SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number: 0-28732
HVIDE MARINE INCORPORATED
State of Incorporation: Delaware I.R.S. Employer I.D. 65-0966399
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, Florida 33316
(954) 523-2200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days.
Yes X No
--------------------- --------------------
There were 10,001,696 shares of Class A Common Stock, par value $0.01 per share
outstanding at August 1, 2000.
<PAGE>
HVIDE MARINE INCORPORATED
Quarter ended June 30, 2000
Index
<TABLE>
<CAPTION>
Page
Part I. Financial Information
<S> <C>
Item 1. Condensed Consolidated Financial Statements (Unaudited)............................................... 1
Condensed Consolidated Balance Sheets at
December 31, 1999 and June 30, 2000......................................................................... 1
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 1999 (Predecessor Company) and 2000 (Successor Company)...................................... 3
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1999 (Predecessor Company) and 2000 (Successor Company)....................................... 4
Notes to Condensed Consolidated Financial Statements......................................................... 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................20
Part II. Other Information
Item 1. Legal Proceedings......................................................................................30
Item 4. Submission of Matters to a Vote of Security Holders....................................................30
Item 6. Exhibits and Reports on Form 8-K.......................................................................30
Signature.......................................................................................................31
</TABLE>
As used in this Report, the term "Parent" means Hvide Marine Incorporated, and
the term "Company" means the Parent and/or one or more of its consolidated
subsidiaries.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
--------------- --------------
(Note 1) (Unaudited)
(in thousands)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 19,046 $ 12,050
Restricted cash.......................................................... 15,217 8,892
Accounts receivable:
Trade, net of allowance for doubtful accounts of $5,799 and
$5,717, respectively................................................. 47,555 48,993
Insurance claims and other............................................. 6,775 6,238
Marine operating supplies................................................ 10,632 11,654
Prepaid expenses......................................................... 4,013 7,009
--------------- ---------------
Total current assets................................................. 103,238 94,836
Property:
Construction-in-progress................................................. 1,345 1,290
Vessels and improvements................................................. 698,979 690,665
Furniture and equipment.................................................. 11,643 11,721
Less accumulated depreciation............................................ (22,087) (43,043)
--------------- ---------------
Net property......................................................... 689,880 660,633
Other assets:
Deferred costs, net...................................................... 29,464 33,458
Vessels held for sale.................................................... -- 10,699
Restricted investments................................................... 3,752 1,660
Other.................................................................... 4,406 5,341
--------------- ---------------
$ 830,740 $ 806,627
=============== ===============
</TABLE>
Continued.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, June 30,
1999 2000
----------------- ---------------
(Note 1) (Unaudited)
(in thousands, except par value)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable......................................................... $ 10,895 $ 9,995
Current maturities of long-term debt..................................... 17,775 29,169
Current obligations under capital leases................................. 3,332 3,722
Accrued interest......................................................... 3,102 1,740
Accrued liabilities and other............................................ 37,489 29,719
--------------- ---------------
Total current liabilities.............................................. 72,593 74,345
Long-term debt.............................................................. 465,769 453,454
Obligations under capital leases............................................ 33,934 37,037
Senior notes................................................................ 76,709 77,938
Other liabilities........................................................... 5,952 5,266
Minority interest........................................................... 10,457 9,392
Commitments and contingencies
Stockholders' equity:
Class A Common Stock -- $.01 par value, 20,000 shares authorized,
10,002 shares issued outstanding 100 100
Additional paid-in capital............................................... 166,791 166,820
Accumulated deficit...................................................... (1,565) (17,725)
--------------- ---------------
Total stockholders' equity............................................. 165,326 149,195
--------------- ---------------
$ 830,740 $ 806,627
=============== ===============
</TABLE>
See accompanying notes.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Predecessor Successor Predecessor Successor
Company Company Company Company
------------ ------------ ------------ -----------
1999 2000 1999 2000
<S> <C> <C> <C> <C>
Revenues.................................................... $ 89,004 $ 80,211 $ 179,404 $ 158,818
Operating expenses:
Crew payroll and benefits.............................. 23,360 22,501 48,203 45,715
Charter hire and bond guarantee fee.................... 4,960 3,193 8,522 7,427
Repairs and maintenance................................ 7,622 5,779 13,960 12,178
Insurance.............................................. 3,262 3,225 6,759 6,195
Fuel................................................... 4,326 6,701 7,946 14,658
Consumables............................................ 4,368 4,314 9,606 7,623
Rent and utilities..................................... 8,521 6,528 16,259 12,955
---------- ------------ ------------- ------------
Total operating expenses............................. 56,419 52,241 111,255 106,751
Selling, general and administrative expenses:
Salaries and benefits.................................. 4,255 5,113 9,628 10,362
Office................................................. 1,680 1,528 3,547 3,074
Professional fees...................................... 3,497 1,360 4,894 2,756
Other.................................................. 2,011 1,835 4,176 3,443
---------- ------------ ------------- ------------
Total overhead expenses.............................. 11,443 9,836 22,245 19,635
Depreciation, amortization and drydocking................... 21,393 12,157 41,727 24,443
---------- ------------ ------------- ------------
Income (loss) from operations............................... (251) 5,977 4,177 7,989
Other income (expense):
Interest expense....................................... (19,302) (16,436) (37,605) (30,888)
Interest income........................................ 427 184 490 443
Minority interest and equity in
earnings of subsidiaries............................ (1,923) 596 (2,940) 1,065
Gain (loss) on asset sales............................. (14,130) 643 (14,130) 643
Other.................................................. (188) 6,869 (7) 6,695
---------- ------------ ------------- ------------
Total other income (expense)......................... (35,116) (8,144) (54,192) (22,042)
---------- ------------ ------------- ------------
Loss before provision for (benefit from) income taxes....... (35,367) (2,167) (50,015) (14,053)
Provision for (benefit from) income taxes................... (11,649) 1,083 (17,230) 2,107
---------- ------------ ------------- ------------
Net loss............................................... (23,718) (3,250) (32,785) (16,160)
========== ============ ============= ============
Net loss per common share - basic and diluted............... * $ (0.33) * $ (1.62)
========== ============ ============= ============
Weighted average common shares outstanding - basic and
diluted ............................................... * 10,002 * 10,001
========== ============ ============= ============
</TABLE>
* Earnings per share is not presented for the three months ended June 30, 1999
and for the six months ended June 30, 1999 because such presentation would not
be meaningful. The Company's old common stock was cancelled and new common stock
was issued on December 15, 1999 pursuant to the Plan.
See accompanying notes.
<PAGE>
Hvide Marine Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
Predecessor Successor
Company Company
1999 2000
---------------- ----------------
<S> <C> <C>
Operating activities:
Net loss................................................................ $ (32,785) $ (16,160)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization of property........................... 33,836 21,368
Amortization of drydocking costs.................................... 6,048 3,075
Amortization of goodwill............................................ 1,843 --
Amortization of discount on long-term debt and financing costs...... 1,543 2,619
Provision for bad debts............................................. 471 143
Loss (gain) on disposal of property................................. 14,130 (643)
Deferred income tax benefit......................................... (17,230) --
Minority partners' equity in earnings of subsidiaries, net.......... (797) (1,065)
Undistributed earnings losses of affiliates......................... -- --
Other non-cash items................................................ 104 439
Changes in operating assets and liabilities:
Accounts receivable............................................... 14,506 (1,248)
Other current and long-term assets................................ (6,996) (7,978)
Payment of reorganization items................................... -- (4,494)
Accounts payable and other liabilities............................ (8,728) (5,915)
--------------- ---------------
Net cash provided by (used in) operating activities............. 5,945 (9,859)
Investing activities:
Purchases of property................................................. (36,845) (5,404)
Proceeds from disposal of property.................................... -- 7,598
Payments on vessels under construction................................ (5,102) --
Capital contribution to affiliates.................................... (3,164) --
Redemption of restricted investments.................................. 19,592 2,092
-------------- --------------
Net cash (used in) provided by investing activities................. (25,519) 4,286
Financing activities:
Proceeds from short-term borrowings................................... 5,000 --
Proceeds from revolving credit facility............................... -- 14,353
Repayment of revolving credit facility................................ -- (4,000)
Proceeds from long-term borrowings.................................... 45,479 --
Repayment of long-term borrowings..................................... (21,768) (11,059)
Proceeds from issuance of Title XI bonds, net of offering costs....... 5,428 --
Repayment of Title XI bonds........................................... (617) (4,715)
Redemption of restricted cash......................................... -- 6,433
Payment of financing costs............................................ -- (596)
Payment of obligations under capital leases........................... (1,391) (1,839)
Proceeds from issuance of common stock................................ 252 --
Repayment of short-term debt.......................................... (5,000) --
--------------- ---------------
Net cash provided by (used in) financing activities................. 27,383 (1,423)
--------------- ---------------
Change in cash and cash equivalents........................................ 7,809 (6,996)
Cash and cash equivalents at beginning of period........................... 10,106 19,046
--------------- ---------------
Cash and cash equivalents at end of period................................. $ 17,915 $ 12,050
=============== ===============
</TABLE>
See accompanying notes.
<PAGE>
HVIDE MARINE INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements in this Report are
unaudited for the periods indicated herein. In accordance with the rules and
regulations of the Securities and Exchange Commission, certain information and
footnote disclosures have been condensed or omitted; therefore, such financial
statements should be read in conjunction with the consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, as amended on Form 10-K/A (the "1999 Form 10-K"). The
condensed consolidated financial statements in this Report reflect all
adjustments and accruals that, in the opinion of management, are necessary for a
fair presentation of the results for the interim periods presented; all such
adjustments were of a normal recurring nature. The results of operations for the
six-month interim period ended June 30, 2000 are not necessarily indicative of
the results of operations for the year ending December 31, 2000.
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 in the United States Bankruptcy Court for the District of
Delaware on September 8, 1999. The Bankruptcy Court confirmed the Company's
Joint Plan of Reorganization (the "Plan") on December 9, 1999, and the Plan
became effective on December 15, 1999 (the "Effective Date"). The Company
emerged from bankruptcy on December 15, 1999 (see Note 3 for additional
information).
The unaudited consolidated financial statements as of and for the
periods after the effective date, reflect accounting principles and practices
set forth in American Institute of Certified Public Accountants Statement of
Position ("SOP") 90-7, Financial Reporting by Entities in Reorganization under
the Bankruptcy Code, which provides guidance for financial reporting by entities
that have filed voluntary petitions for relief under, and have reorganized in
accordance with the Bankruptcy Code. In accordance with SOP 90-7 the Company
adopted "fresh start reporting" as of December 15, 1999. The Company's emergence
from its Chapter 11 proceedings resulted in a new reporting entity. The assets
and liabilities of the Company were restated as of December 15, 1999, in
accordance with SOP 90-7, and therefore the accompanying condensed consolidated
statements of operations and cash flows for periods prior to the Company's
emergence from bankruptcy (the "Predecessor Company") are not comparable to the
results of operations and cash flows of the Company subsequent to emergence from
bankruptcy and the adoption of fresh-start reporting (the "Successor Company").
In June 1998, the Company paid $18.5 million to increase its equity
interest in entities that own five double-hull carriers (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 therefore continued to account for
investments in Lightship Tankers 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 Standards 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 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%. The Lightship
Tankers were not party to the Chapter 11 proceedings.
Certain amounts in the 1999 condensed consolidated financial statements
have been reclassified to conform with the 2000 presentation. These
reclassifications had no effect on the Company's net income.
2. Issues Affecting Liquidity
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 transport businesses, 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, on April 14, 2000, the Company entered into an amendment to the
Credit Facility (the "First Amendment") with the lending banks under which the
relevant covenants have been modified through March 31, 2001 and the Company was
required to prepay principal under the term loans of $10.0 million before June
30, 2000 and is required to prepay an additional $25.0 million before August 31,
2000, and $25.0 million before January 1, 2001. The Company is selling vessels
and other assets to obtain the funds with which to make these payments and may
sell certain vessels at amounts below their carrying values. The First Amendment
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 $35.0 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. Through June 30, 2000, the Company sold 12 vessels
for net proceeds of $7.6 million, which were applied to the repayment
obligation. 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. In connection with the First Amendment the
Company paid a fee of $4.5 million to the lending banks in the form of a
promissory note, accruing interest at 15% per annum, due the earlier of (i)
April 2002 or (ii) the date on which the ratio of funded indebtedness to EBITDA
for any quarter is less than four to one.
On June 29, 2000, the Company entered into a second amendment to the
Credit Facility (the "Second Amendment") which extended the deadline for
prepayment of $10.0 million under the term loans from June 30, 2000 to July 17,
2000. The Company has met this deadline. The Second Amendment also expanded the
Company's flexibility in determining which assets to sell to obtain the funds to
make the principal payments of term loans required under the First Amendment.
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 obligations, apart from the
prepayments described above, and other capital requirements through 2000. It is
uncertain, however, whether proceeds from the sale of assets will be sufficient
to enable it to satisfy the prepayment obligations as currently scheduled or
whether it will be required to seek further extension of the prepayment
deadlines. As the Company's operating cash flow is dependent on factors beyond
the Company's control, moreover, 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.
3. Plan of Reorganization
In September 1999, the Company filed the Plan with the Bankruptcy Court
which set forth a plan for repaying or otherwise compensating the Company's
creditors in order of relative seniority of their respective claims while
seeking to maintain the Company as a going concern. The Plan specifically
provided for the conversion of the Company's previously outstanding senior notes
and preferred securities into equity interests in the Successor Company and
cancellation of all of the prepetition equity interests, as more fully described
in the Plan. Substantially all of the Company's other pre- and post petition
unsecured liabilities were unaffected by the Plan.
4. Long Term Debt
Because the Company's senior notes did not receive the rating required
by the note indenture by April 15, 2000, the interest rate on the senior notes
increased from 12 1/2% to 13 1/2%, effective as of December 15, 1999. The
additional interest is payable in the form of additional senior notes, of which
notes in the principal amount of $514,517 were issued on April 15, 2000. The
Company is currently seeking the ratings necessary to return the interest rate
to 12 1/2%.
5. Income Taxes
For the six months ended June 30, 2000, the deferred provision for
income taxes was computed using a net estimated annual effective tax rate of 0%.
For the six months ended June 30, 2000, a gross deferred benefit was computed
using an estimated annual effective tax rate of 36%. Management has determined
that a tax valuation allowance is necessary at June 30, 2000 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. The current provision for income taxes
represents taxes withheld on foreign source revenue. For the six months ended
June 30, 1999, the benefit for income taxes was computed using an estimated
annual effective tax rate of 34%, adjusted principally for depreciation on
vessels built with capital construction funds.
6. Comprehensive Income
The Company has no other component of comprehensive (income) loss
except net loss.
7. Earnings Per Share (EPS)
Pursuant to the Plan, 10,000,000 new shares of common stock were issued
at the Effective Date. In April 2000, warrants to purchase 1,696 shares of
common stock were exercised by the holders. Common stock equivalents outstanding
during the period ending June 30, 2000, which consist principally of warrants
and employee stock options, have not been included in the computation of diluted
loss per share, as their effect is antidilutive.
8. Segment Information
Revenues by segment and geographic area consist only of services
provided to external customers, as reported in the condensed consolidated
statements of operations. Consolidated income (loss) from operations by
geographic area represents net revenues less applicable costs and expenses
related to those revenues. The Company does not have significant intersegment
transactions.
The following schedule presents information about the Company's
operations in its three segments (in thousands):
<TABLE>
<CAPTION>
Predecessor Successor Predecessor Successor
Company Company Company Company
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------- --------------------------------
1999 2000 1999 2000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues:
Offshore energy support..................... $ 39,097 $ 37,510 $ 84,835 $ 71,729
Harbor and offshore towing.................. 11,252 8,315 22,401 17,046
Marine transportation services.............. 38,655 34,386 72,168 70,043
--------------- --------------- --------------- ---------------
Consolidated revenues............................ $ 89,004 $ 80,211 $ 179,404 $ 158,818
============== ============== ============== ==============
Income (loss) from operations:
Offshore energy support..................... $ (4,115) $ 2,814 $ (3,236) $ 1,010
Harbor and offshore and towing.............. 3,442 1,309 6,338 2,963
Marine transportation services.............. 5,641 5,379 10,036 10,986
General corporate........................... (5,219) (3,525) (8,961) (6,970)
--------------- --------------- --------------- ---------------
Consolidated income (loss) from operations....... $ (251) $ 5,977 $ 4,177 $ 7,989
============== ============== ============== ==============
Income (loss) before income taxes:
Offshore energy support..................... $ (31,757) $ (7,313) $ (43,514) $ (18,365)
Harbor and offshore and towing.............. 2,288 (98) 3,807 388
Marine transportation services.............. 2,902 1,065 (518) 2,352
General corporate........................... (8,800) 4,179 (9,790) 1,572
--------------- --------------- --------------- ---------------
Consolidated loss before income taxes............ $ (35,367) $ (2,167) $ (50,015) $ (14,053)
============== ============== ============== ==============
</TABLE>
<PAGE>
9. Supplemental Condensed Consolidated Financial Information
The Senior Notes are fully and unconditionally guaranteed on a joint
and several basis by certain of the Company's wholly owned consolidated
subsidiaries. A substantial portion of the Company's cash flows are generated by
these subsidiaries. As a result, the funds necessary to meet the Company's
obligations are provided in substantial part by distributions or advances from
these subsidiaries. Under certain circumstances, contractual or legal
restrictions, as well as the financial and operating requirements of the
Company's subsidiaries, could limit the Company's ability to obtain cash from
these subsidiaries for the purpose of meeting its obligations, including the
payments of principal and interest on the Senior Notes. The Company has not
presented separate financial statements or other discussions concerning the
guarantor subsidiaries because management has determined that such information
is not material to investors.
The following is summarized condensed consolidating financial
information for the Company, segregating the parent, the combined guarantor
subsidiaries, the combined non-guarantor subsidiaries and eliminations.
<PAGE>
Condensed Consolidating Balance Sheet (unaudited)
(in thousands)
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------------------------------------
Domestic Foreign Non-Guarantor Condensed
Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents....... $ 4,830 $ 2,908 $ 7,816 $ 3,492 $ -- $ 19,046
Restricted cash................. 15,027 190 -- -- -- 15,217
Accounts receivable:
Trade, net.................... 1,804 23,728 17,579 5,132 (688) 47,555
Insurance claims and other.... 1,866 2,150 3,028 516 (785) 6,775
Marine operating supplies....... (465) 2,481 3,810 4,806 -- 10,632
Prepaid expenses................ 933 918 1,675 487 -- 4,013
------------ ------------ ------------- ------------ ------------ ------------
Total current assets.......... 23,995 32,375 33,908 14,433 (1,473) 103,238
Property:
Construction-in-progress........ -- 541 664 140 -- 1,345
Vessels and improvements........ 9,292 177,938 206,764 304,985 -- 698,979
Furniture and equipment......... 5,822 3,051 2,135 635 -- 11,643
Less accumulated depreciation... (196) (533) (671) (20,687) -- (22,087)
------------ ------------- ------------- ------------ ------------ ------------
Net property.................. 14,918 180,997 208,892 285,073 -- 689,880
Other assets:
Deferred costs, net.............. 14,962 4,615 1,454 8,433 -- 29,464
Restricted investments........... -- -- -- 3,752 -- 3,752
Other............................ 455,560 406,592 70,888 8,303 (936,937) 4,406
------------ ------------- ------------- ------------ ------------ ------------
$ 509,435 $ 624,579 $ 315,142 $ 319,994 $ (938,410) $ 830,740
============ ============= ============= ============ ============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable................ $ 1,383 $ 4,236 $ 4,329 $ 947 $ -- $ 10,895
Current maturities of long-term
debt ......................... 12,065 1,891 -- 3,820 (1) 17,775
Current obligations under
capital leases................ 555 2,777 -- -- -- 3,332
Accrued interest................ 2,418 -- -- 684 -- 3,102
Accrued liabilities and other... 18,685 7,579 9,635 3,063 (1,473) 37,489
------------ ------------- ------------- ------------ ------------ ------------
Total current liabilities..... 35,106 16,483 13,964 8,514 (1,474) 72,593
Long-term debt................... 214,212 27,410 -- 224,147 -- 465,769
Obligations under capital leases. 13,662 20,272 -- -- -- 33,934
Senior notes..................... 76,709 -- -- -- -- 76,709
Other............................ 4,425 559 740 226 2 5,952
Minority interest................ -- -- -- -- 10,457 10,457
Commitment and contingencies
Stockholders equity:
Common stock.................... 100 -- -- -- -- 100
Additional paid-in capital...... 166,786 332,837 301,148 11,143 (645,123) 166,791
Retained earnings (accumulated
deficit)....................... (1,565) 227,018 (710) 75,964 (302,272) (1,565)
------------ ------------- ------------- ------------ ------------ ------------
Total stockholders' equity.... 165,321 559,855 300,438 87,107 (947,395) 165,326
------------ ------------- ------------- ------------ ------------ ------------
$ 509,435 $ 624,579 $ 315,142 $ 319,994 $ (938,410) $ 830,740
============ ============= ============= ============ ============ ============
</TABLE>
Condensed Consolidating Balance Sheet (unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, 2000
--------------------------------------------------------------------------------------------
Domestic Foreign Non-Guarantor Condensed
Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents........... $ 1,142 $ (354) $ 6,817 $ 4,445 $ -- $ 12,050
Restricted cash..................... 8,892 -- -- -- -- 8,892
Accounts receivable:
Trade, net........................ 1,428 21,098 24,073 2,931 (537) 48,993
Insurance claims and other........ 618 3,054 2,427 139 -- 6,238
Marine operating supplies........... (349) 2,407 3,287 6,496 (187) 11,654
Prepaid expenses.................... 764 1,801 1,637 2,807 -- 7,009
----------- ------------ ----------- ----------- ----------- -----------
Total current assets.............. 12,495 28,006 38,241 16,818 (724) 94,836
Property:
Construction-in-progress............ 11 349 107 636 187 1,290
Vessels and improvements............ 7,905 171,321 205,667 305,772 -- 690,665
Furniture and equipment............. 5,828 3,107 2,151 635 -- 11,721
Less accumulated depreciation....... (1,702) (7,185) (8,763) (25,393) -- (43,043)
----------- ------------ ------------ ----------- ----------- -----------
Net property...................... 12,042 167,592 199,162 281,650 187 660,633
Other assets:
Deferred costs, net.................. 18,747 4,946 1,712 8,053 -- 33,458
Vessels held for sale................ -- 9,720 979 -- -- 10,699
Restricted investments............... -- -- -- 1,660 -- 1,660
Other................................ 444,732 392,180 65,232 3,070 (899,873) 5,341
----------- ------------ ------------ ----------- ----------- -----------
$ 488,016 $ 602,444 $ 305,326 $ 311,251 $ (900,410) $ 806,627
=========== ============ ============ =========== =========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.................... $ 1,349 $ 3,659 $ 3,436 $ 1,551 $ -- $ 9,995
Current maturities of long-term debt 23,399 1,950 -- 3,820 -- 29,169
Current obligations under capital
leases............................ 813 2,909 -- -- -- 3,722
Accrued interest.................... 987 74 -- 679 -- 1,740
Accrued liabilities and other....... 7,339 5,817 13,781 3,319 (537) 29,719
----------- ------------ ------------ ----------- ----------- -----------
Total current liabilities......... 33,887 14,409 17,217 9,369 (537) 74,345
Long-term debt....................... 204,883 26,301 -- 222,270 -- 453,454
Obligations under capital leases..... 18,449 18,588 -- -- -- 37,037
Senior notes......................... 77,938 -- -- -- -- 77,938
Other................................ 3,690 474 864 238 -- 5,266
Minority interest.................... -- -- -- -- 9,392 9,392
Commitment and contingencies
Stockholders equity:
Common stock........................ 100 20 -- -- (20) 100
Additional paid-in capital.......... 166,794 333,204 301,169 10,756 (645,103) 166,820
Retained earnings (accumulated
deficit).......................... (17,725) 209,448 (13,924) 68,618 (264,142) (17,725)
----------- ------------ ------------ ----------- ----------- -----------
Total stockholders' equity........ 149,169 542,672 287,245 79,374 (909,265) 149,195
----------- ------------ ------------ ----------- ----------- -----------
$ 488,016 $ 602,444 $ 305,326 $ 311,251 $ (900,410) $ 806,627
=========== ============ ============ =========== =========== ===========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1999
----------------------------------------------------------------------------------------
Domestic Foreign Non-Guarantor Condensed
Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Predecessor Company
Revenues................................ $ 12,656 $ 47,203 $ 28,540 $ 14,684 $ (14,079) $ 89,004
Operating expenses:
Crew payroll and benefits............. 4,492 8,153 7,273 3,456 (14) 23,360
Charter hire and bond guarantee fee... 486 15,168 -- -- (10,694) 4,960
Repairs and maintenance............... 646 1,984 4,765 241 (14) 7,622
Insurance............................. 325 1,482 1,117 338 -- 3,262
Fuel.................................. 702 1,338 1,370 916 -- 4,326
Consumables........................... 415 2,185 1,542 351 (125) 4,368
Rent and utilities.................... 333 4,452 1,864 2,854 (982) 8,521
---------- ------------- ------------- ------------- ------------- ----------
Total operating expenses.......... 7,399 34,762 17,931 8,156 (11,829) 56,419
Selling, general and administrative
expenses:
Salaries and benefits................. 1,271 1,007 1,325 652 -- 4,255
Office................................ 536 288 656 200 -- 1,680
Professional fees..................... 2,495 598 57 347 -- 3,497
Other................................. 654 (21) 2,540 400 (1,562) 2,011
---------- ------------- ------------- ------------- ------------- ----------
Total overhead expenses............ 4,956 1,872 4,578 1,599 (1,562) 11,443
Depreciation, amortization and drydocking 3,502 6,373 9,205 2,313 -- 21,393
---------- ------------- ------------- ------------- ------------- ----------
Income (loss) from operations........... (3,201) 4,196 (3,174) 2,616 (688) (251)
Other income (expense):
Interest expense...................... (379) (9,222) (9,501) (2,882) 2,682 (19,302)
Interest income....................... 703 2,041 -- 365 (2,682) 427
Minority interest and equity in
earnings of subsidiaries............. (30,513) (25,013) -- 240 53,363 (1,923)
Other................................. 738 284 (1,654) (242) 686 (188)
Net loss on asset sales............... (2,715) (11,415) -- -- -- (14,130)
---------- ------------- ------------- ------------- ------------- ----------
Total other expense, net.......... (32,166) (43,325) (11,155) (2,519) 54,049 (35,116)
---------- ------------- ------------- ------------- ------------- ----------
Income (loss) before income taxes....... (35,367) (39,129) (14,329) 97 53,361 (35,367)
Benefit from income taxes............... (11,649) -- -- -- -- (11,649)
---------- ------------- ------------- ------------- ------------- ----------
Net income (loss)....................... $ (23,718) $ (39,129) $ (14,329) $ 97 $ 53,361 $ (23,718)
========== ============= ============= ============= ============= ==========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, 2000
----------------------------------------------------------------------------------------
Domestic Foreign Non-Guarantor Condensed
Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Successor Company
Revenues................................ $ 8,091 $ 38,775 $ 25,072 $ 16,674 $ (8,401) $ 80,211
Operating expenses:
Crew payroll and benefits............. 3,964 8,256 5,747 4,545 (11) 22,501
Charter hire and bond guarantee fee... 498 10,182 -- -- (7,487) 3,193
Repairs and maintenance............... 357 1,618 3,098 712 (6) 5,779
Insurance............................. 263 1,493 999 470 -- 3,225
Fuel.................................. 1,039 2,872 1,549 1,241 -- 6,701
Consumables........................... 399 1,975 1,646 322 (28) 4,314
Rent and utilities.................... 497 2,713 1,875 2,663 (1,220) 6,528
---------- ------------- ------------- ------------- ------------- ----------
Total operating expenses............ 7,017 29,109 14,914 9,953 (8,752) 52,241
Selling, general and
administrative expenses:
Salaries and benefits.................. 1,699 1,219 1,521 674 -- 5,113
Office................................. 517 299 551 161 -- 1,528
Professional fees...................... 847 326 134 53 -- 1,360
Other.................................. 469 532 1,353 445 (964) 1,835
---------- ------------- ------------- ------------- ------------- ----------
Total overhead expenses............... 3,532 2,376 3,559 1,333 (964) 9,836
Depreciation, amortization and
drydocking............................ 676 4,066 4,830 2,585 -- 12,157
---------- ------------- ------------- ------------- ------------- ----------
Income from operations.................. (3,134) 3,224 1,769 2,803 1,315 5,977
Other income (expense):
Interest expense...................... (1,065) (5,574) (5,542) (4,847) 592 (16,436)
Interest income....................... 735 10 -- 31 (592) 184
Minority interest and equity in
earnings of subsidiaries............. (6,576) (20,859) -- (1,490) 29,521 596
Net gain (loss) on asset sales........ -- 776 (133) -- -- 643
Other................................. 7,873 4 305 2 (1,315) 6,869
---------- ------------- ------------- ------------- ------------- ----------
Total other expense, net.......... 967 (25,643) (5,370) (6,304) 28,206 (8,144)
---------- ------------- ------------- ------------- ------------- ----------
Loss before income taxes................ (2,167) (22,419) (3,601) (3,501) 29,521 (2,167)
Provision for income taxes.............. 1,083 -- -- -- -- 1,083
---------- ------------- ------------- ------------- ------------- ----------
Net loss................................ $ (3,250) $ (22,419) $ (3,601) $ (3,501) $ 29,521 $ (3,250)
========== ============= ============= ============= ============= ==========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
----------------------------------------------------------------------------------------
Domestic Foreign Non-Guarantor Condensed
Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Predecessor Company
Revenues................................ $ 25,794 $ 95,668 $ 65,783 $ 27,196 $ (35,037) $ 179,404
Operating expenses:
Crew payroll and benefits............. 9,127 17,139 15,445 6,514 (22) 48,203
Charter hire and bond guarantee fee... 957 31,891 -- -- (24,326) 8,522
Repairs and maintenance............... 1,116 4,133 8,400 340 (29) 13,960
Insurance............................. 744 3,089 2,276 650 -- 6,759
Fuel.................................. 1,375 2,614 2,512 1,445 -- 7,946
Consumables........................... 747 3,952 4,633 535 (261) 9,606
Rent and utilities.................... 1,262 8,795 3,398 4,568 (1,764) 16,259
---------- ------------- ------------- ------------- ------------- ----------
Total operating expenses.......... 15,328 71,613 36,664 14,052 (26,402) 111,255
Selling, general and administrative
expenses:
Salaries and benefits................. 3,055 2,426 2,827 1,320 -- 9,628
Office................................ 1,374 584 1,168 421 -- 3,547
Professional fees..................... 3,161 1,164 206 363 -- 4,894
Other................................. 1,316 724 4,698 702 (3,264) 4,176
---------- ------------- ------------- ------------- ------------- ----------
Total overhead expenses............ 8,906 4,898 8,899 2,806 (3,264) 22,245
Depreciation, amortization
and drydocking....................... 6,917 12,607 17,899 4,304 -- 41,727
---------- ------------- ------------- ------------- ------------- ----------
Income (loss) from operations........... (5,357) 6,550 2,321 6,034 (5,371) 4,177
Other income (expense):
Interest expense...................... (685) (17,222) (17,175) (7,702) 5,179 (37,605)
Interest income....................... 1,335 3,965 -- 369 (5,179) 490
Minority interest and equity in
earnings of subsidiaries............. (44,442) (24,654) -- 606 65,550 (2,940)
Net loss on asset sales............... (2,715) (8,093) (3,322) -- -- (14,130)
Other................................. 1,849 103 (7,306) (24) 5,371 (7)
---------- ------------- ------------- ------------- ------------- ----------
Total other expense, net.......... (44,658) (45,901) (27,803) (6,751) 70,921 (54,192)
---------- ------------- ------------- ------------- ------------- ----------
Income (loss) before income taxes....... (50,015) (39,351) (25,482) (717) 65,000 (50,015)
Benefit from income taxes............... (17,230) -- -- -- -- (17,230)
---------- ------------- ------------- ------------- ------------- ----------
Net income (loss)....................... $ (32,785) $ (39,351) $ (25,482) $ (717) $ 65,000 $ (32,785)
========== ============= ============= ============= ============= ==========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
----------------------------------------------------------------------------------------
Domestic Foreign Non-Guarantor Condensed
Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Successor Company
Revenues................................ $ 19,544 $ 79,303 $ 49,481 $ 33,219 $ (22,729) $ 158,818
Operating expenses:
Crew payroll and benefits............. 8,108 17,243 11,684 8,701 (21) 45,715
Charter hire and bond guarantee fee... 989 23,761 49 1,000 (18,372) 7,427
Repairs and maintenance............... 778 3,581 6,660 1,174 (15) 12,178
Insurance............................. 660 2,870 1,935 730 -- 6,195
Fuel.................................. 2,267 5,884 3,322 3,185 -- 14,658
Consumables........................... 659 3,113 3,483 506 (138) 7,623
Rent and utilities.................... 974 4,913 3,639 5,749 (2,320) 12,955
----------- ------------- ------------- ----------- ------------ -----------
Total operating expenses............ 14,435 61,365 30,772 21,045 (20,866) 106,751
Selling, general and
administrative expenses:
Salaries and benefits.................. 3,164 2,664 3,190 1,344 -- 10,362
Office................................. 1,002 598 1,131 343 -- 3,074
Professional fees...................... 1,773 525 319 139 -- 2,756
Other.................................. 824 942 3,439 639 (2,401) 3,443
----------- ------------- ------------- ----------- ------------ -----------
Total overhead expenses............... 6,763 4,729 8,079 2,465 (2,401) 19,635
Depreciation, amortization
and drydocking.......................... 1,464 8,608 9,638 4,733 -- 24,443
----------- ------------- ------------- ----------- ------------ -----------
Income (loss) from operations........... (3,118) 4,601 992 4,976 538 7,989
Other income (expense):
Interest expense...................... (1,260) (9,209) (12,644) (8,972) 1,197 (30,888)
Interest income....................... 1,559 8 -- 73 (1,197) 443
Minority interest and equity in
earnings of subsidiaries............ (19,877) (14,014) -- (3,173) 38,129 1,065
Net gain (loss) on asset sales........ -- 776 (133) -- -- 643
Other................................. 8,643 17 (1,430) 2 (537) 6,695
----------- ------------- ------------- ----------- ------------ -----------
Total other expense, net.......... (10,935) (22,422) (14,207) (12,070) 37,592 (22,042)
----------- ------------- ------------- ----------- ------------ -----------
Loss before income taxes................ (14,053) (17,821) (13,215) (7,094) 38,130 (14,053)
Provision for income taxes.............. 2,107 -- -- -- -- 2,107
----------- ------------- ------------- ----------- ------------ -----------
Net loss................................ $ (16,160) $ (17,821) $ (13,215) $ (7,094) $ 38,130 $ (16,160)
=========== ============= ============= =========== ============ ===========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1999
------------------------------------------------------------------------------
Domestic Foreign Condensed
Guarantor Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Predecessor Company
Operating activities:
Net income (loss)................................ $ (32,785) $ (39,351) $ (25,482) $ (717) $ 65,550 $(32,785)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization of property...... 5,380 9,552 14,934 3,970 -- 33,836
Amortization of drydocking costs............... 1,532 2,454 1,942 120 -- 6,048
Amortization of goodwill....................... 6 583 1,023 214 17 1,843
Amortization of discount on long-term debt
and financing costs......................... 892 -- -- 651 -- 1,543
Provision for bad debts........................ 19 349 103 -- -- 471
Loss (gain) on disposal of property............ 2,715 8,093 3,322 -- -- 14,130
Deferred income tax benefit.................... (17,230) -- -- -- -- (17,230)
Minority partners' equity in earnings loss
of subsidiaries, net......................... -- -- -- -- (797) (797)
Undistributed earnings of affiliates........... 10,292 24,654 -- (606) (34,340)
Other non-cash items........................... 104 -- -- (1) 1 104
Changes in operating assets and liabilities:
Accounts receivable......................... 5,319 1,927 7,935 (681) 6 14,506
Other current and long-term assets.......... 27,973 35,817 2,762 (17,322) (56,226) (6,996)
Accounts payable and other liabilities...... (2,102) (77) (6,467) (3,138) 3,056 (8,728)
----------- ----------- ----------- ----------- -------- --------
Net cash provided by (used in)
operating activities.................... 2,115 44,001 72 (17,510) (22,733) 5,945
Investing activities:
Purchases of property.......................... (21,331) (12,325) 1,752 (12,689) 7,748 (36,845)
Payments on vessels under construction......... -- (5,102) -- -- -- (5,102)
Capital contribution to affiliates............. 9,177 (37,772) 1,364 9,082 14,985 (3,164)
Redemption of restricted investments........... -- -- -- 19,592 -- 19,592
----------- ----------- ----------- ----------- -------- --------
Net cash provided by (used in)
investing activities...................... (12,154) (55,199) 3,116 15,985 (22,733) (25,519)
Financing activities:
Proceeds from short-term borrowings............ -- 5,000 -- -- -- 5,000
Proceeds from long-term borrowings............. 31,008 14,200 -- -- -- 45,208
Repayment of long-term borrowings.............. (21,142) (626) -- -- -- (21,768)
Proceeds from issuance of Title XI bonds, net
of offering costs.......................... -- -- -- 5,428 -- 5,428
Repayment of Title XI debt..................... (1) -- -- (616) -- (617)
Proceeds from sale leaseback................... -- 271 -- -- -- 271
Payment of obligations under capital leases.... (317) (1,074) -- -- -- (1,391)
Proceeds from option exercise & ESPP........... 252 -- -- -- -- 252
Repayments of short-term borrowings............ -- (5,000) -- -- -- (5,000)
----------- ----------- ----------- ----------- -------- --------
Net cash provided by financing
activities................................. 9,800 12,771 -- 4,812 -- 27,383
----------- ----------- ----------- ----------- -------- --------
Change in cash and cash equivalents.............. (239) 1,573 3,188 3,287 -- 7,809
Cash and cash equivalents at beginning of period. 1,401 2,099 5,002 1,604 -- 10,106
----------- ----------- ----------- ----------- -------- --------
Cash and cash equivalents at end of period....... $ 1,162 $ 3,672 $ 8,190 $ 4,891 $ -- $ 17,915
=========== =========== =========== =========== ======== ========
</TABLE>
<PAGE>
Condensed Consolidating Statement of Cash Flows (unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30, 2000
-------------------------------------------------------------------------------
Domestic Foreign Condensed
Guarantor Guarantor Non-Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
<S> <C> <C> <C> <C> <C> <C>
Successor Company
Operating activities:
Net loss......................................... $ (16,160) $ (17,821) $ (13,215) $ (7,094) $ 38,130 $ (16,160)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization of property... 1,167 6,833 8,794 4,574 -- 21,368
Amortization of drydocking costs............ 297 1,775 844 159 -- 3,075
Amortization of discount on long-term debt
and financing costs...................... 2,264 19 -- 336 -- 2,619
Provision for bad debts........................ (208) 112 90 149 -- 143
Gain (loss) on disposal of assets.............. -- (776) 133 -- -- (643)
Minority partners' equity in earnings of
subsidiaries, net........................... 19,878 14,014 -- 3,173 (38,130) (1,065)
Other non-cash items........................... 418 -- 21 -- -- 439
Changes in operating assets and liabilities:
Accounts receivable......................... 1,628 1,614 (5,982) 2,428 (936) (1,248)
Other current and long-term assets.......... (14,540) 3,368 5,115 (2,107) 186 (7,978)
Payment of reorganization items............. (4,494) -- -- -- -- (4,494)
Accounts payable and other liabilities...... (8,743) (2,351) 3,377 866 936 (5,915)
----------- --------- ----------- ----------- --------- ---------
Net cash provided by (used in)
operating activities.................... (18,493) 6,787 (823) 2,484 186 (9,859)
Investing activity:
Purchases of property.......................... 4,342 (8,276) (176) (1,108) (186) (5,404)
Proceeds from disposal of property............. 7,598 -- -- -- -- 7,598
Redemption of restricted investments........... -- -- -- 2,092 -- 2,092
Capital contribution to affiliate.............. -- 639 -- (639) -- --
----------- --------- ----------- ----------- --------- ---------
Net cash provided by (used in) investing
activity................................. 11,940 (7,637) (176) 345 (186) 4,286
Financing activities:
Proceeds from revolving credit facility........ 14,353 -- -- -- -- 14,353
Repayment of revolving credit facility......... (4,000) -- -- -- -- (4,000)
Repayment of long-term borrowings.............. (10,546) (513) -- -- -- (11,059)
Repayment of Title XI bonds.................... (2,302) (537) -- (1,876) -- (4,715)
Redemption of restricted cash.................. 6,243 190 -- -- -- 6,433
Payment of financing costs..................... (596) -- -- -- -- (596)
Payment of obligations under capital leases.... (287) (1,552) -- -- -- (1,839)
----------- --------- ----------- ----------- --------- ---------
Net cash provided by (used in)
financing activities..................... 2,865 (2,412) -- (1,876) -- (1,423)
----------- ---------- ----------- ------------ --------- ----------
Change in cash and cash equivalents.............. (3,688) (3,262) (999) 953 -- (6,996)
Cash and cash equivalents at beginning of period. 4,830 2,908 7,816 3,492 -- 19,046
----------- --------- ----------- ----------- --------- ---------
Cash and cash equivalents at end of period....... $ 1,142 $ (354) $ 6,817 $ 4,445 $ -- $ 12,050
=========== ========= =========== =========== ========= =========
</TABLE>
<PAGE>
10. Contingencies
Under United States law, "United States persons" are prohibited from
performing contracts in support of an industrial, commercial, public utility or
governmental project in the Republic of Sudan, or facilitating such activities.
During 1999, two vessels owned by subsidiaries of the Company performed services
for third parties in support of energy exploration activities in Sudan; one of
these vessels continued to perform such services until January 31, 2000. The
Company has reported these activities to the Office of Foreign Assets Control of
the United States Department of the Treasury and to the Bureau of Export
Administration of the United States Department of Commerce. Should either of the
agencies determine that these activities constituted violations of the laws or
regulations administered by them, civil and/or criminal penalties, including
fines, could be assessed against the Company and/or certain individuals who
knowingly participated in such activities. The Company cannot predict whether
any such penalties will be imposed or the nature or extent of any such
penalties.
In J. Erik Hvide and Betsy Hvide v. Hvide Marine Incorporated, No.
00-5640-02, a civil action filed in March 2000 in the Circuit Court of Broward
County, Florida, the Company's former chief executive officer and his wife
allege that the Company has breached an agreement to provide Mr. Hvide with
severance benefits valued at approximately $1.0 million. Mr. Hvide further
alleges that the Company fraudulently induced him to enter into the agreement by
making false representations concerning its intention to provide him with
benefits. In connection with his fraud claim, Mr. Hvide also seeks unspecified
punitive damages. The Company believes that it never reached any agreement with
Mr. Hvide concerning compensation relating to his severance, that it did not
make any false representations to Mr. Hvide, and that the suit has no merit. The
Company intends to vigorously defend the suit.
Equal Employment Opportunity Commission Notice of Charge of
Discrimination No. 150A024Q. On April 6, 2000, J. Erik Hvide, the Company's
former chief executive officer, filed a complaint with the Florida Commission of
Human Relations alleging that he was forced to resign from the Company because
he is disabled with post-polio syndrome. The complaint was transferred to the
Equal Employment Opportunity Commission on May 15, 2000, for administrative
reasons. The Company believes that Mr. Hvide was not forced to resign because of
his affliction with post-polio syndrome and that his claim has no merit. The
Company intends to vigorously defend the claim.
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.
The holder of voting and disposition rights with respect to
approximately 60% of the Company's outstanding common stock has advised the
Company that the holder's parent organization is to be acquired by a French
company in a transaction scheduled to close in the fourth quarter of this year.
Such transaction may be deemed to be a transfer to the French company of the
holder's rights for purposes of the U.S.-citizenship requirements of section 27
of the Merchant Marine Act, 1920, commonly referred to as the "Jones Act," in
which event the Company would no longer meet the Jones Act's citizenship
requirements. The transaction may also be deemed to be a change of control under
the Company's debt obligations. The Company and the holder are working to
structure the manner in which the rights are held in order to avoid these
consequences. While there can be no assurance that such efforts will be
successful, the Company believes that they will be. Any failure of the Company
to meet the citizenship requirements of the Jones Act would result in its
vessels being prohibited from engaging in the U.S. domestic trade, which
accounts for the majority of the Company's revenues, and would also result in
covenant defaults under all of the company's outstanding debt instruments. A
change in control as defined in the Company's credit agreement and senior note
indenture would result in a default under the credit agreement and a repurchase
obligation with respect to the outstanding senior notes.
11. Recent Accounting Pronouncements
In June 1999, the Financial Standards Boards ("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 on its financial
statements.
In December 1999, the SEC issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes
the requirements that must be met in order to recognize revenue and provides
guidance for disclosure of revenue recognition policies. In June 2000, the SEC
issued SAB No. 101B which delays the implementation date of SAB 101 until no
later than the fourth quarter of fiscal 2000. The Company does not expect the
adoption of SAB 101 to have a material effect of its financial position or
results of operation.
In March 2000, the FASB issued Interpretation No. 44 ("FIN 44"), "
Accounting for Certain Transactions Involving Stock Compensation", an
interpretation of APB Opinion No. 25 ("APB 25"). FIN 44 clarifies the
application of APB 25 with respect to: the definition of an employee for the
purposes of applying APB 25, the criteria for determining whether a plan
qualifies as a non-compensatory plan, the accounting consequences of various
modifications of the terms of a previously fixed stock option or awards, and the
accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, but certain conclusions cover
specific events that occur after either December 15, 1998 or January 12, 2000.
The Company does not expect the adoption of FIN 44 to have a material effect of
its financial position or results of operations.
12. Subsequent Events
In July and August 2000, the Company sold three barges and three tugs
for aggregate cash proceeds of $11.2 million. Substantially all of the cash
proceeds were used to repay principal under the term loans of the Credit
Facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources" in this report for
additional information.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") should be read in conjunction with
the condensed consolidated financial statements and the related notes thereto
included elsewhere in this Report and the 1999 Form 10-K.
The MD&A contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact, included in the MD&A are forward-looking
statements. Although the Company believes that the expectations and beliefs
reflected in such forward-looking statements are reasonable, it can give no
assurance that they will prove correct. For information regarding the risks and
uncertainties that could cause such forward-looking statements to prove
incorrect, see "Projections and Other Forward-Looking Information" in Item 1 of
the 1999 Form 10-K.
<PAGE>
21
Revenue Overview
Marine Support Services
Revenue is derived from marine support services provided by the
Company's offshore energy support fleet and offshore and harbor towing
operations.
Offshore Energy Support. Revenue derived from the Company's offshore
energy support services is primarily a function of the size of the Company's
fleet, vessel day rates or charter rates, and fleet utilization. Rates and
utilization are primarily a function of offshore drilling, production, and
construction activities, which are in turn heavily dependent upon the price of
crude oil. Further, in many areas where the Company conducts offshore energy
support operations (particularly the U.S. Gulf of Mexico), contracts for the
utilization of offshore service vessels commonly include termination provisions
with three- to five-day notice requirements and no termination penalty. As a
result, companies engaged in offshore energy support operations (including the
Company) are particularly sensitive to changes in market demand.
The following table sets forth average day rates achieved by the
offshore supply boats and crew boats owned and operated by the Company in the
U.S. Gulf of Mexico and their average utilization for the periods indicated.
<TABLE>
<CAPTION>
1999 2000
------------------------------------------- ----------------------
Q1 Q2 Q3 Q4 Q1 Q2
<S> <C> <C> <C> <C> <C> <C>
Number of supply boats at end of period... 21 21 21 21 21 23
Average supply boat day rates(1) ......... $4,530 $4,049 $3,596 $3,379 $3,740 $3,895
Average supply boat utilization(2)........ 70% 69% 75% 73% 71% 63%
Number of crew boats at end of period(3).. 33 33 33 33 33 32
Average crew boat day rates(1)(3)......... $2,097 $1,864 $1,754 $1,827 $1,850 $1,926
Average crew boat utilization(2)(3)....... 69% 72% 75% 87% 78% 77%
</TABLE>
----------------------------
(1) Average day rates are calculated based on vessels operating domestically by
dividing total vessel revenue by the total number of days of vessel
utilization.
(2) Utilization is based on vessels operating domestically and determined on
the basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
(3) Excludes utility boats.
As indicated in the above table, supply boat average day rates declined
during 1999 but improved during the first half of 2000; the increase was due to
an increase in offshore exploration and production activities. Supply boat
utilization declined during the second quarter of 2000 as several vessels were
out of service for repair and several vessels were transferred to the U.S. Gulf
from other markets. At July 15, 2000, supply boat day rates averaged
approximately $4,300. This reflects a continued increase over levels experienced
in the first half of 2000 and results from increased exploration and production
activities.
<PAGE>
Crew boat day rates also declined during 1999 and have improved
slightly during the first half of 2000. Utilization decreased during the first
quarter of 2000 due to weather conditions and a seasonal decline in demand which
began to reverse towards the end of the second quarter. At July 15, 2000, crew
boat day rates averaged approximately $2,000.
The following table shows average rate and average utilization
information for foreign operations:
<TABLE>
<CAPTION>
1999 2000
------------------------------------------- ---------------------
Q1 Q2 Q3 Q4 Q1 Q2
--------- --------- --------- --------- --------------------
<S> <C> <C> <C> <C> <C> <C>
Number of anchor handling tug/supply boats........ 67 69 67 67 67 67
Average anchor handling tug/supply boat day rates. $4,817 $5,433 $4,662 $4,803 $4,290 $4,471
Average anchor handling tug/supply boat
utilization(1)................................. 61% 49% 49% 47% 56% 63%
Number of crew/utility boats...................... 38 39 39 39 39 39
Average crew/utility boat day rates(1)............ $1,543 $1,559 $1,629 $1,749 $1,551 $1,618
Average crew/utility boat utilization(2).......... 65% 48% 47% 52% 40% 41%
</TABLE>
-------------------------------
(1) Average day rates are calculated based on vessels operating internationally
by dividing total vessel revenue by the total number of days of vessel
utilization.
(2) Utilization is based on vessels operating internationally and determined on
the basis of a 365-day year. Vessels are considered utilized when they are
generating charter revenue.
As indicated in the above table, foreign anchor handling tug/supply
boat average date rates fluctuated during 1999 and declined during the first
quarter of 2000; the fluctuations and decline were primarily due to lower rates
in West Africa. Average day rates improved slightly during the second quarter of
2000 due to overall increased activity. Utilization declined during 1999 and
increased during the first quarter of 2000 primarily due to fluctuations in
drilling activity in the Middle East and West Africa. Utilization improved
during the second quarter of 2000 due to overall increased activity. At July 15,
2000, day rates for foreign anchor handling tug/supply boats averaged
approximately $4,300.
Foreign crew/utility boat average day rates declined during the first
quarter of 2000 and improved slightly during the second quarter of 2000. The
lower utilization since the first quarter of 2000 is primarily due to the
political and civil unrest in parts of Africa. At July 15, 2000, day rates for
foreign crew/utility boats averaged approximately $1,700.
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.
Marine Transportation Services
Generally, demand for industrial petrochemical transportation services
coincides with overall economic activity.
<PAGE>
Overview of Operating Expenses and Capital Expenditures
The Company's operating expenses are primarily a function of fleet size
and utilization. The most significant expense categories are crew payroll and
benefits, charter hire, maintenance and repairs, fuel, and insurance. For
general information concerning these categories of operating expenses as well as
capital expenditures, see the corresponding section in the 1999 Form 10-K.
Results of Operations
Upon the Effective Date of its Chapter 11 reorganization the Company
adopted fresh start accounting in accordance with SOP 90-7. See Note 1 to the
condensed consolidated financial statements. Thus the Company's balance sheets
and statements of operations and cash flows after the Effective Date reflect a
new reporting Company and are not comparable to periods prior to the Effective
Date.
The three months ended June 30, 1999 and 2000 include the results of
the Predecessor Company and the Successor Company, respectively. The principal
difference between these periods relate to reporting changes regarding the
Company's capital structure, changes in indebtedness and the revaluation of the
Company's long-term assets to reflect reorganization value at the Effective
Date. These changes primarily affect depreciation, amortization and drydocking
expense and interest expense in the Company's result of operations.
The following table sets forth certain selected financial data and
percentages of net revenue for the periods indicated:
<TABLE>
<CAPTION>
Three Months ended June 30, Six Months ended June 30,
--------------------------------------------- ---------------------------------------------
1999 2000 1999 2000
-------------------- -------------------- -------------------- --------------------
(in millions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................. $ 89.0 100% $ 80.2 100% $ 179.4 100% $ 158.8 100%
Operating expenses........ 56.4 63 52.2 65 111.3 62 106.8 67
Overhead expenses......... 11.4 13 9.8 12 22.2 12 19.6 12
Depreciation, amortization
And drydocking expense.. 21.4 24 12.2 15 41.7 23 24.4 15
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
Income from operations.... $ 0.3 0% $ 6.0 7% $ 4.2 2% $ 8.0 5%
========== ========== ========== ========== ========== ========== ========== ==========
Interest expense, net..... $ 18.9 21% $ 16.4 20% $ 37.1 21% $ 30.9 20%
========== ========== ========== ========== ========== ========== ========== ==========
Net loss.................. $ (23.7) (27)% $ (3.3) (4)% $ (32.8) (18)% $ (16.2) (10)%
========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE>
Three months ended June 30, 2000 compared with the three months ended June 30,
1999
Revenues. Revenues decreased 10% to $80.2 million for the three months
ended June 30, 2000, from $89.0 million for the three months ended June 30,
1999, primarily due to lower revenue from the Company's harbor and offshore
towing and marine transportation services operations.
Revenue from offshore energy operations decreased 4% for the three
months ended June 30, 2000 compared to the 1999 period, primarily due to lower
day rates and utilization resulting from the decline in offshore exploration and
production activity. During the 2000 period, average domestic day rates for
supply boats owned, operated, or managed by the Company declined 4% from the
1999 period, while average domestic day rates for crew boats owned, operated, or
managed by the Company increased 3% from the 1999 period. Average international
day rates for anchor handling tug/supply boats fell 18% to $4,471 from $5,433,
while average international day rates for crew/utility boats increased less than
4% to $1,618 from $1,559.
Harbor and offshore towing revenue decreased 26% to $8.3 million from
$11.3 million primarily due to a decline in the Company's offshore towing
operations and overall decreased activity in harbor towing operations resulting
from increased competition in the Port of Tampa and decreased activity in Port
Everglades, Lake Charles and Port Arthur.
Marine transportation revenue decreased 11% to $34.4 million from $38.7
million, primarily due to the retirement of two vessels, the scheduled
drydocking of the Seabulk America and the installation of modifications to the
HMI Cape Lookout Shoals required for its service in Alaska.
Operating Expenses. Operating expenses decreased 7% to $52.2 million
for the three months ended June 30, 2000 from $56.4 million for the
corresponding 1999 period, primarily due to decreases in crew payroll and
benefits, maintenance and repair, and supplies and consumables resulting from
decreased business activity. As a percentage of revenue, operating expenses
increased to 65% for the three months ended June 30, 2000 from 63% for the
corresponding 1999 period, due to a reduction in the Company's marine
transportation services fleet resulting in a decrease in revenue and an increase
in ongoing expenses such as fuel and insurance costs.
Overhead Expenses. Overhead expenses decreased 14% to $9.8 million from
$11.4 million, primarily due to a reduction in professional fees. As a
percentage of revenue, overhead expenses decreased to only 12% from 13%, due to
the corresponding decrease in revenue.
Depreciation, Amortization and Drydocking Expense. Depreciation,
amortization and drydocking expense decreased 43% to $12.2 million for the three
months ended June 30, 2000, compared with $21.4 million for the three months
ended June 30, 1999 due to the decrease in book value of property, goodwill and
deferred costs as a result of the reorganization.
Income (loss) from Operations. Operations resulted in income of $6.0
million, or 7% of revenue, for the three months ended June 30, 2000 compared to
a loss of $0.3 million for the three months ended June 30, 1999, as a result of
the factors noted above.
Net Interest Expense. Net interest expense decreased 15% to $16.0
million, for the three months ended June 30, 2000 from $18.9 million, for the
corresponding 1999 period, primarily as a result of the reorganization and
conversion of the Predecessor Company senior notes and preferred securities to
the Successor Company's common stock.
Net Income (Loss). The Company had a net loss of $3.0 million for the
three months ended June 30, 2000, compared to a net loss of $23.7 million for
the three months ended June 30, 1999, primarily as a result of the factors noted
above and the loss in the 1999 period of $14.1 million on asset sales.
Six months ended June 30, 2000 compared with the six months ended June 30, 1999
Revenues. Revenues decreased 11% to $158.8 million for the six months
ended June 30, 2000, from $179.4 million for the six months ended June 30, 1999,
primarily due to lower revenue from offshore energy support and harbor and
offshore towing operations.
Revenue from offshore energy operations decreased 15% to $71.7 from
$84.8, primarily due to lower utilization and day rates resulting from the
decline in offshore exploration and production activity.
Harbor and offshore towing revenue decreased 24% to $17.0 from $22.4
million, primarily due to vessel sales and the decline in the Company's offshore
towing operations and overall decreased activity in harbor towing operations
resulting from increased competition in the Port of Tampa and decreased activity
in Port Everglades, Lake Charles and Port Arthur.
Marine transportation revenue decreased 3% to $70.0 million from $72.2,
primarily due to a decrease in rates and the drydocking of one tanker and
modification of another, the shifting of one vessel from grain transportation
which is a higher revenue generator, and the reduction of the tanker fleet.
Operating Expenses. Operating expenses decreased 4% to $106.8 million
for the six months ended June 30, 2000 from $111.3 million for corresponding
1999 period, primarily due to decreases in crew payroll and benefits,
maintenance and repair, and supplies and consumables resulting from decreased
business activity. As a percentage of revenue, operating expenses increased to
67% for the six months ended June 30, 2000 from 62% for the six months ended
June 30, 1999, due to the decline in revenues from the Company's marine
transportation services business and an increase in ongoing expenses such as
fuel and insurance costs.
Overhead Expenses. Overhead expenses decreased 12% to $19.6 million
from $22.2 million, primarily due to a reduction in professional fees. As a
percentage of revenue, overhead expenses was 12% for the six month period ended
June 30, 2000 and the corresponding 1999 period.
Depreciation, Amortization and Drydocking Expense. Depreciation,
amortization and drydocking expense decreased 41% to $24.4 million from $41.7
million, due to the decrease in book value of property, and the write-off of
goodwill and deferred costs as a result of the reorganization.
Income from Operations. Income from operations increased 52% to $8.0
million, or 5% of revenue, from $4.2 million, as a result of the factors noted
above.
Net Interest Expense. Net interest expense decreased 18% to $30.4
million from $37.1 million, primarily as a result of the reorganization and
conversion of the Predecessor Company senior notes and preferred securities to
shares of the Successor Company's common stock.
Net Income (Loss). The Company had a net loss of $16.2 million for the
six months ended June 30, 2000 compared to a net loss of $32.8 million for the
six months ended June 30, 1999 primarily as a result of the factors noted above.
Liquidity and Capital Resources
Background. The Company's capital requirements arise primarily from its
need to service debt, fund working capital, and maintain and improve its
vessels. Historically, the Company's principal sources of cash have been equity
and debt financing and cash provided by operations. As a result of the declines
in rates and utilization of its offshore energy support vessels that led to its
Chapter 11 reorganization operating income was substantially reduced in 1999 and
the first six months of 2000 reducing the availability of cash from operations
to fund the Company's capital requirements.
The Company's principal and interest payment obligations and operating
lease obligations for the last two quarters of 2000 are estimated to be
approximately $79.6 million $2.0 million, respectively. Capital requirements for
fleet maintenance and improvements are currently expected to aggregate $15.0
million during the remainder of 2000. In view of declines in day 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 the five Lightship Tankers in which the Company currently holds a
75.8% equity interest (see Note 1 to the condensed consolidated financial
statements). During the remainder of 2000, an estimated $9.7 million of
principal and interest payments are due on the Title XI ship financing bonds for
these vessels.
During the first six months of 2000, the Company used $9.9 million of
cash from operations primarily reflecting the net loss for the period, after
elimination of noncash items. Cash provided by investing activities was
approximately $4.3 million for the period, primarily reflecting the costs of
capital improvements to vessels and proceeds from the sale of vessels. Cash used
in financing activities was approximately $1.4 million consisting primarily of
proceeds from the revolving credit facility, offset by repayments of borrowings.
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 and led to its Chapter 11
reorganization. The results for the first six months of 2000 continue to be
adversely affected by the weak market conditions in the offshore markets
although this situation appears to be improving.
The Reorganization. The Company's reorganization plan became effective
on December 15, 1999. The details of the plan are reported in the 1999 Form 10-K
In connection with the restructuring 10,000,000 shares of common stock
were issued. The 9,800,000 shares received by the holders of the Predecessor
Company's senior notes represent 98.0% of the Company's currently outstanding
common stock and 89.3% of its common stock assuming exercise of all outstanding
warrants. The 200,000 shares received by holders of the Predecessor Company's
trust preferred securities represent 2.0% of the Company's currently outstanding
common stock and 1.8% of its common stock assuming exercise of the warrants.
The Company also obtained new credit facilities from a group of
financial institutions. The new facilities, totaling $320.0 million, consist of
$200.0 million in term loans, a $25.0 million revolving credit facility, and
$95.0 million in aggregate principal amount at maturity of 12 1/2% senior
secured notes due 2007. A portion of the proceeds from these facilities was used
to repay all outstanding borrowings under the Predecessor Company's bank loans
and to pay administrative and other fees and expenses. The balance of the
proceeds is being used for working capital and general corporate purposes.
The terms of the term loans and revolving credit facility are contained
in a credit agreement between the Company and the financial institutions. The
credit agreement provides for the following facilities:
<TABLE>
<CAPTION>
Interest Rate as of
Facility Amount Maturity August 1, 2000
-------- ------ -------- --------------
<S> <C> <C> <C>
Tranche A term loan $75 million 2004 9.89%
Tranche B term loan $30 million 2005 10.39%
Tranche C term loan $95 million 2006 10.89%
Revolving credit facility $25 million 2004 9.89%
</TABLE>
The interest rate for borrowings under the credit agreement is set from
time to time at the Company's option, subject to certain conditions set forth in
the credit agreement, at either:
o the higher of the rate that the administrative agent announces
from time to time as its prime lending rate and 1/2 of 1% in
excess of the overnight federal funds rate, plus a margin
ranging from 2.25% to 4.25% or
o a rate based on a percentage of the administrative agent's
quotation to first-class banks in the New York interbank
Eurodollar market for dollar deposits, plus a margin ranging
from 3.25% to 4.25%.
Borrowings under the credit agreement are secured by first priority
perfected security interests in equity of certain of the Company's subsidiaries
and by first priority perfected security interests in certain of the vessels and
other assets owned by the Company and its subsidiaries. In addition, certain of
the Company's subsidiaries have guaranteed its obligations under the credit
agreement. The credit agreement contains customary covenants that require the
Company, among other things, to meet certain financial ratios and that prohibit
it from taking certain actions and entering into certain transactions.
At June 30, 2000, approximately $10.4 million was outstanding under the
revolving credit facility. On June 30, 2000, the Company made the following
payments under the term loans: Tranche A, $5.2 million, Tranche B, $1.3 million
and Tranche C, $4.0 million.
The senior secured notes are senior obligations and are secured by a
second priority lien on the same assets that secure borrowings under the credit
agreement. The notes are unconditionally guaranteed by all of the Company's
subsidiaries that have guaranteed borrowings under the credit agreement. The
notes were issued at 90.0% of their face value, for gross proceeds of $85.5
million. The notes were issued under an indenture among the Company, the
subsidiary guarantors and financial institutions serving as trustee and
collateral agent. The indenture contains customary covenants that, among other
things, restrict the Company's ability to incur additional debt, sell assets,
and engage in mergers and transactions with affiliates. As consideration for the
purchase of the notes and as compensation for certain financial services, the
Company issued to the purchasers of the notes noteholder warrants to purchase
6.75% of the Company's common stock on a fully diluted basis after giving effect
to the exercise of these warrants at an exercise price of $.01 per share for a
term of seven and one-half years.
Recent Developments. Because the senior secured notes did not receive
the rating from the rating agencies required under the note indenture, to have
been received by April 15, 2000, the interest rate of the notes has increased
from 12 1/2% to 13 1/2% effective December 15, 1999. The indenture requires that
such additional interest be paid in the form of additional notes, of which notes
in aggregate principal amount of $514,517 were issued on April 15, 2000. The
Company is currently seeking the required ratings which would return the
interest rate to 12 1/2%.
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 was not in compliance with
certain covenants in its bank credit agreement as of March 31, 2000, and
anticipated that it would not be in compliance on future dates if market
conditions did not improve. The Company entered into an amendment to the credit
agreement with the lending banks under which the relevant covenants were
modified through March 31, 2001 and the Company was required to prepay principal
under the term loans of $10.0 million before June 30, 2000, and will be required
to prepay an additional $25.0 million before August 31, 2000, and $25.0 million
before January 1, 2001.
The Company is selling 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 $35.0 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. In connection with the amendment of the credit
agreement, the Company paid a fee of $4.5 million to the lending banks in the
form of a promissory note, accruing interest at 15% per annum, due the earlier
of (i) April 2002 or (ii) the date on which the ratio of funded indebtedness to
EBITDA for any quarter is less than four to one.
On June 29, 2000, the Company entered into a second amendment to the
Credit Facility which extended the deadline for prepayment of $10.0 million
under the term loans from June 30, 2000 to July 17, 2000. The Company has met
this deadline. The Second Amendment also expanded the Company's flexibility in
determining which assets to sell to obtain the funds to make the principal
payments of term loans required under the first amendment.
As of August 7, 2000, the Company had prepaid term loans of $18.6
million from the proceeds of asset sales and expects to receive at least $2.3
million of proceeds from additional assets sales by the end of August.
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 obligations, apart from the
prepayments described above, and other capital requirements through 2000.
It is uncertain, however, whether proceeds from the sale of assets
will be sufficient to enable it to satisfy the prepayment obligations as
currently scheduled or whether it will be required to seek further extension of
the prepayment deadlines. As the Company's operating cash flow is dependent on
factors beyond the Company's control, moreover, including general economic
conditions and conditions in the markets the Company serves, there can be no
assurance that actual operating cash flow will meet expectations.
Recent Developments
The holder of voting and disposition rights with respect to
approximately 60% of the Company's outstanding common stock has advised the
Company that the holder's parent organization is to be acquired by a French
company in a transaction scheduled to close in the fourth quarter of this year.
Such transaction may be deemed to be a transfer to the French company of the
holder's rights for purposes of the U.S.-citizenship requirements of section 27
of the Merchant Marine Act, 1920, commonly referred to as the "Jones Act," in
which event the Company would no longer meet the Jones Act's citizenship
requirements. The transaction may also be deemed to be a change of control under
the Company's debt obligations. The Company and the holder are working to
structure the manner in which the rights are held in order to avoid these
consequences. While there can be no assurance that such efforts will be
successful, the Company believes that they will be. Any failure of the Company
to meet the citizenship requirements of the Jones Act would result in its
vessels being prohibited from engaging in the U.S. domestic trade, which
accounts for the majority of the Company's revenues, and would also result in
covenant defaults under all of the company's outstanding debt instruments. A
change in control as defined in the Company's credit agreement and senior note
indenture would result in a default under the credit agreement and a repurchase
obligation with respect to the outstanding senior notes.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning certain legal proceedings see Note 10 of the
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on June 15, 2000.
At the meeting, the shareholders elected the following individuals to three-year
terms as Class I members of the Board of Directors: James J. Gaffney and Robert
L. Keiser.
The voting results of the election of directors and the other matters
voted upon at the meeting are as follows:
Election of Directors:
<TABLE>
<CAPTION>
Votes Withheld
Nominee: For Authority
<S> <C> <C>
James J. Gaffney........................................ 4,984,958 32,050
Robert L. Keiser........................................ 4,984,958 32,050
</TABLE>
Other Matters:
<TABLE>
<CAPTION>
Abstentions
and
Description of Votes Votes Broker
Matter For Against Non-Votes
<S> <C> <C> <C>
Approval of the Company's Amended and
Restated Equity Ownership Plan...................... 4,029,322 741,840 43
Approval of the Company's Stock Option
Plan for Directors.................................. 4,465,776 305,386 43
Approval of the appointment of Ernst &
Young LLP as the Company's independent
public accountants............................... 5,012,599 4,409 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
None
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HVIDE MARINE INCORPORATED
/s/ JOHN J. KRUMENACKER
John J. Krumenacker
Controller and Chief Accounting Officer
Date: August 14, 2000
