SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File Number 0-28732
HVIDE MARINE INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 65-0966399
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2200 Eller Drive, P.O. Box 13038
Ft. Lauderdale, Florida 33316
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 523-2200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A Common
Stock, $.01 par value
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 12 months and (2) has been subject to such filing
requirements for the past 90 days. YES X NO __
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant at March 29, 2000 (based on the closing price
of such stock on the Over-the-Counter Bulletin Board) was $122,500,000.
At March 29, 2000, there were 10,000,000 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
Proxy Statement for Annual Meeting
to be held June 15, 2000 (specified portions) Part III
<PAGE>
HVIDE MARINE INCORPORATED
1999 FORM 10-K
Table of Contents
<TABLE>
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Item Page
Part I
<S> <C> <C>
1 Business........................................................................................... 3
2 Properties......................................................................................... 17
3 Legal Proceedings.................................................................................. 17
4 Submission of Matters to a Vote of Security Holders................................................ 18
4A Executive Officers of the Registrant............................................................... 18
Part II
5 Market for Registrant's Common Equity and Related Stockholder Matters.............................. 21
6 Selected Financial Data............................................................................ 22
7 Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................................... 23
7A Quantitative and Qualitative Disclosures About Market Risk......................................... 36
8 Financial Statements and Supplementary Data........................................................ 36
9 Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure......................................................................................... 37
Part III
10 Directors and Executive Officers of the Registrant................................................. 38
11 Executive Compensation............................................................................. 38
12 Security Ownership of Certain Beneficial Owners and Management..................................... 38
13 Certain Relationships and Related Transactions..................................................... 38
Part IV
14 Exhibits, Financial Statement Schedules, and Reports on Form 8-K................................... 39
</TABLE>
<PAGE>
PART I
Item 1. Business
General
We provide marine support and transportation services domestically and
internationally, primarily serving the energy and chemical industries. We have
been an active consolidator in each of the markets in which we operate,
increasing our fleet from 23 vessels in 1993 to 274 vessels at year-end 1999.
Our three principal markets are domestic and international offshore energy
support services, domestic offshore and harbor towing services, and
transportation of specialty chemicals and petroleum products in the U.S.
domestic trade. Our offshore energy support fleet provides services to operators
of offshore oil and gas exploration, development and production facilities in
the Gulf of Mexico, the Arabian Gulf, offshore West Africa and Southeast Asia.
We are the sole provider of commercial tug services at Port Everglades and Port
Canaveral, Florida and a leading provider of those services in Tampa, Florida,
Mobile, Alabama, Lake Charles, Louisiana, and Port Arthur, Texas. Our domestic
transportation fleet includes five new double-hull chemical and petroleum
product carriers delivered in 1998 and 1999.
From September 9 to December 15, 1999 we operated under the protection
of the reorganization provisions of chapter 11 of the U.S. Bankruptcy Code. For
more information about recent developments in our business, see "--Our Recent
Reorganization." As used in this Report, the terms "we," "the Company" and "the
Successor Company" refer to Hvide Marine Incorporated, a Delaware corporation,
and its pre-reorganization predecessor (the "Predecessor Company"), a Florida
corporation of the same name, and their subsidiaries. Our principal executive
offices are located at 2200 Eller Drive, P.O. Box 13038, Fort Lauderdale,
Florida 33316, and our telephone number is (954) 523-2200.
Projections and Other Forward-Looking Information
This Report contains, and other communications by us may contain,
projections or other "forward-looking" information. Forward-looking information
includes all statements regarding our expected financial position, results of
operations, cash flows, financing plans, business strategy, budgets, capital and
other expenditures, competitive position, growth opportunities for existing or
new services, management plans and objectives, and markets for securities. Like
any other business, we are subject to risks and other uncertainties that could
cause our actual results to differ materially from any projections or that could
cause other forward-looking information to prove incorrect. In addition to
general economic and business risks, some of the specific risks to which our
business is subject are:
o declines in oil or gas prices, which tend to cause reductions in
exploration, development and production activities and, in turn, reductions
in the use of offshore energy support vessels and in the rates paid for
their use;
o increased construction of new offshore energy support vessels, which can
cause oversupply in the market and consequent reductions in the use of our
offshore energy support vessels and rates paid for their use;
o international political instability, which can lead to reductions in
exploration, development and production activities, particularly in less
developed regions;
o fluctuations in weather, which can lead to declines in energy consumption
and resulting declines in oil or gas prices;
o changes in laws and regulations affecting the marine transportation
industry, including any possible weakening of the Jones Act, which could
result in increased competition from non-U.S. companies in our domestic
offshore energy support, towing and petroleum product transportation
businesses; and
o changes in environmental laws and regulations, including any possible
weakening of the U.S. Oil Pollution Act of 1990 ("OPA 90"), which could
result in increased competition for the petroleum product transportation
services provided by our modern double-hull fleet.
Additional information regarding these and other factors affecting our
business appears elsewhere in this Report.
Our Recent Reorganization
The events leading to the reorganization. Between 1997 and early 1998,
we completed a number of acquisitions and built new vessels that substantially
expanded our offshore energy support operations into several new international
markets, increased the deepwater capability of our offshore energy support
fleet, and expanded our domestic harbor and offshore towing and petroleum
product transportation operations. Our principal sources of cash to finance
these acquisitions and vessel construction contracts were bank borrowings, cash
provided by operations, Title XI debt, proceeds from two public offerings of
common stock, proceeds from an offering of $119.0 million of trust preferred
securities and proceeds from an offering of $300.0 million principal amount of
senior notes. The significant increase in our indebtedness incurred to finance
these acquisitions and newbuilds placed great demands on our capital resources
beginning in mid-1998, when market forces brought about a precipitous decline in
our revenues.
The revenues of our offshore energy support fleet are dependent upon
the level of offshore oil and gas exploration, development and production
activities, which are in turn heavily dependent upon the prevailing price of
crude oil and natural gas. Beginning in late 1997 and continuing through 1998,
crude oil prices declined substantially, which resulted in a severe downturn in
these offshore activities, and in turn, in the revenues of our offshore energy
support operations. As a result of this decline in revenues, we experienced a
liquidity crisis beginning at the end of September 1998, and were unable to
comply with some of the financial covenants in our bank loan agreement. Although
the lending banks agreed to modifications of these covenants, the continuing
decline in our revenues caused us to be unable to comply with the modified
financial covenants at the end of the first quarter of 1999.
Our lending banks agreed to further waivers of our noncompliance with
covenants, which were accompanied by substantial fees and increases in interest
rates. Despite these waivers, adoption of a cash management program and
reduction in operating and overhead expenses during 1999, we were unable to make
a $12.5 million interest payment due on August 16, 1999 on our senior notes.
Discussions with an informal committee of holders of the senior notes and the
trust preferred securities led to our filing of a petition under Chapter 11 of
the U.S. Bankruptcy Code on September 8, 1999.
The reorganization. Under our reorganization plan, which became
effective on December 15, 1999:
o the holders of the $300.0 million of senior notes received 9,800,000 shares
of our common stock (representing 98.0% of our currently outstanding common
stock) in exchange for their notes;
o the holders of the $115.0 million of trust preferred securities received
200,000 shares of our common stock (representing 2.0% of our outstanding
common stock), as well as Class A Warrants to purchase an additional
125,000 shares at $38.49 per share, in exchange for those securities;
o our former stockholders received Class A Warrants to purchase a total of
125,000 shares of our common stock;
o claims of general and trade creditors were unaffected; and
o we reincorporated from Florida to Delaware.
We 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 new 12 1/2% senior secured
notes due 2007. As consideration for the purchase of the senior secured notes
and as compensation for certain financial services, we issued to the purchasers
of the notes and to the investment advisors Noteholder Warrants to purchase
723,861 shares of our common stock at an exercise price of $.01 per share.
Substantially all of the proceeds from these facilities were used to repay all
outstanding borrowings under our prior bank loans and to pay administrative and
other fees and expenses. The balance of the proceeds and the $25 million
revolving credit facility is available to be used for working capital and
general corporate purposes.
The Reorganized Company. Although our reorganization significantly
reduced our debt, we still have substantial debt and debt service requirements,
in absolute terms and in relation to stockholders' equity. Our ability to meet
our debt service obligations will depend on a number of factors, including our
ability to maintain operating cash flow, which in turn will depend in large part
upon improvement in the industry conditions that led to our reorganization.
Those conditions have not yet improved significantly, and, despite recent
increases in oil and gas prices, are not expected to improve unless the
increases are sufficiently sustained to lead to upturns in exploration,
development and production activities.
In addition, as a result of our need to reduce capital expenditures, we
have deferred required drydockings of a number of our offshore energy support
vessels that are laid up due to lack of demand. We have also deferred certain
non-essential vessel maintenance. If and when industry conditions improve, we
might not have the capital resources with which to proceed with the required
drydockings and maintenance or to proceed with them on as timely a basis as our
competitors. Also, as a result of our need to conserve capital, during 1999 we
sold some of our newest offshore energy support vessels, including some still
under construction, and cancelled the construction of others, which may
adversely affect our ability to compete with operators having more modern fleets
than ours.
Recent Developments
Due to continuing weakness in day rates and utilization in the offshore
energy support business, as well as adverse market conditions in our towing and
transportation businesses, we anticipate that earnings will be lower than
expected in the first quarter of 2000. As a result, we anticipated that we would
not be in compliance with certain covenants in our bank credit agreement as of
March 31, 2000 as well as future dates if market conditions did not improve. We
have entered into an amendment to the credit agreement with our lending banks
under which the relevant covenants have been modified through March 31, 2001 and
we are required to prepay principal under the term loans aggregating $10.0
million before June 30, 2000, $35 million before August 31, 2000, and $60
million before January 1, 2001. We intend to sell vessels and other assets to
obtain the funds with which to make these payments. Some of these sales may be
at less than book value. The amended credit agreement further provides that, in
the event the we have not made the required principal payments as scheduled or
achieved certain target levels of EBITDA for the third and fourth quarters of
2000, the lending banks may require us to sell additional vessels, to be
selected by the lending banks, with an aggregate fair market value of $35
million on a timetable specified by the lending banks. Additionally, we are
required to obtain the consent of the lending banks to borrow in excess of $17.5
million under the revolving loan portion of the credit facility. We are required
to pay a fee of $4.5 million to the lending banks in connection with the
amendment of the credit agreement., payable 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 our funded indebtedness to EBITDA for any quarter
is less than four to one.
Fleet Overview
The following table lists the types of vessels we owned or operated as
of March 15, 2000:
Vessels
in Fleet
-------------
Marine Support Services
Domestic Offshore Energy Support:
Supply Boats................................................ 25
Crew/Utility Boats........................................ 39
Geophysical Boats......................................... 3
---
Total Domestic Offshore Energy Support............... 67
International Offshore Energy Support: 40
Anchor Handling Tugs...................................... 30
Supply Boats.............................................. 17
Crew/Utility Boats........................................ 35
Specialty Units........................................... 11
----
Total International Offshore Energy Support.......... 133
Offshore and Harbor Towing Tugs.............................. 37
----
Total Marine Support Services........................ 237
----
Marine Transportation Services
Fuel Barges.................................................. 17
Towboats..................................................... 9
----
Total Marine Transportation Services................. 37
----
Total Vessels................................. 274
===
These include 265 vessels that we own and operate, seven vessels that we own
that are operated by others, and two vessels owned by others but operated by us,
under various financing and operating arrangements.
For financial information about our business segments and geographic
areas of operation, see Note 19 to our financial statements.
Marine Support Services
Offshore Energy Support
Offshore energy support vessels are used primarily to transport
materials, supplies, equipment and personnel to drilling rigs and to support the
construction, positioning and ongoing operation of oil and gas production
platforms. Offshore energy support vessels are hired, or "chartered," by oil
companies and others engaged in offshore exploration and production activities.
The market for these services is fundamentally driven by the offshore
exploration, development and production activities of oil and gas companies
worldwide. The level of these activities depends primarily on the capital
expenditures of oil and gas producers, which is largely a function of current
and anticipated oil and gas prices. Oil and gas prices are influenced by a
variety of factors, including worldwide demand, production levels, governmental
policies regarding exploration and development of reserves, and political
factors in producing countries.
Offshore energy support services are provided primarily by the
following types of vessels:
o Supply boats (also called workboats) are generally steel-hull vessels of at
least 150 feet in length. They serve exploration and production facilities
and support offshore construction and maintenance activities and are
differentiated from other vessel types by cargo flexibility and capacity.
In addition to transporting deck cargo, such as drill pipe and heavy
equipment, supply boats transport liquid mud, potable and drilling water,
diesel fuel, dry bulk cement, and dry bulk mud. With their relatively large
liquid mud and dry bulk cement capacity and large areas of open deck space,
they are generally in greater demand than other types of support vessels
for exploration and workover drilling activities.
o Crew boats (also called crew/supply boats) are faster and smaller than
supply boats and are used primarily to transport personnel and light cargo,
including food and supplies, to and among production platforms, rigs and
other offshore installations. They are chartered together with supply boats
to support drilling or construction operations or, separately, to serve the
various requirements of offshore production platforms. Crew boats are
typically constructed of aluminum and generally have longer useful lives
than steel-hull supply boats. Crew boats also provide a cost-effective
alternative to helicopter transportation services and can operate reliably
in all but the most severe weather conditions.
o Anchor handling vessels, which include anchor handling tug/supply boats and
some tugs, are more powerful than supply boats and are used to tow and
position drilling rigs, production facilities and construction barges. Some
are specially equipped to assist tankers while they are loading from
single-point buoy mooring systems, and some are used in place of supply
boats when not performing towing and positioning functions.
From 1989 until mid-1997, our offshore energy support operations were
conducted primarily in the U.S. Gulf of Mexico from facilities in Lafayette,
Louisiana. At that time, we began the substantial expansion of our international
offshore energy support fleet. In addition, in response to deteriorating market
conditions in the U.S. Gulf of Mexico in 1998, we redeployed some of our vessels
from the U.S. Gulf to international markets. Our current primary international
markets are the Arabian Gulf and adjacent areas, offshore West Africa, Southeast
Asia and Mexico. We also operate offshore energy support vessels in other
regions, including Europe and Central and South America. Operations in the
Arabian Gulf, Southeast Asia and adjacent areas are directed from facilities in
Dubai, United Arab Emirates; operations offshore West Africa and certain other
international areas are directed from facilities in Lausanne, Switzerland; and
operations in Mexico are directed from our Lafayette, Louisiana facilities. We
also have sales offices and/or maintenance and other facilities in many of the
countries where our vessels operate.
The following table shows the deployment of our offshore energy support
fleet at March 15, 2000.
Location Vessels
Arabian Gulf and adjacent areas 80
U.S. Gulf of Mexico 61
West Africa 30
Southeast Asia 17
Mexico 8
Other 4
The average age of our offshore energy support vessels, based on the
later of the date of construction or rebuilding, is approximately 18 years, and
approximately 31% of them are more than 20 years old. After a vessel has been in
service for approximately 30 years, the costs of repair, vessel certification
and maintenance may not be economically justifiable.
Harbor and Offshore Towing
Our harbor tugs serve six ports in Florida, Alabama, Texas and
Louisiana, where they assist petroleum product carriers, barges, other cargo
vessels and cruise ships in docking and undocking and in proceeding within the
port areas and harbors. We also operate seven tugs with offshore towing
capabilities that conduct a variety of offshore towing services in the Gulf of
Mexico and the Atlantic Ocean. Our tug fleet consists of 24 conventional tugs,
10 tractor tugs and three Ship Docking Modules(TM), known as SDMs(TM). SDMs(TM)
are innovative ship docking vessels, designed and patented by us, that are more
maneuverable, efficient and flexible, and require fewer crew members, than
conventional harbor tugs.
Harbor Tug Operations. In most U.S. ports, competition is unregulated.
However, a few ports grant non-exclusive franchises to harbor tug operators;
these include Port Canaveral and Port Everglades, Florida, where we are
currently the sole franchisee, and Tampa and Port Manatee (near Tampa), Florida
where we are currently a leading provider of commercial tug services. Rates are
unregulated in all ports, including the franchised ports, that we serve. Each
port is generally a distinct market for harbor tugs, even though harbor tugs can
be moved from port to port.
Port Everglades. Port Everglades has the second largest petroleum
non-refining storage and distribution center in the United States, providing
substantially all of the petroleum products for south Florida. Since 1958, when
our tug operations commenced, we have enjoyed a franchise as the sole provider
of docking services in the port. The franchise specifies, among other things,
that five tugs serve the port and that three be less than 90 feet in length,
because of the narrowness of slips in the port, and that tugs have firefighting
capability. The franchise is not exclusive, and a competing operator could be
granted an additional franchise. The current franchise expires in 2007, and
there can be no assurance that it will be renewed. At March 15, 2000, we
operated five tugs in Port Everglades and were the port's sole provider of
harbor towing services.
Tampa. We expanded our harbor towing services to Tampa through the
October 1997 acquisition of an established operator in the port. Tampa is the
tenth largest port in the continental United States in terms of tonnage. Because
the port is comprised of three "sub-ports" (including Port Manatee) and a
distant sea buoy, a greater number of tugs is required to be a competitive
operator in Tampa than in other ports of similar size. At March 15, 2000, we
operated 11 tugs, including six tractor tugs, in the port (including Port
Manatee). We were the principal harbor tug operator in the port until late
October 1999, when another company began operations in the port. The new
competitor includes two of our former executives involved in the management of
our Tampa operations, whom we believe violated legal obligations to us in
assisting the competitor. While we have instituted litigation against the two
executives, the new competitor has obtained some of our former market share and
has also instituted litigation against us under the antitrust laws.
Port Canaveral. In Port Canaveral, like Port Everglades, we have the
sole franchise to provide harbor docking services. In this port, the smallest of
the Company's harbor tug operations, we provide docking and undocking services
for commercial cargo vessels serving central Florida and for cruise ships
visiting the Disney World/Kennedy Space Center attractions. Our franchise is a
month-to-month arrangement and, there can be no assurance that we will be able
to retain our franchise in Port Canaveral. At March 15, 2000, we operated four
tugs in Port Canaveral and were the port's sole provider of harbor towing
services.
Mobile. At this port, we provide docking and undocking services
primarily to commercial cargo vessels, including vessels transporting coal and
other bulk exports. We believe that we provide from 40% to 50% of the harbor tug
business in this port, where we operated three tugs at March 15, 2000.
Port Arthur and Lake Charles. In March 1998 we acquired seven harbor
tugs. Currently, four of these tugs serve Port Arthur, Texas, two serve Lake
Charles, Louisiana, and one serves both harbors. Each of these ports has a
competing provider of harbor tug services.
Offshore Towing Operations. We operate seven tugs with offshore towing
capabilities that conduct a variety of offshore towing services in the U.S. Gulf
of Mexico, the Bay of Campeche in Mexico and the Atlantic Ocean. Demand for
towing services depends on vessel traffic, which is in turn generally dependent
on local and national economic conditions. OPA 90 and state legislation require
oil tankers to be escorted in and around certain ports located in Alaska and the
U.S. Pacific coast.
Marine Transportation Services
We provide marine transportation services, principally for specialty
chemicals and petroleum products, in the U.S. domestic, or "coastwise," trade, a
market largely insulated from international competition under the Jones Act.
Chemical Transportation. In the U.S. domestic chemical transportation
trade, vessels carry chemicals, primarily from chemical manufacturing plants and
storage tank facilities along the coast of the U.S. Gulf of Mexico to industrial
users in and around Atlantic and Pacific coast ports. The chemicals transported
consist primarily of caustic soda, alcohol, chlorinated solvents, paraxylene,
alkylates, toluene, methyl tertiary butyl ether (MTBE), phosphoric acid and
lubricating oils. Coastwise chemical tonnage demand has increased in recent
years as a result of the general expansion of the U.S. economy and as gasoline
additives have begun to move coastwise. Some of the chemicals transported must
be carried in vessels with specially coated or stainless steel cargo tanks; many
of them are very sensitive to contamination and require special cargo-handling
equipment.
At March 15, 2000, we operated the following chemical carriers:
Tonnage (in dead
Name of Vessel Capacity (in barrels) weight tons or "dwt")
-------------- --------------------- ---------------------
Seabulk Magnachem 298,000 39,300
Seabulk America 297,000 46,300
HMI Petrochem 360,000 49,900
HMI Dynachem 360,000 49,900
HMI Ambrose Channel 341,000 45,000
HMI Brenton Reef 341,000 45,000
We operate the Seabulk Magnachem under a long-term bareboat charter
expiring in February 2002. We own a 67.0% equity interest in the Seabulk
America; the remaining 33.0% interest is owned by Stolt Tankers (U.S.A.), Inc.
We own a 75.8% equity interest in the HMI Ambrose Channel and the HMI Brenton
Reef and have an option through December 31, 2000 to purchase the remaining
minority interest.
The Seabulk Magnachem, Seabulk America, HMI Dynachem and HMI Petrochem
have full double bottoms (as distinct from double hulls). Double bottoms provide
increased protection over single-hull vessels in the event of a grounding.
Delivered in 1977, the Seabulk Magnachem is a CATUG (or catamaran tug)
integrated tug and barge, or "ITB," which has a higher level of dependability,
propulsion efficiency and performance than an ordinary tug and barge. Delivered
in 1990, the Seabulk America is the only vessel in the U.S. domestic trade
capable of carrying large cargoes of acid, as a result of its large high-grade
alloy stainless steel tanks, and the only such vessel strengthened to carry
relatively heavy cargoes such as phosphoric and other acids. The Seabulk
America's stainless steel tanks were constructed without internal structure,
which greatly reduces cargo residue from transportation and results in less
cargo degradation. Stainless steel tanks, unlike epoxy-coated tanks, also do not
require periodic sandblasting and recoating. The HMI Ambrose Channel and HMI
Brenton Reef are two of our five new double-hull carriers.
All of our chemical carriers have from 13 to 24 cargo segregations
which are configured, strengthened, and coated to handle various sized parcels
of a wide variety of industrial chemical and petroleum products, giving them the
ability to handle a broader range of chemicals than chemical-capable product
carriers. Many of the chemicals we transport are hazardous substances. Voyages
are currently generally conducted from the Houston and Corpus Christi, Texas,
and Lake Charles, Louisiana areas to such ports as New York, Philadelphia,
Baltimore, Wilmington, North Carolina, Charleston, South Carolina, Los Angeles,
San Francisco, and Kalama, Washington. Our chemical carriers are also suitable
for transporting other cargoes, including grain.
Pursuant to OPA 90, the Seabulk America, HMI Dynachem, HMI Petrochem
and Seabulk Magnachem (which unlike the two new double-hull carriers were built
with full double bottoms but not double sides) cannot be used to transport
petroleum and petroleum products in U.S. commerce after 2015, 2011, 2011, and
2007, respectively.
We market our chemical carriers through our wholly owned subsidiary,
Ocean Specialty Tankers Corporation ("OSTC"). We believe that the total capacity
of these carriers represents a substantial portion of the capacity of the
domestic specialty chemical carrier fleet, and that these chemical carriers are
among the last independently owned carriers scheduled to be retired under OPA
90.
OSTC books cargoes either on a spot (movement-by-movement) or time
basis. Approximately 75% of contracts for cargo are committed on a 12- to
30-month basis, with minimum and maximum cargo tonnages specified over the
period at fixed or escalating rates per ton. OSTC is often able to generate
additional revenues by chartering cargo space on competitors' vessels and by
expanding the carriers' backhaul (return voyage) opportunities.
Petroleum Product Transportation. In the domestic energy transportation
trade, oceangoing and inland-waterway vessels transport fuel and other petroleum
products, primarily from refineries and storage facilities along the coast of
the U.S. Gulf of Mexico, to utilities, waterfront industrial facilities and
distribution facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific
coasts and inland rivers. The inventory of U.S.-flag oceangoing vessels eligible
to participate in the U.S. domestic trade and capable of transporting fuel or
petroleum products has steadily decreased since 1980, as vessels have reached
the end of their useful lives and the cost of constructing a vessel in the
United States (a requirement for U.S. domestic trade participation) has
substantially increased.
At March 15, 2000, we operated the following petroleum product
carriers:
Tonnage (in dead
Name of Vessel Capacity (in barrels) weight tons or "dwt")
-------------- --------------------- ----------------------
HMI Cape Lookout Shoals 340,000 46,000
HMI Diamond Shoals 340,000 46,000
HMI Nantucket Shoals 340,000 46,000
HMI Defender 260,000 36,600
HMI Trader 250,000 32,200
The HMI Cape Lookout Shoals, HMI Diamond Shoals and HMI Nantucket
Shoals are the remaining three of our five new double-hull carriers. We own a
75.8% equity interest in the five carriers and have an option through December
31, 2000 to purchase the remaining minority interest. The cost of exercising the
option to acquire the remaining 24.2% interest in all five carriers is
approximately $11.0 million. Should we fail to exercise the option, we will then
have a right of first refusal to purchase the minority interest for the same
amount plus interest accrued from December 31, 2000.
We acquired the HMI Defender and HMI Trader in March 1998. Under OPA
90, these vessels cannot be used to transport petroleum and petroleum products
in U.S. commerce after 2008 and 2000, respectively.
Our petroleum product carriers are also marketed through OSTC and
operate under short-term spot charters or longer-term charters depending upon
market conditions. One of the new carriers is subject to a three-year charter
commencing in the second quarter of 2000 with a subsidiary of Tesoro Petroleum
Corporation to transport crude oil and petroleum products in Alaska and other
locations.
Sun State. Our Sun State Marine Services subsidiary owns and operates a
petroleum transportation fleet of nine towboats and 17 barges, all of which are
primarily engaged in fuel transportation along the Atlantic intracoastal
waterway and the St. Johns River in Florida.
The majority of Sun State's revenue is derived from a fuel
transportation contract with Steuart Petroleum Company, in which Sun State is
responsible for handling all marine deliveries including the servicing of
Steuart's paper mill, electric utility and vessel bunker customers. The contract
with Steuart Petroleum is up for renewal on November 30, 2000. The remainder of
its marine transportation revenue is derived from fuel transportation and towing
contracts with other customers along with its marine maintenance, repair,
drydocking and construction facility.
OPA 90 requires all single-hull barges, including those owned by Sun
State, to discontinue transporting fuel and other petroleum products in 2015. We
recently constructed two double-hull barges at a cost of $1.0 million each and
previously purchased four additional double-hull barges for an aggregate of $2.4
million (exclusive of refurbishment costs aggregating approximately $2.6
million).
Other Services
Sun State also owns and operates a small vessel maintenance, repair and
construction drydocking facility in Green Cove Springs, Florida, which is
engaged principally in the maintenance and construction of tugs and barges,
offshore support vessels and other small vessels. The lease for the facility,
including optional renewals, expires in 2005. This facility is capable of
drydocking vessels up to 300 feet in length for repair and can make dockside
repairs on vessels up to 320 feet in length. Since 1994, when we acquired Sun
State, the facility has been utilized to overhaul or rebuild a number of our
harbor tugs and offshore energy support vessels. It also services vessels owned
by others. The facility (originally a U.S. government naval repair and
operations station) has covered steel fabrication facilities, workshops and
office spaces adjacent to a 1,840-foot finger pier and mooring basins, where the
facility's three floating drydocks are located. The drydocks are 60, 80 and 108
feet in length, and are capable of lifting 300, 200 and 700 tons, respectively.
The 60- and 108-foot drydocks are capable of being joined together for lifting a
vessel or barge with a nominal capacity of 1,000 long tons. Sun State also
maintains another yard, primarily for use in new construction projects and
vessels requiring long-term repairs. The yard has a marine railway capable of
lifting and launching vessels weighing up to 600 tons, and a 600-foot finger
pier with adjacent covered steel fabrication facilities, workshops and office
space.
We also own a 40-acre facility in Port Arthur, Texas that serves as a
storage and supply base and a facility for topside repairs. This facility has
1200 feet of dock space and is suitable for development as a shipyard.
Customers and Charter Terms
We offer our offshore energy support services primarily to oil
companies and large drilling companies. Consistent with industry practice, our
U.S. Gulf of Mexico operations are conducted primarily in the "term" market
pursuant to short-term (less than six months) charters at varying day rates.
Generally, such short-term charters can be terminated either by us or our
customers upon notice of five days or less. Charters in our international
markets have terms ranging from a few days to several years.
Our offshore and harbor towing services are offered to vessel owners
and operators and their agents. Our rates for harbor towing services are set
forth in published tariffs and may be modified at any time, subject to
competitive factors. We also grant volume discounts to major users of harbor
services. Offshore towing services are priced based upon the service required on
an ad hoc basis.
The primary purchasers of chemical transportation services are chemical
and oil companies. The primary purchasers of petroleum product transportation
services are utilities, oil companies, and large industrial consumers of fuel
with waterfront facilities. Both services are generally contracted for on the
basis of short- or long-term time charters, voyage charters, contracts of
affreightment, or other transportation agreements tailored to the shipper's
requirements. CITGO, which accounted for 6.7% of our 1999 revenues, is currently
our largest single customer with a contract of affreightment commitment
utilizing up to three ships of their choosing. In addition, Equiva Trading Co.
is a purchaser of our marine transportation services and accounted for 5% of our
1999 revenues. On a segment basis in 1999, CITGO accounted for 15.3% of our
marine transportation services revenues, Oceanografia, S.A. accounted for 12.9%
of our harbor and offshore towing revenues, and Elf Petroleum accounted for 6%
of our offshore energy support revenues.
Competition
We operate in a highly competitive environment in all our operations.
Recent adverse publicity concerning our financial condition and bankruptcy has
harmed our ability to attract new customers and to maintain favorable
relationships with our existing customers and suppliers. The principal
competitive factors in each of the markets in which we operate are suitability
of equipment, personnel, price, service and reputation. Competitive factors in
the offshore energy support segment also include operating conditions and
intended vessel use (both of which determine the suitability of vessel type),
the complexity of maintaining logistical support and the cost of transferring
equipment from one market to another. Our vessels that provide marine
transportation services compete with both other vessel operators and, in some
areas and markets, with alternative modes of transportation, such as pipelines,
rail tank cars and tank trucks. Moreover, the users of such services are placing
increased emphasis on safety, the environment and quality, partly due to
heightened liability for the cargo owner in addition to the vessel
owner/operator under OPA 90. With respect to towing services, we compete not
only with other providers of tug services in the ports in which we operate, but
with the providers of tug services in nearby ports. Many of our competitors have
substantially greater financial and other resources than we do. A new competitor
recently entered the harbor tug market in Tampa, and additional competitors may
enter our markets in the future. Moreover, should U.S. coastwise laws be
repealed, foreign-built, foreign-manned and foreign-owned vessels could be
eligible to compete with our vessels operating in the domestic trade.
Environmental and Other Regulation
Our operations are subject to significant federal, state and local
regulation, the principal provisions of which are described below.
Environmental. Our operations are subject to federal, state and local
laws and regulations relating to safety and health and environmental protection,
including the generation, storage, handling, emission, transportation and
discharge of hazardous and non-hazardous materials. The recent trend in
environmental legislation and regulation is generally toward stricter standards,
and this trend will likely continue. We believe that our operations currently
are in substantial compliance with applicable environmental regulations.
Governmental authorities have the power to enforce compliance with
applicable regulations, and violations are subject to fines, injunction or both.
We do not expect that we will be required in the near future to expend amounts
that are material to our financial condition or operations by reason of
environmental laws and regulations; however, because such laws and regulations
are frequently changed and may impose increasingly stricter requirements, we
cannot predict the ultimate cost of complying with these laws and regulations.
OPA 90. OPA 90 established an extensive regulatory and liability regime
for the protection of the environment from oil spills. OPA 90 affects owners and
operators of facilities operating near navigable waters and owners and operators
of vessels operating in United States waters, which include the navigable waters
of the United States and the 200-mile exclusive economic zone of the United
States. Although it applies in general to all vessels, for purposes of its
liability limits and financial-responsibility and response-planning
requirements, OPA 90 differentiates between tank vessels (which include our
chemical and petroleum products carriers and fuel barges) and "other vessels"
(which include our tugs and offshore energy support vessels).
Under OPA 90, owners and operators of facilities, and owners, operators
and certain charterers of vessels, are "responsible parties" and are jointly,
severally and strictly liable for removal costs and damages arising from oil
spills relating to their facilities and vessels, unless the spill results solely
from the act or omission of a third party, an act of God or an act of war.
Damages are defined broadly to include (i) natural resources damages and the
costs of assessment thereof; (ii) damages for injury to, or economic losses
resulting from the destruction of, real and personal property; (iii) the net
loss of taxes, royalties, rents, fees and profits by the U.S. government, a
state or political subdivision thereof; (iv) lost profits or impairment of
earning capacity due to property or natural resources damage; (v) the net costs
of providing increased or additional public services necessitated by a spill
response, such as protection from fire, safety or other hazards; and (vi) the
loss of subsistence use of natural resources.
For facilities, the statutory liability of responsible parties is
limited to $350 million. For tank vessels, the statutory liability of
responsible parties is limited to the greater of $1,200 per gross ton or $10
million ($2 million for a vessel of 3,000 gross tons or less) per vessel; for
any "other vessel," such liability is limited to the greater of $600 per gross
ton or $500,000 per vessel. Such liability limits do not apply, however, to an
incident proximately caused by violation of federal safety, construction or
operating regulations or by the responsible party's gross negligence or willful
misconduct, or if the responsible party fails to report the incident or provide
reasonable cooperation and assistance as required by a responsible official in
connection with oil removal activities. Although we currently maintain pollution
liability insurance, a catastrophic spill could result in liability in excess of
available insurance coverage, resulting in a material adverse effect on our
business.
Under OPA 90, with certain limited exceptions, all newly built or
converted oil tankers operating in United States waters must be built with
double hulls, and existing single-hull, double-side or double-bottom vessels
must be phased out at some point, depending upon their size, age and place of
discharge, through 2015 unless retrofitted with double hulls. As a result of
this phase-out requirement, as interpreted by the U.S. Coast Guard, our
single-hull chemical and petroleum product carriers will be required to cease
transporting petroleum products over the next 15 years, and its "single-skinned"
fuel barges will cease transporting fuel in 2015.
OPA 90 expanded pre-existing financial responsibility requirements and
requires vessel owners and operators to establish and maintain with the United
States Coast Guard evidence of insurance or qualification as a self-insurer or
other evidence of financial responsibility sufficient to meet their potential
liabilities under OPA 90. Coast Guard regulations require evidence of financial
responsibility demonstrated by insurance, surety bond, self-insurance or
guaranty. The regulations also implement the financial responsibility
requirements of the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"), which imposes liability for discharges of
hazardous substances such as chemicals, in an amount equal to $300 per gross
ton, thus increasing the overall amount of financial responsibility from $1,200
to $1,500 per gross ton. We have obtained "Certificates of Financial
Responsibility" pursuant to the Coast Guard regulations for our product and
chemical carriers through self-insurance and commercial insurance and as
guarantor for the fuel barges.
OPA 90 also amended the federal Water Pollution Control Act to require
the owner or operator of certain facilities or the owner or operator of a tank
vessel to prepare facility or vessel response plans and to contract with oil
spill removal organizations to remove to the maximum extent practicable a
worst-case discharge. We have complied with these requirements. As is customary,
our oil spill response contracts are executory in nature and are not activated
unless required. Once activated, our pollution liability insurance covers the
cost of spill removal subject to overall coverage limitations and deductibles.
OPA 90 does not prevent individual states from imposing their own
liability regimes with respect to oil pollution incidents occurring within their
boundaries, and many states have enacted legislation providing for unlimited
liability for oil spills. Some states have issued implementing regulations
addressing oil spill liability, financial responsibility and vessel and facility
response planning requirements. We do not anticipate that such legislation or
regulations will have any material impact on our operations.
In addition to OPA 90, the following are examples of environmental,
safety and health laws that relate to our operations:
Water. The Federal Water Pollution Control Act ("FWPCA") or Clean Water
Act ("CWA") imposes restrictions and strict controls on the discharge of
pollutants into navigable waters. Such discharges are typically authorized by
National Pollutant Discharge Elimination System ("NPDES") permits. The FWPCA
provides for civil, criminal and administrative penalties for any unauthorized
discharges and imposes substantial potential liability for the costs of removal,
remediation and damages. State laws for the control of water pollution also
provide varying civil, criminal and administrative penalties and liabilities in
the case of a discharge of petroleum, its derivatives, hazardous substances,
wastes and pollutants into state waters. In addition, the Coastal Zone
Management Act authorizes state implementation and development of programs of
management measures for non-point source pollution to restore and protect
coastal waters.
We manage our exposure to losses from potential discharges of
pollutants through the use of well-maintained and well-managed facilities,
well-maintained and well-equipped vessels, safety and environmental programs and
our insurance program, and believe we will be able to accommodate reasonably
foreseeable environmental regulatory changes. There can be no assurance,
however, that any new regulations or requirements or any discharge of pollutants
by the Company will not have an adverse effect on us.
Solid Waste. Our operations may generate and result in the
transportation, treatment and disposal of both hazardous and non-hazardous solid
wastes that are subject to the requirements of the federal Resource Conservation
and Recovery Act ("RCRA") and comparable state and local requirements. In August
1998, the EPA added four petroleum refining wastes to the list of RCRA hazardous
wastes.
Clean Air Regulations. The federal Clean Air Act of 1970, as amended by
the Clean Air Act Amendments of 1990, requires the EPA to promulgate standards
applicable to the emission of volatile organic compounds and other air
pollutants. Our vessels are subject to vapor control and recovery requirements
when loading, unloading, ballasting, cleaning and conducting other operations in
certain ports. Our chemical and petroleum product carriers are equipped with
vapor control systems that satisfy these requirements. The fuel barges are not
equipped with, and are not operated in areas that require, such systems. In
addition, it is anticipated that the EPA will issue regulations addressing air
emission requirements applicable to marine engines. Adoption of such standards
could require modifications to existing marine diesel engines in some cases.
Coastwise Laws. A substantial portion of our operations are conducted
in the U.S. domestic trade, which is governed by the coastwise laws of the
United States (commonly referred to as the Jones Act). The coastwise laws
reserve marine transportation (including harbor tug services) between points in
the United States (including drilling rigs fixed to the ocean floor on the U.S.
outer continental shelf) to vessels built in and documented under the laws of
the United States (U.S. flag) and owned and manned by U.S. citizens. Generally,
a corporation is deemed a citizen for these purposes so long as (i) it is
organized under the laws of the U.S. or a state, (ii) each of its president or
other chief executive officer and the chairman of its board of directors is a
citizen, (iii) no more than a minority of the number of its directors necessary
to constitute a quorum for the transaction of business are non-citizens, and
(iv) 75% of the interest and voting power in the corporation are held by
citizens. Because we could lose our privilege of operating our vessels in the
U.S. domestic trade if non-citizens were to own or control in excess of 25% of
our outstanding capital stock, our Certificate of Incorporation contains
restrictions concerning foreign ownership of our stock.
There have been repeated efforts aimed at repeal or significant change
of the Jones Act. Although we believe it is unlikely that the Jones Act will be
substantially modified or repealed, there can be no assurance that Congress will
not substantially modify or repeal it. Such changes could have a material
adverse effect on our operations and financial condition.
Occupational Health Regulations. Our facilities are subject to
occupational safety and health regulations issued by the U.S. Occupational
Safety and Health Administration and comparable state programs. Such regulations
currently require us to maintain a workplace free of recognized hazards, observe
safety and health regulations, maintain records and keep employees informed of
safety and health practices and duties. Our vessel operations are also subject
to occupational safety and health regulations issued by the U.S. Coast Guard
and, to an extent, OSHA. Such regulations currently require us to perform
monitoring, medical testing and record keeping with respect to seamen engaged in
the handling of the various cargoes transported by our chemical and petroleum
products carriers.
Vessel Condition. Our chemical and petroleum products carriers,
offshore energy support vessels, certain of our tugs and our fuel barges are
subject to periodic inspection and survey by, and drydocking and maintenance
requirements of, the Coast Guard and/or the American Bureau of Shipping and
other marine classification societies whose periodic certification as to the
construction and maintenance of certain vessels is required in order to maintain
insurance coverage. All of our vessels requiring certification to maintain
insurance coverage are certified.
Oil Tanker Escort Requirements. Implementation of oil tanker escort
requirements of OPA 90 and pending state legislation are expected to introduce
certain performance or engineering standards on tugs to be employed as tanker
escorts. We believe our tractor tugs will be able to comply with any existing or
currently anticipated requirements for escort tugs. Adoption of such new
standards could require modification or refitting of the tugs we currently
operate to the extent they are employed as tanker escorts. We do not anticipate
OPA 90 or state requirements to require modification of tugs such as ours that
are involved in harbor tug operations.
We believe we are currently in compliance in all material respects with
the environmental and other laws and regulations, including health and safety
requirements, to which our operations are subject and are unaware of any pending
or threatened litigation or other judicial, administrative or arbitration
proceedings against it occasioned by any alleged non-compliance with such laws
or regulations. The risks of substantial costs, liabilities and penalties are,
however, inherent in marine operations, and there can be no assurance that
significant costs, liabilities or penalties will not be incurred by or imposed
on us in the future.
International Laws and Regulations. Our vessels that operate
internationally are subject to various international conventions, including
certain safety, environmental and construction standards. Among the more
significant of the conventions applicable to the fleet are: (i) the
International Convention for the Prevention of Pollution from Ships, 1973, 1978
Protocol, (ii) the International Convention on the Safety of Life at Sea, 1978
Protocol, including the International Management Code for the Safe Operation of
Ships and for Pollution Prevention, which went into effect for tank vessels on
July 1, 1998, and (iii) the International Convention on Standards of Training,
Certification and Watchkeeping for Seafarers, 1978, as amended in 1995. These
conventions govern oil spills and other matters of environmental protection,
worker health and safety and the manning, construction and operation of vessels.
Generally, surveys and inspections are performed by internationally recognized
classification societies. The vessels that operate internationally are
registered primarily in the Marshall Islands, Panama and St. Vincent and The
Grenadines.
Although we believe we are in substantial compliance with all
applicable requirements, the risks of incurring substantial compliance costs and
liabilities and penalties for noncompliance are inherent in offshore energy
support operations and there can be no assurance that significant costs,
liabilities and penalties will not be incurred by or imposed on us in the
future.
Insurance
Our marine transportation services operations are subject to the normal
hazards associated with operating vessels carrying large volumes of cargo and
rendering services in a marine environment. These hazards include the risk of
loss of or damage to our vessels, damage to third parties as a result of
collision, loss, or contamination of cargo, personal injury of employees, and
pollution and other environmental damages. We maintain insurance coverage
against these hazards. Risk of loss of or damage to our vessels is insured
through hull insurance policies in amounts that approximate fair market value.
Vessel operating liabilities, such as collision, cargo, environmental, and
personal injury, are insured primarily through our participation in a mutual
insurance association, Steamship Mutual Underwriting Association (Bermuda)
Limited. Because we maintain mutual insurance, we are subject to funding
requirements and coverage shortfalls in the event claims exceed available funds
and reinsurance and to premium increases based on prior loss experience.
Employees
As of March 15, 2000, we had approximately 2,530 employees. Management
considers relations with employees to be satisfactory. The Seabulk America, HMI
Trader, and Seabulk Magnachem are manned by approximately 106 officers and crew
who are subject to two collective bargaining arrangements that expire on
December 31, 2002 and 2001, respectively. In addition, the HMI Dynachem, HMI
Petrochem, HMI Defender, the five new double-hull carriers, and seven harbor
tugs are manned by approximately 418 members of national maritime labor unions
pursuant to an agreement between the Company and a third-party employer that
expires December 20, 2000 for the HMI Dynachem, HMI Petrochem and HMI Defender
and June 21, 2001 for the five new double-hull carriers.
Item 2. Properties
The Company's principal offices are located in Fort Lauderdale,
Florida, where the Company leases approximately 36,000 square feet of office and
shop space under a lease expiring in 2009. The Company also leases office and
other facilities in Lafayette, Louisiana; the United Arab Emirates; and
Lausanne, Switzerland. In addition, the Company leases sales offices and/or
maintenance and other facilities in many of the locations where its vessels
operate. The Company believes that its facilities are generally adequate for
current and anticipated future use, although the Company may from time to time
lease additional facilities as operations require.
Item 3. Legal Proceedings
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 Marine Towing of Tampa, Inc. v. Hvide Marine Towing, No.
8:00-CV-444-T-26C, a civil action filed in March 2000 in the U.S. District Court
for the Middle District of Florida, the plaintiff seeks unspecified treble
damages from the Company as a result of alleged violations of federal and state
antitrust laws. The plaintiff, Marine Towing of Tampa, Inc., has been a
competitor of the Company in the harbor towing business in the port of Tampa,
Florida since October 1999 and alleges that the Company has obtained an unlawful
monopoly in providing tug services in Tampa Bay and has unlawfully used its
monopoly power and engaged in a conspiracy in restraint of trade to restrain
others, including the plaintiff, from competing in the port and to maintain
prices at artificially high levels. The specific acts of which the plaintiff
complains include the non-exclusive franchise granted by the Tampa Port
Authority to the Company, the Company's reduction of its rates and granting of
discounts to specific customers when confronted with competition, the Company's
one-year exclusive-provider agreements with customers, and the Company's alleged
disparagement of the plaintiff's service. The Company believes that it has not
engaged in any unlawful conduct, that the plaintiff has not been restrained from
competing in the market, and that the suit has no merit. The Company intends to
vigorously defend the suit.
In J. Erik Hvide and Betsy Hvide v. Hvide Marine Incorporated, No.
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 has breached an agreement to provide Mr. Hvide with
severance benefits valued at approximately $1.0 million. In addition, Mr. and
Mrs. Hvide allege that the Company's conduct, in obtaining the return of certain
of the Company's property from Mr. Hvide and in discontinuing the payment of
life insurance premiums, constituted an intentional course of conduct calculated
to cause them severe emotional distress and public humiliation for which they
seek unspecified punitive damages. The Company believes that it never reached
any agreement with Mr. Hvide concerning compensation relating to his severance,
that it engaged in no conduct intended to cause harm to Mr. or Mrs. Hvide, and
that the suit has no merit. The Company intends to vigorously defend the suit.
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.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
<PAGE>
Item 4A. Executive Officers
The executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Current Positions
<S> <C> <C>
Jean Fitzgerald..................... 73 Chairman of the Board, Chief Executive Officer and Director
Eugene F. Sweeney................... 57 President, Chief Operating Officer and Director
Walter S. Zorkers................... 53 Executive Vice President, Chief Financial Officer and Director
Andrew W. Brauninger................ 53 Senior Vice President--Offshore
Division and President--Seabulk Offshore, Ltd
Walton S. Kinsey.................... 49 Senior Vice President, General Counsel and Secretary
William R. Ludt..................... 52 Senior Vice President, President--Hvide Marine Towing, Inc.
John J. O'Connell, Jr............... 56 Senior Vice President--Corporate Communications and Investor
Relations and Assistant Secretary
Leo T. Carey........................ 48 Vice President--Ship Management
Arthur T. Denning................... 45 Vice President--Engineering
Eileen Florian...................... 55 Vice President--Risk Management
L. Stephen Willrich................ 47 Vice President and President--Ocean Specialty Tankers Corporation
</TABLE>
Mr. Fitzgerald has been Chairman and Chief Executive Officer of the
Company since June 1999. He has served as a director of the Company since March
1994. From 1990 to 1992, he was Executive Vice President of NDE Testing &
Equipment, Inc., a nationwide storage-tank testing company. From 1988 to 1990,
he was with Frederic R. Harris, Inc., an international consulting engineering
firm. Mr. Fitzgerald was a co-founder and the President of American Tank Testing
Service, Inc., a firm that was subsequently acquired by NDE Environmental
Corporation, from 1986 to 1987. In 1982 and 1983, he served as the Company's
Vice President for Governmental Affairs. His other business experience includes
service as President of Tracor Marine, Inc. from 1976 to 1979 and Director of
Engineering of Tracor's Systems Technology Division from 1974 to 1976. Mr.
Fitzgerald retired from the U.S. Navy in 1974 in the rank of Captain. During his
naval career he commanded major fleet units at sea and served in the offices of
the Chief of Naval Operations and the Secretary of Defense. He is a past
Commissioner and Chairman of the Port Everglades Authority.
Mr. Sweeney has been President since January 2000, Chief Operating
Officer since April 1998, Executive Vice President since September 1994 and a
director since 1984. He was Senior Vice President--Operations of the Company
from 1991 to September 1994. He joined the Company in 1981 as Vice
President--Ship Management. Prior to joining the Company, Mr. Sweeney was
employed for 17 years by Texaco, Inc., where he served in seagoing and shore
management positions, including operations manager of Texaco's U.S. tanker
fleet. Mr. Sweeney is on the board of directors of the Chamber of Shipping of
America and the Florida Pilots Commission and is a member of the American Bureau
of Shipping.
Mr. Zorkers has been Executive Vice President and Chief Financial
Officer since January 2000. He was Senior Vice President--Corporate Development
since April 1997. Prior to joining the Company, Mr. Zorkers was the principal of
Commonwealth Management Group, a management consulting firm. From 1993 to 1995
he served as Executive Vice President of Boston Pacific Medical, Inc., a
manufacturer of disposable medical products.
Mr. Brauninger has been Senior Vice President--Offshore Division since
August 1997. He was Vice President--Offshore Division from 1990 until July 1997
and has been President of Seabulk Offshore, Ltd., the Company's offshore energy
support services subsidiary, since September 1994. He was Vice President of
Offshore Operations from 1990 to September 1994 and Vice President--Development
from 1989 to 1990. From 1987 to 1989, Mr. Brauninger was President of OMI
Offshore Services, Inc., an operator of offshore service vessels. Previously, he
was employed by Sabine Towing and Transportation Company, where he held a
variety of posts including Vice President--Harbor Division.
Mr. Kinsey has been Senior Vice President, General Counsel and
Secretary since April 2000. He was previously Branch Chief in the Division of
Enforcement of the U.S. Securities and Exchange Commission, which he joined in
1995 as Senior Counsel. Prior to that, Mr. Kinsey practiced general securities
law in Florida and Washington, D.C. with the firms of Gunster, Yoakley &
Stewart; Malizia, Spidi, Sloane & Fisch; and Muldoon, Murphy & Faucette. From
1974 to 1982 he served in the Office of the Comptroller of the State of Florida,
first as Chief Investigator and then as Deputy Comptroller. He is a member of
both the Florida and District of Columbia Bar Associations.
Mr. Ludt has been Senior Vice President and President of Hvide Marine
Towing, Inc. since December 1999 and President of Sun State Marine Services,
Inc., since September 1994. He was Director--Fleet Operations of the Company
from 1982 to September 1994. Since joining the Company in 1979, he has also
served as Fleet Manager and Port Engineer. He served as President of the
Chemical Carriers Association from 1989 to 1990 and as its Vice President from
1990 to 1992. Mr. Ludt has also served on various working groups within the U.S.
Coast Guard's Chemical Transportation Advisory Committee concerning issues such
as vapor control and marine occupational safety and health. Mr. Ludt holds a
dual license as a Third Mate and Third Assistant Engineer, Steam and Motor
Vessels.
Mr. O'Connell has been Senior Vice President of Corporate
Communications and Investor Relations since January 2000. He is also Assistant
Secretary. He was Vice President--Corporate Communications since August 1996,
when he joined the Company. From September 1995 to August 1996 he was an
independent consultant. Previously, he served in a variety of management
positions with W. R. Grace & Co. for 20 years, most recently as Director of
Public Affairs. Mr. O'Connell was a member of the President's Private Sector
Survey on Cost Control in the Federal Government from 1982 to 1984.
Mr. Carey has been Vice President--Ship Management since November 1996.
He previously served as Director of Operations for the Company's fleet of
chemical and petroleum product carriers. He joined the Company in 1981 as
Superintendent Engineer. Prior to that, he served with El Paso Marine Co. as a
deck officer and maintenance manager.
Mr. Denning has been Vice President--Engineering since August 1997. He
previously served as Director of Engineering of the Company from November 1994
to July 1997, and as Superintendent Engineering from September 1986 to October
1994.
Miss Florian has been Vice President - Risk Management since February
2000. She was previously Director of Risk Management since 1997 and Manager of
Risk Management since 1995. She joined the Company in 1980 as Benefits Manager.
Mr. Willrich has been a Vice President of the Company and President of
OSTC since March 1998. He was Senior Vice President of OSTC from August 1996. He
served as Vice President of Chartering of OSTC from January 1988. Prior to
joining the Company, Mr. Willrich was employed by Diamond Shamrock Chemical
Company from 1975 to 1988, where he rose to Division General Manager. Prior to
his service with Diamond Shamrock, he worked for Gulf Oil Corporation as a Third
Assistant Engineer on various company tankers. He has more than 25 years of
experience in the management of Jones Act product tankers.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Predecessor Company's Class A Common Stock began trading on the
NASDAQ National Market on August 9, 1996 under the symbol "HMAR." Prior to that
date, there was no established public trading market for the Class A Common
Stock. On September 28, 1999, the common stock was delisted from the NASDAQ
National Market. Subsequent to September 28, 1999 and prior to the Effective
Date of the Plan, the Predecessor Company's Class A Common Stock was traded on
the OTC Bulletin Board under the symbol "HMARQ." Prior to the Effective Date of
the Plan, the Predecessor Company's Class B Common Stock was not traded on an
established public trading market. The Predecessor Company did not pay any
dividends on its common stock in 1998 or in 1999. Pursuant to the Plan, each
class of the Predecessor Company's common stock was canceled as of the Effective
Date.
In connection with the emergence from Chapter 11 bankruptcy
protection, the Successor Company issued 10,000,000 shares of Class A Common
Stock and 250,000 Class A Warrants. As of and subsequent to the Effective Date
of the Plan, the Successor Company's Class A Common Stock and Class A Warrants
were traded on the OTC Bulletin Board under the symbols "HVDM" and "HVDMW,"
respectively. The Successor Company has not paid and does not expect to pay any
dividends on its Class A Common Stock.
The following table sets forth the high and low closing sale prices
per share of the Predecessor Company's Class A Common Stock, as reported by the
NASDAQ National Market and the OTC Bulletin Board, through the Effective Date of
the Plan and the Successor Company's Common Stock and Class A Warrants, as
reported by the OTC Bulletin Board, subsequent to the Effective Date of the
Plan.
Predecessor Company
High Low
1998
First Quarter ............................. 25 3/4 16 5/8
Second Quarter............................. 18 1/4 12
Third Quarter.............................. 13 5/8 6 3/4
Fourth Quarter............................. 8 3/8 4 1/2
1999
First Quarter.............................. 6 1/8 3 15/16
Second Quarter............................. 3 1/2 1 19/32
Third Quarter.............................. 2 11/32 17/32
Fourth Quarter (through December 15)....... 15/32 7/64
Successor Company
Common Stock
1999
Fourth Quarter (from December 15).......... -- --
2000
First Quarter (through March 15)........... 16 9 3/4
Class A Warrants
1999
Fourth Quarter (from December 15).......... -- --
2000
First Quarter (through March 15)........... 5 1/4
As of March 15, 2000, there were three holders of record of the
Successor Company's Class A Common Stock.
Item 6. Selected Financial Data.
Upon emergence from its Chapter 11 proceeding the Company adopted Fresh
Start Accounting, see "--- Fresh Start Reporting." Thus the Company's
consolidated balance sheets and statements of operation and cash flows after the
Effective Date reflect a new reporting Company and are not comparable to periods
prior to the Effective Date.
The financial data presented below includes the results of the
Predecessor Company for the period from January 1, 1999 to December 15, 1999 and
the Successor Company for the period December 16, 1999 to December 31, 1999. The
principal differences 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.
The selected consolidated financial data presented below should be
read in conjunction with the consolidated financial statements and notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Report.
<PAGE>
<TABLE>
<CAPTION>
Predecessor Successor
Company Company
Period from Period from
January 1 to December 16 to
Year Ended December 31, December 15, December 31,
------------------------------------------- ------------ ------------
1995 1996 1997 1998(5) 1999(6) 1999
---------- ---------- ---------- ----------- ------------ -----------
(in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues..................................... $ 70,562 $109,356 $210,257 $404,793 $328,751 $ 13,479
Operating expenses........................... 39,147 60,720 104,933 213,601 212,753 8,047
Overhead expenses............................ 12,518 14,979 24,791 43,179 47,814 1,643
Depreciation, amortization and drydocking.... 7,825 12,887 25,200 64,244 79,410 2,069
---------- --------- -------- -------- --------- ----------
Income (loss) from operations................ 11,072 20,770 55,333 83,769 (11,226) 1,720
Interest expense, net (1).................... 11,460 11,631 7,024 41,238 70,374 2,688
Other income (expense)....................... 26 437 (3,704) (5,692) (32,129) (597)
Reorganization items (2)..................... -- -- -- -- (433,273) --
---------- --------- -------- -------- --------- ----------
Income (loss) before income taxes and
extraordinary item......................... (362) 9,576 44,605 36,839 (547,002) (1,565)
Provision for (benefit from) income
taxes...................................... (2) 3,543 16,950 13,489 (32,004) --
---------- ---------- --------- --------- ---------- ----------
Income (loss) before extraordinary item...... (360) 6,033 27,655 23,350 (514,998) (1,565)
Gain (loss) on extinguishment of debt (3).... -- (8,108) (2,132) (1,602) 266,643 --
---------- --------- ---------- ---------- ----------- ----------
Net income (loss)............................ $ (360) $ (2,075) $ 25,523 $ 21,748 $(248,355) $ (1,565)
=========== ========= ======== ======== ========== ==========
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item.. $ (0.14) $ 0.99 $ 1.75 $ 1.43 $ (33.22) $ (0.16)
=========== ========= ======== ======== ========== ==========
Net income (loss)........................ $ (0.14) $ (0.24) $ 1.63 $ 1.35 $ (16.02) $ (0.16)
=========== ========= ======== ======== ========== ==========
Weighted average number of shares
and common equivalent shares
outstanding............................ 2,535 6,590 17,120 19,451 15,503 10,000
=========== ========= ======== ======== ========== ==========
Other Financial Data:
EBITDA (4)................................. $ 18,897 $ 33,657 $ 80,533 $148,013 $ 68,184 $ 3,789
========== ========= ======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Predecessor Successor
Company Company
Period from Period from
January 1 to December 16
to
Year Ended December 31, December 15, December 31,
---------------------------------------------- ------------ ------------
1995 1996 1997 1998 (5) 1999(6) 1999
--------- ------ ------- ----------- ------------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement of Cash Flows Data:
Net cash provided by (used in):
Operating activities........................ $ 3,948 $ 22,584 $ 40,042 $ 66,918 $ 9,042 $ 1,137
Investing activities........................ (8,066) (84,354) (261,343) (501,314) (9,672) (1,597)
Financing activities........................ 805 68,337 226,636 429,550 11,521 (1,491)
</TABLE>
<TABLE>
<CAPTION>
Predecessor Successor
Company Company
At December 31,
1995 1996 1997 1998 (5) 1999 (6)
-------- ------ ------- --------------- -----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital (deficit)..................... $ 4,315 $(8,704) $ 25,790 $ (216,802) $ 30,645
Total assets.................................. 143,683 273,473 604,561 1,355,267 830,740
Total long-term obligations................... 100,766 124,454 217,217 631,416 582,364
Convertible preferred securities of a subsidiary
trust....................................... -- -- 115,000 115,000 --
Stockholders and minority partner's equity.... 13,999 101,989 227,282 276,584 175,783
</TABLE>
(1)Interest expense for the period from January 1, 1999 through December 15,
1999 excludes $8.8 million of contractual interest that was not accrued
during the Company's Chapter 11 proceeding. See Notes to the Company's
consolidated financial statements.
(2)Reorganization items are comprised of items directly related to the
Predecessor Company's Chapter 11 proceeding. See Notes to the Company's
consolidated financial statements.
(3)Reflects gains and losses on the extinguishment of debt, net of applicable
income taxes of $1,474, $1,252 and $413 for 1996, 1997, and 1998,
respectively.
(4)EBITDA (net income from continuing operations before interest expense,
income tax expense, depreciation expense, amortization expense, minority
interests, and other non-operating income) is frequently used by securities
analysts and is presented here to provide additional information about the
Company's EBITDA operations. EBITDA is not recognized by generally accepted
accounting principles, should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows from operations as a measure of liquidity, and does
not represent funds available for management's use. Further, the Company's
EBITDA may not be comparable to similarly titled measures reported by other
companies.
(5)Reflects the acquisition of a 50% ownership interest in 1998, and an
additional 25% interest in 1999, of five newly-constructed double-hulled
tankers. See Notes to the Company's consolidated financial statements.
(6)Reflects the Chapter 11 reorganization and the application of fresh-start
accounting. See Notes to the Company's consolidated financial statements.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company emerged from its Chapter 11 proceeding and adopted fresh
start accounting on December 15, 1999 (the "Effective Date"). Thus the Company's
balance sheets and statements of operation and cash flows after the Effective
Date reflect a new reporting Company and are not comparable to periods prior to
the Effective Date.
For purposes of comparative analysis, the twelve months ended December
31, 1999 include the results of the Predecessor Company for the period from
January 1, 1999 to December 15, 1999, and the Successor Company for the period
from December 16, 1999 to December 31, 1999. The principal differences 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 and amortization expense and interest
expense in the Company's results of operations.
This discussion and analysis of the Company's financial condition and
historical results of operations should be read in conjunction with the
Company's consolidated historical financial statements and the related notes
thereto included elsewhere in this Report.
Revenue Overview
Marine Support Services
Revenue from marine support services is attributable to the Company's
offshore energy support operations and its offshore and harbor towing
operations.
Offshore Energy Support. Revenue from the Company's offshore energy support
operations 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 exploration, development and production
activities, which are in turn heavily dependent upon the price of crude oil.
Beginning in late 1997 and continuing through the first half of 1999, crude oil
prices declined substantially, with resultant adverse effects on exploration,
development and production activities and, in turn, the Company's offshore
energy support operations. Further, in certain areas where the Company conducts
offshore energy support operations (particularly the U.S. Gulf of Mexico),
contracts for the utilization of offshore energy support 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. In late 1999, crude oil prices began to decrease and offshore
development and production activities began to increase over their 1998 levels.
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.
<PAGE>
<TABLE>
<CAPTION>
1997 1998 1999
-----------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of supply boats at end
of period(1)..................... 19 21 25 26 28 29 27 24 21 21 21 21
Average supply boat day rates(2).... $6,478 $7,176 $7,636 $8,032 $8,475 $8,211 $6,505 $5,191 $4,530 $4,049 $3,596 $3,174
Average supply boat utilization(3).. 87% 90% 91% 93% 86% 80% 55% 72% 70% 69% 75% 73%
Number of crew boats at end
of period(4)..................... 39 39 39 39 39 39 38 37 33 33 33 33
Average crew boat day rates(2)(4)... $1,777 $1,940 $2,119 $2,294 $2,419 $2,502 $2,375 $2,383 $2,097 $1,864 $1,754 $1,837
Average crew boat utilization(3)(4). 95% 93% 95% 93% 89% 91% 77% 83% 69% 72% 75% 87%
</TABLE>
(1) The decline in the number of supply boats beginning in the third quarter of
1998 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 beginning
in the third quarter of 1998 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
continued to decline in 1999. The third and fourth quarters reflect a slight
improvement in utilization due to the increase in offshore exploration
activities in the U.S. Gulf of Mexico; however, it is unclear whether the
increase in exploration activities will continue to have a positive effect on
utilization. At March 31, 2000, supply boat day rates averaged approximately
$3,900 per day, which reflects an increase over levels experienced in the fourth
quarter of 1999 as a result of the increased exploration and production
activities indicated above. The current level of supply boat day rates is
expected to continue until there is a significant increase in offshore
exploration, development and production activities.
In the first half of 1999, average crew boat day rates and utilization
declined compared to their 1998 levels. However, the second half of 1999
reflects a slight improvement in day rates and utilization due to the increase
in offshore exploration activities in the U.S. Gulf of Mexico. At March 31,
2000, crew boat day rates averaged approximately $1,900 per day, which reflects
an increase over levels experienced in the fourth quarter of 1999 as a result of
the increased exploration and production activities indicated above. As is the
case with supply boat rates, no substantial improvement in crew boat rates is
anticipated until there is a significant increase in offshore exploration,
development and production activities
The following table shows rate and utilization information for foreign
operations (which commenced in the 1997 second quarter):
<TABLE>
<CAPTION>
1997 1998 (4) 1999
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Number of anchor handling tug/supply
boats............................... -- 9 23 23 66 67 66 69 67 69 67 67
Average anchor handling tug/supply
boat day rates(1)................... $ -- $2,900 $3,162 $3,357 $5,505 $6,008 $5,914 $5,727 $4,817 $5,433 $4,662 $4,803
Average anchor handling tug/supply boat
utilization(1)(2)................... -- 66% 80% 75% 75% 77% 77% 77% 61% 49% 49% 47%
Number of crew/utility boats........ -- 8 8 8 32 33 31 36 38 39 39 39
Average crew/utility boat
day rates(2).................... $ -- $1,330 $1,365 $1,344 $1,549 $1,544 $1,588 $1,616 $1,543 $1,559 $1,629 $1,749
Average crew/utility boat
utilization(3).................. -- 100% 93% 90% 75% 76% 72% 67% 65% 48% 47% 52%
</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.
(4) In 1997, the Company acquired by acquisition an aggregate of 82 vessels
operating primarily in the Middle East. In 1998, the Company acquired 37
vessels operating primarily offshore West Africa.
As indicated in the above table, foreign anchor handling tugs supply
boats experienced decreased day rates in 1999 as compared with 1998. Utilization
decreased substantially throughout 1999 for all foreign operated vessels as
offshore drilling exploration continued to decrease. Day rates for foreign
crew/utility boats experienced a slight decrease in the first half of the year,
but rebounded in the second half of the year to levels that are higher than
those that have been experienced for several quarters but at lower utilization
rates. Foreign rates have again declined slightly through March 2000. At March
31, 2000, day rates averaged approximately $4,100 per day for foreign anchor
handling tugs supply boats and approximately $1,600 for foreign crew/utility
boats.
Harbor and Offshore Towing. Revenue derived from the Company's tug operations is
primarily a function of the number of tugs available to provide services, the
rates charged for their services, and the volume of vessel traffic requiring
docking and other ship-assist services. Vessel traffic, in turn, is largely a
function of the general trade activity in the region served by the port.
The following table summarizes certain operating information for the Company's
tugs.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1997 1998 1999
<S> <C> <C> <C>
Number of tugs at end of period.............................................. 30 41 37
Total offshore and harbor towing revenue (in thousands)...................... $ 20,424 $ 46,368 $ 42,959
</TABLE>
In 1998, the Company acquired or constructed several harbor tugs and
expanded their operations to two new ports. Revenue for 1999 reflect a full year
of operations for these tugs. However, total revenues decreased in 1999 due to
the sale of certain underutilized tugboats, decreased offshore towing
opportunities and less shipping activity in ports served by the Company. The
decrease in revenues was also partially due to increased competition in the Port
of Tampa. In November 1999, certain of the Company's former personnel began a
competing harbor towing operation in the Port of Tampa. The Company is not yet
able to determine the ultimate impact of these developments on its operation in
Tampa.
Marine Transportation
Revenues from the Company's marine transportation services are derived
principally from the operations of chemical and petroleum product carriers in
the U.S. Jones Act Trade, and to a lesser extent from towboat and fuel barge
operations in Jacksonville, Florida.
Chemical Tankers. Generally, demand for industrial chemical
transportation services coincides with overall economic activity. The Company
operated six chemical tankers at December 31, 1999. Two of the Company's
chemical tankers are newly built and are owned by Lightship Tankers, a
consolidated subsidiary in which the Company has a 75.8% ownership interest
(50.8% at December 31, 1998). These tankers were delivered in the first half of
1999.
Petroleum Product Tankers. Demand for petroleum product transportation
services is dependent both on the level of production and refining, as well as
consumer use of petroleum-based products. The Company operated five petroleum
tankers at December 31, 1999. Three of the Company's petroleum tankers are newly
built and are owned by Lightship Tankers. These tankers were delivered in late
1998.
The Company's tanker fleet operates on either long-term voyage and time
charters or pursuant to short-term arrangements. During 1999, two of the
Company's tankers operated under long-term contracts. In April 2000, the Company
entered into a new one-year contract for one of its newly built petroleum
product tankers.
The following table sets forth the number of vessels and revenues for
the Company's chemical and product carriers.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1997 1998(1) 1999(2)
<S> <C> <C> <C>
Number of vessels owned...................................................... 6 11 11
Revenues (in thousands)...................................................... $ 61,229 $ 98,930 $146,555
</TABLE>
(1) During 1998, the Company acquired two tankers and took delivery of three of
the newly built Lightship Tankers.
(2) During 1999, the Company took delivery of the final two newly built
Lightship Tankers, scrapped one tanker that was at the end of its useful
life, and returned one tanker to the lessor pursuant to the expiration of
the lease.
Revenues for 1999 increased substantially over 1998 due to a full year
of operations for the five vessels built or acquired in 1998 and a partial year
of operations for the two newly built vessels delivered in the first half of
1999. The effect of these vessels was partially offset by the loss of two older
vessels in the fourth quarter of 1999. One of these vessels was at the end of
its useful life and was scrapped and the other was returned to the lessor at the
expiration of the lease.
Towboats and Fuel Barges. 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 Florida Power and Light Company contract having a
guaranteed minimum utilization. The principal contract with FPL expired in
September 1998 and the current contract expires in September 2002. Revenues from
these operations were $10 million in 1998 and $5.2 million in 1999. The extent
of the services provided under the new FPL contract is substantially less than
under the prior contract, which led to the decrease in revenues in 1999.
Overview of Operating Expenses and Capital Expenditures
The Company's operating expenses are primarily a function of fleet size
and utilization. The most significant expense categories are crew payroll and
benefits, depreciation and amortization, maintenance and repairs, charter hire,
insurance and fuel. During periods of decreased demand for vessels, the Company
temporarily ceases using, i.e. lay-ups or stacks, certain vessels to minimize
investments in marine operating supplies, crew payroll and maintenance costs. At
December 31, 1999, 41 of the Company's 200 offshore energy support vessels were
stacked.
The crews of Company-manned chemical and product carriers are paid on a
time-for-time basis under which they receive paid leave in proportion to time
served aboard a vessel. The crews of offshore energy support vessels and certain
tugs and towboats are paid only for days worked.
In addition to variable expenses associated with vessel operations, the
Company incurs fixed charges to depreciate its marine assets. The Company
calculates depreciation based on useful lives ranging from 11 to 25 years from
acquisition for its steel-hull offshore energy support vessels, 11 to 30 years
from acquisition for aluminum-hull vessels, the lesser of any applicable lease
term or the OPA 90 life for its product and chemical carriers, 30 years for
newly constructed double-hulled carriers, 10 years from acquisition for its fuel
barges, and 40 years from the date built for its towboats and tugs.
The Company capitalizes expenditures exceeding $10,000 for product and
chemical tankers and $5,000 for all other vessels, where the item acquired has a
useful life of seven years or greater. Vessel improvements are capitalized if
they extend the useful life of the vessel or increase its value. The Company
overhauls main engines and key auxiliary equipment in accordance with a
continuous planned maintenance program. Under applicable regulations, the
Company's chemical and product carriers and offshore service vessels and its
four largest tugs are required to be drydocked twice in each five-year period
for inspection and routine maintenance and repairs. These vessels are also
required to undergo special surveys every five years involving comprehensive
inspection and corrective measures to insure their structural integrity and
proper functioning of their cargo and ballast piping systems, critical machinery
and equipment, and coatings. The Company's fuel barges, because they are
operated in fresh water, are required to be drydocked only twice in each
ten-year period. The Company's harbor tugs and towboats generally are not
required to be drydocked on a specific schedule. During the years ended December
31, 1997, 1998, and 1999, the Company drydocked 42, 90, and 47 vessels,
respectively, at an aggregate cost (exclusive of lost revenue) of $4.5 million,
$13.7 million, and $11.8 million, respectively. The Company accounts for its
drydocking costs under the deferral method, under which capitalized drydocking
costs are expensed over the period preceding the next scheduled drydocking. See
Note 4 to the Company's consolidated financial statements.
Charter hire consists primarily of payments made with respect to the
bareboat charter of the Seabulk Magnachem, which was acquired pursuant to a
leveraged lease transaction, and operating lease payments on the tractor tug
Broward. The Company also pays charter hire when it charters harbor tugs to meet
requirements in excess of its own tugs' availability.
Insurance costs consist primarily of premiums paid for (i) protection
and indemnity insurance for the Company's marine liability risks, which are
insured by a mutual insurance association of which the Company is a member and
through the commercial insurance markets; (ii) hull and machinery insurance and
other maritime-related insurance, which are provided through the commercial
marine insurance markets; and (iii) general liability and other traditional
insurance, which is provided through the commercial insurance markets. Insurance
costs, particularly costs of marine insurance, are directly related to overall
insurance market conditions and industry and individual loss records, which vary
from year to year.
Results of Operations
Upon emergence from its Chapter 11 proceeding the Company adopted Fresh
Start Accounting. See Note 5 to the company's consolidated financial statements.
Thus the Company's balance sheets and statements of operation and cash flows
after the Effective Date reflect a new reporting Company and are not comparable
to periods prior to the Effective Date.
The twelve months ended December 31, 1999 include the results of the
Predecessor Company for the period from January 1, 1999 to December 15, 1999 and
the Successor Company for the period from December 16, 1999 to December 31,
1999. The principal differences 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 and
amortization 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>
Year Ended December 31,
-----------------------
1997 1998 1999
---- ---- ----
(in millions)
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................... $ 210.2 100% $ 404.8 100% $ 342.2 100%
Operating expenses..................... 104.9 50% 213.6 53% 220.8 65%
Overhead expenses...................... 24.8 12% 43.2 11% 49.4 14%
Depreciation, amortization and
drydocking.......................... 25.2 12% 64.2 16% 81.5 24%
--------- --------- ----------- ------- --------- -------
Income (loss) from operations.......... $ 55.3 26% $ 83.8 21% $ (9.5) -3%
========= ========= =========== ======= ========== =======
Interest expense, net.................. $ 7.0 3% $ 41.2 10% $ 73.0 21%
========= ========= =========== ======= ========= =======
Other expenses......................... $ (3.7) -2% $ (5.7) -1% $ (32.7) -10%
========= ========= =========== ======= ========= =======
Reorganization items................... $ -- -- $ -- -- $ (433.3) -127%
========= ========= ============ ======= ========= =======
Net income (loss)...................... $ 25.5 12% $ 21.7 5% $ (249.9) -73%
========= ========= ============ ======= ========== =======
</TABLE>
1999 Compared with 1998
Net Revenue. Net revenue decreased 15% to $342.2 for 1999 from $404.8
for 1998 primarily due to decreased revenue from the Company's offshore energy
support operations.
Revenue from offshore energy support operations decreased 38% to $150.3
million for 1999 from $242.6 million for 1998 due primarily to the worldwide
decrease in day rates and utilization for both supply and crew boats. This
decline, as described above, began in 1998 and continued in 1999 as a result of
a steep decline in energy prices and exploration and production activity.
Marine transportation services revenue increased 29% to $148.9 million
for 1999 from $115.7 million for 1998 primarily due to revenue earned by the
five new Lightship Tankers, which were brought into service between October 1998
and June 1999. These new tankers operate more efficiently and in some cases
demand higher rates than the Company's other tankers. Revenue from Lightship was
$49.5 million in 1999 compared to $3.2 million for the three months in 1998.
These increases were offset in part because the Company returned the Seabulk
Challenger to the lessor at the expiration of the lease in October 1999 and
scrapped the HMI Astrachem, in November 1999 in anticipation of its OPA
90-mandated retirement date. Combined revenues for these tankers were $14.9
million in 1999 compared to $17.2 million in 1998.
Revenue from harbor and offshore towing decreased 7% to $43.0 million
for 1999 from $46.4 million for 1998 due to reduced shipping activity in the
ports that the Company serves, decreased offshore towing activities and
increased competition in the Port of Tampa, as described above.
Operating Expenses. Operating expenses increased 3% to $220.8 million
for 1999 from $213.6 million for 1998, primarily due to increases in maintenance
and repairs of $7.0 million and crew payroll and benefits of $3.0 million
resulting from the acquisition of the Lightship Tankers, increased bad debt
expense and rising fuel prices approximately $5.3 million, offset in part by
reduced crew payroll and benefits and maintenance of approximately $5.7 million
on vessels that were stacked. This factor, combined with the general economic
downturn experienced by the Company's offshore energy customers, resulted in an
increase provision for uncollectible accounts receivable of approximately $5.2
million in 1999, compared to 1998. As a percentage of revenue, operating
expenses increased to 65% for 1999 from 53% for 1998 due primarily to the
decline in revenue from the offshore energy support operations and the other
factors noted above.
Overhead Expenses. Overhead expenses increased 14% to $49.4 million for
1999 from $43.2 for 1998 primarily due to an increase in consulting and
professional fees of 53% in 1999 over 1998 incurred as a result of the Company's
liquidity issues. As a percentage of revenue, overhead expenses were 14% and 11%
for 1999 and 1998, respectively. The increase as a percentage of revenue
reflects the combined effects of increased expenditures and lower revenues.
Depreciation, Amortization and Drydocking Expenses. Depreciation,
amortization and drydocking expenses increased 27% to $81.5 million in 1999 from
$64.2 million in 1998. Approximately $7.7 million of the increase is
attributable to an increase in the marine transportation operation resulting
from the addition of the Lightship Tankers. Also, the Company acquired 37
offshore energy support vessels in the first quarter of 1998 and the results of
operations for 1999 reflect a full year of depreciation expense for those
acquired vessels, which had the effect of increasing depreciation expense by
approximately $9.6 million.
Income (loss) from Operations. Income (loss) from operations decreased
111% to $(9.5) million in 1999 from $83.8 million in 1998, as a result of the
factors indicated above.
Net Interest Expense. Net interest expense increased $31.8 million from
$41.2 million in 1998 to $73 million in 1999 as a result of additional
borrowings under the Company's revolving credit facility and additional interest
payable at default rates of interest from March 31, 1999 through the September
8, 1999 bankruptcy filing date. Besides these increases, the Company did not
accrue approximately $8.8 million of contractual interest subsequent to the
bankruptcy filing on debt that was ultimately extinguished at the Effective Date
of the Plan of Reorganization. Interest expense was partially offset by interest
income of $0.9 million and $8.5 million in 1999 and 1998, respectively. Interest
income in 1998 primarily reflects earnings on the proceeds of the Lightship
Tankers Title XI ship financing bonds that were invested pursuant to MARAD
regulations and restricted to fund the remaining construction costs of the
Lightship Tankers.
Other Expenses. Other expenses increased $27.0 million, from $5.7
million in 1998 to $32.7 million in 1999. The increase was primarily the result
of the loss on the sale of vessels.
Reorganization Items. Reorganization items in 1999 represent items
directly related to the Company's Chapter 11 proceeding. These expenses consist
primarily of the writedown of long-term assets and goodwill to reflect the
reorganization value of the Company and professional fees.
1998 Compared with 1997
Revenue. Revenue increased 93% to $404.8 million for 1998 from $210.3
million for 1997, primarily due to increased revenue from the Company's offshore
energy support and chemical transportation operations.
Revenue from offshore energy support operations increased 118% for 1998
over 1997, primarily due to an increase of $133.6 million from acquisitions,
offset by a decrease of $2.3 million resulting from a decrease in day rates and
utilization rates. Utilization of supply boats decreased to 73% for 1998 from
93% in 1997 and domestic rates for crew boats decreased to 83% for 1998 from 93%
in 1997. As indicated above under "Revenue Overview - Marine Support
Services-Domestic Operations," average supply boat day rates and utilization
rates in the U.S. Gulf of Mexico declined in the 1998 second, third and fourth
quarters. In addition, average crew boat day rates and utilization rates
declined in the 1998 second half (although the decline was not as severe as that
of supply boat rates, due primarily to fewer actual and anticipated new vessel
deliveries).
Marine transportation services revenue increased 48% to $115.8 million
for 1998 from $78.4 million for 1997, primarily due to additional revenues
earned by OSTC for marketing vessels owned by third parties and the acquisition
of five petroleum product tankers in 1998.
Revenue from offshore and harbor towing operations increased 127% to
$46.4 million for 1998 from $20.4 million for 1997, primarily due to an increase
of $24.6 million from acquisitions. The remaining increase resulted from the
redeployment of certain vessels from harbor towing to offshore towing. Offshore
towing contracts generate higher revenues than harbor towing contracts.
Operating Expenses. Operating expenses increased 104% to $213.6 million
for 1998 from $104.9 million for 1997, primarily due to the acquisitions. As a
result of these acquisitions, crew payroll and benefits, maintenance and
repairs, and supplies and consumables increased $37.9, $9.0, and $27.7 million,
respectively. As a percentage of revenue, operating expenses increased to 53%
for 1998 from 50% for 1997, primarily due to the aforementioned declines in day
rates and utilization and an increase in consumable expenses due to the
acquisition of two tankers.
Overhead Expenses. Overhead expenses increased 74% to $43.2 million for
1998 from $24.8 million for 1997, primarily due to increased staffing
requirements due to acquisitions. As a percentage of revenue, overhead expenses
were 11% and 12% for 1998 and 1997, respectively.
Depreciation, Amortization and Drydock Expense. Depreciation,
amortization and drydock expense increased 155% to $64.2 million for 1998
compared with $25.2 million for 1997 as a result of an increase in fleet size
due to acquisitions.
Income from Operations. Income from operations increased 52% to $83.8
million, or 21% of revenue, for 1998 from $55.3 million, or 26% of revenue, for
1997 as a result of the factors noted above.
Net Interest Expense. Net interest expense increased 488% to $41.2
million, or 10% of revenue, for 1998 from $7.0 million, or 3% of revenue, for
1997, primarily as a result of the February 1998 offering of Senior Notes and
debt incurred in connection with acquisitions.
Other Income (Expense). Other expenses were $5.7 million for 1998 as
compared to $3.7 million for 1997, primarily due to dividend payments relating
to the Trust Convertible Preferred Securities issued in July 1997.
Net Income (Loss). The Company had net income of $21.7 million for 1998
as compared to $25.5 million for 1997 as a result of the factors noted above.
Seasonality
The Company has experienced some slight seasonality in its operations.
The first half of the year is generally not as strong as the second half due to
lower activity in offshore energy support services and petroleum product
transportation during the months of February, March, and April.
Liquidity and Capital Resources
Background. The Company's capital requirements have historically arisen
primarily from its working capital needs, acquisitions of and improvements to
vessels, and debt service requirements. The Company's principal sources of cash
have been bank borrowings, cash provided by operations, and proceeds from public
offerings of securities, consisting of the initial public offering of common
stock in August 1996, a second offering of common stock in February 1997, an
offering of 6 1/2% Trust Convertible Preferred Securities (the "Preferred
Securities") in 1997, and an offering of 83/8% Senior Notes (the "Senior Notes")
in February 1998. In addition, the Company has financed various vessel
acquisitions through U.S. government-guaranteed Title XI ship financing bonds
and capital lease obligations.
In addition to these securities offerings, the Company has established
various bank credit facilities from time to time. The Company entered into a
revolving credit and term loan agreement with a group of banks in February 1998.
The agreement provided for (i) a $175.0 million revolving credit facility
maturing in 2003, and (ii) a $150.0 million term loan maturing in 2005, payable
in equal quarterly installments beginning in June 1998. The agreement required
the Company to maintain specified ratios relating to leverage, debt service and
indebtedness; limited the Company's ability to create or incur certain liens;
limited the incurrence of certain indebtedness; restricted the Company's ability
to make certain investments; and restricted certain payments, including
dividends on the Company's capital stock.
As a result of the declines in rates and utilization of its offshore
energy support vessels beginning in 1998 (discussed more fully under "Liquidity
Concerns" below), the Company entered into an amendment of the agreement,
effective September 30, 1998. In the absence of the amendment, the Company would
not have been in compliance with the covenant in the loan agreement that it
maintain a maximum "Leverage Ratio" (as defined in the Agreement) of 4.0:1.0.
The amendment modified that and other covenants in the agreement, generally
imposing restraints on future capital and other expenditures. In addition, the
amendment (i) reduced the revolving credit facility to $150.0 million,
increasing to $166.0 million subsequent to March 1, 1999, subject to repayment
of a portion of the term loan with proceeds from a sale and leaseback
transaction, and then increasing to $175.0 million, subject to compliance with a
specified leverage ratio; (ii) provided that borrowings thereunder be secured by
Company-owned vessels having an appraised value of at least $600.0 million and
by substantially all other assets of the Company; and (iii) increased the rate
of interest on borrowings and fees payable under the Agreement.
Cash Flows. During 1998, the Company generated $66.9 million in cash
flows from operations, primarily reflecting net income adjusted by normal
recurring non-cash items and changes in working capital. Cash used in investing
activities was approximately $501.3 million, primarily reflecting the
acquisition and construction of and capital improvements to vessels. Cash
provided by financing activities was approximately $429.6 million, consisting of
proceeds from the offering of the Senior Notes and borrowings under bank credit
facilities, offset in part by principal payments on debt and capital lease
obligations.
During 1999, the Company generated $10.2 million of cash from
operations before reorganization items, primarily reflecting the net loss for
the period, after elimination of reorganization expense of $433.3 million and
noncash items. Cash used in investing activities was approximately $11.3 million
for the period, primarily reflecting the disposal of vessels and the redemption
of investments, offset by the costs of construction of and capital improvements
to other vessels. Cash generated by financing activities was approximately $10.0
million, consisting primarily of payments under the Loan Agreement, offset by
borrowings.
Recent Expenditures and Future Cash Requirements. During 1998 and
through June 1999, 61 vessels were delivered to or acquired by the Company, at a
total cost of $405.4 million. These vessels included more than 30 offshore
energy support vessels and seven petroleum product and chemical tankers. As a
result of the declines in rates and utilization discussed above, the Company
curtailed its vessel acquisition activities in March 1999.
The Company's current and future capital needs relate primarily to debt
service and maintenance and improvements of its fleet. The Company's principal
and interest payment obligations for 2000 are estimated to be approximately
$114.4 million, and operating lease obligations for 2000 are estimated to be
approximately $4.4 million. Capital requirements for fleet maintenance and
improvements were approximately $72.8 million for 1998, $13.6 million for 1999
and are currently expected to aggregate $19 million during 2000. The reductions
for 1999 and 2000 reflect the substantial amounts expended in 1998, which
resulted primarily from planned refurbishments of vessels acquired in 1997 and
early 1998, and the deferral of certain scheduled drydockings and reduction of
other expenses in 1999 and 2000. In view of declines in average day rates and
utilization rates, particularly in the U.S. Gulf of Mexico, and the possibility
that rates will remain at low levels, the Company has curtailed or deferred
certain capital and other expenditures.
The above amounts do not include capital and other expenditures
relating to five 45,300 dwt double-hull product and chemical carriers in which
the Company currently holds a 75.8% equity interest (see Note 1 to the
consolidated financial statements). The Company paid $18.5 million in June 1998
to increase its equity interest in these carriers from 0.8% to 50.8% and an
additional $9.6 million (comprised of cash of $1.0 million and a note payable of
$8.6 million) in December 1999 to further increase its interest to 75.8%. Three
of these carriers were delivered in the fourth quarter of 1998, a fourth was
delivered in early 1999, and the fifth was delivered in the second quarter of
1999. The aggregate cost of the five carriers was approximately $280 million, a
substantial portion of which was financed with the proceeds of U.S.
government-guaranteed Title XI ship financing bonds. The Company has through
December 31, 2000 to purchase the remaining 24.2% interest for approximately
$11.0 million and thereafter a right of first refusal to purchase such interest
for the same amount plus interest accrued from December 31, 2000.
During 2000, an estimated $19.5 million of principal and interest
payments are due on the Title XI ship financing bonds referred to above. In the
event that the operations of the carriers do not generate sufficient cash to
fund those payments and other operating and capital expenses of the carriers on
a cumulative basis from May 1, 1999, the Company has the right to require the
current holder of the 24.2% minority interest to fund up to $5.0 million of the
cumulative operating shortfall through June 1, 2000.
Liquidity Concerns. As a result of the severe worldwide downturn in
offshore oil and gas exploration, development and production activities
beginning in 1998 and continuing and deepening during 1999, substantial declines
in offshore energy support vessel day rates and utilization adversely affected
the Company's operating results during 1999. See "Results of Operations" above
for additional information. As a result of these declines, beginning March 31,
1999, the Company was not in compliance with certain covenants contained in its
bank credit agreement. The Company's bank lenders waived the Company's
noncompliance on several occasions, the last such waiver covering the period
from August 20 until September 7, 1999. However, these waivers resulted in the
payment of additional interest, as well as substantial fees. Further, in late
August and early September 1999, due to the Company's financial condition and
the covenants in the credit agreement and other debt instruments, the Company
had no further borrowing capacity. In addition, an interest payment of
approximately $12.5 million was due on the Senior Notes on August 16, 1999. The
Company did not have sufficient funds to make this payment. Discussions with an
informal committee of holders of the Senior Notes and Preferred Securities led
to the Company's filing of a petition under Chapter 11 of the U.S. Bankruptcy
Code on September 8, 1999.
The Reorganization. The Company's reorganization plan became effective
on December 15, 1999. Under the plan:
o the holders of the $300.0 million of senior notes received 9,800,000 shares
of Company common stock in exchange for their notes; o the holders of the
$118.0 million of trust preferred securities received 200,000 shares of
common stock, as well as Class A warrants to purchase an additional 125,000
shares, in exchange for those securities;
o stockholders received Class A warrants to purchase a total
of 125,000 shares of common stock; o noteholder warrants to
purchase 6.75% of common stock on a fully diluted basis
after giving effect to the exercise of these warrants,
exercisable at a nominal purchase price for seven and
one-half years, were issued to purchasers of our new senior
secured second notes described below;
o claims of general and trade creditors were unaffected; and
o the Company reincorporated from Florida to Delaware.
The 9,800,000 shares received by the holders of the senior notes
represent 98.0% of the Company's currently outstanding common stock and 89.3% of
its common stock on a fully diluted basis after assuming exercise of all the
Class A warrants and the noteholder warrants. The 200,000 shares received by
holders of the trust preferred securities represent 2.0% of the Company's
currently outstanding common stock and 1.8% of its common stock on a fully
diluted basis.
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 new 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 Company's bank loans and to pay
administrative and other fees and expenses. The balance of the proceeds will be
used for working capital and general corporate purposes. At December 31, 1999,
no amounts were outstanding under the revolving credit facility.
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:
Facility. Amount Maturity
-------- ------ --------
o Tranche A term loan $75 million 2004
o Tranche B term loan $30 million 2005
o Tranche C term loan $95 million 2006
o Revolving loan $25 million 2004
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 substantially all of the equity of the Company's
subsidiaries and by first priority perfected security interests in substantially
all of the vessels and other assets owned by the Company and its subsidiaries.
In addition, substantially all 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.
The senior secured notes are senior obligations and are secured by a
second priority lien on the 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, we
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. Due to continuing weakness in day rates and
utilization in the offshore energy support business, as well as adverse market
conditions in the Company's towing and transportation businesses, the Company
anticipated that earnings would be lower than expected in the first quarter of
2000. As a result, the Company anticipated that it would not be in compliance
with certain covenants in its bank credit agreement as of March 31, 2000 as well
as future dates if market conditions did not improve. The Company has entered
into an amendment to the credit agreement with the lending banks under which the
relevant covenants have been modified through March 31, 2001 and the Company is
required to prepay principal under the term loans aggregating $10.0 million
before June 30, 2000, $35 million before August 31, 2000, and $60 million before
January 1, 2001. The Company intends to sell vessels and other assets to obtain
the funds with which to make these payments. Some of these sales may be at less
than book value. The amended credit agreement further provides that, in the
event the Company has not made the required principal payments as scheduled or
achieved certain target levels of EBITDA for the third and fourth quarters of
2000, the lending banks may require the Company to sell additional vessels, to
be selected by the lending banks, with an aggregate fair market value of $35
million on a timetable specified by the lending banks. Additionally, the Company
is required to obtain the consent of the lending banks to borrow in excess of
$17.5 million under the revolving loan portion of the credit facility. The
Company is required to pay a fee of $4.5 million to the lending banks in
connection with the amendment of the credit agreement., payable in the form of a
promissory note, accruing interest at 15% per annum, due the earlier of (i)
April 2002 and (ii) the date on which the ratio of funded indebtedness to EBITDA
for any quarter is less than four to one.
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 for it to meet its debt service, including the prepayments
described above, and other capital requirements through 2000. 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.
Effects of Inflation
The Company does not consider inflation a significant business risk in
the current and foreseeable future, although the Company has experienced some
cost increases, some of which have been offset by charter hire escalation
clauses.
Prospective Accounting Changes
In September 1998, the Financial Accounting Standards Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
as amended by statement No. 137 which is required to be adopted by the company
in fiscal 2001. Because of the Company's minimal use of derivatives, management
does not anticipate that the adoption of the new Statement will have a
significant effect on the Company's earnings or financial position.
Impact of Year 2000
In prior years, the Predecessor Company discussed the nature and
progress of its plans to become Year 2000 ready. In late 1999, the Successor
Company substantially completed its remediation and testing of systems. As a
result of those planning and implementation efforts, the Successor Company
experienced no significant disruptions in mission-critical information
technology and non-information technology systems and believes those systems
successfully responded to the Year 2000 date change. The Successor Company is
not aware of any material problems resulting from Year 2000 issues, either with
its products, its internal systems, or the products and services of third
parties. The Company will continue to monitor its mission-critical computer
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates
which may adversely affect its results of operations and financial condition.
The Company's policy is not to use financial instruments for trading or other
speculative purposes and the Company is not a party to any leveraged financial
instruments. Except as set forth below, the Company manages market risk by
restricting the use of derivative financial instruments to infrequent purchases
of forward contracts for the purchase of fuel oil for its carrier fleet. The
Company does not have any open contracts at December 31, 1999. A discussion of
the Company's credit risk and the fair value of financial instruments is
included in Notes 19 and 21 of the Company's consolidated financial statements.
Exposure To Short-Term Interest Rates. Short-term variable rate debt,
primarily borrowings under the Credit Agreement, comprised approximately $200
million of the Company's total debt at December 31, 1999. The Company's variable
rate debt had an average interest rate of 11.3% at December 31, 1999. A
hypothetical 2% increase in interest rates on $200 million of debt would cause
the Company's interest expense to increase approximately $4.0 million per year,
with a corresponding decrease in income before taxes.
As a requirement of its Credit Agreement, the Company entered into an
interest rate cap in February 2000 with Deutsche Bank AG. The notional amount of
the cap is $75 million and is for a term of three years. The underlying index is
the three-month LIBOR and the strike price of the cap is 8.5%. Each quarter the
three-month LIBOR will be compared to the strike price. If the three-month LIBOR
is above the strike price, Deutsche Bank AG will make a payment to the Company.
The interest rate cap gives Hvide protection against rising rates and benefit
from declining rates.
Item 8. Financial Statements
The Company's Consolidated Financial Statements are listed in Item
14(a)(1), included at the end of this Report on Form 10-K beginning on page F-1,
and incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is contained in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the captions
"Directors and Nominees" and "Compliance with Section 16(a) of the Securities
Exchange Act of 1934," and in Item 4a of this Report on Form 10-K, and is
incorporated herein by reference.
Item 11. Executive Compensation
The information required by Item 11 is contained in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the caption
"Executive Compensation," and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is contained in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the caption
"Common Stock Ownership of Certain Beneficial Owners and Management," and is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 is contained in the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders under the caption
"Compensation Committee Interlocks and Insider Participation and Certain
Transactions," and is incorporated herein by reference.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements and Schedules. See Index to Consolidated
Financial Statements and Schedules which appear on page F-1 herein.
(b) Reports on Form 8-K.
Reports on Form 8-K filed during the last quarter of the fiscal year
covered by this Report on Form 10-K are as follows:
(1) a Current Report on Form 8-K dated October 12, 1999, reporting
(under Item 5, "Other Events") the filing of the proposed
Joint Plan of Reorganization and a related proposed Disclosure
Statement with the Bankruptcy Court;
(2) a Current Report on Form 8-K dated December 27, 1999,
reporting (under Item 3, "Bankruptcy or Receivership") the
confirmation of the First Amended Joint Plan of Reorganization
as filed in the Bankruptcy Court;
(3) a Current Report on Form 8-K/A dated December 30, 1999,
reporting (under Item 3, "Bankruptcy or Receivership") the
amendment to Form 8-K filed on December 27, 1999.
(c) List of Exhibits. The following is a list of exhibits furnished.
Copies of exhibits will be furnished upon written request of any stockholder at
a charge of $.25 per page plus postage. The Company hereby files as part of this
Form 10-K the exhibits listed in Item 14(a)(3) above. Exhibits which are
incorporated herein by reference can be inspected and copied at the public
reference facilities maintained by the Commission, 450 Fifth Street, N.W., Room
1024, Washington, D.C., and at the Commission's regional offices at CitiCorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511 and Seven
World Trade Center, Suite 1300, New York, NY 10048. Copies of such material can
also be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 29549, at prescribed rates.
Exhibit
Number Exhibit
2.1* Debtor's First Amended Joint Plan of Reorganization, dated November 1,
1999, and related Disclosure Statement, filed with the U.S. Bankruptcy
Court for the District of Delaware (incorporated by reference to
Exhibits 1 and 2 to the Schedule 13D/A filed with the Commission on
December 29, 1999 by Loomis, Sayles & Company, L.P. (Commission File
No. 000-28732)).
3.1(a)* Certificate of Incorporation of the Registrant
3.1(b)* Certificate of Merger of the Registrant
3.2* By-laws of the Registrant
4.1* Form of Common Stock Certificate of the Registrant
4.2* Form of Warrant Certificate of the Registrant
4.3* Indenture for the 12 1/2% Senior Secured Notes due 2007, dated December
15, 1999 among Hvide Marine Incorporated as the Issuer, the Subsidiary
Guarantors named therein, State Street Bank and Trust Company as the
Trustee and Bankers Trust Company as the Collateral Agent (incorporated
by reference to Exhibit 4.1 to the Registrant's Form 8-K filed with the
Commission on December 27, 1999 (Commission File No. 000-28732)).
4.4* Warrant Agreement, dated December 15, 1999, between Hvide Marine
Incorporated and State Street Bank and Trust Company as Warrant Agent
(incorporated by reference to Exhibit 4.2 to the Registrant's Form 8-K
filed with the Commission on December 27, 1999 (Commission File No.
000-28732)).
4.5* Class A Warrant Agreement, dated as of December 15, 1999 by and between
Hvide Marine Incorporated and State Street Bank and Trust Company.
10.1* Credit Agreement, dated December 15, 1999, among Hvide Marine
Incorporated, Bankers Trust Company as Administrative Agent, Deutsche
Bank Securities Inc. as Lead Arranger and Book Manager, Meespierson
Capital Corp. as Syndication Agent and Co-Arranger and the various
persons from time to time parties to the agreement as Lenders
(incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K
filed with the Commission on December 27, 1999 (Commission File No.
000-28732)).
10.2* Common Stock Registration Rights Agreement, dated December 15, 1999,
among Hvide Marine Incorporated, Bankers Trust Corporation and Great
American Life Insurance Company, Great American Insurance Company, New
Energy Corp., American Empire Surplus Lines Insurance Company,
Worldwide Insurance Company and American National Fire Insurance
Company as Purchasers (incorporated by reference to Exhibit 10.2 to the
Registrant's Form 8-K filed with the Commission on December 27, 1999
(Commission File No. 000-28732)).
10.3* Registration Rights Agreement for the 12 1/2% Senior Secured Notes due
2007, dated December 15, 1999, among Hvide Marine Incorporated, Bankers
Trust Corporation and Great American Life Insurance Company, Great
American Insurance Company, New Energy Corp., American Empire Surplus
Lines Insurance Company, Worldwide Insurance Company and American
National Fire Insurance Company as Purchasers (incorporated by
reference to Exhibit 10.3 to the Registrant's Form 8-K filed with the
Commission on December 27, 1999 (Commission File No. 000-28732)).
10.4* Registration Rights Agreement by and between Loomis, Sayles &
Company, L.P. and Hvide Marine Incorporated, dated as of December 15,
1999 (incorporated by reference to Exhibit 4 to the Schedule 13D/A
filed with the Commission on December 29, 1999 by Loomis, Sayles &
Company, L.P. (Commission File No. 000-28732)).
10.5 First Amendment, dated as of April 13, 2000 among Hvide Marine
Incorporated, the financial institutions party to the Credit Agreement
and Bankers Trust Company, as administrative agent.
23.1 Consents of Ernst & Young LLP.
27 Financial Data Schedule.
99.1* Order, dated December 9, 1999, of the United States Bankruptcy Court
for the District of Delaware, confirming the First Amended Joint Plan
of Reorganization in In re: Hvide Marine Incorporated, et al., Case No.
99-3024 (PJW), including the Supplement to such Plan (incorporated by
reference to Exhibit 99.1 to the Registrant's Form 8-K filed with the
Commission on December 27, 1999 (Commission File No. 000-28732)).
- -----------------
* Incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ EUGENE F. SWEENEY
----------------------
Eugene F. Sweeney
Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
Chairman of the Board, April , 2000
- --------------------------------------
Jean Fitzgerald Chief Executive Officer
and Director
/s/ JAMES J. GAFFNEY Acting Chairman of the Board, April 14, 2000
- --------------------------------------
James J. Gaffney Director
/s/ EUGENE F. SWEENEY President, Chief Operating April 14, 2000
- --------------------------------------
Eugene F. Sweeney Officer and Director (principal
executive officer)
/s/ WALTER S. ZORKERS Executive Vice President, April 14, 2000
- --------------------------------------
Walter S. Zorkers Chief Financial Officer
and Director (principal financial
officer)
/s/ JOHN J. KRUMENACKER Controller (chief accounting April 14, 2000
- --------------------------------------
John J. Krumenacker officer)
/s/ THOMAS P. MOORE, JR. Director April 14, 2000
- --------------------------------------
Thomas P. Moore, Jr.
/s/ DONALD R. SHEPHERD Director April 14, 2000
- --------------------------------------
Donald R. Shepherd
/s/ PETER H. CRESSY Director April 14, 2000
- --------------------------------------
Peter H. Cressy
/s/ JOHN F. MCGOVERN Director April 14, 2000
- --------------------------------------
John F. McGovern
/s/ ROBERT KEISER Director April 14, 2000
- --------------------------------------
Robert Keiser
</TABLE>
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Index to Consolidated Financial Statements and Schedules
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants.............................................................F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1998 (Predecessor Company)
and December 31, 1999 (Successor Company)......................................................................F-3
Consolidated Statements of Operations for the years ended December 31, 1997,
December 31, 1998, the period from January 1, 1999 to December 15, 1999
(Predecessor Company) and the period from December 16, 1999 to December 31, 1999
(Successor Company)............................................................................................F-4
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1997, December 31, 1998, the period from January 1, 1999 to
December 15, 1999 (Predecessor Company) and the period from December 16, 1999 to
December 31, 1999 (Successor Company)..........................................................................F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
December 31, 1998, the period from January 1, 1999 to December 15, 1999
(Predecessor Company) and the period from December 16, 1999 to December 31, 1999
(Successor Company)............................................................................................F-6
Notes to Consolidated Financial Statements.....................................................................F-7
</TABLE>
All schedules have been omitted because the information is not applicable or is
not material or because the information required is included in the consolidated
financial statements or the notes thereto.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Hvide Marine Incorporated
We have audited the accompanying consolidated balance sheet of Hvide
Marine Incorporated as of December 31, 1999 (Successor Company), and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the period from December 16, 1999 to December 31, 1999 (Successor
Company) and for the period from January 1, 1999 to December 15, 1999
(Predecessor Company). We have also audited the consolidated balance sheet of
Hvide Marine Incorporated as of December 31, 1998 (Predecessor Company), and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the two years in the period ended December 31, 1998
(Predecessor Company). The Predecessor Company and the Successor Company are
hereinafter referred to as the Company. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Hvide
Marine Incorporated at December 31, 1999 (Successor Company) and the
consolidated results of its operations and its cash flows for the period from
December 16, 1999 to December 31, 1999 (Successor Company) and for the period
from January 1, 1999 to December 15, 1999 (Predecessor Company) as well as the
consolidated financial position at December 31, 1998 (Predecessor Company) and
the consolidated results of its operations and its cash flows for each of the
two years in the period then ended (Predecessor Company), in conformity with
accounting principles generally accepted in the United States.
As discussed in Note 1 to the consolidated financial statements, a
change in reporting entity occurred during 1999. The consolidated financial
statements as of and for the year ended December 31, 1998 have been restated to
reflect this change.
/s/ Ernst & Young LLP
Miami, Florida
February 25, 2000, except for the seventh
paragraph of Note 10, as to which the date
is March 31, 2000 and Note 24, as to which
the date is April 14, 2000
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except par value data)
<TABLE>
<CAPTION>
Predecessor Successor
Company Company
December 31, 1998 December 31, 1999
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................................. $ 10,106 $ 19,046
Restricted cash........................................................................ -- 15,217
Accounts receivable:
Trade, net of allowance for doubtful accounts of $2,169 and $5,799 in 1998 and 1999.. 69,448 47,555
Insurance claims and other........................................................... 12,290 6,775
Marine operating supplies.............................................................. 18,998 10,632
Prepaid expenses....................................................................... 4,623 4,013
---------- --------------
Total current assets................................................................. 115,465 103,238
Property:
Construction-in-progress............................................................... 116,056 1,345
Vessels and improvements............................................................... 1,042,717 698,979
Furniture and equipment................................................................ 17,328 11,643
Less accumulated depreciation.......................................................... (95,468) (22,087)
---------- --------------
Net property........................................................................... 1,080,633 689,880
Deferred costs, net....................................................................... 38,771 29,464
Restricted investments.................................................................... 23,344 3,752
Goodwill, net............................................................................. 91,357 --
Other..................................................................................... 5,697 4,406
---------- --------------
$ 1,355,267 $ 830,740
=========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................................................... $ 26,759 $ 10,895
Current maturities of long-term debt................................................... 264,341 17,775
Current obligations under capital leases............................................... 2,991 3,332
Accrued interest....................................................................... 10,553 3,102
Accrued liabilities and other.......................................................... 27,623 37,489
---------- --------------
Total current liabilities............................................................ 332,267 72,593
Long-term debt............................................................................ 256,161 465,769
Obligations under capital leases.......................................................... 36,983 33,934
Senior notes.............................................................................. 300,000 76,709
Deferred income taxes..................................................................... 32,721 --
Other..................................................................................... 5,551 5,952
Company-obligated mandatorily redeemable preferred securities of a subsidiary trust
holding solely debentures issued by the Predecessor Company............................ 115,000 --
Minority interest......................................................................... 28,549 10,457
Commitments and contingencies
Stockholders' equity:
(Predecessor Company)
Preferred stock, $1.00 par value--authorized 10,000 shares;
issued and outstanding, none....................................................... -- --
Class A common stock--$.001 par value, authorized 100,000 shares; 12,873 shares issued and
outstanding as of December 31, 1998................................................ 13 --
Class B common stock--$.001 par value, authorized 5,000 shares; 2,547 shares issued and
outstanding as of December 31, 1998................................................ 2 --
(Successor Company)
Class A common stock--$.01 par value, authorized 20,000 shares; 10,000 shares issued and
outstanding as of December 31, 1999................................................ -- 100
Additional paid-in capital............................................................. 196,822 166,791
Retained earnings (accumulated deficit)................................................ 51,198 (1,565)
---------- --------------
Total stockholders' equity......................................................... 248,035 165,326
---------- --------------
$1,355,267 $ 830,740
========== ==============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15, December 31,
-------------------------- -------------- ------------
1997 1998 1999 1999
------------ ------------ -------------- -------
<S> <C> <C> <C> <C>
Revenues.......................................................... $ 210,257 $ 404,793 $ 328,751 $ 13,479
Operating expenses:
Crew payroll and benefits...................................... 48,732 92,483 91,374 4,155
Charter hire and bond guarantee fee............................ 10,548 19,679 15,791 554
Repairs and maintenance........................................ 10,162 19,807 26,045 719
Insurance...................................................... 8,867 12,718 12,716 532
Consumables.................................................... 13,654 39,628 35,966 1,660
Rent and utilities............................................. 12,970 29,286 30,861 427
---------- --------- ------------ ----------
Total operating expenses..................................... 104,933 213,601 212,753 8,047
Selling, general and administrative expenses:
Salaries and benefits.......................................... 12,052 21,062 18,048 870
Office......................................................... 2,248 5,827 6,563 220
Professional fees.............................................. 4,683 6,963 10,447 211
Other.......................................................... 5,808 9,327 12,756 342
---------- --------- ------------ ----------
Total overhead expenses...................................... 24,791 43,179 47,814 1,643
Depreciation, amortization and drydocking......................... 25,200 64,244 79,410 2,069
---------- --------- ------------ ----------
Income (loss) from operations..................................... 55,333 83,769 (11,226) 1,720
Other income (expense):
Interest expense............................................... (8,341) (49,723) (71,215) (2,756)
Interest income................................................ 1,317 8,485 841 68
Minority interest and equity in earnings of subsidiaries....... (3,527) (5,848) (2,596) (408)
Loss on disposal of assets..................................... -- -- (25,658) --
Other............................................................. (177) 156 (3,875) (189)
--------- --------- --------------- ----------
Total other expense, net..................................... (10,728) (46,930) (102,503) (3,285)
Income (loss) before reorganization items, income taxes, and
extraordinary item............................................. 44,605 36,839 (113,729) (1,565)
Reorganization items:
Professional fees.............................................. -- -- (8,535) --
Write down of goodwill and property............................ -- -- (419,998) --
Other, net..................................................... -- -- (4,740) --
---------- --------- ------------ ----------
Total reorganization items................................... -- -- (433,273) --
---------- --------- ------------ ----------
Income (loss) before income taxes and extraordinary item.......... 44,605 36,839 (547,002) (1,565)
Provision for (benefit from) income taxes......................... 16,950 13,489 (32,004) --
---------- --------- ------------ ----------
Income (loss) before extraordinary item........................... 27,655 23,350 (514,998) (1,565)
Gain (loss) on early extinguishment of debt, net of applicable
income taxes................................................... (2,132) (1,602) 266,643 --
---------- --------- ------------ ----------
Net income (loss)............................................ $ 25,523 $ 21,748 $ (248,355) $ (1,565)
========== ========= ============ ==========
Earnings per common share:
Income (loss) before extraordinary item........................... $ 1.87 $ 1.52 $ (33.22) $ (0.16)
Gain (loss) on early extinguishment of debt....................... (0.14) (0.10) 17.20 --
--------- --------- ------------ ----------
Net income (loss) per common share........................... $ 1.73 $ 1.42 $ (16.02) $ (0.16)
========== ========= ============ ==========
Earnings per common share--assuming dilution:
Income (loss) before extraordinary item........................... $ 1.75 $ 1.43 $ (33.22) $ (0.16)
Gain (loss) on early extinguishment of debt....................... (0.12) (0.08) 17.20 --
--------- --------- --------------- ----------
Net income (loss) per common share........................... $ 1.63 $ 1.35 $ (16.02) $ (0.16)
========== ========= =============== ==========
Weighted average common shares outstanding........................ 14,785 15,324 15,503 10,000
========== ========= =============== ==========
Weighted average common and common equivalent
shares outstanding--assuming dilution.......................... 17,120 19,451 15,503 10,000
========== ========= =============== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION>
Class A
Class B
Retained
Common Stock Common Stock Additional Earnings
Paid-In (Accumulated
Shares Amount Shares Amount Capital Deficit) Total
---------- ------ ------ ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR COMPANY
Balance at December 31, 1996 7,647 $ 8 3,419 $ 3 $ 97,153 $ 3,927 $101,091
Common stock issued in public
offering, net of issuance costs 4,000 4 -- -- 93,516 -- 93,520
Conversion of Class B to Class A
common stock... 513 -- (513) -- -- -- --
Common stock issued in connection
with acquisition 142 -- -- -- 3,650 -- 3,650
Common stock issued upon exercise
of stock options 53 -- -- -- 641 -- 641
Common stock issued pursuant to
employee stock purchase plan 22 -- -- -- 467 --
467
Common stock issued to directors 5 -- -- -- 95 --
95
Net income......... -- -- -- -- -- 25,523 25,523
----------- ------- --------- --------- ----------- ----------- ----------
Balance at December 31, 1997 12,382 12 2,906 3 195,522 29,450
224,987
Conversion of common stock 360 1 (359) (1) -- --
- --
Common stock issued upon exercise
of stock options 1 -- -- -- 1 -- 1
Common stock issued pursuant to
employee stock purchase plan 112 -- -- -- 889 --
889
Common stock issued to directors 18 -- -- -- 216 --
216
Stock compensation pursuant to key
employee stock plan -- -- -- -- 194 --
194
Net income......... -- -- -- -- -- 21,748 21,748
----------- ------- --------- --------- ----------- ----------- ----------
Balance at December 31, 1998 12,873 13 2,547 2 196,822 51,198 248,035
Common stock issued pursuant to
employee stock purchase plan 79 -- -- -- 253 --
253
Stock compensation pursuant to key
employee stock plan -- -- -- -- 104 -- 104
Common stock issued to directors 55 -- -- -- 130 --
130
Other.............. -- -- -- -- (167) -- (167)
Conversion of common stock 2,020 2 (2,020) (2)
Cancellation of Predecessor
Company common stock and
elimination of existing stockholder's
equity upon emergence from
bankruptcy....... (15,027) (15) (527) -- (197,142) 197,157 --
Issuance of Successor Company
common stock..... 10,000 100 -- -- 154,881 -- 154,981
Warrants issued in connection with
exit financing... -- -- -- -- 11,910 -- 11,910
Net loss........... -- -- -- -- -- (248,355) (248,355)
----------- ------- --------- --------- ----------- ----------- ----------
SUCCESSOR COMPANY
Balance at December 15, 1999 10,000 100 -- -- 166,791 -- 166,891
Net loss........... -- -- -- -- -- (1,565) (1,565)
----------- ------- --------- --------- ----------- ----------- ----------
Balance at December 31, 1999 10,000 $ 100 -- $ -- $ 166,791 $ (1,565) $165,326
======= ========= ========= =========== =========== ========== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15, December 31,
1997 1998 1999 1999
Operating activities:
<S> <C> <C> <C> <C>
Net income (loss)..................................................... $ 25,523 $ 21,748 $ (248,355) $ (1,565)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Reorganization items:
Write-off of goodwill............................................ -- -- 88,052 --
Revaluation of property and related assets....................... -- -- 331,946 --
Accrued reorganization expenses.................................. -- -- 5,828 --
Revaluation of other liabilities and assets...................... -- -- 2,872 --
Loss (gain) on early extinguishment of debt........................ 2,132 1,602 (266,643) --
Depreciation and amortization of property ......................... 19,093 49,106 64,220 1,795
Provision for bad debts............................................ 1,029 1,087 6,180 56
Loss (gain) on disposal of assets.................................. 524 (26) 25,658 --
Amortization of drydocking costs................................... 5,350 11,354 11,249 268
Amortization of goodwill........................................... 757 3,784 3,940 6
Amortization of discount on long-term debt and financing costs..... 680 1,489 2,777 180
Deferred income tax provision (benefit)............................ 13,147 10,189 (32,004) --
Minority partners' equity in (earnings) loss of subsidiaries, net.. (183) (1,627) (2,596) 408
Undistributed losses of affiliates................................. (110) (395) -- --
Other non-cash items............................................... 95 217 (164) --
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable.............................................. (20,640) (41,110) 20,000 1,172
Marine operating supplies........................................ (1,032) (4,270) 232 239
Other current and long-term assets............................... (8,468) (17,503) (6,409) (118)
Accounts payable and other liabilities........................... 2,145 31,273 3,084 (1,304)
---------- ---------- ---------- ---------
Net cash provided by operating activities................... 40,042 66,918 9,867 1,137
---------- ---------- ---------- ---------
Investing activities:
Purchases of property.................................................. (67,117) (114,521) (57,144) (597)
Acquisitions of businesses, net of escrow deposits utilized of $6,349 and of
cash acquired of $3,525 in 1997...................................... (194,723) (373,535) -- --
Payments on vessels under construction................................. (910) (155,980) (5,102) --
Purchases of restricted investments.................................... -- (369,629) (45,790) --
Redemption of restricted investments................................... -- 515,584 65,382
Capital contribution to unconsolidated affiliates...................... (226) (3,233) -- --
Proceeds from disposals of assets...................................... 1,633 -- 32,852 --
Purchase of minority interest in subsidiary...................... -- -- -- (1,000)
---------- ---------- ---------- ----------
Net cash used in investing activities...................... (261,343) (501,314) (9,802) (1,597)
Financing activities:
Repayments of short-term borrowings.................................... (16,242) -- -- --
Proceeds from DIP credit facility...................................... -- -- 26,690 --
Proceeds from long-term borrowings..................................... 177,210 431,700 245,208 --
Repayment of long-term borrowings...................................... (130,416) (313,938) (288,205) (80)
Proceeds from issuance of Senior notes and warrants.................... -- 292,500 -- --
Proceeds from issuance of Successor Company senior secured notes and warrants -- -- 85,500
--
Proceeds from issuance of Title XI bonds............................... -- 139,023 5,428 --
Repayment of Title XI bonds............................................ (5,461) (137,250) (6,643) (1,252)
Escrow of restricted cash.............................................. -- -- (15,217) --
Payments of financing costs............................................ (2,724) (10,819) (12,678) --
Proceeds from sale-leaseback of vessels................................ -- 32,622 -- --
Payments of obligations under capital leases........................... (1,468) (5,088) (2,820) (159)
Proceeds from issuance of common stock................................. 94,628 800 253 --
Proceeds from issuance of redeemable preferred securities, net......... 111,109 -- -- --
Repayment of DIP credit facility....................................... -- -- (26,690) --
---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities.............. 226,636 429,550 10,826 (1,491)
---------- ---------- ---------- ----------
Change in cash and cash equivalents....................................... 5,335 (4,846) 10,891 (1,951)
Cash and cash equivalents at beginning of period.......................... 9,617 14,952 10,106 20,997
---------- ---------- ---------- ----------
Cash and cash equivalents at end of period................................ $ 14,952 $ 10,106 $ 20,997 $ 19,046
========== ========== ========== ==========
Supplemental schedule of noncash investing and financing activities:
Notes payable issued for the acquisition of vessels....................... $ 6,000 $ -- $ -- $ 8,586
========== ========== ========== ==========
Capital lease obligations for the acquisition of vessels and equipment.... $ 4,972 $ 32,621 $ -- $ --
========== ========== ========== ==========
Title XI debt assumed for the acquisition of vessels...................... $ 15,057 $ -- $ -- $ --
========== ========== ========== ==========
Short-term debt assumed in connection with acquisition of business........ $ 5,595 $ -- $ -- $ --
========== ========== ========== ==========
Common stock issued for the acquisition of vessels........................ $ 3,650 $ -- $ -- $ --
========== ========== ========== ==========
Supplemental disclosures:
Interest paid, net of interest capitalized............................. $ 9,200 $ 44,972 $ 57,821 $ 739
========== ========== ========== ==========
Cash paid for professional fees in connection with
Chapter 11 Proceedings............................................ $ -- $ -- $ 4,575 $ --
========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
HVIDE MARINE INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
1. Organization and Basis of Presentation
Hvide Marine Incorporated and subsidiaries (collectively, the
"Company") is a provider of marine support and transportation services, serving
primarily the energy and chemical industries. The Company operates offshore
energy support vessels, principally in the U.S. Gulf of Mexico, the Arabian
Gulf, offshore West Africa and Southeast Asia. The Company's fleet of tankers
transports petroleum products and specialty chemicals in the U.S. domestic
trade. The Company also provides commercial tug services in several ports in the
southeastern U.S.
The accompanying consolidated financial statements include the accounts
of Hvide Marine Incorporated and its majority-owned subsidiaries. All material
intercompany transactions and balances have been eliminated in the consolidated
financial statements.
Hvide Marine Incorporated and substantially all of its wholly-owned
subsidiaries filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy
Court for the District of Delaware (the "Bankruptcy Court") on September 8, 1999
(the "Petition Date"). 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 consolidated financial statements reflect accounting principles and
practices set forth in 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. As discussed further
in Note 4, the assets and liabilities of the Company were restated as of
December 15, 1999, in accordance with SOP 90-7 and therefore the results of
operations and cash flows for periods prior to December 15, 1999 (the
"Predecessor Company") are not comparable to the results of operations and cash
flows of the Company subsequent to emergence from bankruptcy for the period from
December 16 to December 31, 1999 (the "Successor Company").
In June 1998, the Company paid $18.5 million to increase its equity
interest in five double-hull carries (collectively the "Lightship Tankers") from
0.8% to 50.8%. Three of these carriers were delivered in the fourth quarter of
1998, and two others were delivered during 1999. At the time of the increase in
its equity interest, the Company intended to reduce its equity interest to less
than 50% and accounted for this investment under the equity method. During 1999,
the Company was not able to reduce its equity investment in Lightship Tankers
and was required to consolidate the Lightship Tankers as of September 30, 1999,
in accordance with the Financial Accounting Standard Board Statement No. 94;
Consolidation of All Majority-Owned Subsidiaries. The consolidation of the
Lightship Tankers was accounted for as a change in reporting entity and the
financial statements for 1998 have been retroactively restated to include the
accounts of the Lightship Tankers as if they were consolidated as of the date
majority ownership was obtained. The Successor Company increased its ownership
in the Lightship Tankers at December 30, 1999 from 50.8% to 75.8% (see Note 11).
The Lightship Tankers were not a party to the Chapter 11 proceeding.
2. Issues Affecting Liquidity
As a result of a decline in revenues, the Company was not in
compliance, as of March 31, 2000, with certain covenants contained in its Credit
Facility and anticipated that it would not be in compliance with certain
covenants throughout 2000. Accordingly, the Company entered into Amendment No. 1
to the Credit Facility, which reduced the Company's covenant requirements
through March 31, 2001. The Amendment also requires the Company to prepay an
additional $60 million of borrowings in 2000 and limits the availability under
the $25 million revolving credit portion of the Credit Facility to $17.5 million
(See Note 24).
The Company believes that it will remain in compliance with the Credit
Facility, as amended. Additionally, the Company believes that operating cash
flow and amounts available under its revolving credit facility will be
sufficient to meet current obligations and capital requirements through 2000 and
that net proceeds from planned asset sales will be sufficient to satisfy
prepayments of debt as set forth above. 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 and the proceeds from sales of
vessels will equal or exceed management's expectations.
3. Joint Plan of Reorganization and Exit Financing
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 Predecessor Company's senior notes and
Preferred Securities to equity interests in the Successor Company and
cancellation of all of the prepetition equity interests in the Predecessor
Company, 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.
On the Effective Date, the Predecessor Company's Senior Notes and
Preferred Securities were converted to 9.8 million and 0.2 million shares of the
Successor Company's common stock, respectively. As a result of the transactions
which occurred on the Effective Date, indebtedness of approximately $266.6
million was discharged and is reflected as a gain on the extinguishment of debt
in the accompanying consolidated statements of operations. This gain is not
recognized for tax purposes to the extent the Company was insolvent at the date
of discharge. However, the Company's net operating loss carryforwards,
alternative minimum tax credits and tax basis in fixed assets were reduced by
the amount of the gain.
On the Effective Date, the Company raised an aggregate of approximately
$295 million through the issuance of term loans and 12 1/2% Senior Secured Notes
(the "Senior Secured Notes") with detachable common stock purchase warrants,
resulting in approximately $263 million of net proceeds to the Company after
deducting related offering costs and discount on the Senior Secured Notes (the
"Exit Financing"). The proceeds were used to repay the Company's
debtor-in-possession credit facilities, the Predecessor Company's Credit
Facility and certain bankruptcy administrative claims and reorganization costs
incurred in connection with the Company's bankruptcy proceeding.
4. Summary of Significant Accounting Policies
Revenues. Revenues from time charters are earned and recognized on a
daily basis. Time charter rates are adjusted periodically based on changes in
specified price indices and market conditions. Revenues on voyage contracts are
recognized based upon the percentage of voyage completion.
Cash and Cash Equivalents. The Company considers all highly liquid
investments with a maturity of three months or less when purchased to be cash
equivalents.
Restricted Cash. Restricted cash primarily consists of money market
investments held to fund the first four scheduled interest payments on the
Senior Secured Notes.
Insurance Claims Receivable. Insurance claims receivable represent
costs incurred in connection with insurable incidents for which the Company
expects to be reimbursed by the insurance carrier(s), subject to applicable
deductibles. Deductible amounts related to covered incidents are expensed in the
period of occurrence of the incident.
Marine Operating Supplies. Such amounts consist of vessel spare parts,
fuel and supplies that are recorded at cost and charged to vessel expenses as
consumed.
Impairment of Long-Lived Assets. The Company accounts for the
impairment of long-lived assets under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, Accounting For the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of, which requires
impairment losses to be recorded on long-lived assets used in operations when
indications of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets carrying amounts. If
the carrying value of the assets will not be recoverable, as determined based on
the undiscounted cash flows estimated, the carrying value of the assets are
reduced to fair value. Generally, fair value will be determined using valuation
techniques such as expected discounted cash flows or appraisals, as appropriate.
The Company has not recorded any impairment losses.
Property. Vessels, improvements and furniture and equipment are stated
at cost less accumulated depreciation. The Company recorded the allocation of
its reorganization value (see Note 5) to vessels, improvements, furniture and
equipment, and identifiable intangible assets in accordance with SOP 90-7, which
provides for the reorganization value to be applied to the Company's assets in
conformity with the procedures specified by Accounting Principles Board Opinion
No. 16, "Business Combinations", for transactions reported on the basis of the
purchase method. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets. The estimated useful lives of vessels,
other than tankers, range from 12 to 40 years and the estimated useful lives of
furniture and equipment range from 3 to 10 years. Tankers and related
improvements are depreciated over estimated useful lives ranging from 1 to 30
years, as determined by the Oil Pollution Act of 1990 and other factors.
Vessels under capital leases are amortized over the lesser of the lease
term or their estimated useful lives. Included in vessels and improvements at
December 31, 1998 and 1999 are vessels under capital leases of approximately
$47.1 million and $36.1 million, net of accumulated amortization of
approximately $1.7 million and $0.1 million, respectively.
Deferred Costs. Deferred costs primarily represent drydocking and
financing costs. Substantially all of the company's vessels must be periodically
drydocked and pass certain inspections to maintain its operating classification,
as mandated by certain maritime regulations. Costs incurred to drydock the
vessel are deferred and amortized over the period to the next drydocking,
generally 30 to 36 months. Drydocking costs are comprised of painting the vessel
hull and sides, recoating cargo and fuel tanks, and performing other maintenance
activities to bring the vessel into compliance with classification standards and
which can typically only be performed while the vessel is drydocked. Deferred
financing costs are amortized over the term of the related borrowings. At
December 31, 1998 and 1999, deferred costs include unamortized drydocking costs
of approximately $16.0 million and $7.2 million, respectively, and net financing
costs of $14.8 million and $22.3 million, respectively.
Restricted Investments. Pursuant to the Lightship Tankers' Title XI
Bond Financing Agreements, the Company is required to deposit all proceeds from
the bond issuance into an escrow account (restricted investments) with MARAD.
Funds from the escrow account are disbursed for qualifying expenses related to
the construction of the Vessels after documentation is received and approved by
MARAD. The Company expects the provisioning of the Lightship Tankers in 2000 and
does not expect the costs to exceed the amounts included in restricted
investments.
Restricted investments primarily consists of U.S. Treasury bills and
notes stated at their amortized cost as they are expected to be held to
maturity. The maturity date of such investments range from February to April
2000. The average interest rates on these investments in 1998 and 1999 were
consistent with short term U.S. treasury note rates during such periods.
Interest earned on the investments is not restricted and may be used for general
working capital purposes for the Lightship Tankers.
Goodwill. Goodwill represents the excess of the purchase price over the
fair value of assets acquired and is amortized on the straight-line basis over
periods ranging from 20 to 35 years. The carrying value of goodwill is reviewed
if facts and circumstances suggest that it may be impaired. If this review
indicates that goodwill will not be recoverable, as determined based on the
estimated undiscounted cash flows of the assets acquired over the remaining
amortization periods, the carrying value will be adjusted accordingly. The
remaining carrying amounts relating to the Company's intangible assets were
written off at the Effective Date as a result of the allocation of its
reorganization value (see Note 5). At December 31, 1998 accumulated amortization
of goodwill was approximately $6.0 million.
Accrued Liabilities. Accrued liabilities included in current
liabilities consist of the following (in thousands):
Predecessor Successor
Company Company
1998 1999
------------ --------
Accrued reorganization items...................... $ -- $ 4,437
Accrued payroll and benefits...................... 7,267 6,134
Accrued professional services..................... 249 1,098
Accrued voyage operating expenses................. 6,880 7,218
Accrued litigation, claims and settlements........ 4,082 8,146
Accrued taxes..................................... 2,713 4,890
Deferred voyage revenues.......................... 788 2,587
Other............................................. 5,644 2,979
----------- --------
Total............................................. $ 27,623 $ 37,489
=========== =========
Stock-Based Compensation. As permitted by SFAS No. 123, Accounting for
Stock-Based Compensation ("SFAS 123"), the Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB 25") and related interpretations in accounting for its employee
stock-based transactions and has complied with the disclosure requirement of
SFAS 123. Under APB 25, compensation expense is calculated at the time of option
grant based upon the difference between the exercise prices of the option and
the fair market value of the Company's common stock at the date of grant
recognized over the vesting period.
Income Taxes. The Company files a consolidated tax return with
substantially all corporate subsidiaries; the other subsidiaries file separate
income tax returns. Each partnership and trust subsidiary files a separate tax
return.
Deferred income tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities,
and are measured using the enacted tax rates and laws in effect when the
differences are expected to reverse. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.
Foreign Currency Translation. In accordance with SFAS No. 52, Foreign
Currency Translation, assets and liabilities denominated in foreign currencies
are translated into U.S. dollars at the rate of exchange in effect at the
balance sheet date, while revenue and expenses are translated at the weighted
average rates prevailing during the respective years. Components of
shareholders' equity are translated at historical rates. The Company's foreign
subsidiaries use the U.S. dollar as their functional currency and substantially
all external transactions are denominated in U.S. dollars. Gains and losses
resulting from changes in exchange rates from year to year are insignificant for
all years presented.
Reorganization Items. In accordance with SOP 90-7, costs incurred
directly related to the bankruptcy proceeding are classified as Reorganization
Items in the accompanying statements of operations.
Recent Pronouncements. In June 1999, the Financial Accounting Standards
Board (FASB) issued SFAS 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement 133. The Statement
defers the effective date of SFAS 133 to fiscal 2001. Management is evaluating
SFAS 133 and does not believe that adoption of the Statement will have a
material impact in the Company's financial statements.
Reclassifications. Certain amounts from prior periods' consolidated
financial statements have been reclassified to conform with the current period's
presentation.
5 Fresh Start Reporting
Upon emergence from Chapter 11 Bankruptcy Protection as of the
Effective Date, the Company adopted fresh start reporting pursuant to the
provisions of SOP 90-7. In accordance with SOP 90-7, assets of the entities in
Chapter 11 proceeding have been restated as of the Effective Date to reflect the
reorganization value of the Company and liabilities have been recorded at the
present value of the future amounts expected to be paid. In addition, the
accumulated deficit of the Company through the Effective Date has been
eliminated and the debt and capital structure of the Predecessor Company
reflects the application of the provisions of the Plan. Thus, the balance sheet
as of December 31, 1999 reflects reporting of the Successor Company and is not
comparable to the prior periods of the Predecessor Company. Furthermore, the
accompanying consolidated statements of operations and cash flows of the
Predecessor Company reflect operations prior to the Effective Date and the
effect of adopting fresh start reporting and are thus not comparable with the
results of operations and cash flows of the Successor Company.
The reorganization value of the Company of approximately $587.6 million
(excluding the Lightship Tankers which were not part of the Chapter 11
proceeding) was determined by the Company with the assistance of financial
advisors. These advisors (1) reviewed certain historical financial information
of the Company; (2) reviewed certain internal operating reports, including
management-prepared financial projections and analyses; (3) discussed historical
and projected financial performance with senior management and industry experts;
(4) reviewed industry trends and operating statistics as well as analyzed the
effects of certain economic factors on the industry; (5) analyzed the capital
structures, financial performance and market valuations of the Company's
competitors, and (6) prepared such other analyses as they deemed necessary to
their valuation determination. Based upon the foregoing, the financial advisors
developed a range of values for the Company as of the Effective Date. In
developing this valuation estimate, the advisors, using a rate of approximately
14%, discounted the Company's five year forecasted free cash flows and an
estimate of sales proceed assuming the Company would be sold at the end of the
five year period within a range of comparable company multiples. Certain of the
projected results used in the valuation were materially better than those
achieved historically by the Company. In addition to relying on management's
projections, the valuation analysis made a number of assumptions including, but
not limited to, a successful and timely reorganization of the Company's capital
structure and the continuation of current market conditions through the forecast
period.
The difference between the Company's reorganized value and a
revaluation of the Company's assets and liabilities resulted in the recording of
a reorganization item of approximately $420 million for the period ended
December 15, 1999, which primarily consisted of a decrease in goodwill, property
and other long-term assets.
<PAGE>
The effects of the Plan, the Exit Financing, and fresh start reporting
on the Company's condensed consolidated balance sheet at the Effective Date are
as follows (in thousands):
<TABLE>
<CAPTION>
Pre- Discharge Exit Fresh Start Reorganized
Emergence of Financing Adjustments Balance
Balance Sheet Debt (1) (2) (3) Sheet
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents.................... $ 13,229 $ -- $ 7,768 $ -- $ 20,997
Restricted cash.............................. 190 -- 15,027 -- 15,217
Accounts receivables, net.................... 55,557 -- -- -- 55,557
Marine operating supplies.................... 13,525 -- -- (2,654) 10,871
Prepaid expenses............................. 5,832 -- 125 -- 5,957
------------ ----------- ------------ ----------- --------
Total current assets...................... 88,333 -- 22,920 (2,654) 108,599
Net property................................. 1,017,600 -- -- (325,555) 692,045
Deferred costs, net.......................... 32,309 (10,399) 11,194 (4,679) 28,425
Restricted investments....................... 3,752 -- -- -- 3,752
Goodwill, net................................ 88,052 -- -- (88,052) --
Other........................................ 3,996 -- -- (220) 3,776
------------ ----------- ------------ ----------- --------
$ 1,234,042 $ (10,399) $ 34,114 $ (421,160) $ 836,597
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable............................. $ 10,998 $ -- $ -- $ -- $ 10,998
Current maturities of long-term debt......... 30,041 -- (13,269) -- 16,772
Current obligations under capital leases..... 3,326 -- -- -- 3,326
Accrued interest............................. 21,073 (19,337) (322) -- 1,414
Accrued liabilities and other................ 40,625 -- (145) -- 40,480
------------ ----------- ------------ ----------- --------
Total current liabilities................. 106,063 (19,337) (13,736) -- 72,990
Long-term debt.................................. 497,909 -- (38,390) -- 459,519
Obligations under capital leases................ 34,098 -- -- -- 34,098
Senior notes.................................... 300,000 (300,000) 76,644 -- 76,644
Other .......................................... 3,743 -- -- 2,109 5,852
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding solely
debentures issued by the
Predecessor Company.......................... 115,000 (115,000) -- -- --
Minority interest............................... 20,603 -- -- -- 20,603
Stockholders' equity:
(Predecessor Company)
Class A common Stock..................... 13 -- -- (13) --
Class B common Stock....................... 2 -- -- (2) --
(Successor company)
Class A common Stock....................... -- 100 -- -- 100
Additional paid-in capital................... 197,142 154,881 11,910 (197,142) 166,791
Retained earnings (accumulated deficit)...... (40,531) 268,957 (2,314) (226,112) --
------------ ----------- ------------ ----------- --------
Total stockholders' equity............... 156,626 423,938 9,596 (423,269) 166,891
------------ ----------- ------------ ---------- --------
$ 1,234,042 $ (10,399) $ 34,114 $ (421,160) $ 836,597
</TABLE>
<PAGE>
6. Change in Estimates
In 1998, the Predecessor Company changed the estimated useful lives of
certain offshore energy support vessels from an average useful life of 13 years
to 16.78 years and the amortization period for certain goodwill from 20 to 35
years. Management believes these changes more accurately reflect the economic
lives of the Company's assets. For 1998, the change had the effect of reducing
depreciation and amortization expense by approximately $4.0 million, which
increased earnings per diluted share by $0.21 for both income before
extraordinary item and net income.
7. Long-Term Debt
Senior Notes
In February 1998, the Predecessor Company completed an offering of
$300.0 million of 8.375% senior notes (the "Senior Notes"). Pursuant to the
Plan, the Senior Notes and accrued and unpaid interest were exchanged for
9,800,000 shares of the Successor Company's Common Stock. In accordance with SOP
90-7, the Company did not accrue pre-petition interest of approximately $6.7
million on the Senior Notes after the Petition Date, as it was unlikely such
amounts would be paid under the Plan.
On the Effective Date, the Company issued $95.0 million face amount of
12.5% senior secured lien notes, Series A, (the "Senior Secured Notes") with
536,193 detachable common stock purchase warrants and an original issue discount
of $9.5 million. As determined by the Company's management, the fair value of
the warrants was estimated to be approximately $8.9 million and was recorded as
part of the discount on the Senior Secured Notes. The Senior Secured Notes were
recorded at approximately $76.6 million, net of discounts and offering costs of
approximately $18.4 million. The discount is being amortized through the
maturity date using the effective interest method (amortization of $0.1
million). The discounts and offering costs resulted in an effective interest
rate on the Senior Secured Notes of 18.2%. Interest on the Senior Secured Notes
is payable quarterly in arrears beginning March 30, 2000.
Of the proceeds, approximately $69.8 million was used to repay a
portion of the Predecessor Company's indebtedness and approximately $11.9
million was used to establish an interest escrow account to fund interest
payments through December 30, 2000. The interest escrow account balance is
classified as Restricted Cash in the Company's Consolidated Balance Sheet.
The Senior Secured Notes mature June 30, 2007 and are redeemable, in
whole or in part, at the option of the Company after December 15, 1999 at the
redemption amount, as defined, plus accrued and unpaid interest. In addition,
upon a change in control, as defined, the Company must redeem the Senior Secured
Notes at 101% of the stated principal amount, plus accrued and unpaid interest.
The Company is obligated to consummate an exchange offer pursuant to
which the holders of the Senior Secured Notes shall have the right to exchange
the Series A Notes for 12.5% Senior Secured Notes due 2007, Series B, (the
"Exchange Notes"). The Exchange Notes will be registered under the Securities
Act in like principal amount and having identical terms as the Senior Secured
Notes.
The Senior Secured Notes are secured by substantially all the assets of
the Company. Covenants under the Notes require the Company to meet certain
financial tests and, among other things, (1) limit the incurrence of additional
indebtedness; (2) limit the creation or incurrence of certain liens; (3)
restrict certain payments and investments; and (4) restrict certain asset sales
and affiliate transactions.
Other Debt
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
Predecessor Successor
Company Company
1998 1999
----------------------------
<S> <C> <C>
Lines of Credit........................................................ $ 135,000 $ --
Term Loan.............................................................. 117,954 200,000
Title XI Debt.......................................................... 261,674 259,206
Notes Payable.......................................................... 5,874 24,338
------------- -------------
520,502 483,544
Less: Current maturities.............................................. 264,341 17,775
------------- -------------
$ 256,161 $ 465,769
============= =============
</TABLE>
In September 1997, the Predecessor Company entered into a $175.0
million revolving line of credit. In November 1997, the Predecessor Company
entered into a $300.0 million Term Loan Agreement. In February 1998, the
Predecessor Company entered into an Amended and Restated Revolving Credit and
Term Loan Agreement which merged the Credit Agreement and the Term Loan
Agreement and resulted in their individual termination.
Effective September 30, 1998, the Predecessor Company entered into
Amendment No. 1 to the Amended and Restated Revolving Credit and Term Loan
Agreement (the "Predecessor Credit Facility"). Pursuant to the Predecessor
Credit Facility, borrowings under the revolving line of credit could not
initially exceed $150.0 million, inclusive of a letter of credit sub-limit of
$20.0 million, increasing to (1) $166.0 million subsequent to March 1, 1999,
subject to repayment of a portion of the term loan with proceeds from a
specified sale and leaseback transaction or (2) $175.0 million, based upon the
Predecessor Company's compliance with a specified leverage ratio. The
Predecessor Credit Facility provided that borrowings thereunder would be secured
by substantially all of the Predecessor Company-owned vessels having an
appraised value of at least $600.0 million and by substantially all other assets
of the Predecessor Company and its subsidiaries. Interest on borrowings were
based on one of two rates, at the Company's election, plus a margin based on the
Predecessor Company's compliance with certain financial ratios. In addition, the
revolving line of credit was subject to a commitment fee of 0.4% on the unused
potion.
Prior to the Chapter 11 filing, the Predecessor Company entered into
various amendments to the Predecessor 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) waivers of noncompliance
with certain covenants in the Predecessor Credit Facility.
Effective September 10, 1999, the Predecessor Company and certain
lending institutions entered into a Debtor-in-Possession Revolving Credit and
Term Loan Agreement (the "DIP Facility"). Subject to certain conditions and
limitations, the DIP Facility provided the Predecessor Company with a revolving
credit facility of up to $60 million. In addition, approximately $241 million of
borrowings previously outstanding under the Predecessor Credit Facility with the
same group of banks were converted into a term loan under the DIP Facility.
Borrowings under the DIP Facility bore interest at three percentage points over
the "Base Rate" of Citibank. The DIP Facility also provided for certain fees
payable by the Company and for certain covenants relating to earnings before
interest, taxes, depreciation and amortization; capital expenditures; collateral
coverage; and outstanding borrowings.
Outstanding borrowings under the Predecessor Credit Facility were
repaid upon the Company's emergence from bankruptcy with the proceeds of the
Exit Financing (See Note 3) and the facility was eliminated.
On December 15, 1999, the Company entered into a Credit Facility ("the
Credit Facility") consisting of $200.0 million of term loans and a $25.0 million
revolving line of credit. The term loans consist of three facilities of $75.0
million, $30.0 million, and $95.0 million maturing over 5, 6, and 7 years,
respectively. The revolving line of credit matures on December 15, 2004. The
$75.0 million term loan and the revolving line of credit accrue interest at the
Base Rate, as defined, of 8.5% plus 2.25% (10.75% at December 31, 1999). The
$30.0 million and $95.0 million term loans accrue interest at the Base Rate plus
2.75% (11.25% at December 31, 1999) and Base Rate plus 3.25% (11.75% at December
31, 1999), respectively. At December 31, 1999, the Company did not have any
outstanding indebtedness under the revolving line of credit and approximately
$200.0 million was outstanding under the term loans.
Covenants under the Credit Facility, among other things, (i) require
the Company to meet certain financial tests, including tests requiring the
maintenance of minimum leverage ratios, debt service coverage ratios, and
indebtedness to tangible worth ratios; (ii) limit the creation or incurrence of
certain liens; (iii) limit the incurrence of additional indebtedness; (iv) limit
the Company from making certain investments; (v) limit sales of assets; (vi)
require maintenance of certain appraised market collateral values, (vii) limit
transactions with affiliates and changes in business; and (viii) limit mergers
and consolidations.
Based upon current circumstances the Company will not be in compliance
at March 31, 2000 with certain of the covenants contained in the Credit Facility
and on April 13, 2000, entered into amendment No. 1 to the Credit Facility which
waived the Company's non-compliance at March 31, 2000 and Modified the covenants
(see Note 25).
In March 1996, the Company issued United States Government Ship
Financing Bonds (the Original Bonds) under Title XI of the Merchant Marine Act,
1936 (Title XI), as amended, bearing interest at 7.54%. On September 30, 1998,
the Company redeemed approximately $129.9 million of the bonds at face value
plus accrued interest pursuant to the special redemption feature under the bond
indenture. The Company issued new United States Government Guaranteed Ship
Financing Bonds (the Reissued Bonds) under Title XI bearing interest at 6.50%.
The proceeds of the Title XI debt were used for the construction of the
Lightship Tankers.
On February 14, 1999, and on June 18, 1999, the Company issued Title XI
bonds (the Tack-on Bonds) of approximately $2.1 million and $3.3 million,
respectively, in connection with the construction of the Lightship Tankers. The
Original Bonds, Reissued Bonds, and Tack-on Bonds are collectively referred to
as the Title XI Bonds. The full faith and credit of the United States Government
is pledged as a guarantee to the payment of all principal and interest on the
Title XI Bonds. The Title XI Bonds are subject to semi-annual redemption at par,
plus accrued interest through mandatory sinking funds, calculated to retire
approximately 96% of the Bonds prior to maturity through 49 increasing principal
payments with balloon payments at maturity.
On each mandatory sinking fund redemption date, the Company, at its
option, will have the noncumulative right to redeem without premium an
additional principal amount of the Title XI Bonds up to the amount of such bonds
redeemed on such date. Title XI Bonds optionally redeemed without premium by the
Company may be credited against mandatory sinking fund payments.
The Original Bonds may be redeemed at any time following June 14, 1999,
in whole, but not in part, at the Company's option at a premium equivalent to
107%, if on or prior to December 14, 1999 and, thereafter, at prices declining
semiannually to par through June 14, 2009, plus accrued interest, upon at least
30 but not exceeding 60 days prior to the holders, provided that no such
redemption may be made through refunding at an effective interest cost of less
than the interest rate thereon.
The Reissued Bonds may be redeemed at any time following June 14, 1999,
in whole, or in part, at the Company's option at a redemption price equal to
100% of the principal amount plus accrued interest and the make whole premium,
as defined, upon at least 30 but not exceeding 60 days prior to the holders,
provided that no such redemption may be made prior to June 14, 2008 through
refunding at an effective cost of less than the interest rate thereon. However,
the Reissued Bonds are redeemable at face value plus accrued interest under
certain circumstances.
The Tack-on Bonds may be redeemed at any time following their issuance,
in whole, or in part, a the Company's option at a redemption price equal to 100%
of the principal amount plus accrued interest and the make whole premium, as
defined.
Covenants under the Title Bond agreements contain financial tests which
if not met, among other things, (1) restrict the withdrawal of capital; (2)
restrict certain payments, including dividends, increases in employee
compensation and payments of other indebtedness; (3) limit the incurrence of
additional indebtedness; and (4) prohibit the Company from making certain
investments or acquiring additional fixed assets. Certain vessels and all
contract rights thereof have been secured as collateral in consideration of the
United States Government guarantee of the Title XI Bonds.
The Company is required to make deposits to a Title XI reserve fund
based on a percentage of net income attributable to the operation of the
Lightship Tanker Vessels, as defined by the Title Bond agreement.
Cash held in the Title XI reserve fund is invested by the trustee of
the fund and any income earned thereon is either paid to the Company or retained
in the reserve fund. Withdrawals from the Title XI reserve fund may be made for
limited purposes, subject to prior approval from MARAD. To date, no deposits
have been required.
Other Title XI debt of approximately $31.2 million is collateralized by
first preferred mortgages on certain vessels and bears interest at rates ranging
from 5.4% to 10.1%. The debt is due in semiannual principal and interest
payments through 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.
On February 17, 1999, the Company issued a promissory note of
approximately $14.2 million for the acquisition of vessels. The note bears
interest at 8.49%. Monthly principal and interest payments are due through
February 2009.
On December 30, 1999, the Company issued a promissory note of
approximately $8.6 million for the acquisition of an additional interest in a
subsidiary. The note bears interest at 8.5%. Semi-annual interest and increasing
principal payments are due through December 2003.
Other notes payable bear interest at rates ranging from 7.92% to 10%
and mature at various dates through November 2011. The notes are collateralized
by certain vessels.
At December 31, 1999, the Company had letters of credit outstanding in
the amount of approximately $2.9 million which expire on various dates through
December 2002. At December 31, 1999, restricted cash on the accompanying balance
sheet includes $3.1 million as collateral for these letters of credit.
The aggregate annual future payments due on the Senior Notes and other
debt as of December 31, 1999 are as follows (in thousands):
2000.............................................. $ 17,775
2001.............................................. 20,129
2002.............................................. 24,704
2003.............................................. 35,962
2004.............................................. 38,077
Thereafter........................................ 441,897
-------------
$ 578,544
8. Capital Leases
The Company owns certain vessels and other equipment under leases that
are classified as capital leases. The following is a schedule of future minimum
lease payments under capital leases, including obligations under sale-leaseback
transactions, together with the present value of the net minimum lease payments
as of December 31, 1999 (in thousands):
2000........................................................$ 5,665
2001........................................................ 5,436
2002........................................................ 4,587
2003........................................................ 4,446
2004........................................................ 4,217
Thereafter.................................................. 28,970
---------
Total minimum lease payments................................ 53,321
Less amount representing interest........................... (16,055)
--------
Present value of minimum lease payments (including current
portion of $3,332).......................................$ 37,266
=========
9. Company Obligated Mandatorily Redeemable Preferred Securities
In June 1997, a private offering of 2,300,000 of 6 1/2% Trust
Convertible Preferred Securities (the "Preferred Securities") was completed by
Hvide Capital Trust, a 100%-owned subsidiary of the Predecessor Company.
Pursuant to the Plan, the Preferred Securities along with accrued and unpaid
preferred distributions were exchanged for 200,000 shares of the Successor
Company's Common Stock and 125,000 common stock purchase warrants (See Note 16).
In accordance with SOP 90-7, the Company did not accrue prepetition
distributions of approximately $2.1 million on the Preferred Securities after
the Petition Date, as it was unlikely such amounts would be paid under the plan.
10. Commitments and Contingencies
Commitments
Subsequent to the Petition Date, the Company defaulted on its payment
obligations under certain contracts providing for the construction of vessels.
The shipyard has asserted claims for damages against the Company and included in
other current liabilities at December 31, 1999 is approximately $7 million which
represents management's estimate of the amount of these claims that will
ultimately be paid.
The Company leases its office facilities and certain vessels under
operating lease agreements which expire at various dates through 2013. Rent
expense was approximately $4.7 million, $5.9 million and $5.6 million for the
years ended December 31, 1997, 1998 and 1999, respectively.
Aggregate annual future payments due under non-cancelable operating
leases with remaining terms in excess of one year are as follows (in thousands):
2000............................................... $ 4,426
2001............................................... 4,446
2002............................................... 3,554
2003............................................... 2,610
2004............................................... 2,669
------------
$ 17,705
Contingencies
In 1990, the Company withheld approximately $2.4 million from a
shipyard relating to delays and other problems encountered in the construction
of a vessel. In 1993, the shipyard filed a claim to recover approximately $6.1
million for additional construction costs allegedly due the shipyard. In
December 1998, all claims were dismissed with prejudice in consideration of the
Company's agreement to pay the shipyard $4.75 million of the additional
construction costs previously claimed. Included in charter hire and other
liabilities on the accompanying December 31, 1998 balance sheet is $3.75 million
due the shipyard in 1999, representing the Company's remaining payments under
the settlement agreement. The remaining amounts were paid in 1999.
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.
The Company has been named in Marine Towing of Tampa, Inc. v. Hvide
Marine Towing, pursuant to which the plaintiff seeks unspecified treble damages
from the Company as a result of alleged violations of federal and state
antitrust laws. The plaintiff, has been a competitor of the Company in the
harbor towing business in the port of Tampa, Florida since October 1999 and
alleges that the unlawful monopoly in providing tug services in Tampa Bay and
has unlawfully used its monopoly power and engaged in a conspiracy in restraint
of trade to restrain others, including the plaintiff, from operating in the port
and to maintain prices at artificially high levels. The specific acts of which
the plaintiff complains include the non-exclusive franchise granted by the Tampa
Port Authority to the Company, the Company's reduction of its rates and on-year
exclusive-provider agreements with customers, and the Company's alleged unlawful
conduct, that the plaintiff has not been restrained from competing in the
market, and that the suit has no merit. The Company is unable to predict the
ultimate outcome of this matter.
On March 31, 2000, the Company was named in J. Erik Hvide and Betsy
Hvide v. Hvide Marine Incorporated, pursuant to which the Company's former chief
executive officer and his wife allege that the Company has breached an agreement
to provide Mr. Hvide with severance benefits valued at approximately $1.0
million. In addition, Mr. and Mrs. Hvide allege that the Company's conduct, in
obtaining the return of certain of the Company's property from Mr. Hvide and in
discontinuing the payment of life insurance premiums, constituted an intentional
course of conduct calculated to cause them severe emotional distress and public
humiliation for which they seek unspecified punitive damages. The Company
believes that it never reached any agreement with Mr. Hvide concerning
compensation relating to his severance, that it engaged in no conduct intended
to cause harm to Mr. or Mrs. Hvide, and that the suit has no merit. The Company
is unable to predict the ultimate outcome of this matter.
11. Acquisitions
In February 1998, the Company acquired a fleet of 37 offshore energy
support vessels, operating primarily offshore West Africa and Southeast Asia,
which now operate as Seabulk Offshore Operators, Inc. ("SOOP"), for a cash
purchase price of approximately $291.7 million. The acquisition was accounted
for under the purchase method and resulted in costs in excess of net assets
acquired of approximately $61.4 million.
In May 1997, the Company acquired substantially all of the assets of an
entity, which now operates as Seabulk Offshore International, Inc. ("SOII"), in
a transaction accounted for as a purchase. The consideration, valued at $58.7
million, consisted of $49.0 million cash, a $6.0 million note (repaid in June
1997) and 141,760 shares of Class A Common Stock valued at approximately $3.7
million. The fair value of net assets acquired approximated the purchase price
paid by the Company.
In October 1997, the Company acquired 100% of the outstanding common
stock of Bay Transportation Corporation ("Bay") for $36.5 million in cash and
the assumption of approximately $20.6 million of debt. The purchase agreement
provided for additional consideration based on specified changes in the working
capital of Bay, which resulted in the payment of approximately $500,000 in
January 1998. The acquisition was accounted for under the purchase method and
resulted in goodwill of approximately $17.4 million.
The Company's unaudited pro-forma information, assuming that the
acquisition of SOOP, SOII and Bay had occurred on January 1, 1997, is summarized
as follows (in thousands, except per share amounts):
Year Ended December 31,
-------------------------
1997 1998
------------- ----------
Revenues............................................ $ 292,248 $ 409,494
Income before extraordinary item.................... 21,032 22,549
Net income.......................................... 18,900 21,815
Diluted earnings per common share, before
extraordinary item................................ 1.37 1.40
Diluted earnings per common share................... 1.24 1.36
This pro-forma information does not purport to be indicative of the
results which might have been obtained had the acquisitions been consummated at
the date assumed.
In March 1998, the Company acquired seven harbor tugs, two petroleum
product carriers, and a topside repair facility for a cash purchase price of
$31.9 million. The fair value of net assets acquired approximated the purchase
price paid by the Company.
In 1998, the Company also acquired 3 vessels under various asset
purchase agreements for an aggregate cash consideration of approximately $8.9
million and completed the construction of 10 vessels at a total cost of $56.0
million.
On December 30, 1999, the Successor Company exercised its option to
purchase an additional 25% equity interest in the Lightship Tankers and paid
cash of $1 million and issued a note for $8,6 million. The Successor Company has
an option to purchase the remaining 24.2% equity interest for $9.0 million plus
interest through December 31, 2000. The Successor Company has not yet determined
whether or to what extent it will exercise the option.
The operations of the acquired three vessels and businesses are
included in the accompanying consolidated statements of operations for periods
subsequent to their acquisition dates.
12. Loss on Disposal of Assets
Loss on disposal of assets on the accompanying consolidated statement
of operations includes losses on the vessels sold and the forfeiture of deposits
and progress payments on and the settlement of cancelled shipbuilding contracts.
During 1999, the Predecessor Company sold ten vessels for net cash proceeds of
approximately $32.9 million. The proceeds were primarily used to repay amounts
outstanding under the Predecessor Company Credit Facility.
13. Stock Option Plans
In August 1996, the Predecessor Company adopted an Equity Ownership
Plan (the "EOP"), which provided for the issuance of a maximum of 2,000,000
shares of the Predecessor Company's Class A Common Stock. Under the terms of the
EOP, options were generally granted to employees at exercise prices not less
than the fair market value of the underlying common stock at the date of grant.
Option terms ranged from 5 to 10 years.
The Stock Option Plan for Directors provided for the issuance of a
maximum of 70,000 shares of the Predecessor Company's Class A common stock to
directors of the Predecessor Company. The exercise price for all options was
equal to the fair market value of the underlying common stock at the date of
grant and the term of these options was 10 years.
On the Effective Date, all rights and awards granted under the EOP and
Stock Option Plan for Directors were cancelled. The holders of common stock
issuable but not earned or vested under these plans received a pro rata share of
125,000 Class A warrants issued by the Successor Company (See Note 16).
On the Effective Date, the Successor Company approved a new stock
option plan, which provides certain key employees of the Successor Company the
right to acquire shares of common stock. Pursuant to the plan, 500,000 shares of
the Successor Company's common stock are reserved for issuance to the
participants in the form of nonqualified stock options. Options may be granted
at exercise prices not less than 100% of the fair market value of the underlying
common stock on the date of the grant. The vesting and other terms of the stock
options granted under the plan will be determined by the compensation committee
of the Board of Directors ("the Compensation Committee"). The options expire no
later than seven years from the date of the grant.
Pursuant to the Successor plan, options to purchase 200,000 shares of
the Successor Company's common stock were granted to certain senior employees on
the Effective Date. Half of these options vested automatically on the Effective
Date and the remaining option vest 91 days thereafter. On March 31, 2000, the
Compensation Committee approved the exercise price of these option at $12.47 per
share.
<PAGE>
The following table of data is presented in connection with the stock
option plans for both the Predecessor and Successor Company:
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
January 1 to December 16 to
December 15, December 31,
1997 1998 1999 1999
---------------------- --------------------- ----------------------- -------------------
Weighted Weighted Weighted Weighted
Number average Number average Number average Number average
of exercise of exercise of exercise of exercise
options price options price options price options price
------- ----- ------- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of period........... 806,000 $ 12.00 894,025 $ 14.83 987,675 $ 12.60 -- $ --
Granted........................... 150,950 28.96 221,350 13.61 379,441 6.06 200,000 12.47
Exercised......................... (53,425) 12.00 (100) 12.00 -- -- -- --
Cancelled......................... (9,500) 14.73 (127,600) 29.35 (1,367,116) 10.78 -- --
Options outstanding at
end of period................ 894,025 14.83 987,675 12.60 -- -- 200,000 12.47
Options exercisable at end of period 99,325 12.00 228,325 12.73 -- -- 100,000 --
Options available for future grants at end
of period......................... 113,050 -- 891,700 -- -- -- 300,000 --
</TABLE>
The weighted average fair value of options granted under the
Predecessor Company's stock option plans during 1997, 1998 and the period from
January 1, 1999 through December 15, 1999, based on the Black-Scholes option
valuation model, were $18.38, $7.98 and $5.72, respectively. Had compensation
expense for the stock option grants been determined based on the fair value at
the grant date for awards consistent with the methods of SFAS No. 123, the
Predecessor Company's net income would have increased to the pro forma amounts
for each year as indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
January 1 to
1997 1998 December 15, 1999
-------- ----------- -----------------
<S> <C> <C> <C>
Net income (loss):
As reported............................................ $ 25,523 $ 21,748 $ (248,355)
Pro-forma.............................................. 24,334 20,261 (250,395)
Earnings per share--assuming dilution:
As reported............................................ 1.63 1.35 (16.02)
Pro-forma.............................................. 1.56 1.27 (16.15)
</TABLE>
The fair value of each option is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
assumptions applied to grants in 1997, 1998 and the period from January
1, 1999 through December 15, 1999:
<TABLE>
<CAPTION>
January 1 to
1997 1998 December 15, 1999
----------- ----------- -------------------
<S> <C> <C> <C>
Dividend yield................................................ 0.0% 0.0% 0.0%
Expected volatility factor.................................... 0.62 0.68 1.39
Approximate risk-free interest rate........................... 6.5% 4.5% 6.5%
Expected life (in years)...................................... 6 6 6
</TABLE>
<PAGE>
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because changes in the subjective input assumptions can materially
affect the fair value estimate, the existing models, in management's opinion, do
not necessarily provide a reliable single measure of the fair value of the
Company's stock options.
14. Employee Benefit and Stock Plans
The Company sponsors a retirement plan and trust (the "Plan")
established pursuant to Section 401(k) of the Internal Revenue Code, which
covers substantially all employees. Subject to certain dollar limitations,
employees may contribute a percentage of their salaries to this Plan, and the
Company will match a portion of the employees' contributions. Profit sharing
contributions by the Company to the Plan are discretionary. For 1997, 1998 and
1999 the Company contributed approximately $1.5 million, $2.7 million and $1.9
million, respectively, to the Plan.
The 1996 Stock Purchase Plan (the "1996 Plan") provided for the sale of
a maximum of 500,000 shares of the Predecessor Company's Class A common stock to
employees of the Company at a price equal to 85% of the market value of the
Predecessor Company's common stock at the beginning or end of each purchase
period, whichever was lower. Participants under the 1996 Plan received 21,639,
112,319 and 79,678 shares of Predecessor Company's common stock for 1997, 1998,
and 1999, respectively.
The Key Employee Stock Compensation Plan provided for the issuance of a
maximum of 65,000 shares of the Predecessor Company's Class A common stock to
key employees. Key employees could elect to receive up to 50% of their annual
incentive compensation denominated in shares of the Predecessor Company's common
stock at the fair value of the shares at the date of issuance. No shares of
common stock were issued under the Key Employee Stock Compensation Plan.
The Board of Directors Stock Compensation Plan was approved in 1997 and
provided for the issuance of a maximum of 90,000 shares of the Predecessor
Company's common stock to non-employee directors. Each eligible director could
elect to convert all or a portion their fees for attendance at Board and
committee meetings into shares of the Predecessor Company's common stock at a
20% discount from the fair value of the shares at the date of issuance. Shares
issued pursuant to the plan were 14,374 and 55,048 in 1998 and 1999,
respectively.
<PAGE>
On the Effective Date, all rights and awards granted under the 1996
Stock Purchase Plan, the Key Employee Stock Compensation Plan and the Board of
Directors Stock Compensation Plan were cancelled. The holders of common stock
issuable but not earned or vested under these plans received a pro rata share of
125,000 Class A warrants issued by the Successor Company (See Note 16).
15. Income Taxes
The United States and foreign components of income (loss) before income
taxes and extraordinary item are as follows (in thousands):
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15, December 31,
---------------------------------- ------------- ------------
1997 1998 1999 1999
-------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
United States................................ $ 39,013 $ (2,525) $ (314,447) $ (855)
Foreign...................................... 5,592 39,364 (232,555) (710)
----------- -------------- -------------- ---------------
Total................................... $ 44,605 $ 36,839 $ (547,002) $ (1,565)
=========== ============== ============== ===============
</TABLE>
The components of the provision for income tax expense (benefit) are as
follows (in thousands):
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15, December 31,
---------------------------------- ------------- ------------
1997 1998 1999 1999
------------- --------------- ----------------- ----------
<S> <C> <C> <C> <C>
Current:
Federal.................................. $ 3,803 $ -- $ (2,234) $ --
Foreign.................................. -- 3,300 2,234 --
------------ -------------- ----------------- ---------------
Total current....................... 3,803 3,300 -- --
------------ -------------- ----------------- ---------------
Deferred .................................... 13,147 10,189 (32,004) --
------------ -------------- ----------------- ---------------
Total income tax expense (benefit)....... $ 16,950 $ 13,489 $ (32,004) $ --
============ ============== ================= ===============
</TABLE>
Income taxes paid were approximately $4.3 million and $3.6 million for
the years ended December 31, 1997 and 1998, respectively. No income taxes were
paid in 1999.
A reconciliation of income tax attributable to continuing operations
computed at the U.S. federal statutory tax rates to income tax expense is:
Successor
<TABLE>
<CAPTION>
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15, December 31,
---------------------------------- ------------- ------------
1997 1998 1999 1999
------------- --------------- --------------- ---------
<S> <C> <C> <C> <C>
Income tax expense computed at the federal
statutory rate............................... 35% 35% (35)% (35)%
State income taxes................................ 3 1 (1) (1)
Permanent reorganization items.................... -- -- 2 --
Reduction of tax attributes....................... -- -- 20 --
Valuation allowance............................... -- -- 8 36
Other............................................. -- 1 -- --
---------- ------------- -------------- --------------
38% 37% (6)% 0%
========== ============== ============== ===============
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are as follows (in
thousands):
Predecessor Successor
Company Company
December 31,
1998 1999
----------- -------
Deferred income tax assets:
Allowances for doubtful accounts ................. $ 786 $ 1,978
Goodwill.......................................... -- 22,752
Property differences.............................. -- 12,804
Accrued compensation.............................. 1,883 840
Foreign tax credit carryforwards.................. 4,683 5,448
Alternative minimum tax credit carryforwards...... 6,141 --
Net operating loss carryforwards.................. 26,903 --
Other............................................. -- 4,007
--------- ---------
Total deferred income tax assets................ 40,396 47,829
Less: valuation allowance...................... -- 43,252
--------- ---------
Net deferred income tax assets.................. 40,396 4,577
Deferred income tax liabilities:
Property differences.............................. 70,480 --
Deferred drydocking costs......................... 1,172 2,569
Other ............................................ 748 2,008
--------- ---------
Total deferred income tax liabilities........... 72,400 4,577
--------- ---------
Net deferred income tax liabilities.................. $(32,004) $ --
========= =========
The Company has available approximately $5.4 million in foreign tax
credits, expiring in years 2002 through 2004, that are available to offset
future federal tax liabilities.
SFAS No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a valuation allowance of approximately $43.2 million is
necessary at December 31, 1999 to reduce the deferred tax assets to the amount
that will more likely than not be realized. After application of the valuation
allowance, the Company's net deferred tax assets and liabilities are zero. In
the event that the Company recognizes, in subsequent years, the tax benefit of
any deferred tax asset that existed on the date the reorganization became
effective, such tax benefit will be reported as a direct addition to contributed
capital.
For financial reporting purposes, the Company reported a gain of $266.6
million resulting from the extinguishment of indebtedness that occurred from the
bankruptcy discharge on the Effective Date. Pursuant to Section 108 of the
Internal Revenue Code, this gain is excluded from income taxation and certain
tax attributes of the Company are eliminated or reduced, up to the amount of
such income excluded from taxation. As a result, the Company's net operating
loss and alternative minimum tax credit carryforwards in the amount of $245.8
million and $2.0 million respectively, were eliminated and the tax basis in the
Company's assets was reduced by $14.8 million.
As of December 31, 1999, the Company has a tax basis in its assets in
excess of its basis for financial reporting purposes that will generate tax
deductions in future periods. As a result of a "change in ownership" under the
Internal Revenue Code Section 382, the Company's ability to utilize
depreciation, amortization and other tax attributes will be limited to
approximately $9.5 million per year for the five subsequent years. This
limitation is applied to all net built-in losses which exist on the "change of
ownership" date (the Effective Date), including all items giving rise to a
deferred tax asset.
16. Stockholder's Equity
Pursuant to the Plan, prior to the effective date, shares of the
Predecessor Company's Class B common stock were converted to Class A common
stock. On the Effective Date, holders of Predecessor Company Class A common
stock and holders of certain rights to obtain common stock under the Predecessor
Company's compensation plans were issued 125,000 warrants to purchase Class A
common stock of the Successor Company on a pro rata basis. The warrants have a
four-year term and an exercise price of $38.49 per share. On the Effective Date,
all classes of the Successor Company's equity securities were cancelled.
Pursuant to the articles of incorporation of the Successor, there are
20 million shares of common stock authorized for issuance, of which 10 million
were granted at the Effective Date in exchange for Predecessor Company
liabilities as discussed in Note 3. The Predecessor Company's Class A common
shares were issued on January 21, 2000.
At the Effective Date, holders of the Predecessor Company's Preferred
Securities, discussed in Note 9, received $0.2 million shares of Successor
Company Class A common stock and 125,000 common stock purchase warrants. The
warrants have a four-year term and an exercise price of $38.49 per share.
At the Effective Date, the holders of the Predecessor Company's Senior
Notes, discussed in Note 7, received 9.8 million shares of Successor Company
Class A common stock.
As discussed in Note 7, the holders of Senior Secured Notes received
536,193 common stock purchase warrants. The warrants have a six and one-half
year term and a exercise price of $0.01 per warrant. As determined by the
Company's Management, the fair value of the warrants was approximately $8.9
million and was recorded as a component of additional paid in capital of the
Succesor.
All of the Predecessor Company's outstanding warrants contain customary
anti-dilution provisions for issuances of common stock, splits, combinations and
certain other events, as defined. In addition, the outstanding warrants have
certain registration rights, as defined.
In connection with the issuance of the Senior Secured Notes, the
Successor Company issued 187,668 Class A Warrants to purchase common stock to an
investment advisor. The warrants have a six and one-half year term and an
exercise price of $0.01. As determined by the Company's management, the fair
value of the warrants was approximately $3.5 million and was recorded as
financing costs.
The Successor Company is authorized to issue 5 million shares of
preferred stock, $0.01 par value per share. The company has no present plans to
issue such shares.
At December 31, 1999, 1,473,861 shares of Common Stock were reserved
for issuance, under the Successor Company's 1999 Stock Option Plan and
outstanding warrants.
17. Earnings 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>
Successor
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15, December 31,
------------------------ ------------ ---------------
1997 1998 1999 1999
----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C>
Numerator:
Numerator for basic earnings per share--income
(loss) before extraordinary item available to common
shareholders...................................... $ 27,655 $ 23,350 $ (514,998) $ (1,565)
Effect of dilutive securities:
Payments on convertible preferred securities........... 2,369 4,635 -- --
----------- ----------- ------------- ----------------
Numerator for diluted earnings per share--income
(loss) available to common shareholders after
assumed conversions.............................. $ 30,024 $ 27,985 $ (514,998) $ (1,565)
=========== =========== ============= ================
Denominator:
Denominator for basic earnings per share--
weighted average shares........................... 14,785 15,324 15,503 10,000
Effect of dilutive securities:
Convertible preferred securities....................... 2,067 4,035 -- --
Deferred compensation(a)............................... -- 14 -- --
Stock options.......................................... 268 78 -- --
----------- ----------- ------------- ----------------
Dilutive potential common shares....................... 2,335 4,127 -- --
----------- ----------- ------------- ----------------
Denominator for diluted earnings per share--
adjusted weighted average shares and assumed
conversions....................................... 17,120 19,451 15,503 10,000
=========== =========== ============= ================
Earnings (loss) per share before extraordinary item.... $ 1.87 $ 1.52 $ (33.22) $ (0.16)
=========== =========== ============= ================
Earnings (loss) per share before extraordinary item--
assuming dilution................................. $ 1.75 $ 1.43 $ (33.22) $ (0.16)
=========== =========== ============= ================
</TABLE>
(a) Includes shares contingently issuable pursuant to the Key Employee Stock
Plan (see Note 11).
18. Business Risks
Risks and Uncertainties. The Company's operating results and financial
condition may vary in the future depending on a number of factors. The following
factors may impact the Company's business, results of operations and financial
condition.
Significant Customers. The Company derived revenues from one customer,
Oceanografia, S.A., representing approximately 13% of total offshore and harbor
towing revenue for the year ended December 31, 1999. The Company derived
revenues from one customer, Oceanografia, S.A., representing approximately 16%
of total offshore and harbor towing revenue for the year ended December 31,
1998. The Company derived revenues from two customers, CITGO and Equiva Trading
Co., each representing approximately 15% and 12% respectively of total marine
transportation services revenue for the year ended December 31, 1999. The
Company derived revenues from three customers, Amoco, Koch Refining and
Phillips, each representing 10-11% of total marine transportation services
revenue for the year ended December 31, 1997. There were no customers from which
the Company derived more than 10% of its total revenue for the year ended
December 31, 1999.
Dependence on Oil and Gas Industry. The Company's current business and
operations are substantially dependent upon conditions in the oil and gas
industry, particularly the expenditures by oil and gas companies for offshore
exploration and production activities. To the extent that oil and natural gas
prices decline or remain at present levels for an extended period of time, the
Company's business could be adversely affected due to a reduction in or absence
of an increase in expenditures for offshore exploration and production.
International Operations. The Company derives substantial revenue from
international operations, primarily under U.S. dollar-denominated contracts with
major international oil companies. Risks associated with operating in
international markets include vessel seizure, foreign exchange restrictions and
currency fluctuations, foreign taxation, political instability, expropriation,
nationalization, modification or renegotiation of contracts, war and civil
disturbances or other risks that may limit or disrupt markets.
Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consists principally of
cash and cash equivalents in banks, restricted cash, trade accounts receivable
and insurance claims receivable. The credit risk associated with cash and cash
equivalents and restricted cash in banks is considered low due to their credit
quality. The Company performs ongoing credit evaluations of its trade customers
and generally does not require collateral. The credit risk associated with
insurance claims receivable is considered low due to the credit quality and
funded status of the insurance pools in which the Company participates.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Litigation. The Company is sometimes named as a defendant in
litigation, usually relating to claims for bodily injuries or property damage.
The Company maintains insurance coverage against such claims to the extent
deemed prudent by management and applicable deductible amounts are accrued at
the time of the incident. The Company believes that there are no existing claims
of a potentially material adverse nature for which it has not already provided
appropriate accruals.
Unions and Collective Bargaining Agreements. At December 31, 1999,
approximately 10% of the Company's employees were members of national maritime
labor unions, or are subject to collective bargaining agreements. Management
considers relations with employees to be satisfactory; however, the
deterioration of these relations could have an adverse effect on the Company's
operating results.
19. Segment and Geographic Data
The Company adopted SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information. The Company organizes its business
principally into three segments. The accounting policies of the reportable
segments are the same as those described in Note 4. The Company does not have
significant intersegment transactions.
These segments and their respective operations are as follows:
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 productions platforms.
Harbor and Offshore Towing - Harbor and offshore 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
includes 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.
The Company evaluates performance by operating segment. Also, within
the offshore energy support segment, the Company performs additional performance
evaluation of vessels marketed in U.S. and foreign locations. Resources are
allocated based on segment profit or loss from operations, before interest and
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 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 these segments (in thousands):
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
Year Ended January 1 to December 16 to
December 31, December 15 December 31
1997 1998 1999 1999
<S> <C> <C> <C> <C>
Revenues
Offshore energy support................. $ 111,385 $ 242,655 $ 144,702 $ 5,610
Offshore and harbor towing.............. 20,424 46,368 41,431 1,528
Marine transportation services.......... 78,448 115,770 142,618 6,341
--------------- --------------- --------------- ---------------
Consolidated revenue........................ $ 210,257 $ 404,793 $ 328,751 $ 13,479
=============== =============== =============== ===============
Operating expenses
Offshore energy support................. $ 43,697 $ 114,369 $ 95,811 $ 4,168
Offshore and harbor towing.............. 11,798 21,558 19,949 745
Marine transportation services.......... 49,438 77,674 96,993 3,134
--------------- --------------- --------------- ---------------
Consolidated operating expenses............. $ 104,933 $ 213,601 $ 212,753 $ 8,047
=============== =============== =============== ===============
Selling, general and administrative
expenses
Offshore energy support................. $ 5,866 $ 14,707 $ 19,684 $ 635
Offshore and harbor towing.............. 2,361 5,528 5,385 239
Marine transportation services.......... 5,739 8,269 7,416 199
General corporate....................... 10,825 14,675 15,329 570
--------------- --------------- --------------- ---------------
Consolidated selling, general and
administrative expenses.................. $ 24,791 $ 43,179 $ 47,814 $ 1,643
=============== =============== =============== ===============
Depreciation, amortization and drydocking
Offshore energy support................. $ 10,949 $ 41,547 $ 49,893 $ 1,236
Offshore and harbor towing.............. 1,645 4,750 4,991 150
Marine transportation services.......... 12,181 16,876 22,855 623
General corporate....................... 425 1,071 1,671 60
--------------- --------------- --------------- ---------------
Consolidated depreciation, amortization and
drydocking.............................. $ 25,200 $ 64,244 $ 79,410 $ 2,069
=============== =============== =============== ===============
Income (loss) from operations
Offshore energy support................. $ 50,873 $ 72,032 $ (20,686) $ (429)
Offshore and harbor towing.............. 4,620 14,532 11,106 394
Marine transportation services.......... 11,090 12,951 15,354 2,385
General corporate....................... (11,250) (15,746) (17,000) (630)
--------------- --------------- --------------- ---------------
Consolidated income (loss) from operations.. $ 55,333 $ 83,769 $ (11,226) $ 1,720
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
as of December 31,
------------------------------------------------------------
1997 1998 1999
---------------- ----------------- ---------------
<S> <C> <C> <C?
Identifiable assets
Offshore energy support................. $ 237,131 $ 653,687 $ 386,444
Offshore and harbor towing.............. 101,547 116,381 81,364
Marine transportation services.......... 298,707 579,580 325,936
Unallocated................................. (33,602) 5,619 36,996
--------------- --------------- ---------------
Total ..................................... $ 603,783 $ 1,355,267 $ 830,740
=============== =============== ===============
Capital expenditures
Offshore energy support................. $ 207,207 $ 304,387 $ 10,649
Offshore and harbor towing.............. 47,003 27,525 838
Marine transportation services.......... 7,513 179,251 2,083
Unallocated............................. 37,404 50,057 138
--------------- --------------- ---------------
Total ...................................... $ 299,127 $ 561,220 $ 13,708
=============== =============== ===============
</TABLE>
<PAGE>
The Company is engaged in providing marine support and transportation
services in the United States and foreign locations. The Company's foreign
operations are conducted on a worldwide basis, primarily in the Arabian Gulf,
West Africa, Southeast Asia and Mexico, with assets that are highly mobile.
These operations are subject to risks inherent in operating in such locations.
The vessels generating revenues from offshore and marine transportation
services move regularly and routinely from one country to another, sometimes in
different continents depending on the charter party. Because of this asset
mobility, revenues and long-lived assets attributable to the Company's foreign
operations in any one country are not material, as defined in SFAS No. 131.
The following table presents selected financial information pertaining
to the Company's geographic operations for 1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
Year Ended Year Ended January 1 to December 16 to
December 31, December 31, December 15, December 31,
1997 1998 1999 1999
--------------- ------------- ------------- --------
<S> <C> <C> <C> <C>
Revenues
Domestic.............................. $ 189,336 $ 254,582 $ 232,067 $ 10,039
Foreign............................... 20,921 150,211 96,684 3,440
--------------- ------------- ------------- --------------
Consolidated revenues..................... $ 210,257 $ 404,793 $ 328,751 $ 13,479
=============== ============= ============= ==============
Income (loss) from operations
Domestic.............................. $ 57,782 $ 56,184 $ 23,252 $ 2,877
Foreign............................... 8,376 43,331 (17,478) (527)
Unallocated expenses.................. (10,825) (15,746) (17,000) (630)
--------------- ------------- ------------- --------------
Consolidated income (loss)from operations $ 55,333 $ 83,769 $ (11,226) $ 1,720
=============== ============= ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
as of December 31,
-----------------------------------------------------------
1997 1998 1999
--------------- ------------- --------------
<S> <C> <C> <C>
Identifiable assets
Domestic.............................. $ 454,688 $ 836,915 $ 546,235
Foreign............................... 147,332 512,733 247,509
Unallocated........................... 2,541 5,619 36,996
--------------- ------------- -------------
Consolidated identifiable assets.......... 604,561 $ 1,355,267 $ 830,740
=============== ============= =============
</TABLE>
20. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair
value of financial instruments included in the following categories:
Cash, Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts
Payable and Accrued Liabilities. The carrying amounts reported in the balance
sheets approximate fair value due to the current maturity of such instruments.
Successor Company Senior Secured Notes and Term Loan. The carrying
amounts reported in the December 31, 1999 balance sheet approximates fair value
due to the recent issuance of such instruments.
Senior Notes. The fair value of the Predecessor Company's Senior Notes
was approximately $237.0 million at December 31, 1998 based upon quoted market
rates. Pursuant to the Plan, the Senior Notes were converted to an equity
interest in the Successor Company at the Effective Date.
Revolving Credit and Term Loan Agreement. Amounts previously
outstanding under the Credit Facility provided for interest at variable rates
that are periodically adjusted to reflect changes in overall market rates and
therefore approximated fair value.
Title XI Debt. The fair value of the Lightship Tanker Title XI Bonds
was approximately $213.8 million and $238.2 million at December 31, 1999 and
1998, respectively, compared to its carrying value of approximately $228.0
million and $225.0 million, respectively. The carrying value of other Title XI
debt approximates fair value at December 31, 1999. The fair values were
determined using a discounted cash flow analysis at estimated market rates as of
December 31, 1999.
Notes Payable and Capital Lease Obligations. The carrying amounts
reported in the balance sheets approximate fair value using a discounted cash
flow analysis at estimated market rates.
Preferred Securities. The Preferred Securities were publicly traded.
The fair value of the Preferred Securities was approximately $39.0 million at
December 31, 1998, based upon quoted market rates. Pursuant to the Plan, the
Preferred Securities were converted to an equity interest in the Successor
Company at the Effective Date.
21. Extraordinary Items
In 1997, the Company repaid $126.7 million of its outstanding debt and
amended its then existing credit facility. As a result, the Company recorded a
loss on the early extinguishment of $2.1 million, net of an income tax benefit
of $1.2 million.
In February 1998, the Company repaid $268.0 million of its outstanding
debt. As a result, the Company recorded a loss on the early extinguishment of
approximately $0.7 million, net of an income tax benefit of $0.4 million.
In 1999, the Predecessor Company was relieved of approximately $421.6
million of outstanding debt and related accrued interest in exchange for
approximately $155 million in equity interests in the Successor Company in
connection with the Plan. As a result, the Predecessor Company recorded a gain
on the early extinguishment of debt of approximately $266.6 million.
22. Supplemental Condensed Consolidating Financial Information
The Senior Secured Notes described in Note 7 are fully and
unconditionally guaranteed on a joint and several basis by certain 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 Secured Notes.
The following is summarized condensed consolidating financial
information for the Company, segregating the Parent, the combined guarantors,
the combined non-guarantor subsidiaries and eliminations.
<TABLE>
<CAPTION>
Condensed Consolidating Balance Sheet
(in thousands)
December 31, 1999
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Assets
Current assets.......................
...Cash and cash equivalents............. $ 4,830 $ 10,724 $ 3,492 $ -- $ 19,046
...Restricted cash....................... 15,027 190 -- -- 15,217
...Accounts receivable:
... Trade, net.......................... 1,804 41,307 5,132 (688) 47,555
... Insurance claims and other.......... 1,866 5,178 516 (785) 6,775
Marine operating supplies................ (465) 6,291 4,806 -- 10,632
...Prepaid expenses...................... 933 2,593 487 -- 4,013
----------- --------------- --------------- ------------- --------------
... Total current assets................ 23,995 66,283 14,433 (1,473) 103,238
Property:
...Construction in progress.............. -- 1,205 140 -- 1345
...Vessel and improvements............... 9,292 384,702 304,985 -- 698,979
...Furniture and equipment............... 5,822 5,186 635 -- 11,643
...Less accumulated depreciation......... (196) (1,204) (20,687) -- (22,087)
----------- --------------- --------------- ------------- --------------
...Net property.......................... 14,918 389,889 285,073 -- 689,880
Deferred costs (net)..................... 14,962 6,069 8,433 -- 29,464
Restricted investments................... -- -- 3,752 -- 3,752
Due from affiliates...................... (82,320) 120,532 (34,734) (3,478)
Goodwill, net............................ -- -- -- -- --
... Other............................... 537,880 356,947 43,038 (933,459) 4,406
----------- --------------- --------------- ------------- --------------
... $ 509,435 $ 940,112 $ 319,603 $ (938,410) $ 830,740
=========== =============== =============== ============= ==============
Current liabilities:
...Accounts payable...................... $ 1,383 $ 8,565 $ 947 $ -- $ 10,895
...Current maturities of long term debt.. 12,065 1,890 3,820 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 17,214 3,063 (1,473) 37,489
----------- --------------- --------------- ------------- --------------
... Total current liabilities........... 35,106 30,446 8,514 (1,473) 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
...Deferred income taxes................. -- -- -- -- --
...Other................................. 4,425 1,301 226 5,952
Company-obligated mandatorily redeemable
...preferred securities of a subsidiary trust
...holding solely debentures issued by the
...Company............................... -- -- -- -- --
Minority interest........................ -- (1) -- 10,458 10,457
Commitments and contingencies............ -- -- -- -- --
----------- --------------- --------------- ------------- --------------
Stockholders' equity..................... -- -- -- -- --
----------- --------------- --------------- ------------- --------------
Common stock............................. 100 -- -- -- 100
Additional paid in capital............... 166,786 633,985 11,143 (645,123) 166,791
Retained earnings (accumulated deficit).. (1,565) 226,308 75,964 (302,272) (1,565)
----------- --------------- --------------- ------------- --------------
... Total stockholders' equity........ 165,321 860,293 87,107 (947,395) 165,326
----------- --------------- --------------- ------------- --------------
... $ 509,435 $ 939,721 $ 319,994 $ (938,410) $ 830,740
=========== =============== =============== ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidating Balance Sheet
(in thousands)
December 31, 1998
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Assets
Current assets.......................
...Cash and cash equivalents............. $ 1,401 $ 7,101 $ 1,604 $ -- $ 10,106
...Restricted cash....................... -- -- -- -- --
...Accounts receivable:
... Trade, net.......................... 5,337 62,973 1,810 (672) 69,448
... Insurance claims and other.......... 4,874 7,015 401 -- 12,290
...Marine operating supplies............. 2,707 13,704 2,864 (277) 18,998
...Prepaid expenses...................... 1,373 2,852 398 -- 4,623
----------- --------------- --------------- ------------- --------------
... Total current assets................ 15,692 93,645 7,077 (949) 115,465
Property:
...Construction in progress.............. 14,573 24,716 76,601 166 116,056
...Vessel and improvements............... 116,256 710,114 219,358 (3,011) 1,042,717
...Furniture and equipment............... 6,833 9,597 898 -- 17,328
...Less accumulated depreciation......... (23,974) (58,839) (12,655) -- (95,468)
----------- --------------- --------------- ------------- --------------
...Net property.......................... 113,688 685,588 284,202 (2,845) 1,080,633
Deferred costs (net)..................... 15,642 15,704 7,711 (286) 38,771
Restricted investments................... -- -- 23,344 -- 23,344
Due from affiliates...................... 167,216 (117,420) (50,230) 434 --
Goodwill, net............................ 114 86,842 -- 4,401 91,357
... Other............................... 697,005 822,426 32,467 (1,546,201) 5,697
----------- --------------- --------------- ------------- --------------
... $ 1,009,357 $ 1,586,785 $ 304,571 $ (1,545,446) $ 1,355,267
=========== =============== =============== ============= ==============
Current liabilities:
...Accounts payable...................... $ 6,190 $ 19,388 $ 1,182 $ -- $ 26,759
...Current maturities of long term debt.. 261,106 859 2,376 -- 264,341
...Current obligations under capital leases 630 2,361 -- -- 2,991
...Accrued interest...................... 9,688 175 690 -- 10,553
...Accrued liabilities and other......... 5,166 17,426 5,753 (722) 27,623
----------- --------------- --------------- ------------- --------------
... Total current liabilities........... 282,780 40,209 10,000 (722) 332,267
...Long-term debt........................ 136,355 15,766 222,597 (118,557) 256,161
...Obligations under capital leases...... 14,186 22,797 -- -- 36,983
...Senior notes.......................... 300,000 -- -- -- 300,000
...Deferred income taxes................. 25,649 7,072 -- -- 32,721
...Other................................. 2,352 3,084 115 -- 5,551
Preferred securities..................... -- 115,000 -- -- 115,000
Minority interest........................ -- 1 -- 28,548 28,549
Commitments and contingencies............ -- -- -- -- --
----------- --------------- --------------- ------------- --------------
Stockholders' equity..................... -- -- -- -- --
----------- --------------- --------------- ------------- --------------
Common stock............................. 15 17 3 (20) 15
Additional paid in capital............... 196,822 658,017 30,086 (688,103) 196,822
Retained earnings........................ 51,198 724,822 41,770 (766,592) 51,198
----------- --------------- --------------- ------------- --------------
... Total stockholders' equity........ 248,035 1,382,856 71,859 (1,454,715) 248,035
----------- --------------- --------------- ------------- --------------
... $ 1,009,357 $ 1,586,785 $ 304,571 $ (1,545,446) $ 1,355,267
=========== =============== =============== ============= ==============
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Income Sheet
(in thousands)
For the Period of December 16, 1999 to December 31, 1999
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 2,118 $ 10,516 $ 3,203 $ (2,358) $ 13,479
Operating expenses:
...Crew payroll and benefits............. 876 2,598 681 -- 4,155
...Charter hire and bond guarantee fee... 80 2,618 -- (2,144) 554
...Repair and maintenance................ 70 594 55 -- 719
...Insurance............................. 51 338 143 -- 532
...Consumables........................... 217 1,228 224 (9) 1,660
...Rent and utilities.................... 91 613 (110) (167) 427
----------- --------------- --------------- ------------- --------------
... Total operating expenses............ 1,385 7,989 993 (2,320) 8,047
Selling, general and administrative expenses:
...Salaries and benefits................. 239 522 109 -- 870
...Office................................ 83 125 12 -- 220
...Professional fees..................... 203 (6) 14 -- 211
...Other................................. 100 419 59 (236) 342
----------- --------------- --------------- ------------- --------------
...Total overhead expenses............... 625 1,060 194 (236) 1,643
...Depreciation, amortization and drydocking 222 1,445 402 -- 2,069
Income (loss) from operations............ (114) 22 1,614 198 1,720
Other income (expense):
...Interest expense...................... (2,041) -- (715) -- (2,756)
...Interest income....................... 24 1 43 -- 68
...Minority interest and equity earnings of
... subsidiaries........................ 565 1,645 582 (3,200) (408)
...Loss on disposal of assets............ -- -- -- -- --
... Other............................... 1 8 0 (198) (189)
----------- --------------- --------------- ------------- --------------
... Total other expense, net.......... (1,451) 1,654 (90) (3,398) (3,285)
...Income (loss) before reorganization items,
...income taxes and extraordinary item... (1,565) 1,676 1,524 (3,200) (1,565)
Reorganization items:
...Professional fees..................... -- -- -- -- --
...Write down of goodwill and property... -- -- -- -- --
...Other, net............................ -- -- -- -- --
----------- --------------- --------------- ------------- --------------
... Total reorganization items.......... -- -- -- -- --
----------- --------------- --------------- ------------- --------------
Income (loss) before income taxes and
...extraordinary item.................... (1,565) 1,676 1,524 (3,200) (1,565)
Provision for (benefit from) income taxes -- -- -- -- --
Income (loss) before extraordinary item.. (1,565) 1,676 1,524 (3,200) (1,565)
Gain (loss) on early extinguishment of debt,
...net of applicable income taxes........ -- -- -- -- --
----------- --------------- --------------- ------------- --------------
Net income (loss)........................ $ (1,565) $ 1,676 $ 1,524 $ (3,200) $ (1,565)
=========== =============== =============== ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Operations
(in thousands)
For the Period January 1, 1999 to December 15, 1999
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 48,598 $ 279,355 $ 60,999 $ (60,201) $ 328,751
Operating expenses:
...Crew payroll and benefits............. 17,405 59,386 14,799 (216) 91,374
...Charter hire and bond guarantee fee... 1,859 61,192 -- (47,260) 15,791
...Repairs and maintenance............... 2,263 22,796 1,182 (196) 26,045
...Insurance............................. 1,569 9,694 1,453 -- 12,716
...Consumables........................... 4,063 29,556 5,381 (3,034) 35,966
...Rent and utilities.................... 2,963 21,049 10,851 (4,002) 30,861
----------- --------------- --------------- ------------- --------------
... Total operating expenses............ 30,122 203,673 33,666 (54,708) 212,753
Selling, general and administrative expenses:
...Salaries and benefits................. 5,836 12,212 -- -- 18,048
...Office................................ 2,569 3,598 396 -- 6,563
...Professional fees..................... 6,753 2,482 1,212 -- 10,447
...Other................................. 1,684 11,797 4,891 (5,616) 12,756
----------- --------------- --------------- ------------- --------------
...Total overhead expenses............... 16,842 30,089 6,499 (5,616) 47,814
...Depreciation, amortization and drydocking 12,105 57,793 9,524 (12) 79,410
Income (loss) from operations........... (10,471) (12,200) 11,310 135 (11,226)
Other income (expense):
...Interest expense...................... (61,692) (407) (17,150) 8,034 (71,215)
...Interest income....................... 2,850 5,558 467 (8,034) 841
...Minority interest and equity earnings of
... subsidiaries........................ (377,286) (286,522) (3,938) 665,150 (2,596)
...Loss on disposal of asset sales....... (13,573) (12,085) -- -- (25,658)
...Other................................. 4,629 (15,332) 2,658 4,170 (3,875)
----------- --------------- --------------- ------------- --------------
... Total other expense, net............ (445,072) (308,788) (17,963) 669,320 (102,503)
----------- --------------- --------------- ------------- --------------
Income (loss) before reorganization items,
...income taxes and extraordinary item... (455,543) (320,988) (6,653) 669,455 (113,729)
Reorganization items:
...Professional fees..................... (8,535) -- -- -- (8,535)
...Write down of goodwill and property... (79,868) (332,999) (2,730) (4,401) (419,998)
-
...Other................................. (4,154) (586) -- -- (4,740)
----------- --------------- --------------- ------------- --------------
... Total reorganization items.......... (92,557) (333,585) (2,730) (4,401) (433,273)
----------- --------------- --------------- ------------- --------------
Income (loss) before taxes and extraordinary
...item.................................. (548,100) (654,573) (9,383) 665,054 (547,002)
Provision for (benefit from) taxes....... (32,004) -- -- -- (32,004)
----------- --------------- --------------- ------------- --------------
Income (loss) before extraordinary item.. (516,096) (654,573) (9,383) 665,054 (514,998)
Gain (loss) on early extinguishment of debt 267,741 (1,098) -- -- 266,643
...Net income (loss)..................... $ (248,355) $ (655,671) $ (9,383) $ 665,054 $ (248,355)
=========== =============== =============== ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Operations
(in thousands)
Year ended December 31, 1998
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 69,616 $ 452,263 $ 16,822 $ (133,908) $ 404,793
Operating expenses:
...Crew payroll and benefits............. 21,507 68,744 3,851 (1,619) 92,483
...Charter hire and bond guarantee fee... 3,633 69,113 -- (53,067) 19,679
...Repair and maintenance................ 3,888 15,376 543 -- 19,807
...Insurance............................. 2,014 10,348 356 -- 12,718
...Consumables........................... 5,994 36,846 687 (3,899) 39,628
...Rent and utilities.................... 3,408 26,669 485 (1,275) 29,286
----------- --------------- --------------- ------------- --------------
... Total operating expenses............ 40,444 227,095 5,922 (59,860) 213,601
Selling, general and administrative expenses:
...Salaries and benefits................. 9,344 10,232 1,486 -- 21,062
...Office................................ 2,013 3,574 240 -- 5,827
...Professional fees..................... 2,868 1,831 2,264 -- 6,963
...Other................................. 3,621 9,712 1,636 (5,642) 9,327
----------- --------------- --------------- ------------- --------------
...Total overhead expenses............... 17,846 25,349 5,626 (5,642) 43,179
...Depreciation, amortization and drydocking 13,690 47,056 3,498 -- 64,244
Income (loss) from operations............ (2,364) 152,763 1,776 (68,406) 83,769
Other income (expense):
...Interest expense...................... (50,483) (7,223) (7,110) 9,839 (49,723)
...Interest income....................... 2,767 -- 7,855 (9,839) 8,485
...Minority interest and equity earnings of
... subsidiaries........................ 81,513 75,147 582 (163,090) (5,848)
...Loss on disposal of assets............ -- -- -- -- --
...Other................................. 4,538 (71,872) 277 67,213 156
----------- --------------- --------------- ------------- --------------
... Total other expense, net............ 38,335 10,498 114 (95,877) (46,930)
Income (loss) before reorganization items,
...income taxes and extraordinary item... 35,971 163,261 1,890 (164,283) 36,839
Provision for (benefit from) income taxes 13,489 -- -- -- 13,489
Income (loss) before extraordinary item.. 22,482 163,261 1,890 (164,283) 23,350
Gain (loss) on early extinguishment of debt,
...net of applicable income taxes........ (734) -- (868) -- (1,602)
----------- --------------- --------------- ------------- --------------
Net income (loss)........................ $ 21,748 $ 163,261 $ 1,022 $ (164,283) $ 21,748
=========== =============== =============== ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Operations
(in thousands)
Year ended December 31, 1997
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 52,280 $ 219,735 $ 10,329 $ (72,087) $ 210,257
Operating expenses:
...Crew payroll and benefits............. 15,866 31,103 2,741 (978) 48,732
...Charter hire and bond guarantee fee... 4,170 59,124 -- (52,746) 10,548
...Repairs and maintenance............... 2,380 7,390 392 -- 10,162
...Insurance............................. 2,230 6,166 471 -- 8,867
...Consumables........................... 2,796 15,750 254 (5,146) 13,654
...Rent and utilities.................... 2,635 9,909 448 (22) 12,970
----------- --------------- --------------- ------------- --------------
... Total operating expenses............ 30,077 129,442 4,306 (58,892) 104,933
Selling, general and administrative expenses:
...Salaries and benefits................. 7,167 4,715 170 -- 12,052
...Office................................ 1,118 1,129 1 -- 2,248
...Professional fees..................... 1,921 478 2,284 4,683
...Other................................. 2,960 4,368 563 (2,083) 5,808
----------- --------------- --------------- ------------- --------------
...Total overhead expenses............... 13,166 10,690 3,018 (2,083) 24,791
...Depreciation, amortization and drydocking 9,750 13,720 1,730 25,200
Income (loss) from operations............ (713) 65,883 1,275 (11,112) 55,333
Other income (expense):
...Interest expense...................... (10,274) (1,432) (1,800) 5,165 (8,341)
...Interest income....................... 2,346 4,136 -- (5,165) 1,317
...Minority interest and equity earnings of
... subsidiaries........................ 53,147 114,282 192 (171,148) (3,527)
Other.................................... 99 (9,133) (36) 8,893 (177)
----------- --------------- --------------- ------------- --------------
... Total other expense, net.......... 45,318 107,853 (1,644) (162,255) (10,728)
Income (loss) before reorganization items,
...income taxes and extraordinary item... 44,605 173,736 (369) (173,367) 44,605
Provision for (benefit from) income taxes 16,950 -- -- -- 16,950
Income (loss) before extraordinary item.. 27,655 173,736 (369) (173,367) 27,655
Gain (loss) on early exinguishment of debt,
...net of applicable income taxes........ (2,132) -- -- -- (2,132)
----------- --------------- --------------- ------------- --------------
Net income (loss)........................ $ 25,523 $ 173,736 $ (369) $ (173,367) $ 25,523
=========== =============== =============== ============= ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
(In thousands)
For the Period December 16, 1999 to December 31, 1999
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).......................................... $ (1,565) $ 1,676 $ 1,524 $ (3,200) $ (1,565)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Reorganization items:
Write-off of goodwill.............................. -- -- -- -- --
Revaluation of property and related assets.......... -- -- -- -- --
Accrued reorganization expenses................ -- -- -- -- --
Revaluation of other liabilities and assets.......... -- -- -- -- --
Loss (gain) on early extinguishment of debt............
Depreciation and amortization of property ............. 157 1,251 387 -- 1,795
Provision for bad debts................................ 4 39 13 -- 56
Loss (gain) on disposal of assets...................... -- -- -- -- --
Amortization of drydocking costs....................... -- 259 9 -- 268
Amortization of goodwill............................... -- -- 6 -- 6
Amortization of discount on long-term debt
and financing costs............................ 65 115 -- -- 180
Deferred income tax provision (benefit)................ -- -- -- -- --
Minority partners' equity in (earnings)
loss of subsidiaries, net...................... -- -- -- 408 408
Undistributed losses of affiliates..................... (565) (1,646) (582) 2,793 --
Other non-cash items................................... -- -- -- -- --
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable.................................... (208) 1,583 (1,068) 865 1,172
Marine operating supplies.............................. (157) 240 156 -- 239
Other current and long-term assets..................... 22,970 (2,104) 124 (21,108) (118)
Accounts payable and other liabilities................. 515 (1,469) 515 (865) (1,304)
----------- ----------- -------------- ------------ ------------
Net cash provided by operating activities........ 21,216 (56) 1,084 (21,107) 1,137
Investing activities:
Purchases of property...................................... -- (458) (139) -- (597)
Acquisitions of businesses, net of
cash acquired of $3,525 in 1997.............. (1,000) -- -- -- (1,000)
Payments on vessels under construction.....................
Purchases of restricted investments........................ -- -- -- -- --
Redemption of restricted investments....................... -- -- -- -- --
Capital contributions to consolidated affiliates........... -- -- -- -- --
Proceeds from disposals of assets.......................... -- -- -- -- --
Purchase of minority interest in subsidiary.......... -- -- -- -- --
----------- ----------- -------------- ------------ ------------
Net cash used in investing activities.......... (1,000) (458) (139) -- (1,597)
Financing activities:
Repayments of short-term borrowings........................ -- -- -- -- --
Proceeds from DIP credit facility..........................
Proceeds from long-term borrowings......................... -- -- -- -- --
Repayment of long-term borrowings.......................... -- (80) -- -- (80)
Proceeds from issuance of Senior notes and warrants........
Proceeds from issuance of Successor Company Senior Secured Notes
with warrants............................................. -- -- -- -- --
Proceeds from issuance of Title XI bonds................... -- -- -- -- --
Repayment of Title XI bonds................................ (1,252) -- -- -- (1,252)
Escrow of restricted cash.................................. -- -- -- -- --
Payments of financing costs................................ -- -- -- -- --
Proceeds from sale-leaseback of vessels....................
Payments of obligations under capital leases............... (36) (123) -- -- (159)
Proceeds from issuance of common stock..................... -- -- -- -- --
Proceeds from issuance of redeemable preferred securities, net -- -- -- -- --
Repayment of DIP credit facility........................... -- -- -- -- --
Capital contribution (to) from consolidated affiliates..... (21,707) 279 321 21,107 --
----------- ----------- -------------- ------------ ------------
Net cash provided by (used in) financing activities.. (22,995) 76 321 21,107 (1,491)
Change in cash and cash equivalents........................... (2,779) (438) 1,266 -- (1,951)
Cash and cash equivalents at beginning of period.............. 7,609 11,162 2,226 -- 20,997
----------- ----------- -------------- ------------ ------------
Cash and cash equivalents at end of period.................... $ 4,830 $ 10,724 $ 3,492 $ -- $ 19,046
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
(In thousands)
For the Period December 1, 1999 to December 15, 1999
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).......................................... (248,355) $ (655,671) $ (9,383) $ 665,054 $ (248,355)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Reorganization items:
Write-off of goodwill................................ 109 83,542 -- 4,401 88,052
Revaluation of property and related assets........... 79,759 249,457 2,730 -- 331,946
Accrued reorganization expenses...................... 5,828 -- -- -- 5,828
Revaluation of other liabilities and assets.......... 1,710 1,162 -- -- 2,872
Loss (gain) on early extinguishment of debt............ (151,643) (115,000) -- -- (266,643)
Depreciation and amortization of property ............. 9,186 46,178 8,856 -- 64,220
Provision for bad debts................................ 746 5,199 235 -- 6,180
Loss (gain) on disposal of assets...................... 13,573 12,085 -- -- 25,658
Amortization of drydocking costs....................... 2,861 8,158 230 -- 11,249
Amortization of goodwill............................... 58 3,444 438 -- 3,940
Amortization of discount on long-term
debt and financing costs............................ 1,624 180 973 -- 2,777
Deferred income tax provision (benefit)................ (32,004) -- -- -- (32,004)
Minority partners' equity in (earnings)
loss of subsidiaries, net............................ -- -- -- (2,596) (2,596)
Undistributed losses of affiliates..................... 377,286 287,241 3,938 (668,465) --
Other non-cash items................................... (164) -- -- -- (164)
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable.................................... 5,997 16,569 (2,502) (64) 20,000
Marine operating supplies.............................. (310) 2,917 (2,098) (277) 232
Other current and long-term assets..................... 111,238 33,879 (3,228) (148,298) (6,409)
Accounts payable and other liabilities................. 14,800 (8,496) (3,334) 114 3,084
----------- ----------- -------------- ------------ ------------
Net cash provided by operating activities.......... 192,299 (29,156) (3,145) (150,131) 9,867
Investing activities:
Purchases of property...................................... (13,043) (27,584) (13,672) (2,845) (57,144)
Acquisitions of businesses, net of cash
acquired of $3,525 in 1997............................ -- -- -- -- --
Payments on vessels under construction..................... -- (5,102) -- -- (5,102)
Purchases of restricted investments........................ -- -- (45,790) -- (45,790)
Redemption of restricted investments....................... -- -- 65,382 -- 65,382
Capital contribution to unconsolidated affiliates.......... -- -- -- -- --
Proceeds from disposals of assets.......................... 15,045 17,807 -- -- 32,852
Purchase of minority interest in subsidiary.......... -- -- -- -- --
----------- ----------- -------------- ------------ ------------
Net cash used in investing activities.......... 2,002 (14,879) 5,920 (2,845) (9,802)
Financing activities:
Repayments of short-term borrowings........................
Proceeds from DIP credit facility.......................... 26,690 -- -- -- 26,690
Proceeds from long-term borrowings......................... 231,008 14,200 -- -- 245,208
Repayment of long-term borrowings.......................... (287,299) (906) -- -- (288,205)
Proceeds from issuance of Senior notes and warrants........ 85,500 -- -- -- 85,500
Proceeds from issuance of Successor Company Senior Secured Notes
with warrants.............................................
Proceeds from issuance of Title XI bonds................... -- -- 5,428 -- 5,428
Repayment of Title XI bonds................................ (3,670) (539) (2,434) -- (6,643)
Escrow of restricted cash.................................. (15,027) (190) -- -- (15,217)
Payments of financing costs................................ (12,186) -- (492) -- (12,678)
Proceeds from sale-leaseback of vessels.................... -- -- -- -- --
Payments of obligations under capital leases............... (563) (2,257) -- -- (2,820)
Proceeds from issuance of common stock..................... 253 -- -- -- 253
Proceeds from issuance of redeemable preferred
securities, net.................................. -- -- -- -- --
Repayment of DIP credit facility........................... (26,690) -- -- -- (26,690)
Capital contributions (to) from consolidated affiliates.... (186,109) 37,788 (4,655) 152,976 --
----------- ----------- -------------- ------------ ------------
Net cash provided by (used in) financing activities.. (188,093) 48,096 (2,153) 152,976 10,826
----------- ----------- -------------- ------------ ------------
Change in cash and cash equivalents........................... 6,208 4,061 622 -- 10,891
Cash and cash equivalents at beginning of period.............. 1,401 7,101 1,604 -- 10,106
----------- ----------- -------------- ------------ ------------
Cash and cash equivalents at end of period.................... $ 7,609 $ 11,162 $ 2,226 $ -- $ 20,997
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
(In thousands)
Year ended December 31, 1998
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).......................................... $ 21,748 $ 163,261 $ 1,022 $ (164,283) $ 21,748
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Reorganization items:
Write-off of goodwill................................
...........Revaluation of property and related assets
......................Accrued reorganization expenses
Revaluation of other liabilities and assets..........
Loss (gain) on early extinguishment of debt............ 734 -- 868 -- 1,602
Depreciation and amortization of property ............. 9,088 37,331 2,687 -- 49,106
Provision for bad debts................................ 176 911 -- -- 1,087
Loss (gain) on disposal of assets...................... (29) 3 -- -- (26)
Amortization of drydocking costs....................... 4,575 6,024 755 -- 11,354
Amortization of goodwill............................... 27 3,402 355 -- 3,784
Amortization of discount on long-term
debt and financing costs.......................... 1,274 -- 215 -- 1,489
Deferred income tax provision (benefit)................ 10,189 -- -- -- 10,189
Minority partners' equity in (earnings)
loss of subsidiaries, net.......................... -- (2,973) 1,346 -- (1,627)
Undistributed losses of affiliates..................... (81,513) (81,566) (406) 163,090 (395)
Other non-cash items................................... 217 -- -- -- 217
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable.................................... (6,456) (33,856) (817) 19 (41,110)
Marine operating supplies.............................. (209) (2,787) (1,544) 270 (4,270)
Other current and long-term assets..................... (12,504) (22,797) 17,698 100 (17,503)
Accounts payable and other liabilities................. 9,381 15,912 5,994 (14) 31,273
----------- ----------- -------------- ------------ ------------
Net cash provided by operating activities........ (43,302) 82,865 28,173 (818) 66,918
Investing activities:
Purchases of property...................................... (15,803) (76,057) (23,479) 818 (114,521)
Acquisitions of businesses, net
of cash acquired of $3,525 in 1997..................... (341,442) 360,987) 44 328,850 (373,535)
Payments on vessels under construction..................... -- -- (155,980) -- (155,980)
Purchases of restricted investments........................ -- -- (369,629) -- (369,629)
Redemption of restricted investments....................... -- -- 515,584 -- 515,584
Capital contribution to unconsolidated affiliates.......... (3,233) -- -- -- (3,233)
Proceeds from disposals of assets.......................... -- -- -- -- --
Purchase of minority interest in subsidiary.......... -- -- -- -- --
----------- ----------- -------------- ------------ ------------
Net cash used in investing activities.......... (360,478) (437,044) (33,460) 329,668 (501,314)
Financing activities:
Repayments of short-term borrowings........................ -- -- -- -- --
Proceeds from DIP credit facility.......................... -- -- -- -- --
Proceeds from long-term borrowings......................... 431,700 -- -- -- 431,700
Repayment of long-term borrowings.......................... (313,746) (192) -- -- (313,938)
Proceeds from issuance of Senior notes and warrants........ 292,500 -- -- -- 292,500
Proceeds from issuance of Successor Company Senior Secured Notes
with warrants............................................. -- -- -- -- --
Proceeds from issuance of Title XI bonds................... -- -- 139,023 -- 139,023
Repayment of Title XI bonds................................ (6,693) (647) (129,910) -- (137,250)
Escrow of restricted cash.................................. -- -- -- -- --
Payments of financing costs................................ (2,760) -- (8,059) -- (10,819)
Proceeds from sale-leaseback of vessels.................... 10,025 22,597 -- -- 32,622
Payments of obligations under capital leases............... (552) (4,536) -- -- (5,088)
Proceeds from issuance of common stock..................... 800 -- -- -- 800
Proceeds from issuance of redeemable preferred securities, net -- -- -- -- --
Repayment of DIP credit facility........................... -- -- -- -- --
Capital contributions (to) from consolidated affiliates.... (8,603) 331,634 5,819 (328,850) --
----------- ----------- -------------- ------------ ------------
Net cash provided by (used in) financing activities.. 402,671 348,856 6,873 (328,850) 429,550
Change in cash and cash equivalents........................... (1,109) (5,323) 1,586 -- (4,846)
Cash and cash equivalents at beginning of period.............. 2,510 12,424 18 -- 14,952
----------- ----------- -------------- ------------ ------------
Cash and cash equivalents at end of period.................... $ 1,401 $ 7,101 $ 1,604 $ -- $ 10,106
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
(In thousands)
Year ended December 31, 1997
Guarantor Non Guarantor Condensed
Parent Subsidiaries Subsidiaries Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)......................................... $ 25,523 $ 173,736 $ (369) $ (173,367) $ 25,523
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Reorganization items:
Write-off of goodwill................................
...........Revaluation of property and related assets
......................Accrued reorganization expenses
Revaluation of other liabilities and assets..........
Loss (gain) on early extinguishment of debt............ 2,132 -- 2,132
Depreciation and amortization of property ............. 6,616 11,060 1,417 -- 19,093
Provision for bad debts................................ 217 812 -- -- 1,029
Loss (gain) on disposal of assets...................... 493 31 -- -- 524
Amortization of drydocking costs....................... 3,096 1,962 292 -- 5,350
Amortization of goodwill............................... 38 698 21 -- 757
Amortization of discount on long-term
debt and financing costs......................... 680 -- 176 (176) 680
Deferred income tax provision (benefit)................ 13,147 -- -- -- 13,147
Minority partners' equity in (earnings)
loss of subsidiaries, net......................... -- -- -- (183) (183)
Undistributed losses of affiliates..................... (53,147) (117,993) (192) 171,222 (110)
Other non-cash items................................... 95 -- -- -- 95
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable.................................... (735) (51,995) 32,073 17 (20,640)
Marine operating supplies.............................. (158) (881) -- 7 (1,032)
Other current and long-term assets..................... 175,840 (150,154) (31,674) (2,480) (8,468)
Accounts payable and other liabilities................. (2,372) 3,205 160 1,152 2,145
----------- ----------- -------------- ------------ ------------
Net cash provided by operating activities......... 171,465 (129,519) 1,904 (3,808) 40,042
Investing activities:
Purchases of property...................................... (15,061) (53,811) (458) 2,213 (67,117)
Acquisitions of businesses, net of
cash acquired of $3,525 in 1997...................... (194,723) -- -- -- (194,723)
Payments on vessels under construction..................... -- (910) -- -- (910)
Purchases of restricted investments........................ -- -- -- -- --
Redemption of restricted investments....................... -- -- -- -- --
Capital contribution to unconsolidated affiliates.......... (226) -- -- -- (226)
Proceeds from disposals of assets.......................... -- 1,633 -- -- 1,633
Purchase of minority interest in subsidiary.......... -- -- -- -- --
----------- ----------- -------------- ------------ ------------
Net cash used in investing activities.......... (210,010) (53,088) (458) 2,213 (261,343)
Financing activities:
Repayments of short-term borrowings........................ (8,000) (8,242) -- -- (16,242)
Proceeds from DIP credit facility.......................... -- -- -- -- --
Proceeds from long-term borrowings......................... 177,210 -- -- -- 177,210
Repayment of long-term borrowings.......................... (108,660) (21,756) (1,446) 1,446 (130,416)
Proceeds from issuance of Senior notes and warrants........ -- -- -- -- --
Proceeds from issuance of Successor Company Senior Secured Notes
with warrants............................................. -- -- -- -- --
Proceeds from issuance of Title XI bonds................... -- -- -- -- --
Repayment of Title XI bonds................................ (5,461) -- -- -- (5,461)
Escrow of restricted cash.................................. -- -- -- -- --
Payments of financing costs................................ (2,724) -- -- -- (2,724)
Proceeds from sale-leaseback of vessels.................... -- -- -- -- --
Payments of obligations under capital leases............... (191) (1,277) -- -- (1,468)
Proceeds from issuance of common stock..................... 94,628 -- -- -- 94,628
Proceeds from issuance of redeemable
preferred securities, net........................ -- 111,109 -- -- 111,109
Repayment of DIP credit facility........................... -- -- -- -- --
Capital contribution (to) from consolidated affiliates..... (112,984) 112,835 -- 149 --
----------- ----------- -------------- ------------ ------------
Net cash provided by (used in) financing activities.. 33,818 192,669 (1,446) 1,595 226,636
Change in cash and cash equivalents........................... (4,727) 10,062 -- -- 5,335
Cash and cash equivalents at beginning of period.............. 7,237 2,362 18 -- 9,617
----------- ----------- -------------- ------------ ------------
Cash and cash equivalents at end of period.................... $ 2,510 $ 12,424 $ 18 $ -- $ 14,952
</TABLE>
23. Selected Quarterly Financial Information (unaudited)
The following information is presented as supplementary financial
information for 1998 and 1999 (in thousands, except per share information):
<TABLE>
<CAPTION>
Successor
Predecessor Company Company
Period from Period from
First Second Third October 1 to December 16 to
Year Ended December 31, 1999 Quarter Quarter Quarter December 15, December 31,
---------------------------- ----------- ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues.......................................... $ 90,400 $ 89,004 $ 85,989 $ 63,358 $ 13,479
Income (loss) from operations..................... 4,431 (250) (1,846) (13,561) 1,720
Loss before extraordinary item.................... (9,064) (23,718) (20,107) (462,109) (1,565)
Gain on early extinguishment of debt (1).......... -- -- -- 266,643 --
Net loss.......................................... (9,064) (23,718) (20,107) (195,466) (1,565)
Earnings per share--basic:
Loss before extraordinary item.................. $ (0.59) $ (1.53) $ (1.29) $ (29.71) $ (0.16)
Net loss........................................ (0.59) (1.53) (1.29) (12.57) (0.16)
Earnings per share--assuming dilution (2):
Loss before extraordinary item.................. $ (0.59) $ (1.53) $ (1.29) $ (29.71) $ (0.16)
Net loss........................................ (0.59) (1.53) (1.29) (12.57) (0.16)
</TABLE>
<TABLE>
<CAPTION>
Predecessor Company
First Second Third Fourth
Year Ended December 31, 1998 Quarter Quarter Quarter Quarter
---------------------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues.......................................... $ 86,485 $ 109,332 $ 100,149 $ 108,827
Income from operations............................ 20,563 27,839 18,963 16,404
Income before extraordinary item.................. 7,184 9,472 4,772 1,922
Loss on early extinguishment of debt (1).......... (734) -- (868) --
Net income........................................ 6,450 9,472 3,904 1,922
Earnings per share--basic:
Income before extraordinary item................ $ 0.47 $ 0.62 $ 0.31 $ 0.13
Net income...................................... 0.42 0.62 0.25 0.13
Earnings per share--assuming dilution(2):
Income before extraordinary item................ $ 0.43 $ 0.55 $ 0.31 $ 0.12
Net income...................................... 0.39 0.55 0.25 0.12
</TABLE>
- ----------------
(1) See Note 22.
(2) The sum of the four quarters' earnings per share will not necessarily equal
the annual earnings per share, as the computations for each quarter are
independent of the annual computation.
24. Subsequent Events
The Company has entered into an amendment to the Credit Facility with
the lending banks under which the relevant covenants have been modified through
March 31, 2001 and the Company is required to prepay principal under the term
loans aggregating $10.0 million before June 30, 2000, $35.0 million before
August 31, 2000, and $60.0 million before January 1, 2001. The Company intends
to sell vessels and other assets to obtain the funds with which to make these
payments and may sell certain vessels at amounts below book value. The amended
Credit Facility further provides that, in the event the Company has not made the
required principal payments as scheduled or achieved certain target levels of
EBITDA for the third and fourth quarters of 2000, the lending banks may require
the Company to sell additional vessels, to be selected by the lending banks,
with an aggregate fair market value of $35 million. The amounts that the Company
has agreed to prepay in 2000 have not been reclassified to current maturities of
long-term debt because the prepayments will be made with the proceeds from sales
of long-term assets. Additionally, the Company is required to obtain the consent
of the lending banks to borrow in excess of $17.5 million under the revolving
loan portion of the Credit Facility. The Company is required to pay a fee of
$4.5 million to the lending banks in connection with the amendment, payable in
the form of a promissory note, accruing interest at 15% per annum, due the
earlier of (i) April 2002 and (ii) the date on which the ratio of funded
indebtedness to EBITDA for any quarter is less than four to one.
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of April 13, 2000 among HVIDE
MARINE INCORPORATED, a corporation existing under the laws of Delaware, as
borrower (the "Borrower"), the financial institutions party to the Credit
Agreement referred to below (the "Lenders") and Bankers Trust Company ("BTCo"),
as administrative agent (in such capacity, the "Administrative Agent"). All
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings provided such terms in the Credit Agreement referred to
below.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties
to a Credit Agreement, dated as of December 15, 1999 among the Borrower, the
Administrative Agent, the Lenders, Deutsche Bank Securities, Inc., as lead
arranger and book manager, MeesPierson Capital Corp., as syndication agent and
co-arranger, GMAC Commercial Credit and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated as co-documentation agents (the "Credit
Agreement");
WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement; and
WHEREAS, subject to the terms and conditions of this Amendment, the Lenders
are willing to grant such amendments.
NOW, THEREFORE, it is agreed:
1. Section 1.01(d) of the Credit Agreement is hereby amended
by (i) deleting the word "and" appearing at the end of sub-clause (ii) and
inserting a semi-colon in lieu thereof, (ii) deleting the period appearing at
the end of sub-clause (iii) and inserting the word "and" in lieu thereof and
(iii) inserting the following new sub-clause (iv) immediately after sub-clause
(iii) appearing therein:
"(iv) shall not exceed $17,500,000 without the consent of the
Required Lenders.
2. Section 4.02(A)(g) of the Credit Agreement is hereby
amended by inserting the text "(other than, except with respect to Permitted
Scheduled Asset Sales, (i) the sale or other disposition of the Lightship Tanker
Entities as provided in Section 8.02(xiii), provided, that the Lenders receive
100% of the first $15,000,000, 50% of the next $10,000,000, and 100% of any
proceeds in excess thereof, of the proceeds from such sale, (ii)" in lieu of the
text "(other than (i)" appearing therein, inserting the text "disposition,
(iii)" in lieu of the text "disposition, (ii)" appearing therein and inserting
the text "Borrower and (iv)" in lieu of the text "Borrower and (iii)" appearing
therein.
3. Section 6.25 of the Credit Agreement is hereby amended by
(i) deleting the text "60 days after the Effective Date" appearing therein and
inserting the text "45 days after the First Amendment Effective Date" in lieu
thereof and (ii) inserting the text "or established such an account with a
banking institution and in a manner satisfactory to the Administrative Agent"
immediately after the text "at BTCo" appearing therein.
4. Section 7.14 of the Credit Agreement is hereby amended by
(i) deleting the text "60 days after the Effective Date" appearing therein and
inserting the text "45 days after the First Amendment Effective Date" in lieu
thereof.
5. Section 8.02(x) of the Credit Agreement is hereby amended
by (i) deleting the text "$20 million" appearing therein and inserting the text
"$5 million" in lieu thereof, (ii) deleting the text "and" appearing at the end
thereof and (iii) inserting the following text "(other than the Permitted
Scheduled Asset Sales)" immediately after the text "sales or dispositions of
assets" appearing therein.
6. Section 8.02 of the Credit Agreement is further amended by
(i) deleting the period appearing at the end of sub-clause (xi) appearing
therein and inserting a semi-colon in lieu thereof and (ii) inserting the
following new sub-clauses (xii) and (xiii) immediately after sub-clause (xi)
appearing therein:
"(xii) sale or disposition of any assets described on Schedule
X; provided that (i) each such sale shall be for an amount at least equal to the
fair market value thereof (as determined in good faith by the Board of Directors
or senior management of the Borrower), (ii) at least 100% of the consideration
therefor shall be in cash and (iii) the proceeds thereof shall be applied as
required under Section 4.02(A)(g) (such sales, the "Permitted Scheduled Asset
Sales") and
"(xiii) sale or disposition of all or a portion of the
Lightship Tanker Entities on terms satisfactory to the Administrative Agent."
7. Section 8.08 of the Credit Agreement is hereby amended by
(i) inserting the text "(a)" immediately prior to the text "The Borrower will"
appearing therein, (ii) deleting the text appearing in the column entitled
"Minimum EBITDA" immediately prior to the text "$60 million" appearing therein,
and inserting the following text in lieu thereof;
"$8.0 million
$17.0 million
$27.0 million
$37.0 million
$43.0 million" and
(iii) inserting the following sub-clause (b) immediately after
the columns appearing therein:
"(b) The Borrower will (i) not permit Consolidated EBITDA to
be less than a total of $30,000,000 for the three fiscal quarters ending on
September 30, 2000 or a total of $44,000,000 for the four fiscal quarters ending
on December 31, 2000 and (ii) make repayments sufficient to reduce the aggregate
principal amount of Term Loans outstanding by $10,000,000 before June 30, 2000,
$35,000,000 before August 31, 2000 (such amount to be reduced by the amount
committed as consideration for the sale or disposition of the Lightship Tanker
Entities as permitted in Section 8.02(xiii), provided that the Lenders receive
the proceeds from such sale or disposition in accordance with Section
4.02(A)(g)(i) within 60 days of such proceeds being so committed) and
$60,000,000 before January 1, 2001 with the proceeds thereof applied in
accordance with Section 4.02(B); provided, however, that the Borrower's failure
to meet the requirements of this Section 8.08(b) shall not be an Event of
Default if the Borrower sells, within 90 days (such period to be extended only
with the approval of 66 2/3% of the Lenders) of receiving the Notice of Lender
Designation (as defined hereafter), at fair market-value and with at least 100%
of the consideration therefor in cash, $35,000,000 of First Preferred Vessel
Value that the Required Lenders set forth, in their sole discretion, in a notice
of lender designation that shall specify (a) the assets to be sold and (b) a
timetable for the completion of the asset sales (such notice, the "Notice of
Lender Designation"). Upon the Borrower's failure to meet any of the
requirements of this Section 8.08(b), the Lenders shall have the option to
present to the Borrower the Notice of Lender Designation and require the
Borrower to sell the assets set forth therein. Once the Lenders have exercised
their option and the Borrower has complied with the terms of the Notice of
Lender Designation and sold the assets set forth therein, the Borrower shall not
be required to comply with the remaining provisions of this Section 8.08(b)
other than reducing the aggregate principal amount of Term Loans outstanding by
$60,000,000 before January 1, 2001 pursuant to clause (ii), above. The terms of
the Notice of Lender Designation shall not be amended or waived without the
approval of 66 2/3% of the Lenders."
8. Section 8.09 of the Credit Agreement is hereby amended by
(i) deleting text "Total Revolving Loan Commitment" appearing therein and (ii)
inserting the text "sum of the aggregate principal amount of Revolving Loans and
Swingline Loans then outstanding plus the aggregate amount of Letter of Credit
Outstandings" in lieu thereof.
9. Section 8.10 of the Credit Agreement is hereby amended by
deleting the text "on the last day of any Test Period (starting with the Test
Period ended on December 31, 2000) to be less than 1.00:1.00." appearing therein
and inserting the following text in lieu thereof:
"on the last day of the Test Period ended on December 31, 2000
and the fiscal quarter ended March 31, 2001 to be less than 0.60:1.00 and on the
last day of any fiscal quarter thereafter to be 1.00:1.00."
10. Section 10 of the Credit Agreement is hereby amended by
(i) inserting the text "(excluding payments required under Section 8.08(b))"
immediately prior to the text "and (iv)" in the definition of `Consolidated
Fixed Charges' appearing therein;
(ii) inserting the text, "excluding any interest payments
covered by the Escrow Agreement" immediately before the period appearing at the
end of the definition of `Consolidated Cash Interest Expense' appearing therein;
(iii) inserting the text "minus the amounts owed under current
maturities of long term debt" immediately after the text "at such time"
appearing in the definition of `Consolidated Current Liabilities';
(iv) deleting the definition of `Fixed Charge Coverage Ratio'
in its entirety and inserting the following definition in lieu thereof:
"`Fixed Charge Coverage Ratio' shall mean, for any period, the
ratio of (x) Consolidated EBITDA for such period to (y) Consolidated Fixed
Charges for such period";
(v) deleting the period appearing at the end of the definition
of `Consolidated EBIT' and inserting the text "or any non-cash effects of any
reserves or elimination of reserves or accruals to be made with respect to
payments to Hans Hvide or the creation of a reserve for payments to Erik Hvide."
in lieu thereof; and
(vi)inserting the following new definitions in the appropriate
alphabetical location:
"`Consolidated Funded Indebtedness' shall mean the
consolidated indebtedness of the Borrower and its Subsidiaries as shown on the
balance sheet of the Borrower and its Subsidiaries, including Capitalized Lease
Obligations and excluding the consolidated indebtedness attributable to the
Lightship Tanker Entities.
"`Notice of Lender Designation' shall have the meaning
provided in Section 8.08(b).
"`Permitted Scheduled Asset Sales' shall have the meaning
provided in Section 8.02(xii)."
11. The Table of Contents of the Credit Agreement is hereby
amended by inserting the text " SCHEDULE X Permitted Scheduled Asset Sales"
immediately below the text "SCHEDULE IX Existing Investments" appearing therein.
12. Notwithstanding anything to the contrary contained herein,
in the Credit Agreement or the fee letter, dated December 8, 1999, executed
between the Borrower and the Administrative Agent, the Borrower hereby agrees to
pay a First Amendment Fee of $4,500,000. Such First Amendment Fee shall be
payable on the earliest of (i) the repayment in full of all Term Loans and
Revolving Loans, (ii) 24 months from the date hereof or (iii) the date on which
the ratio of (a) the Consolidated Funded Indebtedness to (b) Consolidated EBITDA
for the preceding full fiscal quarter period on the last day of any fiscal
quarter after December 31, 2000 is 4.00:1.00 or less. The First Amendment Fee
shall accrue interest at a rate of 15% per annum compounded quarterly from the
date hereof. The First Amendment Fee and interest accrued thereon shall not be
included in the calculation of any financial covenants provided in Sections
8.06, 8.08, 8.09, 8.10 or 8.11 of the Credit Agreement.
13. The Borrower hereby represents and warrants that after
giving effect to this Amendment (x) no Default or Event of Default exists on the
First Amendment Effective Date (as defined below) and (y) all of the
representations and warranties contained in the Credit Agreement or the other
Credit Documents shall be true and correct in all material respects on the First
Amendment Effective Date with the same effect as though such representations and
warranties had been made on and as of such date (it being understood that any
representation or warranty made as of a specific date shall be true and correct
in all material respects as of such specific date).
14. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document. All capitalized terms not defined
herein shall have the meaning given to them in the Credit Agreement.
15. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Administrative Agent.
16. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
OF THE STATE OF NEW YORK.
17. This Amendment shall become effective on the date (the
"First Amendment Effective Date") when each of the Borrower and the Required
Lenders shall have signed a copy hereof (whether the same or different copies)
and, in each case, shall have delivered (including by way of telecopier) the
same to the Administrative Agent at the Notice Office.
* * *
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
HVIDE MARINE INCORPORATED
By________________________________
Name:
Title:
<PAGE>
BANKERS TRUST COMPANY,
Individually and as Administrative Agent
By________________________________
Name:
Title:
<PAGE>
MEES PIERSON CAPITAL CORP.,
By________________________________
Name:
Title:
<PAGE>
MERRILL LYNCH CAPITAL CORPORATION
By________________________________
Name:
Title:
<PAGE>
GMAC COMMERICAL CREDIT
By________________________________
Name:
Title:
<PAGE>
NATIONAL WESTMINSTER BANK PLC
By: NatWest Capital Markets Limited, its Agent
By: Greenwich Capital Markets, Inc., its Agent
By________________________________
Name:
Title:
<PAGE>
PROVIDENT BANK
By________________________________
Name:
Title:
<PAGE>
OFFITBANK
By________________________________
Name:
Title:
Exhibit 23.1
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in the Registration Statement (Form
S-3 No. 333-30390) of Hvide Marine Incorporated and in the related prospectus of
our report dated February 25, 2000 (except for the seventh paragraph of Note 10,
as to which the date is March 31, 2000 and Note 24, as to which the date is
April 14, 2000), with respect to the consolidated financial statements of Hvide
Marine Incorporated included in this Annual Report (Form 10-K) for the year
ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Miami, Florida
April 14, 2000
<PAGE>
Consent of Independent Certified Public Accountants
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of Hvide Marine Incorporated filed April 13, 2000 and in the related
prospectus of our report dated February 25, 2000 (except for the seventh
paragraph of Note 10, as to which the date is March 31, 2000 and Note 24, as to
which the date is April 14, 2000), with respect to the consolidated financial
statements of Hvide Marine Incorporated included in this Annual Report (Form
10-K) for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Miami, Florida
April 14, 2000
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<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 19,046
<SECURITIES> 0
<RECEIVABLES> 53,354
<ALLOWANCES> (5,799)
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<PP&E> 711,967
<DEPRECIATION> 22,087
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<CURRENT-LIABILITIES> 72,596
<BONDS> 657,519
0
0
<COMMON> 100
<OTHER-SE> 165,226
<TOTAL-LIABILITY-AND-EQUITY> 830,740
<SALES> 0
<TOTAL-REVENUES> 13,479
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<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 2,756
<INCOME-PRETAX> (1,565)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,565)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (1,565)
<EPS-BASIC> (0.16)
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