the
provisions of SAB 101 and does not expect the adoption of SAB 101 to have a
material effect on its financial position or results of operations.
13. Subsequent Events
The Company has placed a deposit of $0.2 million with Crewboats, Inc.
to purchase two crew boats for an aggregate cost of $5.0 million. These vessels
were built in 1994 and 1996. The Company expects to take delivery of one vessel
in December 2000 and the second vessel in May 2001.
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 1999 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 1999 Form 10-K.
<PAGE>
Revenue Overview
The Company derives its revenue from two main activities, marine
support services and marine transportation services. Marine support services
consist of (1) Seabulk Offshore, the Company's domestic and international
offshore energy support business, and (2) Hvide Marine Towing, the Company's
domestic harbor towing business. Marine transportation services consist of (1)
the Company's Jones Act tanker business, in which it operates ten petroleum
product and chemical carriers in the coastwise trade, and (2) its inland tug and
barge operation and shipyard, Sun State Marine Services. Marine support services
contributed approximately 58% of the Company's revenues in the quarter, with the
balance of 42% coming from marine transportation services.
Marine Support Services
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. Revenue
from this activity represented approximately 10% of the Company's total revenues
in the third quarter of 2000 and was down slightly from the second quarter. Four
of the Company's towing vessels were sold in the third quarter, the proceeds
from which were used to pay down debt, leaving the Company with a total of 33
tugs.
Offshore Energy Support. Revenue from the Company's offshore energy
support business is primarily a function of the size of the Company's fleet,
vessel day 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 and natural gas.
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. Revenue derived from the
Company's offshore energy support business represented approximately 48% of the
Company's total revenues in the current quarter.
The following table sets forth average day rates achieved by the
offshore supply boats and crew boats owned and operated by the Company in the
U.S. Gulf of Mexico and their average utilization for the periods indicated.
<PAGE>
<TABLE>
<CAPTION>
1999 2000
------------------------------------------- -------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of supply boats at end of period 21 21 21 21 21 23 23
Average supply boat day rates(1) ..... $4,530 $4,049 $3,596 $3,379 $3,740 $3,895 $4,872
Average supply boat utilization(2).... 70% 69% 75% 73% 71% 63% 63%
Number of crew boats at end of period(3) 33 33 33 33 33 32 30
Average crew boat day rates(1)(3)..... $2,097 $1,864 $1,754 $1,827 $1,850 $1,926 $2,114
Average crew boat utilization(2)(3)... 69% 72% 75% 87% 78% 77% 87%
</TABLE>
----------------------------
(1) Average day rates are calculated based on vessels operating domestically by
dividing total vessel revenue by the total number of days of vessel
utilization.
(2) Utilization is based on vessels operating domestically and determined on
the basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue. Laid up and stacked vessels are included in the
total vessel count.
(3) Excludes utility boats.
As indicated in the above table, supply boat average day rates declined
during 1999 but steadily improved during the first nine months of 2000 due to
higher oil and gas prices and a resulting increase in offshore exploration and
production activities. Day rates rose 25% in the third quarter, while
utilization has decreased from 1999 but remained steady at 63% from the second
quarter of 2000. At October 31, 2000, supply boat day rates averaged
approximately $5,900, reflecting both increased exploration and production
activities and a tightening of the supply of available vessels.
Crew boat day rates, which declined during 1999, have also rebounded in
the first nine months of 2000. Average day rates increased 10% in the third
quarter, while utilization improved to 87%. The number of Company vessels
declined by two during the quarter as one was sold and the second transferred to
the international market. At October 31, 2000, crew boat day rates averaged
approximately $2,400.
The following table shows average rate and average utilization
information for foreign operations:
<TABLE>
<CAPTION>
1999 2000
------------------------------------------- -------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of anchor handling tug/supply boats........ 67 69 67 67 67 67 66
Average anchor handling tug/supply boat day rates(1) $4,817 $5,433 $4,662 $4,803 $4,290 $4,471 $4,867
Average anchor handling tug/supply boat .......... 61% 49% 49% 47% 56% 63% 58%
utilization(2)....................................
Number of crew/utility boats...................... 38 39 39 39 39 39 35
Average crew/utility boat day rates(1)............ $1,543 $1,559 $1,629 $1,749 $1,551 $1,618 $1,773
Average crew/utility boat utilization(2).......... 65% 48% 47% 52% 40% 41% 39%
</TABLE>
-------------------------------
(1) Average day rates are calculated based on vessels operating internationally
by dividing total vessel revenue by the total number of days of vessel
utilization.
(2) 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. Laid up and stacked vessels are included in the
total vessel count.
As indicated in the above table, foreign anchor handling tug/supply
boat average day rates fluctuated during 1999 but have increased steadily in
2000 after touching bottom in the first quarter. The increase was led by
improved performance in the West African and, to a lesser extent, the Far East
markets. Utilization declined to 58% in the third quarter due primarily to the
impact of the monsoon season on the Company's operations off the Indian
subcontinent. At October 31, 2000, day rates for foreign anchor handling
tug/supply boats averaged approximately $4,800.
Foreign crew/utility boat average day rates also touched bottom in the
first quarter of 2000 and have since improved in line with the overall market.
Continued low utilization since the first quarter of 2000 reflects political and
civil unrest in parts of Africa and, particularly in the third quarter, the
impact of the monsoon season in the Middle East. Five of the Company's
crew/utility vessels were sold during the quarter and one vessel was
repositioned to the foreign operations from the U.S. Gulf of Mexico. At October
31, 2000, day rates for foreign crew/utility boats averaged approximately
$1,800.
<PAGE>
Marine Transportation Services
Revenue from the Company's Jones Act tanker fleet is dependent on the
overall level of economic activity and the supply of available vessels, which is
shrinking under the phaseout schedule for single-hulls imposed by the Oil
Pollution Act of 1990, or OPA 90. As the supply of available vessels declines,
charter rates tend to increase. At September 30, 2000 and 1999, the Company
owned and operated 10 and 13 tankers, respectively. The Company retired two
tankers in the fourth quarter of 1999 and one additional tanker in the third
quarter of 2000, pursuant to OPA-90 mandated retirement dates. Revenue from this
sector of the Company's business was essentially unchanged in the third quarter
of 2000 from the previous quarter despite the OPA 90-mandated retirement of one
of the Company's Jones Act tankers.
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, repairs and maintenance, fuel, and insurance. For
general information concerning these categories of operating expenses as well as
capital expenditures, see the corresponding section in the 1999 Form 10-K.
Results of Operations
Upon the Effective Date of its Chapter 11 reorganization, the Company
adopted fresh start accounting in accordance with SOP 90-7. See Note 1 to the
condensed consolidated financial statements. Thus, the Company's balance sheets
and statements of operations and cash flows after the Effective Date reflect a
new reporting Company and are not comparable to periods prior to the Effective
Date.
The three and nine months ended September 30, 1999 and 2000 include the
results of the Predecessor Company (through December 15, 1999) and the Successor
Company (subsequent to December 15, 1999). The principal difference between
these periods relate to reporting changes regarding the Company's capital
structure, changes in indebtedness and the revaluation of the Company's
long-term assets to reflect reorganization value at the Effective Date. These
changes primarily affect depreciation, amortization and drydocking expense, and
interest expense in the Company's results of operations.
The following table sets forth certain selected financial data and
percentages of net revenue for the periods indicated:
<TABLE>
<CAPTION>
Three Months ended September 30, Nine Months ended September 30,
--------------------------------------------- ----------------------------------------------
1999 2000 1999 2000
-------------------- -------------------- -------------------- -------------------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... $ 86.0 100% $ 81.6 100% $ 265.4 100% $ 240.4 100%
Operating expenses.......... 57.1 66 50.9 62 168.4 63 157.7 66
Overhead expenses........... 9.9 12 9.2 11 32.1 12 28.9 12
Depreciation, amortization
and drydocking expense.... 20.8 24 12.2 15 62.5 24 36.6 15
---------- --- ------- ------- -------- ------- ---------- -----
Income (loss) from operations $ (1.8) (2)% $ 9.3 11% $ 2.3 1% $ 17.3 7%
=========== ===== ========== ======== ========== ======== ========== ======
Interest expense, net....... $ 21.0 24% $ 15.8 19% $ 58.1 22% $ 46.2 19%
========== ====== ========== ======== ========== ======== ========== =====
Net loss................... $ (20.1) (23)% $ (3.1) (4)% $ (52.9) 20% $ (19.3) (8)%
========== ====== ========== ======== ========== ======== ========== =====
</TABLE>
<PAGE>
Three months ended September 30, 2000 compared with the three months ended
September 30, 1999
Revenues. Revenues decreased 5% to $81.6 million for the three months
ended September 30, 2000 from $85.9 million for the three months ended September
30, 1999. The decrease is primarily due to lower revenue from the Company's
harbor towing and marine transportation services operations.
Harbor towing revenue decreased 26% to $8.0 million for the three
months ended September 30, 2000 from $10.8 million for the three months ended
September 30, 1999, primarily due to vessel sales and increased competition in
the Port of Tampa as well as decreased activity in some of the other remaining
ports in which the Company operates.
Marine transportation revenue decreased 20% to $34.6 million for the
three months ended September 30, 2000 from $43.0 million for the three months
ended September 30, 1999, primarily due to the mandated retirement of three of
the Company's Jones Act tankers and the effect of converting two spot charters
to time charter contracts.
Revenues from offshore energy operations increased 21% to $39.1 million
for the three months ended September 30, 2000 from $32.2 million in the 1999
period, primarily due to increased day rates resulting from the increase in
offshore exploration and production activity. Average domestic day rates for
supply boats increased 35% to $4,872 for the 2000 period from $3,596 for the
1999 period, while average domestic day rates for crew boats increased 21% to
$2,114 for the 2000 period from $1,754 for the 1999 period. Average
international day rates for anchor handling tug/supply boats increased 4% to
$4,867 for the 2000 period from $4,662 for the 1999 period, while average
international day rates for crew/utility boats increased 9% to $1,773 for the
2000 period from $1,629 for the 1999 period.
Operating Expenses. Operating expenses decreased 11% to $50.9 million
for the three months ended September 30, 2000 from $57.1 million in the 1999
period, primarily due to decreases in charter hire expense, insurance and other
expenses. As a percentage of revenue, operating expenses decreased to 62% for
the three months ended September 30, 2000 from 66% for the 1999 period,
primarily due to a reduction in the Company's marine transportation services
fleet and increased time chartering.
Overhead Expenses. Overhead expenses decreased 7% to $9.2 million for
the three months ended September 30, 2000 from $9.9 million for the three months
ended September 30, 1999, primarily due to the non-recurrence of professional
fees related to the company's bankruptcy filing. As a percentage of revenue,
overhead expenses decreased to 11% for the three months ended September 30, 2000
from 12% for the 1999 period.
Depreciation, Amortization and Drydocking Expense. Depreciation,
amortization and drydocking expense decreased 42% to $12.2 million for the three
months ended September 30, 2000 from $20.8 million for the three months ended
September 30, 1999, primarily due to the write-down in the value of property and
the write-off of goodwill as a result of the reorganization.
Income (Loss) from Operations. Income from operations totaled $9.3
million, or 11% of revenue, for the three months ended September 30, 2000
compared to a loss of $1.8 million for the three months ended September 30,
1999, primarily as a result of the factors noted above.
Net Interest Expense. Net interest expense decreased 25% to $15.8
million, or 19% of revenue, for the three months ended September 30, 2000 from
$21.0 million for the three months ended September 30, 1999, primarily due to
the reorganization and conversion of the Predecessor Company's senior notes and
preferred securities to shares of the Successor Company's common stock.
Other Income (Expense). Other income totaled $4.4 million for the three
months ended September 30, 2000 compared to other expense of $9.8 million in the
1999 period, primarily due to reorganization expenses recorded in the 1999
period and a gain on vessel sales in the 2000 period compared to a loss on
vessel sales in the 1999 period.
Provision for (Benefit) from Income Taxes. The provision for income tax
expense was $1.1 million for the three months ended September 30, 2000 compared
to a benefit of $12.5 million for the three months ended September 30, 1999,
primarily due to the valuation allowance recorded against net deferred tax
assets generated in the three month period ended September 30, 2000.
Net Income (Loss). The Company had a net loss of $3.1 million for the
three months ended September 30, 2000 compared to a net loss of $20.1 million
for the three months ended September 30, 1999, primarily as a result of the
factors noted above.
Nine months ended September 30, 2000 compared with the nine months ended
September 30, 1999
Revenues. Revenues decreased 9% to $240.4 million for the nine months
ended September 30, 2000 from $265.4 million for the nine months ended September
30, 1999, due to lower revenue from all three operating segments.
Harbor towing revenue decreased 25% to $25.0 million for the nine
months ended September 30, 2000 from $33.2 million for the nine months ended
September 30, 1999, due to vessel sales, reduced harbor towing activity and
increased competition in the Port of Tampa.
Marine transportation revenue decreased 9% to $104.6 million for the
nine months ended September 30, 2000 from $115.2 million for the nine months
ended September 30, 1999. The overall decrease is primarily a result of the
mandated retirement of three of the Company's Jones Act tankers, planned
drydockings, and conversion of two spot charters to time charter contracts
partially offset by an increase due to the addition of two new double hull
tankers to the Company's fleet.
Revenue from offshore energy operations decreased 5% to $110.8 million
for the nine months ended September 30, 2000 from $117.0 million for the nine
months ended September 30, 1999, primarily due to lower utilization and day
rates during the first six months of 2000.
Operating Expenses. Operating expenses decreased 6% to $157.7 million
for the nine months ended September 30, 2000 from $168.4 million in the 1999
period, primarily due to decreases in crew payroll and benefits, rent and
utilities and lower fuel and port charges as a result of the conversion of two
spot charters to time charter contracts.
Overhead Expenses. Overhead expenses decreased 10% to $28.9 million for
the nine months ended September 30, 2000 from $32.1 million for the nine months
ended September 30, 1999, primarily due to a reduction in professional fees
related to the company's bankruptcy filing. As a percentage of revenue, overhead
expenses were 12% for the two nine-month periods ended September 30, 2000 and
1999, respectively.
Depreciation, Amortization and Drydocking Expense. Depreciation,
amortization and drydocking expense decreased 41% to $36.6 million for the nine
months ended September 30, 2000 from $62.5 million for the nine months ended
September 30, 1999, primarily due to the write-down in the value of property and
the write-off of goodwill as a result of the reorganization.
Income (Loss) from Operations. Income from operations totaled $17.3
million for the nine months ended September 30, 2000, or 7% of revenue, compared
to $2.3 million for the nine months ended September 30, 1999, primarily as a
result of the factors noted above.
Net Interest Expense. Net interest expense decreased 20% to $46.2
million, or 19% of revenue, for the nine months ended September 30, 2000 from
$58.1 million for the nine months ended September 30, 1999, primarily due to the
reorganization and conversion of the Predecessor Company's senior notes and
preferred securities to shares of the Successor Company's common stock.
Other Income (Expense). Other income totaled $12.8 million for the nine
months ended September 30, 2000 compared to other expense of $26.8 million for
the nine months ended September 30, 1999, primarily due to reorganization
expenses recorded in the 1999 period and a gain on vessel sales in the 2000
period compared to a loss on vessel sales in the 1999 period.
Provision for (Benefit) from Income Taxes. The provision for income tax
expense was $3.2 million for the nine months ended September 30, 2000 compared
to a benefit of $29.8 million for the nine months ended September 30, 1999,
primarily due to the valuation allowance, recorded against net deferred tax
assets generated in the nine month period ended September 30, 2000.
Net Income (Loss). The Company had a net loss of $19.3 million for the
nine months ended September 30, 2000 compared to a net loss of $52.9 million for
the nine months ended September 30, 1999, primarily as a result of the factors
noted above.
Liquidity and Capital Resources
Background. The Company's capital requirements arise primarily from its
need to service debt, fund working capital, and maintain and improve its
vessels. Historically, the Company's principal sources of cash have been equity
and debt financing and cash provided by operations. As a result of the declines
in rates and utilization of its offshore energy support vessels that led to its
Chapter 11 reorganization, operating income was substantially reduced in 1999
and the first nine months of 2000 as compared to previous years, reducing the
availability of cash from operations to fund the Company's capital requirements.
For the fourth quarter of 2000, the Company's principal and interest
payment obligation is estimated to be approximately $31.6 million and its
operating lease obligation is approximately $0.6 million. Capital requirements
for fleet maintenance and improvements are currently expected to aggregate $5.5
million during the remainder of 2000.
For the nine months ended September 30, 2000, the company incurred
$19.7 million on capital and life extension improvements including drydock
expenditures for 30 vessels. For the three months ended September 30, 2000, the
company incurred $7.4 million on capital and life extension improvements
including drydock expenditures for 10 vessels.
The above amounts do not include capital and other expenditures
relating to the five Lightship Tankers in which the Company currently holds a
75.8% equity interest. During the remainder of 2000, an estimated $9.7 million
of principal and interest payments are due on the Title XI ship financing bonds
for these vessels.
The Company has an exclusive option through December 31, 2000, to
purchase the remaining 24.25% interest in the five Lightship Tankers held by
Newport News Shipbuilding for $11.0 million. The Company plans to exercise this
option and is evaluating various financing alternatives. The Company's Credit
Facility allows for the incurrence of additional indebtedness to exercise this
option.
During the first nine months of 2000, the Company generated $7.1
million of cash from operations primarily reflecting the net loss for the
period, adjusted for noncash items. Cash provided by investing activities was
approximately $15.5 million for the period, primarily reflecting the proceeds
from the sale of vessels. Cash used in financing activities was approximately
$21.4 million consisting primarily of repayments of borrowings, offset by
proceeds from the revolving credit facility.
The Reorganization. The Company's reorganization plan became effective
on December 15, 1999. The details of the plan are reported in the 1999 Form
10-K.
In connection with the restructuring, 10,000,000 shares of common stock
were issued. The 9,800,000 shares received by the holders of the Predecessor
Company's senior notes represent 96.9% of the Company's currently outstanding
common stock and 89.3% of its common stock, assuming exercise of all outstanding
warrants. The 200,000 shares received by holders of the Predecessor Company's
trust preferred securities represent 2.0% of the Company's currently outstanding
common stock and 1.8% of its common stock, assuming exercise of the warrants.
The Company also obtained new credit facilities from a group of
financial institutions. The new facilities, totaling $320.0 million, consist of
$200.0 million in term loans, a $25.0 million revolving credit facility, and
$95.0 million in aggregate principal amount at maturity of 12 1/2% senior
secured notes due 2007. A portion of the proceeds from these facilities was used
to repay all outstanding borrowings under the Predecessor Company's bank loans
and to pay administrative and other fees and expenses. The balance of the
proceeds is being used for working capital and general corporate purposes.
The terms of the term loans and revolving credit facility are contained
in a credit agreement between the Company and the financial institutions. The
credit agreement provides for the following facilities:
Interest Rate as of
Facility. Amount Maturity October 1, 2000
-------- ------ -------- ---------------
o Tranche A term loan $75 million 2004 9.89%
o Tranche B term loan $30 million 2005 10.39%
o Tranche C term loan $95 million 2006 10.89%
o Revolving credit facility $25 million 2004 9.89%
The interest rate for borrowings under the credit agreement is set from
time to time at the Company's option, subject to certain conditions set forth in
the credit agreement, at either:
o the higher of the rate that the administrative agent announces
from time to time as its prime lending rate and 1/2 of 1% in
excess of the overnight federal funds rate, plus a margin ranging
from 2.25% to 4.25% or
o a rate based on a percentage of the administrative agent's
quotation to first-class banks in the New York interbank
Eurodollar market for dollar deposits, plus a margin ranging from
3.25% to 4.25%.
Borrowings under the credit agreement are secured by first priority
perfected security interests in equity of certain of the Company's subsidiaries
and by first priority perfected security interests in certain of the vessels and
other assets owned by the Company and its subsidiaries. In addition, certain of
the Company's subsidiaries have guaranteed its obligations under the credit
agreement. The credit agreement contains customary covenants that require the
Company, among other things, to meet certain financial ratios and that prohibit
it from taking certain actions and entering into certain transactions.
At September 30, 2000, approximately $6.2 million was outstanding under
the revolving credit facility. During the three months ended September 30, 2000,
the Company made the following principal payments under the term loans: Tranche
A, $1.1 million, Tranche B, $0.1 million and Tranche C, $0.2 million.
The senior secured notes are senior obligations and are secured by a
second priority lien on the same assets that secure borrowings under the credit
agreement. The notes are unconditionally guaranteed by all of the Company's
subsidiaries that have guaranteed borrowings under the credit agreement. The
notes were issued at 90.0% of their face value, for gross proceeds of $85.5
million. The notes were issued under an indenture among the Company, the
subsidiary guarantors and financial institutions serving as trustee and
collateral agent. The indenture contains customary covenants that, among other
things, restrict the Company's ability to incur additional debt, sell assets,
and engage in mergers and transactions with affiliates. As consideration for the
purchase of the notes and as compensation for certain financial services, the
Company issued to the purchasers of the notes noteholder warrants to purchase
6.75% of the Company's common stock on a fully diluted basis after giving effect
to the exercise of these warrants at an exercise price of $.01 per share for a
term of seven and one-half years.
Recent Developments. The senior secured notes did not receive the
rating from the rating agencies required under the note indenture, to have been
received by April 15, 2000. As a result, the interest rate for the notes
increased from 12 1/2% to 13 1/2% effective December 15, 1999. The indenture
requires that such additional interest be paid in the form of additional notes,
of which notes in aggregate principal amount of $514,517 and $238,786 were
issued on June 30, 2000, and September 30, 2000, respectively. The Company is
currently seeking the required ratings that would return the interest rate to 12
1/2%.
Additionally, the Company is required to obtain the consent of the
lending banks to borrow in excess of $17.5 million under the revolving credit
portion of the credit facility. In connection with the April 2000 amendment of
the credit agreement, the Company paid a fee of $4.5 million to the lending
banks in the form of a promissory note, accruing interest at 15% per annum, due
the earlier of (i) April 2002 or (ii) the date on which the ratio of funded
indebtedness to EBITDA for any quarter is less than four to one.
During the second quarter the Company entered into an amendment of the
credit agreement that required it to repay $60.0 million of the term loans prior
to January 1, 2001. On August 30, 2000, the Company entered into a further
amendment to the credit agreement that reduced this obligation to $40.0 million.
The amendment also expanded the Company's flexibility in determining which
assets to sell to obtain the funds to make the prepayments. As of October 23,
2000, the Company had satisfied $27.2 million of the prepayment obligation
through application of $22.7 million proceeds of vessel sales and $4.5 million
of regular quarterly principal payments. The Company may be selling additional
vessels and other assets to obtain the funds, to the extent not generated by
operations, with which to make the remaining prepayments. Some of these sales
may be at less than book value.
The Company has placed a deposit of $0.2 million with Crewboats, Inc.
to purchase two crew boats for an aggregate cost of $5.0 million. These vessels
were built in 1994 and 1996. The Company expects to take delivery of one vessel
in December 2000 and the second vessel in May 2001.
The Company believes that operating cash flow amounts available under
its revolving credit facility and anticipated proceeds from the sale of vessels
will be sufficient to meet its debt service obligations, apart from the term
loan payment obligation described above, and other capital requirements through
2000. While it is uncertain whether proceeds from the sale of assets will be
sufficient to enable it to satisfy the remaining term loan repayment obligation
as currently scheduled, the Company has the ability to use the revolving credit
facility to satisfy this obligation, and currently has sufficient availability
to do so. As the Company's operating cash flow is dependent on factors beyond
the Company's control, however, including general economic conditions and
conditions in the markets the Company serves, there can be no assurance that
actual operating cash flow will meet expectations.
Recent Developments
As anticipated in the Company's quarterly report for the three months
ended June 30, 2000, the parent of the holder of voting and disposition rights
with respect to approximately 60% of the Company's outstanding common stock was
acquired by a French company on October 30, 2000. Based upon information
received from the holder concerning the structure of the acquisition and the
holder and other matters, the Company believes that the acquisition did not
result in a transfer of the holder's voting and disposition rights to the French
company and thus did not affect the Company's coastwise eligibility or result in
a change of control under the debt instruments. The U.S. Coast Guard, which
enforces the laws establishing coastwise eligibility, has concurred with the
Company's view that the acquisition did not affect its coastwise eligibility.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning certain legal proceedings see Note 11 of the
financial statements.
Item 2. Changes in Securities and Use of Proceeds
During the third quarter of 2000, the Company completed the grant of
27,800 shares of restricted common stock to certain employees of the Company in
a transaction not involving a sale. If the transaction were deemed to involve a
sale of securities, it would have been exempt from registration under the
Securities Act of 1933, as amended under section 4(2) of the Act because it did
not involve a public offering.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K.
10.1 Second Amendment, dated as of June 29, 2000, among Hvide Marine
Incorporated, the financial institutions party to the Credit
Agreement and Bankers Trust Company, as administrative agent.
10.2 Third Amendment, dated as of August 30, 2000 among Hvide Marine
Incorporated, the financial institutions party to the Credit
Agreement and Bankers Trust Company, as administrative agent.
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: November 14, 2000
