UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2006
Commission File Number: 001-33068
ULTRAPETROL (BAHAMAS) LIMITED
(Translation of registrant's name into English)
Ocean Centre, Montagu Foreshore
East Bay St.
Nassau, Bahamas
P.O. Box SS-19084
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1): ___
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)7: ___
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection
with Rule 12g3-2(b):
82-______________.
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Set forth herein are a copy of the Company's report for the nine months
ended September 30, 2006, containing certain unaudited financial information and
a Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ULTRAPETROL (BAHAMAS) LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
AND SEPTEMBER 30, 2005 (UNAUDITED)
The following discussion and analysis should be read in conjunction with
the unaudited condensed consolidated financial statements of Ultrapetrol
(Bahamas) Limited (the "Company") and subsidiaries for the nine months ended
September 30, 2006 and September 30, 2005 included elsewhere in this report.
Our Company
We are an industrial shipping company serving the marine transportation
needs of clients in the markets on which we focus. We serve the shipping markets
for grain, forest products, minerals, crude oil, petroleum, and refined
petroleum products, as well as the offshore oil platform supply market, and the
leisure passenger cruise market through our operations in the following four
segments of the marine transportation industry.
Our River Business, with approximately 490 barges, is the largest owner
and operator of river barges and push boats that transport dry bulk and liquid
cargos through the Hidrovia Region of South America, a large area with growing
agricultural, forest and mineral related exports.
Our Offshore Supply Business owns and operates vessels that provide
critical logistical and transportation services for offshore petroleum
exploration and production companies, primarily in the North Sea and the coastal
waters of Brazil. Our Offshore Supply Business fleet currently consists of six
platform supply vessels, or PSVs, including four in operation and two under
construction to be delivered in 2007 and 2008.
Our Ocean Business owns and operates six oceangoing vessels, including
three versatile Suezmax/Oil-Bulk-Ore, or Suezmax OBO, vessels, one Aframax
tanker, one semi-integrated tug/barge unit, and one chemical/product carrier.
Our Ocean Business fleet has an aggregate capacity of approximately 600,000 dwt,
and our three Suezmax OBOs are capable of carrying either dry bulk or liquid
cargos, providing flexibility as dynamics change between these market sectors.
Our Passenger Business fleet consists of two vessels with a total carrying
capacity of approximately 1,600 passengers, and operates primarily in the
European cruise market. We currently employ each of our passenger vessels under
seasonal charters with a tour operator.
Our business strategy is to continue to operate as a diversified marine
transportation company with an aim to maximize our growth and profitability
while limiting our exposure to the cyclical behavior of individual sectors of
the marine transportation industry.
Developments in 2006
On February 6, 2006, we took delivery of the third PSV in our Offshore
Supply fleet, the UP Agua-Marinha from EISA - Estaleiro Ilha S.A. in Rio de
Janeiro, Brazil.
On March 20, 2006, we purchased all of the issued and outstanding capital
stock of Ravenscroft Shipping (Bahamas) S.A., or Ravenscroft, from two of our
related parties, Crosstrade Maritime Inc., and Crosstrees Maritime Inc., for the
purchase price of $11.5 million. The purchase price included a building in Coral
Gables, Florida, U.S., independently valued at $4.5 million. Ravenscroft
Shipping (Bahamas) S.A. is a holding company that is the ultimate parent of our
vessel managers, Ravenscroft Ship Management Inc., which manages the vessels in
our Ocean Business and Offshore Supply Business, and Elysian Ship Management
Inc., which manages the vessels in our Passenger Business. The Promissory Notes
that we issued in connection with this acquisition were paid from the proceeds
of our initial public offering of 12,500,000 shares of common stock, par value
$0.01 per share, which closed on October 18, 2006. In compliance with the
requirements of our indenture, or the Indenture, related to the 9% First
Preferred Ship Mortgage Notes due 2014 (the "Notes") that we issued, we obtained
a fairness opinion from an internationally recognized accounting firm in
connection with this acquisition.
On March 20, 2006, Inversiones Los Avellanos S.A., or Los Avellanos, and
Avemar Holdings (Bahamas) Ltd., or Avemar, two of our shareholders, terminated
their agreement pursuant to which Avemar had previously granted Los Avellanos an
irrevocable proxy to vote our shares owned by Avemar. The shares owned by Avemar
were cancelled upon the closing of our initial public offering.
On March 20, 2006, we exercised our option to repurchase from Los
Avellanos 25,212 shares of our common stock for a total consideration of
$894,999, and the $894,999 note originally issued in connection with the option
was cancelled.
Separately, we purchased 66.67% of the issued and outstanding capital
stock of UP Offshore (Bahamas) Ltd., or UP Offshore, a company through which we
operate our Offshore Supply Business, from LAIF XI Ltd., or LAIF, an affiliate
of Solimar, one of our shareholders, for a purchase price of $48.0 million on
March 21, 2006. Following this acquisition, we hold 94.45% of the issued and
outstanding shares of UP Offshore. The Promissory Note that we issued in
connection with this acquisition was paid from the proceeds of our initial
public offering. In compliance with the requirements of the Indenture, we
obtained a fairness opinion from an internationally recognized accounting firm
in connection with this acquisition.
On May 3, 2006, we signed an agreement with International Finance
Corporation, or IFC, to purchase from IFC the 7.14% of UP River (Holdings) Ltd.,
or UP River, an entity that owned the 50% of UABL Limited that we did not own,
for the price of $6.1 million plus accrued interest from May 15, 2006 to the
closing of our initial public offering. As part of this agreement, IFC agreed to
waive its option to convert its interest in UP River to shares in our company
and its right to participate in our initial public offering. Our obligation
under this agreement was paid from proceeds of the offering.
On August 8, 2006 we took delivery of the fourth PSV in our Offshore
Supply Business fleet, UP Topazio, from EISA - Estaleiro Ilha S.A. in Rio de
Janeiro, Brazil.
On September 8, 2006 we entered into a Memorandum of Agreement with the
Argos Group to form a joint venture to establish a river transportation company
on the Magdalena River in Colombia.
On September 22, 2006, Ultracape Holdings Ltd. (our 60% owned subsidiary)
exercised its option to sell 100% of its membership interest in Ultracape
Delaware LLC to MexPlus Puertos S.A. de C.V. at a price of approximately $2.6
million. The proceeds from this sale were received by the Company on September
29, 2006.
Recent developments
On October 18, 2006, we completed the initial public offering of
12,500,000 shares of our common stock at a price of $11.00 per share (the
"Offering"). The net proceeds of the Offering to us were $127.8 million.
On October 20, 2006, UP Offshore (redeemed all of the outstanding Series A
Preferred Shares held by IFC for an amount of $4.3 million with proceeds from
the Offering.
On October 23, 2006, we signed a Memorandum of Agreement to purchase the
M.T. Rea, a 39,530 dwt. oil product tanker for a purchase price of $19.1
million. The 10% escrow deposit was made on October 31, 2006.
We announced in Athens, Greece on October 31, 2006, that one of our
subsidiaries in the Passenger Business will employ our Grand Victoria (to be
renamed Blue Monarch) on 7-day cruises in Greece and Turkey. Monarch Classical
Cruises will be responsible for the marketing of these cruises and the Blue
Monarch will not have a guaranteed minimum income for the European Summer of
2007.
We have recently entered into an agreement to buy a 9,219 dwt. oil tanker
for a purchase price of $17.0 million.
On November 10, 2006, the underwriters of the Offering exercised their
over-allotment option to purchase an additional 232,712 shares of our common
stock from some of our original shareholders. We expect to close on the exercise
of the over- allotment option on November 15, 2006.
Factors Affecting Our Results of Operations
We have organized our business and evaluate performance by the following
operating segments: the River Business, Ocean Business and, beginning in 2005,
Offshore Supply Business and Passenger Business. The accounting policies of the
reportable segments are the same as those for the unaudited condensed
consolidated financial statements. Other than for allocation of overhead, we do
not have significant intersegment transactions.
Revenues
In our River Business, we currently contract substantially all of our
capacity under contract of affreightment, or COA, most of which have terms
ranging from one to four years. Most of these COAs currently provide for
adjustments to the freight rate based on changes in the price of fuel.
In our Offshore Supply Business we contract our vessels under Time Charter
in both Brazil and the North Sea. During the first quarter of 2006, prior to the
acquisition of 66.67% of the stock of UP Offshore, the revenues and expenses of
UP Offshore were not consolidated with ours, however, two PSVs owned by UP
Offshore were, by virtue of chartering arrangements, operated by us in the North
Sea. The revenues of these charters are recognized in our unaudited condensed
consolidated financial statements.
In our Ocean Business, we contract our vessels either on a time charter
basis or on a COA basis. Some of the differences between time charters and COAs
are summarized below.
Time Charter
------------
o We derive revenue from a daily rate paid for the use of the
vessel, and
o the charterer pays for all voyage expenses, including fuel and
port charges.
Contract of Affreightment (COA)
-------------------------------
o We derive revenue from a rate based on tonnage shipped expressed
in dollars per metric ton of cargo, and
o we pay for all voyage expenses, including fuel and port charges.
Our ships on time charters generate both lower revenues and lower expenses
for us than those under COAs. At comparable price levels both time charters and
COAs result in approximately the same operating income, although the operating
margin as a percentage of revenues may differ significantly.
In our Passenger Business we have operated our vessels under charter
contract agreements with European tour operators during the European summer
season which have provided us with a stable revenue stream as well as the
flexibility to operate the vessels in other regions of the world at the end of
the contract term.
Time charter revenues accounted for 53% of the total revenues from our
businesses for the third quarter of 2006, and COA revenues accounted for 47%.
With respect to COA revenues in the third quarter of 2006, 80% were in respect
of repetitive voyages for our regular customers and 20% in respect of single
voyages for occasional customers.
In our River Business, demand for our services is driven by agricultural,
mining and forestry activities in the Hidrovia Region. Droughts and other
adverse weather conditions, such as floods, could result in a decline in
production of the agricultural products we transport, which would likely result
in a reduction in demand for our services. Drought conditions have affected the
size of the Paraguayan soybean crop in 2006. Further, most of the operation in
our River Business occurs in the Parana and Paraguay Rivers, and any changes
adversely affecting either of these rivers, such as low water levels, could
reduce or limit our ability to effectively transport cargo on the rivers.
In our Ocean Business, we employed a significant part of our ocean fleet
on time charter to different customers during the nine months ended September
30, 2006. During the first half of 2006 the international dry bulk freight
market was on average lower that it was in the first half of 2005. In the third
quarter of 2006 the international dry bulk freight market recovered
progressively to levels which are comparable with the averages seen at the
beginning of 2005.
In our Passenger Business, demand for our services is driven primarily by
movements of tourists during the European summer cruise season.
Expenses
Our operating expenses generally include the cost of all vessel
management, crewing, spares and stores, insurance, lubricants, repairs and
maintenance. Generally, the most significant of these expenses are repairs and
maintenance, wages paid to marine personnel, catering and marine insurance
costs. However, there are significant differences in the manner in which these
expenses are recognized in the different segments in which we operate.
For annual reporting purposes, when a cost that is expensed clearly
benefits two or more interim periods, each interim period is charged for an
appropriate portion of the annual cost by the use of deferrals.
In addition to the vessel operating expenses, our other primary operating
expenses in the third quarter 2006 included general and administrative expenses.
During the first quarter of 2006, we acquired Ravenscroft and the
administrative-related assets and personnel of Oceanmarine. Accordingly, these
tasks are now performed by us and all operating expenses are paid in-house. We
do not expect to pay fees to any related entity other than those described here
for management and administration functions.
In our River Business, our voyage expenses include port expenses and
bunkers as well as charter hire paid to third parties.
In our Offshore Supply Business, voyage expenses include the charter hire
paid by us to UP Offshore, until the end of the first quarter of 2006, and
brokerage commissions paid by us to third parties.
In our Passenger Business, operating expenses include all vessel
management, crewing, stores, insurance, lubricants, repairs and maintenance and
may include catering, housekeeping and entertainment staff if the charter party
so specifies. Voyage expenses may include port expenses and bunkers if such
services are for our account. Similarly, they may include the cost of food and
beverages if such amounts are for our account under the charter agreement.
Through our River Business, we own a dry dock and a repair facility for
our River Business fleet at Pueblo Esther, Argentina, land for the construction
of two terminals in Argentina and 50% joint venture participations in two grain
loading terminals in Paraguay. We also rent offices in Asuncion (Paraguay) and
Buenos Aires (Argentina) and a dry dock facility in Ramallo (Argentina).
Through our acquisition of UP Offshore, we now hold a lease for office
space in both Rio de Janeiro (Brazil) and Aberdeen, United Kingdom. In addition,
through our acquisition of Ravenscroft, we own a building located at 3251 Ponce
de Leon Boulevard, Coral Gables, Florida, United States of America.
Foreign Currency Transactions
During the nine months ended September 30, 2006, 76% of our revenues were
denominated in U.S. dollars, 13% of our revenues were denominated and collected
in Euros and 11% of our revenues were denominated and collected in British
Pounds. Furthermore, 15% of our total revenues were denominated in U.S. dollars
but collected in Argentine Pesos and Paraguayan Guaranies. Significant amounts
of our expenses were denominated in dollars and 25% of our total out of pocket
operating expenses were paid in Argentine Pesos and Paraguayan Guaranies.
Our operating results, which we report in U.S. dollars, may be affected by
fluctuations in the exchange rate between the U.S. dollar and other currencies.
For accounting purposes, we use U.S. dollars as our functional currency.
Therefore, revenue and expense accounts are translated into U.S. dollars at the
average exchange rate prevailing during the month of each transaction.
Inflation and Fuel Price Increases
We do not believe that inflation has had a material impact on our
operations, although certain of our operating expenses (e.g., crewing, insurance
and drydocking costs) are subject to fluctuations as a result of market forces.
In 2005 and prior, in our River Business, we adjusted the fuel component
of our cost into the freights on a seasonal or yearly basis, and therefore we
were adversely affected during that period by rising bunker prices only
partially offset by a hedge of a minor part of our consumption and by bunker
price adjustment formulas on some of our contracts. In 2006, we have negotiated
and intend to continue to negotiate fuel price adjustment clauses in most of our
River Business contracts.
In the Offshore Supply and Passenger Businesses, the risk of variation of
fuel prices under the vessels' current employment is generally borne by the
charterers, since the charterers are generally responsible for the supply of
fuel.
In our Ocean Business, inflationary pressures on bunker costs are not
expected to have a material effect on our immediate future operations which are
currently chartered to third parties, since it is the charterers who pay for
fuel. When our ocean vessels are employed under COAs, freight rates for voyage
charters are generally sensitive to the price of a vessel's fuel. However, a
sharp rise in bunker prices may have a temporary negative effect on results
since freights generally adjust only after prices settle at a higher level.
Seasonality
Each of our businesses has seasonal aspects, which affect its revenues on
a quarterly basis. The high season for our River Business is generally between
the months of March and September, in connection with the South American harvest
and higher river levels. However, growth in the soy pellet manufacturing,
minerals and forest industries may help offset some of this seasonality. The
Offshore Supply Business operates year-round, particularly off the coast of
Brazil, although weather conditions in the North Sea may reduce activity from
December to February. In the Ocean Business, demand for oil tankers tends to be
strongest during the winter months in the Northern hemisphere. Demand for dry
bulk transportation tends to be fairly stable throughout the year, with the
exceptions of the Chinese New Year in our first quarter and the European summer
holiday season in our third quarter, which generally show lower charter rates.
Under existing arrangements, our Passenger Business currently generates its
revenue during the European cruise season, typically from May through October of
each year.
Legal Proceedings
Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
Customs Tax Authorities over the alleged infringement of customs regulations by
the Alianza G-3 and Alianza Campana (collectively, the "Alianza Campana") in
Brazil during 2004. As a result, the Brazilian Customs Tax Authorities commenced
an administrative proceeding and applied the penalty of apprehension against the
Alianza Campana which required the Alianza Campana to remain in port or within a
maximum of five nautical miles from the Brazilian maritime coast. The maximum
customs penalty that could be imposed would be confiscation of the Alianza
Campana, which is estimated by the Brazilian Customs Tax Authorities to be
valued at $4.6 million. The Secretary of Brazilian Federal Revenue decided to
cancel the penalty of confiscation of the Alianza Campana by means of a decision
issued on August 14, 2006. However, the Secretary conditioned his decision on
the compliance with the following requirements: (1) the classification of the
Alianza Campana under the Regime Aduaneiro Especial para a Industria do
Petroleo, or REPETRO regime, and if such classification is confirmed; (2) the
payment by Ultrapetrol S.A. of a penalty in the amount of one percent (1%) of
the customs value of the Alianza Campana, or $45,600. In order to comply with
the above described requirements, our customer, Petroleo Brasileiro S.A.,
presented on September 15, 2006, a formal request to obtain from Brazilian
Customs Tax Authorities the recognition of the classification of the Alianza
Campana under the REPETRO regime. We believe that the customs authorities will
recognize the classification of the Alianza Campana under the REPETRO regime. If
such formal recognition is obtained and we subsequently pay the penalty
mentioned above, the confiscation penalty will be automatically canceled and the
administrative proceeding will be finalized with no further consequences to us.
On September 21, 2005, the local customs authority of Ciudad del Este,
Paraguay issued a finding that certain UABL entities owe taxes to that authority
in the amount of $2.2 million, together with a fine for non-payment of the taxes
in the same amount, in respect of certain operations of our River Business for
the prior three-year period. This matter was referred to the Central Customs
Authority of Paraguay (the "Paraguayan Customs Authority"). We believe that this
finding is erroneous and UABL has formally replied to the Paraguayan Customs
authority contesting all of the allegations upon which the finding was based.
After review of the entire case the Paraguayan Central Tax authorities who have
jurisdiction over the matter have confirmed we have no liability with respect to
two of the three matters at issue, while they held a dissenting view on the
third issue for which our liability, if such interpretation was upheld in court,
would be $0.4 million. Simultaneously with the above, the Paraguayan Customs
Authority issued a resolution confirming the original determination made by the
Customs Authorities at Ciudad del Este therefore committing the matter to a
resolution by the Court. We have entered a plea with the respective court
requesting a confirmation of the release of liability in the two issues where
such view was upheld by the Tax authorities and contending the interpretation on
the third where we claim to be equally non-liable. The legal representative of
the Paraguayan Customs Authority has filed an acceptance of our claim, and the
court is awaiting ratification by the Paraguayan Customs Authority, which if
received would limit our potential liability to $0.4 million. We have been
advised by UABL's counsel in the case that there is only a remote possibility
that a court would find UABL liable for any of these taxes or fines.
On November 3, 2006 the Bolivian Tax Authority (Departamento de
Inteligencia Fiscal de la Gerencia Nacional de Fiscalizacion) issued a notice in
the Bolivian press advising that UABL International S.A. (a Panamanian
subsidiary of the Company) would owe taxes to that authority in the amount of
approximately $2.5 million (including interest), together with certain fines
that have not been determined yet. We believe that this finding is incorrect and
UABL International S.A. will formally reply to the Bolivian Tax Authority
contesting the allegations of the finding. We have been advised by our local
counsel in the case that there is only a remote possibility that UABL
International S.A. would be found liable for any of these taxes or fines.
Various other legal proceedings involving us may arise from time to time
in the ordinary course of business. However, we are not presently involved in
any other legal proceedings that, if adversely determined, would have a material
adverse effect on us.
Results of Operations
Nine months ended September 30, 2006 compared to the nine months ended September
30, 2005.
The following table sets forth certain unaudited historical income
statement data for the periods indicated above derived from our unaudited
condensed consolidated statements of operations expressed in thousands of
dollars.
Nine Months Ended September 30,
-------------------------------
2006 2005 Percent Change
---- ---- --------------
Revenues
Attributable to River Business $59,324 $44,083 35%
Attributable to Offshore Supply Business 17,869 2,694 563%
Attributable to Ocean Business 30,365 41,606 (27%)
Attributable to Passenger Business 20,152 12,772 58%
--------- ---------
Total 127,710 101,155 26%
--------- ---------
Voyage expenses
Attributable to River Business (25,117) (19,622) 28%
Attributable to Offshore Supply Business (3,317) (2,214) 50%
Attributable to Ocean Business (600) (1,271) (53%)
Attributable to Passenger Business (3,694) (1,985) 86%
--------- ---------
Total (32,728) (25,092) 30%
--------- ---------
Running cost
Attributable to River Business (14,624) (13,448) 9%
Attributable to Offshore Supply Business (3,664) (348) 953%
Attributable to Ocean Business (10,082) (9,216) 9%
Attributable to Passenger Business (9,105) (5,576) 63%
--------- ---------
Total (37,475) (28,588) 31%
--------- ---------
Amortization of dry docking & intangible assets (6,386) (5,244) 22%
Depreciation of vessels and equipment (13,916) (10,761) 29%
Management fees and administrative and commercial
expenses (8,868) (6,843) 30%
Other operating income 630 21,867 (97%)
Operating profit 28,967 46,494 (38%)
Financial expense $(15,344) $(14,171) 8%
Financial income 276 514 (46%)
Investment in affiliates 674 (462) -
Other, net 113 47 140%
--------- ---------
Total other expenses (14,281) (14,072) 1%
--------- ---------
Income before income taxes and minority interest 14,686 32,422 (55%)
Income taxes (398) (259) 54%
Minority interest (1,010) (9,794) (90%)
Net income for the period $13,278 $22,369 (41%)
Revenues. Total revenues from our River Business increased by 35% from
$44.1 million for the nine months ended September 30, 2005 to $59.3 million for
the same period in 2006. This growth is primarily attributable to the price
increases and fuel adjustments negotiated in late 2005, which increased freight
rates for the same period in 2006 when compared to the equivalent freight rates
for the same period in 2005, this increase is also attribuitable to a 13%
increase in tons transported in the first nine months of 2006 versus the same
period in 2005. This incremental volume was mainly carried during the third
quarter of 2006.
Total revenues from our Offshore Supply Business increased from $2.7
million for the nine months ended September 30, 2005 to $17.9 million for the
same period in 2006. This increase is mainly attributable to the start of
operations of two PSVs (the UP Agua-Marinha and UP Topazio) in March and
September 2006 respectively, to the operation of the UP Esmeralda and UP Safira
for the full three quarters of 2006 compared to only two months of operation
each in the same nine months of 2005, together with higher rates obtained in the
North Sea operation when compared to rates for the same period in 2005.
Total revenues from our Ocean Business decreased from $41.6 million for
the nine months ended September 30, 2005 to $30.4 million for the nine months
ended September 30, 2006, or a decrease of 27%. This decrease is attributable to
the combined effect of the sale of the Cape Pampas in May 2005 and the lower
revenues of our Suezmax/OBO fleet, partially offset by the revenues generated by
our Miranda I (which started operations in October 2005).
Total revenues from our Passenger Business increased 58% from $12.8
million in the first nine months of 2005 to $20.2 million in the same period of
2006. This increase is attributable to the combined effect of higher revenues
from the New Flamenco and additional revenues of the Grand Victoria which was
not in operation in the same period of 2005.
Voyage expenses. In the nine months ended September 30, 2006, voyage
expenses of our River Business were $25.1 million, as compared to $19.6 million
for the same period of 2005, an increase of $5.5 million. The increase is mainly
attributable to an increase in our fuel expenditure on the River Business,
driven by a 7% increase in consumption due to larger quantities of cargo
transported, and by a 30% fuel price increase.
In the nine months ended September 30, 2006, voyage expenses of our
Offshore Supply Business were $3.3 million, as compared to $2.2 million in 2005.
The increase is mainly attributable to the effect of the consolidation of UP
Offshore as our subsidiary from the second quarter of 2006.
In the nine months ended September 30, 2006, voyage expenses of our Ocean
Business were $0.6 million, as compared to $1.3 million for the same period in
2005. The decrease is primarily attributable to a decrease in brokerage
commissions due to lower rate levels obtained by our Suezmax/OBO fleet.
In the nine months ended September 30, 2006, voyage expenses of our
Passenger Business were $3.7 million as compared to $2.0 million for the same
period in 2005. The increase is primarily attributable to the effect of the
higher voyage activity of the New Flamenco and the addition of Grand Victoria to
our Passenger Business fleet.
Running costs. For the nine months ended September 30, 2006, running costs
of our River Business were $14.6 million, as compared to $13.4 million for the
same period in 2005, an increase of $1.2 million. This increase was mainly
attributable to an increase in our vessel costs driven by increases in wages,
lubricants and spares.
For the nine months ended September 30, 2006, running costs of our
Offshore Supply Business were $3.7 million, as compared to $0.3 million for the
same period in 2005. This increase is primarily attributable to the entry into
operation of two newly built PSVs (the UP Agua-Marinha and UP Topazio) in March
and September 2006 respectively, to the operation of the UP Esmeralda and UP
Safira for the entire nine-month period ended September 30, 2006 compared to
only two months each of operation in the same period of 2005, and to the effect
of the consolidation of UP Offshore as from the second quarter of 2006.
For the nine months ended September 30, 2006, running costs of our Ocean
Business were $10.1 million, as compared to $9.2 million for the same period in
2005. The increase in running costs relating to the operation of the Miranda I
(which started operations in October 2005) as well as increased running costs
related to the rest of the ocean fleet was partially offset by the decrease in
running cost attributable to the sale of the Cape Pampas in May 2005.
For the nine months ended September 30, 2006, running costs of our
Passenger Business were $9.1 million, compared to $5.6 million for the same
period in 2005. This increase is attributable to the effect of the running cost
of our vessel New Flamenco during the full nine months ended September 30, 2006
as compared to only seven months of operation during the same period in 2005 and
the additional operation of the Grand Victoria in 2006 which we did not operate
in 2005.
Amortization of dry docking and intangible assets. Amortization of dry
docking and special survey costs increased by $0.8 million, or 15%, to $6.0
million for the nine months ended September 30, 2006 as compared to $5.2 million
for the same period in 2005. The increase is primarily attributable to the
amortization of dry dock expenses expenses for Princess Marina and amortization
of river equipment purchased in 2005 over the full nine months period ended
September 30, 2006, partially offset by the decrease of amortization of dry
docking expense attributable to the sale of Cape Pampas in May 2005.
Amortization of intangible assets was $0.4 million for the nine months ended
September 30, 2006 as compared to $0 million for the same period in 2005. The
increase is primarily attributable to the amortization expenses related to the
purchase of Ravenscroft as our subsidiary from the second quarter of 2006.
Depreciation of vessels and equipment. Depreciation increased by $3.1
million, or 29%, to $13.9 million for the nine months ended September 30, 2006
as compared to $10.8 million for the same period in 2005. This increase is
primarily attributable to the combined effect of the consolidation of UP
Offshore as our subsidiary from the second quarter of 2006, a full period of
amortization of new tugs and river barges, the operation of our vessels Miranda
I and Grand Victoria (which were set in service in October 2005 and April 2006,
respectively), and the increased value of our vessel New Flamenco which was
fully refurbished during part of the fourth quarter of 2005 and in the first
quarter of 2006, partially offset by the sale of Cape Pampas in May 2005.
Management fees and administrative expenses. Management fees and
administrative expenses were $8.9 million for the nine months ended September
30, 2006 as compared to $6.8 million for the same period in 2005. This increase
of $2.1 million is attributable mainly to the effect of the consolidation of UP
Offshore as our subsidiary from the second quarter of 2006 plus some overhead
increases in our River business.
Other operating income. Other operating income was $0.6 million for the
nine months ended September 30, 2006 as compared to operating income of $21.9
million for the nine months ended September 30, 2005. This decrease of $21.3
million is mainly attributable to the effect of the sale of the Cape Pampas in
the second quarter of 2005.
Operating profit. Operating profit for the nine months ended September 30,
2006 was $29.0 million, a decrease of $17.5 million from the same period in
2005. The difference is mainly attributable to the sale of our vessel Cape
Pampas and the effect of the lower charter rates obtained by our Suezmax/OBO
fleet in the first nine months of 2006 partially offset by the result of our
Miranda I (which started operations in October 2005), the effect of the
consolidation of UP Offshore as our subsidiary from the second quarter of 2006
and a higher operating profit from our River and Passenger Businesses in the
nine months ended September 30, 2006 compared to the same period of 2005.
Financial expense. Financial expense increased by approximately $1.1
million or 8%, to $15.3 million in the nine months ended September 30, 2006 as
compared to $14.2 million in the same period of 2005. This variation is mainly
attributable to the effect of the consolidation of UP Offshore as our subsidiary
from the second quarter of 2006 and an increase in the interest rate of our
variable rate debt in our River Business which was partially offset by the
repayment of principal during the period.
Minority Interest. Minority interest decreased from $9.8 million in the
nine months ended September 30, 2005 to $1.0 million for the same period of
2006. This variation is mainly attributable to the effect of a 40% gain on the
sale of Cape Pampas in May 2005.
Liquidity and Capital Resources
We are a holding company and operate in a capital-intensive industry
requiring substantial ongoing investments in revenue-producing assets. Our
subsidiaries have historically funded their vessel acquisitions through a
combination of bank indebtedness, shareholder loans, cash flow from operations
and equity contributions.
The ability of our subsidiaries to make distributions to us may be
restricted by, among other things, restrictions under our credit facilities and
applicable laws of the jurisdictions of their incorporation or organization.
As of September 30, 2006, we had aggregate indebtedness of $312.0 million,
$246.1 million of which consisted of $180.0 million due under the Notes, $24.9
million in indebtedness of our subsidiary UABL under three senior loan
facilities with IFC and KfW, $1.0 million in indebtedness of our subsidiary UABL
with other lenders, and indebtedness of our new subsidiary UP Offshore of $40.2
million under two senior loan facilities with DVB NV and DVB Bank AG, plus
accrued interest of $6.4 million. Additionally, as of September 30, 2006, we had
indebtedness of $59.5 million related to the promissory notes issued in
connection with the acquisition of all of the issued and outstanding capital
stock of Ravenscroft (Bahamas) S.A. and 66.67% of the issued and outstanding
capital stock of UP Offshore (Bahamas) Ltd.
At September 30, 2006, we had cash and cash equivalents on hand of $18.7
million. In addition, we had $3.8 million in current restricted cash.
As a result of the early prepayment of the variable interest rate debts
and the optional redemption of Series A preferred shares held by IFC in UP
Offshore (Bahamas) Ltd. paid from proceeds of the Offering, we incurred a loss
of approximately $2.4 million that will be recorded in the fourth quarter of
2006.
Operating Activities
In the nine months ended September 30, 2006, we generated $26.2 million in
cash flow from operations compared to $25.0 million in the same period of 2005.
We had a net income of $13.3 million for the first nine months ended September
30, 2006, as compared to a net income of $22.4 million in the same period of
2005, a decrease of $9.1 million.
Net cash provided by operating activities consists of our net income
(loss) increased by non-cash expenses, such as depreciation and amortization of
deferred charges, and adjusted by changes in working capital and expenditures
for dry docking.
Investing Activities
During the nine months ended September 30, 2006, we disbursed $9.9 million
to refurbish the New Flamenco and to recertify and recommission the Grand
Victoria, $6.5 million to enlarge and refurbish barges and pushboats as well as
to purchase a new crane and associated equipment in our River Business, and $4.2
million in respect of PSVs under construction. Included in the result of the
nine months ended September 30, 2006 is the payment during the first quarter of
2006 of $11.4 million from our related party UP Offshore (Bahamas) Ltd. to us as
a repayment of an intercompany advance.
Financing Activities
Net cash used in financing activities was $8.3 million during the nine
months ended September 30, 2006, compared to net cash provided by financing
activities of $1.9 million during the same period of 2005. The decrease in cash
provided by financing activities in this period is mainly attributable to the
repayment of principal of our outstanding debt during the nine months ended
September 30, 2006 and to the payment of deferred costs related to the Offering.
Future Capital Requirements
Our near-term cash requirements are primarily related to funding
operations. We cannot assure that our actual cash requirements will not be
greater than we currently expect. If we cannot generate sufficient cash flow
from operations, we may obtain additional funding through capital market
transactions, although it is possible these sources will not be available to us.
Supplemental Information
In thousands of U.S. dollars Nine Months Ended September 30,
---------------------------- -------------------------------
2006 2005
---- ----
EBITDA (1)
Attributable to River Business 15,191 9,936
Attributable to Offshore Supply Business 9,204 (154)
Attributable to Ocean Business 18,103 38,502
Attributable to Passenger Business 6,824 4,520
-------------- -------------
Total $49,322 $52,804
============== =============
----------
(1) EBITDA consists of net income (loss) prior to deductions for interest
expense and other financial gains and losses, income taxes, depreciation
and amortization of drydock expense and financial gain (loss) on
extinguishment of debt. We believe that EBITDA is intended to exclude all
items that affect results relating to financing activities. The gains and
losses associated with extinguishment of debt are a direct financing item
that affects our results, and therefore should not be included in EBITDA.
We do not intend for EBITDA to represent cash flows from operations, as
defined by GAAP (on the date of calculation), and should not be considered
as an alternative to net income as an indicator of our operating
performance or to cash flows from operations as a measure of liquidity.
This definition of EBITDA may not be comparable to similarly titled
measures disclosed by other companies. We have provided EBITDA in this
report because we believe it provides useful information to investors
to measure our performance and evaluate our ability to incur and service
indebtedness.
The following tables reconcile our EBITDA to our Net Income (loss) for the nine
months ended September 30, 2006 and 2005, on a consolidated and a per segment
basis:
Reconciliation of Net Income to EBITDA (on a per segment basis)
Nine months ended September 30, 2006
In thousands of U.S. dollars
River Offshore Supply Ocean Passenger TOTAL
----- --------------- ----- --------- -----
Net income (loss) 4,544 2,306 3,583 2,845 13,278
Financial expense (2) 4,729 5,804 3,063 1,748 15,344
Income tax 39 (306) 665 0 398
Depreciation and amortization 5,879 1,400 10,792 2,231 20,302
------- ------- -------- -------- --------
EBITDA 15,191 9,204 18,103 6,824 49,322
======= ======= ======== ======== ========
Nine months ended September 30, 2005
In thousands of U.S. dollars
River Offshore Supply Ocean Passenger TOTAL
----- --------------- ----- --------- -----
Net income (loss) (2,876) (154) 23,257 2,142 22,369
Financial expense (2) 7,358 0 5,208 1,605 14,171
Income tax 209 0 50 0 259
Depreciation and amortization 5,245 0 9,987 773 16,005
------- ------- -------- -------- --------
EBITDA 9,936 (154) 38,502 4,520 52,804
======= ======= ======== ======== ========
Notes:
(2) Financial expense was allocated on a per segment basis in proportion to
their fixed assets' net book value as of September 30, 2006 and 2005 in
each case.
Cautionary Statement Regarding Forward-Looking Statements
Matters discussed in this press release may constitute forward-looking
statements. The Private Securities Litigation Reform Act of 1995 provides safe
harbor protections for forward-looking statements in order to encourage
companies to provide prospective information about their business.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events or performance, and underlying assumptions and
other statements, which are other than statements of historical facts.
The Company desires to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 and is including this
cautionary statement in connection with this safe harbor legislation. The words
"believe," "except," "anticipate," "intends," "estimate," "forecast," "project,"
"plan," "potential," "will," "may," "should," "expect" "pending and similar
expressions identify forward-looking statements.
The forward-looking statements in this press release are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, our management's examination of historical
operating trends, data contained in our records and other data available from
third parties. Although we believe that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict and
are beyond our control, we cannot assure you that we will achieve or accomplish
these expectations, beliefs or projections.
In addition to these important factors, other important factors that, in
our view, could cause actual results to differ materially from those discussed
in the forward-looking statements include future operating or financial results;
pending or recent acquisitions, business strategy and expected capital spending
or operating expenses, including drydocking and insurance costs; general market
conditions and trends, including charter rates, vessel values, and factors
affecting vessel supply and demand; our ability to obtain additional financing;
our financial condition and liquidity, including our ability to obtain financing
in the future to fund capital expenditures, acquisitions and other general
corporate activities; our expectations about the availability of vessels to
purchase, the time that it may take to construct new vessels, or vessels' useful
lives; our dependence upon the abilities and efforts of our management team;
changes in governmental rules and regulations or actions taken by regulatory
authorities; adverse weather conditions that can affect production of the goods
we transport and navigability of the river system; the highly competitive nature
of the oceangoing transportation industry; the loss of one or more key
customers; fluctuations in foreign exchange rates and devaluations; potential
liability from future litigation; and other factors. Please see our filings with
the Securities and Exchange Commission for a more complete discussion of these
and other risks and uncertainties.
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
TABLE OF CONTENTS TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS PAGE
o Financial statements
- Condensed Consolidated Balance Sheets as of September
30, 2006 (unaudited) and December 31, 2005
- Condensed Consolidated Statements of Operations for
the nine-month periods ended September 30, 2006 and
2005 (unaudited)
- Condensed Consolidated Statements of Changes
Shareholders' Equity for the nine-month periods
ended September 30, 2006 and 2005 (unaudited)
- Condensed Consolidated Statements of Cash Flows for
the nine-month periods ended September 30, 2006 and
2005 (unaudited)
- Notes to Condensed Consolidated Financial Statements
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands of U.S. dollars, except per value and share amounts)
September 30,
2006 December 31,
(Unaudited) 2005
------------------- --------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 18,668 $ 7,914
Restricted cash 3,771 3,638
Accounts receivable, net of allowance for
doubtful accounts of $412 and $324 in 2006 and 2005, respectively 16,465 9,017
Receivables from related parties 4,302 17,944
Marine and river operating supplies 4,221 3,547
Prepaid expenses 5,678 3,239
Other receivables 8,723 4,997
------------------- --------------------
Total current assets 61,828 50,296
------------------- --------------------
NONCURRENT ASSETS
Other receivables 9,006 7,330
Receivables from related parties 1,710 1,995
Restricted cash 1,015 68
Vessels and equipment, net 304,322 182,069
Dry dock 7,938 12,743
Investment in affiliates 2,515 15,698
Intangible assets 3,945 -
Goodwill 3,800 -
Other assets 8,825 7,548
------------------- --------------------
Total noncurrent assets 343,076 227,451
------------------- --------------------
Total assets $ 404,904 $ 277,747
=================== ====================
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 18,771 $ 12,696
Payable to related parties 59,500 2,008
Current portion of long-term financial debt 17,148 8,322
Other payables 1,295 917
------------------- --------------------
Total current liabilities 96,714 23,943
------------------- --------------------
NONCURRENT LIABILITIES
Long-term debt 180,000 180,000
Financial debt, net of current portion 55,352 22,953
Other payables 1,900 -
------------------- --------------------
Total noncurrent liabilities 237,252 202,953
------------------- --------------------
Total liabilities 333,966 226,896
------------------- --------------------
MINORITY INTEREST 5,715 2,479
------------------- --------------------
MINORITY INTEREST SUBJECT TO PUT RIGHTS 4,986 4,898
------------------- --------------------
REDEEMABLE PREFERRED SHARES 3,491 -
------------------- --------------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value: 100,000,000 authorized shares,
15,500,000 shares issued and outstanding (Notes 9 and 10) 155 155
Additional paid-in capital (Note 10) 48,418 48,418
Accumulated earnings (deficit) 7,983 (5,295)
Accumulated other comprehensive income 190 196
------------------- --------------------
Total shareholders' equity 56,746 43,474
------------------- --------------------
Total liabilities, minority interests, redeemable preferred
shares and shareholders' equity $ 404,904 $ 277,747
=================== ====================
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Stated in thousands of U.S. dollars, except share and per share data)
Nine-month periods
ended September 30,
--------------------------
2006 2005
-------------------------
REVENUES
Revenues from third parties $ 125,085 $ 99,305
Revenues from related parties 2,625 1,850
--------- --------
Total revenues 127,710 101,155
--------- --------
OPERATING EXPENSES
Voyage expenses (32,728) (25,092)
Running costs (37,475) (28,588)
Amortization of dry docking (5,993) (5,244)
Depreciation of vessels and equipment (13,916) (10,761)
Management fees to related parties (511) (1,503)
Amortization of intangible assets (393) -
Administrative and commercial expenses (8,357) (5,340)
Other operating income 630 21,867
--------- --------
(98,743) (54,661)
--------- --------
Operating profit 28,967 46,494
--------- --------
OTHER INCOME (EXPENSES)
Financial expense (15,344) (14,171)
Financial income 276 514
Investment in affiliates 674 (462)
Other, net 113 47
--------- --------
Total other expenses (14,281) (14,072)
--------- --------
Income before income taxes and minority interest 14,686 32,422
Income taxes (398) (259)
Minority interest (1,010) (9,794)
--------- --------
Net income $ 13,278 $ 22,369
--------- --------
Basic net income per share (Note 2.d) $ 0.86 $ 1.44
Diluted net income per share (Note 2.d) $ 0.85 $ 1.43
Basic weighted average number of shares (Note 2.d) 15,500,000 15,500,000
Diluted weighted average number of shares (Note2.d) 15,646,384 15,646,384
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(Stated in thousands of U.S. dollars)
Common Additional Accumulated
stock paid-in Accumulated other
(Notes 9 capital earnings comprehensive
Balance and 10) (Note 10) (deficit) income Total
------- ------- --------- --------- ------ -----
December 31, 2004 $ 155 $ 48,418 $ (19,863) $ 200 $ 28,910
Comprehensive income:
- Net income - - 22,369 - 22,369
- Release of accumulated other
comprehensive income to net income - - - (1) (1)
---------- -----------
Total comprehensive income 22,368
--------- ---------- ---------- ---------- -----------
September 30, 2005 $ 155 $ 48,418 $ 2,506 $ 199 $ 51,278
--------- ---------- ---------- ---------- -----------
December 31, 2005 $ 155 $ 48,418 $ (5,295) $ 196 $ 43,474
Comprehensive income:
- Net income - - 13,278 - 13,278
- Release of accumulated other
comprehensive income to net income (6) (6)
---------- -----------
Total comprehensive income 13,272
--------- ---------- ---------- ---------- -----------
September 30, 2006 $ 155 $ 48,418 $ 7,983 $ 190 $ 56,746
--------- ---------- ---------- ---------- -----------
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in thousands of U.S. dollars)
Nine-month periods ended September 30,
---------------------------------------
2006 2005
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 13,278 $ 22,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of vessels and equipment 13,916 10,761
Amortization of dry docking 5,993 5,244
Expenditure for dry docking (1,188) (3,420)
Note issuance expenses amortization 811 663
Minority interest in equity of subsidiaries 1,010 9,794
Amortization of intangible assets 393 -
(Gain) on disposal of assets (630) (21,867)
Net (gain) loss from investment in affiliates (674) 462
Allowance for doubtful accounts 417 78
Changes in assets and liabilities net of effects from purchase of UP Offshore
(Bahamas) and Ravenscroft companies:
(Increase) decrease in assets:
Accounts receivable (7,240) (4,106)
Receivable from related parties (626) (784)
Marine and river operating supplies (674) (1,175)
Prepaid expenses (1,648) (1,275)
Other receivables (3,005) 2,821
Other (264) (3)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 3,184 2,276
Payable to related parties (770) (750)
Other 3,937 3,904
---------------------------------------
Net cash provided by operating activities 26,220 24,992
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of vessels and equipment (21,293) (42,516)
Proceeds from disposals of assets 2,630 37,880
Decrease in loans to related parties 11,391 (9,722)
Other 139 5
---------------------------------------
Net cash (used in) investing activities (7,133) (14,353)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) decrease in restricted cash (391) 23,657
Payments of long-term financial debt (6,184) (15,641)
Proceeds from long-term financial debt - 7,500
Payments of deferred costs related to the initial public offering (1,586) -
Redemption of minority interest - (13,400)
Other (172) (179)
---------------------------------------
Net cash (used in) provided by financing activities (8,333) 1,937
---------------------------------------
Net increase in cash and cash equivalents 10,754 12,576
Cash and cash equivalents at the beginning of year $ 7,914 $ 11,602
---------------------------------------
Cash and cash equivalents at the end of period $ 18,668 $ 24,178
---------------------------------------
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands of U.S. dollars, except per share
data and otherwise indicated)
(Information pertaining to the nine-month periods ended September 30, 2006
and 2005 is unaudited)
1. CORPORATE ORGANIZATION
Ultrapetrol (Bahamas) Limited ("Ultrapetrol Bahamas", "Ultrapetrol" the
"Company", "us" or "we") is a company organized and registered as a Bahamas
Corporation since December 1997.
The Company is a diversified ocean and river transportation company
involved in the carriage of dry and liquid cargoes as well as passengers.
In our Ocean Business, we are an owner and operator of oceangoing vessels
that transport petroleum products and dry cargo. In our Passenger Business,
we are an owner of cruise vessels that transport passengers primarily
cruising the Mediterranean and Black Sea. In our River Business we are an
owner and operator of river barges and push boats in the Hidrovia region of
South America, a region of navigable waters on the Parana, Paraguay and
Uruguay Rivers and part of the River Plate, which flow through Brazil,
Bolivia, Uruguay, Paraguay and Argentina. In addition, in our Offshore
Supply Business we are an owner and operator of Platform Supply Vessels
(PSV) that provide critical logistical and transportation services for
offshore petroleum exploration and production companies, primarily in the
North Sea and the coastal waters of Brazil.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States of America ("US GAAP") for interim
financial information. The consolidated balance sheet at December 31,
2005, has been derived from the audited financial statement at that
date. The unaudited condensed consolidated financial statements do not
include all of the information and footnotes required by US GAAP for
complete financial statements. All adjustments which, in the opinion
of the management of the Company, are considered necessary for a fair
presentation of the results of operations for the periods shown are of
a normal, recurring nature and have been reflected in the unaudited
condensed consolidated financial statements. When a cost that is
expensed for annual reporting purposes clearly benefits two or more
interim periods, each interim period is charged for an appropriate
portion of the annual cost by the use of deferrals. The results of
operations for the periods presented are not necessarily indicative of
the results expected for the full fiscal year or for any future
period.
The unaudited condensed consolidated financial statements include the
accounts of the Company and its subsidiaries, both majority and wholly
owned. Significant intercompany accounts and transactions have been
eliminated in this consolidation. Investments in 50% or less owned
affiliates, in which the Company exercises significant influence, are
accounted for by the equity method.
b) Identifiable intangible assets
As a result of the Ravenscroft acquisition (see Note 3), the Company
recorded identifiable intangible assets including a safety management
system, software and customer existent contracts, among others, which
are being amortized over useful lives ranging from three to eight
years.
c) Goodwill
Goodwill is accounted for under the provisions of Statement of
Financial Accounting Standards No.142, Goodwill and Other Intangible
Assets ("SFAS 142"). Goodwill is recorded when the purchase price paid
for an acquisition exceeds the estimated fair value of net identified
tangible and intangible assets acquired. In accordance with SFAS 142,
the Company will perform an annual impairment test of goodwill and
further periodic tests to the extent indicators of impairment develop
between annual impairment tests. The Company's impairment review
process compares the fair value of the reporting unit to its carrying
value, including the goodwill related to the reporting unit. To
determine the fair value of the reporting unit, the Company uses a
discounted future cash flow approach that uses estimates for revenue,
estimated costs and appropriate discount rates, among others. These
various estimates will be reviewed each time the Company tests
goodwill for impairment and many are developed as part of the
Company's routine business planning and forecasting process. The
Company believes its estimates and assumptions are reasonable;
however, variations from those estimates could produce materially
different results.
d) Net income per share:
All share and per share data herein have been adjusted to give effect
to the stock split and the distribution of the shares held in treasury
described in note 10. Accordingly, 15,500,000 common shares have been
considered as being outstanding for all of the periods presented for
purposes of determination of net income per share.
Per share data is based upon the average number of common shares of
Ultrapetrol par value $.01 per share, outstanding during the relevant
period. Basic net income per share is calculated using only the
weighted average number of issued and outstanding shares of common
stock. Diluted net income per share, as calculated under the treasury
stock method, reflects the potential dilution that would occur if
securities or other contracts to issuance common stock result in the
issuance of such stock.
The following table sets forth the computation of basic and diluted
net income per share:
2006 2005
-----------------------------
Numerator:
Net income $ 13,278 $ 22,369
=============================
Denominator:
Basic weighted average number of shares 15,500,000 15,500,000
Effect of diluted shares - Warrants issued 146,384 146,384
-----------------------------
Diluted weighted average number of shares 15,646,384 15,646,384
=============================
Basic net income per share $ 0.86 $ 1.44
=============================
Diluted net income per share $ 0.85 $ 1.43
=============================
e) New accounting pronouncements:
In June 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an
interpretation of FAS109, Accounting for Income Taxes (FIN 48), to
create a single model to address accounting for uncertainty in tax
positions. FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold a tax position is required
to meet before being recognized in the financial statements. FIN 48
also provides guidance on derecognition, measurement, classification,
interest and penalties, accounting in interim periods, disclosure and
transition. FIN 48 is effective for fiscal years beginning after
December 15, 2006. The Company does not expect that the adoption of
FIN 48 will have a significant impact on the Company's financial
position and results of operations.
3. BUSINESS ACQUISITIONS
a) Acquisition of 100% of Ravenscroft
On March 20, 2006, we purchased, for $11,500 all of the issued and
outstanding capital stock of Ravenscroft Shipping (Bahamas) S.A.
(Ravenscroft) from two of our related companies Crosstrade Maritime
Inc. and Crosstrees Maritime Inc. Ravenscroft and its affiliated
entities manage the vessels in our Ocean Business, Offshore Supply
Business and Passenger Business.
The results of the Ravenscroft acquisition are consolidated in the
unaudited condensed consolidated financial statements since the date
of acquisition.
The Company expects with this acquisition to open new business
opportunities and to eliminate the management fees paid to related
parties, while bringing the costs of ship management in-house.
The purchase price of this acquisition was paid in the form of a
non-interest bearing promissory note payable upon the earlier of (i)
the successful completion of our initial public offering or (ii)
October 31, 2006. On October 18, 2006 the promissory notes have been
repaid with the proceeds of our initial public offering described in
note 15.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed and allocation of purchase price at
the date of acquisition. This purchase price allocation is preliminary
and is subject to refinement.
Current assets $ 1,459
Buildings and equipment 4,644
Identifiable intangible assets 4,338
Goodwill 3,800
----------------
Total assets acquired 14,241
----------------
Current liabilities 1,582
Noncurrent liabilities 1,159
----------------
Total liabilities assumed 2,741
----------------
Total purchase price $ 11,500
================
Due to immateriality, the Company has not prepared pro forma
information respective to this business combination.
b) Acquisition of an additional 66.67% of UP Offshore (Bahamas) Ltd.
On March 21, 2006, we purchased for $48,000, an additional 66.67% of
the issued and outstanding capital stock of UP Offshore (Bahamas)
Ltd., from LAIF XI Ltd. (LAIF), an affiliate of Solimar Holdings Ltd,
one of our shareholders. Following the acquisition of the shares of UP
Offshore (Bahamas) Ltd. from LAIF, we hold 94.45% of the issued and
outstanding shares of UP Offshore (Bahamas) Ltd.
The results of UP Offshore (Bahamas) Ltd. acquisition are included in
the unaudited condensed consolidated financial statements since the
date of acquisition.
The purchase price was paid in the form of a non-interest bearing
promissory note payable upon the earlier of (i) the successful
completion of our initial public offering or (ii) October 31, 2006. On
October 18, 2006 the promissory note has been repaid with the proceeds
of our initial public offering described in note 15.
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed and allocation of purchase price at
the date of acquisition. This purchase price allocation is preliminary
and is subject to refinement.
Current assets $ 1,547
Vessels and equipment 79,227
Other noncurrent assets 1,517
----------------
Total assets acquired 82,291
----------------
Current liabilities 6,070
Noncurrent liabilities 25,955
----------------
Total liabilities assumed 32,025
----------------
Redeemable preferred shares issued 2,266
----------------
Total purchase price $ 48,000
================
If the transaction had been consummated on January 1, 2005, the
Company's pro forma revenues and net income for the nine-month periods
ended September 30, 2006 and 2005, would have been as shown below.
However, such pro forma information is not necessarily indicative of
what actually would have occurred had the transaction occurred on such
date.
For the nine-month periods
ended September 30,
-----------------------------
2006 2005
-----------------------------
Revenues $ 128,037 $ 101,155
Net income $ 14,080 $ 21,735
Basic net income per share $ 0.91 $ 1.40
Diluted net income per share $ 0.90 $ 1.39
c) UP River (Holdings) Ltd.
In June 2003, the Company sold to International Finance Corporation
(IFC) a 7.14% interest in UP River (Holdings) Ltd., which holds the
50% in UABL, our subsidiary in the River Business.
Also the Company agreed to pay to IFC 7.14% of the amount of the
respective Charter Party Payments pursuant to the Charter Party
Agreements between Ultrapetrol and UABL.
In full consideration for (a) the sale of the shares, and (b) the
right to receive a portion of the Charter Party Payments IFC paid to
the Company $5,000.
On May 3, 2006 we signed an agreement with the IFC, to purchase from
the IFC the 7.14% of UP River (Holdings) Ltd., which we do not own,
for the price of $6,100, plus accrued interest from May 15, 2006 to
the date of the closing of our initial public offering. On October 18,
2006 the Company closed the transaction and paid the purchase price
with the proceeds of its initial public offering described in note 15.
At September 30, 2006 and December 31, 2005, the Company presents
$4,986 and $4,898, respectively, as a "Minority interest subject to
put rights", which represents the initial proceeds received by the IFC
plus accrued interest less Charter Party Payments made to the IFC.
d) Ultracape Delaware LLC
On September 22, 2006, Ultracape (a 60% subsidiary) exercised its
option to sell 100% of its interest in Ultracape Delaware LLC to
MexPlus Puertos S.A. de C.V., a related party of our shareholder
Solimar Holdings Ltd., for a total price of $2,628. Ultrapetrol
recorded a gain of $628 from this disposition in "Other operating
income".
e) Other
In March 2006 we hired the administrative personnel and purchased the
administrative related assets of Oceanmarine for $321 (See Note 8 -
Management fee).
On September 8, 2006 we entered into a Memorandum of Agreement with
the Argos Group to form a joint venture to establish a river
transportation company on the Magdalena River in Colombia.
4. VESSELS AND EQUIPMENT, NET
The capitalized cost of the vessels and equipment, and the related
accumulated depreciation at September 30, 2006 and December 31, 2005 is as
follows:
September 30, December 31,
2006 2005
-------------- ------------
Ocean-going vessels $ 128,954 $ 126,776
River barges and pushboats 120,188 116,054
PSVs 88,677 -
Construction of PSVs in progress 27,937 -
Passenger vessels 37,995 28,105
Furniture and equipment 7,662 6,173
Building, land and operating base 8,389 6,525
-------------- ------------
Total original book value 419,802 283,633
Accumulated depreciation (115,480) (101,564)
-------------- ------------
Net book value $ 304,322 $ 182,069
============== ============
At September 30, 2006, the net book value of the assets pledged as a
guarantee of the debt was approximately $235,000.
- PSVs Construction
In June 2003, UP Offshore Apoio Maritimo Ltda. (our wholly owned
subsidiary in the Offshore Supply Business) signed shipbuilding
contracts for construction of four PSVs with EISA Estaleiro Ilha S/A
(EISA), a Brazilian corporation. During November 2005 UP Offshore
Apoio Maritimo Ltda. and EISA amended some conditions of the
shipbuilding contracts, including the purchase price and the delivery
dates.
The four PSVs are to be built by EISA at a combined cost of $69,750.
In February 2006, the first of the four PSVs, named UP Agua Marinha
was delivered. In August 2006, the second of the four PSVs, named UP
Topazio was delivered and placed into service in September 2006. The
total remaining commitment at September 30, 2006 for the two PSVs cost
is approximately $20,000, which includes the minimum contractual
obligation with the shipyard and the remaining necessary expenditure
to commission the two PSVs in service.
5. LONG-TERM DEBT AND OTHER FINANCIAL DEBT
Balances of long-term debt an other financial debt at September 30,
2006 and December 31, 2005 are as follows:
Financial institution / Nominal value Accrued
Other Due-year Current Noncurrent interest Total Average rate
--------------------------------------------------------------------------------------------------------
Ultrapetrol (Bahamas) Ltd Private Investors (Notes) 2014 $ - $ 180,000 $ 5,670 $ 185,670 9.000%
UP Offshore Panama DVB Tranche A Through 2015 1,800 21,950 14 23,764 Libor + 1.875%
UP Offshore Panama DVB Tranche B Through 2008 1,333 1,000 2 2,335 Libor + 2.250%
UP Offshore Apoio DVB Tranche A Through 2016 900 11,575 42 12,517 Libor + 2.250%
UP Offshore Apoio DVB Tranche B Through 2009 667 944 6 1,617 Libor + 2.875%
UABL Barges IFC Tranche A Through 2011 2,143 9,643 324 12,110 Libor + 3.750%
UABL Barges IFC Tranche B Through 2009 1,000 2,500 94 3,594 Libor + 3.500%
UABL Barges KFW Through 2009 2,000 5,000 187 7,187 Libor + 3.500%
UABL Paraguay IFC Through 2009 750 1,875 92 2,717 Libor + 5.000%
UABL Paraguay Citibank NA Through 2010 124 865 - 989 Libor + 2.750%
-----------------------------------------------
September 30, 2006 $ 10,717 $ 235,352 $ 6,431 $ 252,500
===============================================
December 31, 2005 $ 6,599 $ 202,953 $ 1,723 $ 211,275
===============================================
a) Loan with the DVB Bank America NV (DVB NV) of up to $30,000:
On April 27, 2005 UP Offshore (Panama) S.A. (a wholly owned subsidiary of
UP Offshore) as Holding Company entered into a $30,000 loan agreement with
DVB NV for the purpose of providing post delivery financing of two PSVs
named UP Esmeralda and UP Safira, which were delivered in May and June
2005, and repaying existing financing and shareholder loans.
This loan is divided into two tranches:
- Tranche A, amounting to $26,000, shall be repaid by (i) 40 consecutive
quarterly installments of $450 each beginning in September 2005 and
(ii) a balloon repayment of $8,000 together with the 40 installment
and accrues interest at LIBOR rate plus 1.625% per annum if the
Holding Company Guaranty has been issued or 1.875% per annum if the
Holding Company Guaranty has not been issued, and
- Tranche B, amounting to $4,000, shall be repaid by 12 consecutive
quarterly installments of $333 each beginning in September 2005 and
accrues interest at LIBOR rate plus 2% per annum if the Holding
Company Guaranty has been issued or 2.25% per annum if the Holding
Company Guaranty has not been issued.
At September 30, 2006, the Holding Company Guaranty has not been issued.
The loan is secured by a mortgage on the UP Safira and UP Esmeralda and is
jointly and severally irrevocable and unconditionally guaranteed by Packet
Maritime Inc. and Padow Shipping Inc. The loan also contains customary
covenants that limit, among other things, the Borrower's and the
Guarantors' ability to incur additional indebtedness, grant liens over
their assets, sell assets, pay dividends, repay indebtedness, merge or
consolidate, change lines of business and amend the terms of subordinated
debt. The agreement governing the facility also contains customary events
of default.
If an event of default occurs and is continuing, DVB NV may require the
entire amount of the loan be immediately repaid in full. Further, the loan
agreement requires until June 2008 that the PSVs pledged as security have
an aggregate market value of at least 85% of the value of the loan amount
and at all times thereafter an aggregate market value of at least 75% of
the value of the loan.
At September 30, 2006, the outstanding principal balance under the loan
agreement was $26,083 and the aggregate net book value of the assets
pledged was $40,708.
b) Loan with DVB Bank AG (DVB AG) of up to $15,000
On January 17, 2006 UP Offshore Apoio Maritimo Ltda. (a wholly owned
subsidiary of UP Offshore) as Borrower, Packet Maritime Inc. and Padow
Shipping Inc. as Guarantors and UP Offshore as Holding Company entered into
a $15,000 loan agreement with DVB AG for the purposes of providing post
delivery financing of one PSV named UP Agua Marinha delivered in February
2006.
This loan is divided into two tranches:
- Tranche A, amounting to $13,000, shall be repaid by (i) 120
consecutive monthly installments of $75 each beginning in March 2006
and (ii) a balloon repayment of $4,000 together with the 120
installments which accrue interest at LIBOR rate plus 2.25% per annum
for so long as the PSV is registered under Brazilian flag or 1.875%
per annum for so long as PSV is registered under an approved flag
other than Brazilian flag, and
- Tranche B, amounting to $2,000, shall be repaid by 35 consecutive
installments of $56 each beginning in March 2006 which accrues
interest at LIBOR rate plus 2.875% per annum for so long as the PSV is
registered under Brazilian flag or 1.875% per annum for so long as PSV
is registered under an approved flag other than Brazilian flag.
The loan is secured by a mortgage on the UP Agua Marinha and is jointly and
severally irrevocable and unconditionally guaranteed by Packet Maritime
Inc. and Padow Shipping Inc. The loan also contains customary covenants
that limit, among other things, the Borrower's and the Guarantors' ability
to incur additional indebtedness, grant liens over their assets, sell
assets, pay dividends, repay indebtedness, merge or consolidate, change
lines of business and amend the terms of subordinated debt. The agreement
governing the facility also contains customary events of default. If an
event of default occurs and is continuing, DVB AG may require the entire
amount of the loan be immediately repaid in full. Further, the loan
agreement requires until February 2009 that the PSV pledged as security has
an aggregate market value of at least 117.6% of the value of the loan
amount and at all times thereafter an aggregate market value of at least
133.3% of the value of the loan.
At September 30, 2006 the outstanding principal balance under the loan
agreement was $14,086 and the aggregate net book value of the assets
pledged was $23,084.
c) Loans with IFC and KfW entered into by UABL Barges and UABL Paraguay
On December 17, 2002, UABL Barges, a subsidiary in our River Business,
entered into a loan agreement with the International Finance
Corporation (IFC) in an aggregate principal amount of $20,000.
In addition, on February 27, 2003, UABL Barges entered into a loan
agreement with Kreditanstalt fur Wiederaufbau (KfW) in an aggregate
principal amount of $10,000.
The combined aggregate outstanding principal balance of the loans was
$22,286 at September 30, 2006. On October 20, 2006 the Company fully
prepaid the outstanding balance of the loans with the proceeds of its
initial public offering described in note 15.
On March 27, 2003, UABL Paraguay, a subsidiary in our River Business,
entered into a loan agreement with the IFC in an aggregate principal
amount of $10,000. In 2005, UABL Paraguay received a disbursement for
an amount totaled $3,000. At September 30, 2006 the outstanding
principal balance of the loan was $2,625 which was fully repaid on
October 20, 2006 with the proceeds of our initial public offering
described in note 15.
As a result of the early prepayment of these debts the Company
incurred in a loss of approximately $1,400, that will be recorded in
the 2006 fourth quarter.
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings, claims and contingencies
arising in the ordinary course of business. When such amounts can be
estimated and the contingency is probable, management accrues the
corresponding liability. While the ultimate outcome of lawsuits or other
proceedings against the Company cannot be predicted with certainty,
management does not believe the costs of such actions will have a material
effect on the Company's consolidated financial position or results of
operations.
Paraguayan Customs Dispute
On September 21, 2005 the local Customs Authority of Ciudad del Este,
Paraguay issued a finding that certain UABL entities owe taxes to that
authority in the amount of $2,200, together with a fine for non-payment of
the taxes in the same amount, in respect of certain operations of our River
Business for the prior three-year period. This matter was referred to the
Central Customs Authority of Paraguay. We believe that this finding is
erroneous and UABL has formally replied to the Paraguayan Customs Authority
contesting all of the allegations upon which the finding was based.
After review of the entire case the Paraguayan Central Tax Authorities who
have jurisdiction over the matter have confirmed the Company has no
liability in respect of two of the three matters at issue, while they held
a dissenting view on the third issue. Through a Resolution which was
notified to UABL on October 13, 2006 the Paraguayan Undersecretary for
Taxation has confirmed that, in his opinion, the Company is liable for a
total of approximately $539 and has applied a fine of 100% of this amount.
Simultaneously with above, the Paraguayan Central Customs Authority issued
a resolution confirming the original determination made by the Customs
Authority of Ciudad del Este, Paraguay, therefore committing the matter to
a resolution by the Court. The Company has entered a plea with the
respective court requesting a confirmation of the release of liability in
the two issues where such view was upheld by the Paraguayan Central Tax
Authorities and contending the interpretation on the third where the
Company claims to be equally non-liable.
We have been advised by UABL's counsel in the case that they believe that
there is only a remote possibility that a court would find UABL liable for
any of these taxes or fines.
Brazilian Customs Dispute
Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
Customs Tax Authorities over the alleged infringement of customs
regulations by the Alianza G-3 and Alianza Campana (collectively, the
"Alianza Campana") in Brazil during 2004. As a result, the Brazilian
Customs Tax Authorities commenced an administrative proceeding and applied
the penalty of apprehension against the Alianza Campana which required the
Alianza Campana to remain in port or within a maximum of five nautical
miles from the Brazilian maritime coast. The maximum customs penalty that
could be imposed would be confiscation of the Alianza Campana, which is
estimated by the Brazilian Customs Tax Authorities to be valued at $4,560.
The Secretary of Brazilian Federal Revenue decided to cancel the penalty of
confiscation of the Alianza Campana by means of a decision issued on August
14, 2006. However, the conditioned his decision on the compliance with the
following requirements: (1) the classification of the Alianza Campana under
the Regime Advaneiro Especial Para a Industria do Petroleo, or REPETRO
regime and, if such classification is confirmed; (2) the payment by
Ultrapetrol S.A. of a penalty in the amount of one percent (1%) of the
customs value of the Alianza Campana $46.
In order to comply with the above described requirements, our customer
Petroleo Brasileiro S.A. ("Petrobras") presented on September 15, 2006, a
formal request to obtain from Brazilian Customs Tax Authorities the
recognition of the classification of the Alianza Campana under the REPETRO
regime. We believe that the Customs Tax Authorities will recognize the
classification of the Alianza Campana under the REPETRO regime. If such
formal recognition is obtained and we subsequently pay the penalty
mentioned above, the confiscation penalty will be automatically canceled
and the administrative proceeding will be finalized with no further
consequences to us.
7. INCOME TAXES
The Company operates through its subsidiaries, which are subject to several
tax jurisdictions, as follows:
a) Bahamas
The earnings from shipping operations were derived form sources
outside the Bahamas and such earnings were not subject to Bahamanian
taxes.
b) Panama
The earnings from shipping operations were derived from sources
outside Panama and such earnings were not subject to Panamanian taxes.
c) Paraguay
Two of our Ocean Business subsidiaries, Parfina S.A. and Oceanpar S.A.
and four or our River Business subsidiaries, UABL Paraguay, Parabal
S.A., Yataity and Riverpar are subject to Paraguayan corporate income
taxes.
d) Argentina
Ultrapetrol S.A., one of our Ocean Business subsidiaries and three of
our River Business subsidiaries, UABL S.A., Argenpar S.A. and Sernova
S.A., are subject to Argentine corporate income taxes.
In Argentina, the tax on minimum presumed income ("TOMPI"),
supplements income tax since it applies a minimum tax on the potential
income from certain income generating-assets at a 1% tax rate. The
Company's tax obligation in any given year will be the higher of these
two tax amounts. However, if in any given tax year tax on minimum
presumed income exceeds income tax, such excess may be computed as
payment on account of any excess of income tax over TOMPI that may
arise in any of the ten following years.
e) Brazil
Our subsidiaries in the Offshore Supply Business, UP Offshore Apoio
Maritimo Ltda. and Agriex Importadora e Exportadora de Generos
Alimenticios Ltda. are subject to Brazilian corporate income taxes.
f) Chile
Corporacion de Navegacion Mundial S.A. is subject to Chilean corporate
income taxes.
g) The United States
Pursuant to Section 883 of the U.S. tax code and the final regulations
thereunder which became effective for calendar year taxpayers
commencing January 1, 2005, a foreign corporation which meets the
definition of a "Qualified Foreign Corporation", will be exempt from
United States of America corporate income tax on its U.S. source
shipping income which, as defined, means 50% of the income derived by
a corporation from the international operation of a ship or ships and
the performance of certain services directly related thereto that is
attributable to the transport of cargo to or from U.S. ports.
A corporation will be considered a Qualified Foreign Corporation if
(i) its country of incorporation is a "Qualified Foreign Country"
which, as defined, is a foreign country that exempts U.S. corporations
from income tax on the type(s) of shipping income (bareboat, time or
voyage income) for which exemption is being claimed (the
"Incorporation Test"), (ii) it meets the "Ultimate Owner Test", and
(iii) it files a U.S. Federal income tax return (Form 1120F) to claim
the Section 883 exemption.
A foreign corporation meets the Ultimate Owner Test if (a) more than
50% of the value of its stock is ultimately owned for more than half
the days of the tax year by "Qualified Shareholders" which, as defined
includes an individual who is a tax resident of a Qualified Foreign
Country, an individual tax resident of a Qualified Foreign Country
that is a beneficiary of a pension plan administered in or by such
country or another Qualified Foreign Country, the government (or a
political subdivision or local authority) of a Qualified Foreign
Country and certain not-for-profit organizations organized in a
Qualified Foreign Country.
For the nine-month periods ended September 30, 2006 and 2005 the
Company and its subsidiaries have not earned any U.S. source shipping
income.
Ravenscroft is subject to U.S. corporate income taxes.
8. RELATED PARTY TRANSACTIONS
At September 30, 2006 and December 31, 2005, the balances of receivable
from related parties were as follows:
September 30, December 31,
2006 2005
------------- -------------
Current:
Receivable from related parties
- UP Offshore Bahamas Ltd. and its
subsidiaries (1) - 13,726
- Maritima Sipsa S.A. 400 16
- Puertos del Sur S.A. and O.T.S. 2,760 1,612
- Other 1,142 2,590
------------- -------------
$ 4,302 $17,944
============= =============
(1) This loan accrued interest at a nominal interest rate of 9.50% per year.
The principal and the interest accrued have been repaid in full in
February, 2006.
September 30, December 31,
2006 2005
------------- -------------
Noncurrent:
Receivable from related parties
- Puertos del Sur S.A. (1) $ 1,710 $ 1,995
------------- -------------
$ 1,710 $ 1,995
============= =============
(1) This loan accrues interest at a nominal interest rate of 3% per year,
payable annually. The principal will be repaid in 8 equal annual
installments, beginning on June 30, 2006. The current portion is included
in current receivables from related parties.
At September 30, 2006 and December 31, 2005 the balance of payable to
related parties were as follows:
September 30, December 31,
2006 2005
------------- -------------
Payable to related parties
- LAIF XI Ltd. (Note 3.b) $ 48,000 $ -
- Crosstrade Maritime Inc. and
Crosstrees Maritime Inc. (Note 3.a) 11,500 -
- Ravencroft Shipping Inc - 2,008
------------- -------------
$ 59,500 $ 2,008
============= =============
For the nine-month periods ended September 30, 2006 and 2005, the revenues
derived from related parties were as follows:
For the nine-month periods
ended September 30,
-----------------------------
2006 2005
-----------------------------
Maritima Sipsa S.A. $ 2,625 $ 1,850
=============================
Sale and repurchase of vessel Princess Marina
In 2003, the Company entered into certain transactions to sell, and
repurchase in 2006, to and from Maritima Sipsa S.A., a 49% owned company,
the vessel Princess Marina. The combined effect of the sale at $15,100,
repurchase at $7,700 and a loan granted to Maritima Sipsa S.A. for $7,400
resulted in no cash flow on a consolidated basis at the time of execution.
The loan is repaid to the Company on a quarterly basis over a three-year
period ended June 2006. In June 2006, the Company and Maritima Sipsa S.A.
entered into an amended agreement to modify the delivery date of the vessel
to February 2007 or at a later date if the charter is further extended, at
a purchase price not exceeding $7,700. The transaction was recognized in
the Company's statements of operations as a lease, reflecting quarterly
payments as charter revenues for $ 2,625 and $1,850 for the nine-month
periods ended September 30, 2006 and 2005, respectively, while the vessel
remains presented in the accompanying balance sheets as an asset.
Bareboat charter paid to related parties
Since the second quarter of 2005, through our subsidiary, Corporacion de
Navegacion Mundial S.A., the Company entered into a bareboat charter with
UP Offshore (Panama) S.A., a wholly owned subsidiary of UP Offshore, for
the rental of the two PSVs named UP Safira and UP Esmeralda for a daily
lease amount for each one. Since March 21, 2006, the date of UP Offshore
additional acquisition, our unaudited condensed consolidated financial
statements included the operations of UP Offshore (Panama) S.A., a wholly
owned subsidiary of UP Offshore, on a consolidated basis. Therefore, these
transactions have been eliminated in the unaudited condensed consolidated
financial statements since that date. Prior to the additional acquisition,
the equity method was used.
For the nine-month periods ended September 30, 2006 and 2005 the charters
amounted to $2,640 and $1,575, respectively.
Management fee billed by Ravenscroft
Since the date of acquisition of Ravenscroft we included the management fee
billed by Ravenscroft to Maritima Sipsa S.A., a 49% owned company, for the
ship management services for the vessel Princess Marina. The stipulated fee
is $12.5 per month. During the nine-month period ended September 30, 2006
the fees amounted $75.
Management fee paid
For the nine-month periods ended September 30, 2006 and 2005, management
fees were expensed with the following related parties:
For the nine-month
periods
ended September 30,
--------------------------
2006 2005
--------------------------
Oceanmarine (1) $ 150 $ 430
Ravenscroft Shipping Inc. (2) 361 1,073
--------------------------
Total $ 511 $ 1,503
==========================
(1) The Company through certain of its subsidiaries has contracted with
Oceanmarine, a company under the same control group as Inversiones Los
Avellanos S.A., for certain administrative services. This agreement
stipulated a fee of $10 per month and per ocean going cargo vessel.
(2) Pursuant to the individual ship management agreement between Ravenscroft
Ship Management Ltd., a Bahamas Corporation ("Ravenscroft Bahamas") a
company of the same control group as Inversiones Los Avellanos S.A., and
the Company's relevant vessel-owning subsidiaries, Ravenscroft Bahamas had
agreed to provide certain ship management services for all of the Company's
vessels. Ravenscroft Bahamas had subcontracted the provision of these
services to Ravenscroft Shipping Inc., a Miami-based related party of the
Company. This agreement stipulated a fee of $12.5 per month per ocean going
cargo vessel.
Under these contracts, these related parties were to provide all services
necessary for such companies to operate, including but not limited to
crewing, insurance, accounting and other required services. Additionally,
commissions and agency fees were paid to those related parties.
In addition, the Company paid Ravenscroft a monthly technical ship
management fee of (euro)20 (equivalent to $25.6 at September 30, 2006) per
passenger vessel for services including technical management, crewing,
provisioning, superintendence and related accounting functions. The Company
paid Ravenscroft for each passenger vessel (euro)25 (equivalent to $32 at
September 30, 2006) administrative and operational fee per month for all
operational functions as well as administering the subcontractors,
concessions and credit card/collection system onboard.
We purchased Ravenscroft (see Note 3) and hired the administrative personnel and
purchased the administration related assets of Oceanmarine in March 2006 (see
Note 3); accordingly, after those acquisitions, we did not pay fees to these
related parties, but directly incurred in-house all costs of ship management and
administration.
Brokerage commissions
Ravenscroft from time to time acted as a broker in arranging charters for
the Company's oceangoing vessels for which Ravenscroft charged brokerage
commissions of 1.25% on the freight, hire and demurrage of each such
charter. Total commission expenses incurred by the Company under this
arrangement amounted to $319 and $718 respectively, for the nine-month
periods ended September 30, 2006 and 2005, respectively.
In addition, during the nine-month period ended September 30, 2005, the
Company paid to Ravenscroft $399 for its participation in the sale of one
of our vessels.
Since March 20, 2006, the date of Ravenscroft acquisition, our unaudited
condensed consolidated financial statements included the operations of
Ravenscroft, on a consolidated basis. Therefore, these transactions have
been eliminated in the unaudited condensed consolidated financial
statements since that date.
Administration agreement with UP Offshore (Bahamas) Ltd.
On June 25, 2003 the Company signed an administration agreement with UP
Offshore (Bahamas) Ltd.
Under this agreement Ultrapetrol agrees to assist UP Offshore by providing
management services required by the latter, including providing the
services of the Chief Executive Officer and to provide ongoing management
and commercial advisory services up to the year 2013.
The parties agreed that Ultrapetrol professional fees under this agreement
shall be the 2% of UP Offshore (Bahamas) Ltd. annual EBITDA as defined in
the agreement. For the nine-month period ended September 30, 2006 the
professional fee amounted $40. Since March 21, 2006, the date of UP
Offshore (Bahamas) Ltd. additional acquisition, our unaudited condensed
consolidated financial statements included the operations of UP Offshore
(Bahamas) Ltd., on a consolidated basis. Therefore, these transactions have
been eliminated in the unaudited condensed consolidated financial
statements since that date. Prior to acquisition, the equity method was
used. For the nine-month period ended September 30, 2005, no fees were
recognized because UP Offshore (Bahamas) Ltd. had no EBITDA.
Commercial agreement with Comintra
On June 25, 2003, UP Offshore (Bahamas) Ltd. signed a commercial agreement
with Comintra.
Under this agreement Comintra agrees to assist UP Offshore (Bahamas) Ltd.
regarding the commercial activities of UP Offshore (Bahamas) Ltd.'s fleet
of six PSVs with the Brazilian offshore oil industry. Comintra's
responsibilities, among others, include marketing the PSVs in the Brazilian
market and negotiating the time charters or other revenues contracts with
prospective charterers of the PSVs.
The parties agreed that Comintra's professional fees under this agreement
shall be 2% of the gross time charters revenues from Brazilian charters
collected by UP Offshore (Bahamas) Ltd. on a monthly basis.
Comintra's services in connection with this agreement began on June 25,
2003, and, unless earlier terminated end on June 25, 2013.
UP Offshore (Bahamas) Ltd. may terminate this agreement (a) at any time
upon 30 days notice if (i) PSVs representing more than 50% of the gross
time charter revenues of UP Offshore (Bahamas) Ltd. arising from contracts
in Brazil are sold or (ii) Ultrapetrol and LAIF cease owning, jointly or
separately, more than 50% of UP Offshore (Bahamas) Ltd.'s outstanding
voting stock; (b) Comintra breaches any material term of this agreement;
(c) in the event of gross negligence or material failure to perform the
services by Comintra, or (d) upon mutual agreement.
In the event of termination under subsections (a) or (d) above, such
termination shall not be effective unless and until UP Offshore (Bahamas)
Ltd. shall have also paid to Comintra $2,500 (less any fees already paid to
Comintra through the termination date). Other than the figures mentioned
above no further indemnification will be due by UP Offshore (Bahamas) Ltd.
to Comintra.
During 2005 UP Offshore (Bahamas) Ltd. paid in advance to Comintra fees
under this agreement in the amount of $1,500.
For the nine-month period ended September 30, 2006 the fees amounted to
$63. None of such fees has been expensed in the nine-month period ended
September 30, 2005 because UP Offshore (Bahamas) Ltd. had no revenues from
Brazilian charters.
Operations in OTS S.A.'s terminal
UABL Paraguay, a subsidiary of the Company, operates the terminal that
pertains to Obras Terminales y servicios S.A. (OTS S.A.), a related party.
For the nine-month periods ended September 30, 2006 and 2005, UABL Paraguay
paid to OTS S.A. $492 and $450, respectively, for this operation.
9. SHARE CAPITAL
On June 28, 2001, the Company issued 138,443 new shares for $5,295 which
were totally subscribed by Inversiones Los Avellanos SA, one of the
Company's original shareholders and was paid $3,297 in 2001, $1,104 in 2002
and the balance was payable in July 2006. The Company had an option to
repurchase 25,212 of its shares for a total price of $894 from Inversiones
Los Avellanos S.A. until July 2006. On March 20, 2006, we exercised our
option to repurchase from Inversiones Los Avellanos S.A., 25,212 shares of
our common stock for a total price of $894 and the $894 note issued in
connection with the option was cancelled. The shares were also cancelled.
On July 20, 2006, the Company adopted a resolution authorizing the
amendment and restatement of its Memorandum and Articles of Association
which provides among other things for the authorized capital stock of the
Company to increase to 100,000,000 shares of common stock, par value $.01
per share.
On September 21, 2006, Inversiones Los Avellanos S.A., Hazels (Bahamas)
Investments Inc. and Solimar Holdings Ltd. (collectively the "Original
Shareholders") signed a second amended and restated shareholders agreement.
Pursuant to this agreement, the Original Shareholders agree, among other
things, that, under certain conditions, neither vote their shares of common
stock in favor of any resolution unless each shall agree. Therefore
resulting neither Original Shareholders having control of the Company.
Also, the shares held directly by our Original Shareholders expressly
entitle to seven votes per share and all other holders of our common stock
entitle to one vote per share. The special voting rights of the Original
Shareholders are not transferable.
As of the date of the issuance of these unaudited condensed consolidated
financial statements and after the closing of our initial public offering:
(i) the issued and outstanding shares are 28,000,000 par value $.01 per
share, and (ii) Solimar Holdings Ltd., Inversiones Los Avellanos S.A. and
Hazels (Bahamas) Investments Inc. (a wholly owned subsidiary of Inversiones
Los Avellanos S.A.) hold 35.07%, 17.47% and 2.81%, respectively of our
common stock, and hold 56.81%, 28.30% and 4.56%, respectively of the voting
power of our shares.
10. STOCK SPLIT AND TREASURY STOCK
Stock split
For purpose of effecting a reduction in the unit price of the common shares
in order to improve their marketability, the shareholders of the Company
declared a stock split to shareholders of record as of September 25, 2006
whereby 7.34862 common shares were issued for each common share held at
that date.
A capitalization of $134 from "Additional paid-in capital" to the "Common
stock" account has been reflected retroactively for all of the periods
presented.
Therefore, the Company distributed 13,390,760 additional common shares on a
proportionate basis. After this stock split, the issued and outstanding
shares have been increased from 2,109,240 to 15,500,000.
Treasury stock
On October 12, 2000 the Company through a wholly owned subsidiary, Avemar
Holdings (Bahamas) Limited ("Avemar"), purchased 537,144 shares (3,947,266
shares after the stock split of 7.34862 per share) of the Company.
Therefore, the Company recorded $20,332 in the "Treasury stock" account in
the shareholders' equity, $20,000 of which relates to the amount paid to
Societe Internationale D'Invertissement S.A. (Bahamas) ("SII") and $332
relates to direct cost of acquisition.
On March 20, 2006 and September 21, 2006 two of our shareholders,
Inversiones Los Avellanos S.A. and Avemar (our wholly owned subsidiary),
cancelled their agreement pursuant to which Avemar had previously granted
Inversiones Los Avellanos S.A. an irrevocable proxy to vote our shares
owned by Avemar and agreed to transfer the shares owned by Avemar to the
remaining shareholders of the Company, in proportion to their existing
ownership in the Company before our initial public offering of shares.
On October 16, 2006 the 3,947,266 shares held in treasury were transferred
in proportion to their existing ownership, to Solimar Holdings Ltd.,
Inversiones Los Avellanos S.A. and Hazels Investment Inc. in the amount of
2,500,809 shares, 1,245,927 shares and 200,530 shares, respectively.
This transaction partakes of the nature of a stock split, therefore a
reclassification of $20,332 from "Treasury stock" to "Additional paid-in
capital" account has been reflected retroactively for all of the periods
presented.
11. PREFERRED SHARES OF UP OFFSHORE (BAHAMAS) LTD.
In January 2004, UP Offshore (Bahamas) Ltd. issued 3,000,000 of its Series
A 6% non-voting redeemable preferred shares for a subscription price of
$3,000.
The preferred shares shall accrue cumulative preferred dividends (whether
or not declared, whether or not UP Offshore (Bahamas) Ltd. has earnings or
profits, and whether or not there are funds legally available for the
payment of such dividends) at the annual rate of 6% of the purchase price
of such shares.
UP Offshore (Bahamas) Ltd. may, at any time, redeem all, but not less than
all, of the Series A preferred shares. If UP Offshore (Bahamas) Ltd.
exercises this right prior to December 15, 2010, the redemption price shall
be an amount equal to the amount necessary to cause the holder to realize
an internal rate of return between 14% and 18% per annum on the
subscription amount of such shares.
At September 30, 2006, the Series A preferred shares were disclosed under
the caption "Redeemable preferred shares" in the balance sheet for an
amount of $3,491.
On October 20, 2006 UP Offshore (Bahamas) Ltd. redeemed at its option all
of the outstanding Series A preferred shares for an amount of $ 4,303 with
the proceeds of our initial public offering described in note 15.
The Company incurred in a loss of approximately $950, that will be recorded
in the 2006 fourth quarter.
12. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION
The Company organizes its business and evaluates performance by its
operating segments, Ocean, River, Offshore Supply and starting in 2005 the
new Passenger Business. The accounting policies of the reportable segments
are the same as those for the condensed consolidated financial statements.
The Company does not have significant intersegment transactions. These
segments and their respective operations are as follows:
Ocean Business: In our Ocean Business, we own and operate five oceangoing
vessels and semi-integrated oceangoing tug barge units under the trade name
Ultrapetrol. Our Suezmax and Aframax vessels transport dry and liquid bulk
goods on major trade routes around the globe. Major products carried
include liquid cargo such as petroleum and petroleum derivatives, as well
as dry cargo such as iron ore, coal and other bulk cargoes.
River Business: In our River Business, we own and operate several dry and
tanker barges, and push boats. In addition, we use one barge from our ocean
fleet, the Alianza G2, as a transfer station. The dry barges transport
basically agricultural and forestry products, iron ore and other cargoes,
while the tanker barges carry petroleum products, vegetable oils and other
liquids.
We operate our push boats and barges on the navigable waters of Parana,
Paraguay and Uruguay Rivers and part of the River Plate in South America,
also known as the Hidrovia region.
Offshore Supply Business: We operate our Offshore Supply Business, using
PSVs of UP Offshore (Bahamas), two are employed in the spot market in the
North Sea and two in the Brazilian market. PSVs are designed to transport
supplies such as containerized equipment, drill casing, pipes and heavy
loads on deck, along with fuel, water, drilling fluids and bulk cement in
under deck tanks and a variety of other supplies to drilling rigs and
platforms.
Passenger Business: We own two vessels purchased in 2005. Operations were
concentrated in the Mediterranean and Black Sea.
Ultrapetrol's vessels operate on a worldwide basis and are not restricted
to specific locations. Accordingly, it is not possible to allocate the
assets of these operations to specific countries. In addition, the Company
does not manage its operating profit on a geographic basis.
For the nine-month periods
ended September 30,
---------------------------
2006 2005
------------- -------------
Revenues (1)
- South America $ 62,260 $ 45,457
- Europe 59,740 44,345
- Asia 4,413 9,976
- Other 1,297 1,377
------------- -------------
$ 127,710 $ 101,155
============= =============
(1) Classified by country of domicile of charterers.
The following schedule presents segment information about the Company's
operations for the nine-month period ended September 30, 2006:
Offshore
Ocean River Passenger Supply
Business Business Business Business Total
-------------------------------------------------------------------------------
Revenues $ 30,365 $ 59,324 $ 20,152 $ 17,869 $ 127,710
Running and voyage expenses 10,682 39,741 12,799 6,981 70,203
Depreciation and amortization 10,399 5,879 2,231 1,400 19,909
Other operating income 630 - - - 630
Segment operating profit 5,513 10,110 4,936 8,408 28,967
Segment assets 115,443 127,906 36,724 124,831 404,904
Investments in affiliates 361 2,154 - - 2,515
Income (Loss) from investment in affiliates 396 (51) - 329 674
Additions to long-lived assets $ 971 $ 6,030 $ 9,891 $ 4,401 $ 21,293
The following schedule presents segment information about the Company's
operations for the nine-month period ended September 30, 2005:
Offshore
Ocean River Passenger Supply
Business Business Business Business Total
-------------------------------------------------------------------------------
Revenues $ 41,606 $ 44,083 $ 12,772 $ 2,694 $ 101,155
Running and voyage expenses 10,487 33,070 7,561 2,562 53,680
Depreciation and amortization 9,986 5,246 773 - 16,005
Other operating income 21,867 - - - 21,867
Segment operating profit 39,272 3,181 4,041 - 46,494
Loss from investment in affiliates (200) (54) - (208) (462)
Additions to long-lived assets $ 10,430 $ 11,282 $ 20,804 $ - $ 42,516
13. STOCK COMPENSATION
We have adopted an equity incentive plan, or the Plan, dated July 20, 2006
which entitles our officers, key employees and directors to receive
restricted stock units, stock appreciation rights and options to acquire
common stock. Under the Plan, a total of 1,400,000 shares of common stock
have been reserved for issuance. The Plan is administered by our board of
directors. Under the terms of the Plan, our Board of Directors is able to
grant new options exercisable at a price per share to be determined by our
board of directors. Under the terms of the Plan, no options would be able
to be exercised until at least one year after the closing of our initial
public offering (October 18, 2006). Any shares received on exercise of the
options would not be able to be sold until one year after the date of the
stock option grant. All options will expire ten years from the date of
grant. The Plan expires ten years from the closing of our initial public
offering (October 18, 2006).
In addition, on July 20, 2006 we entered into separate consulting
agreements that become effective upon completion of our initial public
offering (October 18, 2006) with companies controlled by our chief
executive officer, executive vice president, chief financial officer and
chief accountant for work they perform for us in various different
jurisdictions. These consulting agreements obligate us to grant to these
companies an aggregate of 310,000 shares of restricted stock and 348,750
shares issuable upon the exercise of options, with an exercise price equal
to the initial public offering price, granted upon the closing of our
initial public offering price pursuant to our equity incentive plan.
The restricted shares vest annually over a three year period.
No other options have been granted yet by our Board of Directors.
14. SUPPLEMENTAL GUARANTOR INFORMATION
On November 24, 2004, the Company issued $180 million 9% First Preferred
Ship Mortagage Notes due 2014.
The 2014 Senior Notes are fully and unconditionally guaranteed on a joint
and several senior basis by the majority of the Company's subsidiaries
directly involved in our ocean business.
The Indenture provides that the 2014 Senior Notes and each of the
guarantees granted by Subsidiaries, other than the Mortgage, are governed
by, and construed in accordance with, the laws of the state of New York.
Each of the mortgaged vessels is registered under either the Panamanian
flag, or another jurisdiction with similar procedures. All of the
Subsidiary Guarantors are outside of the United States.
Supplemental condensed combining financial information for the Guarantor
Subsidiaries for the 2014 Senior Notes is presented below. This information
is prepared in accordance with the Company's accounting policies. This
supplemental financial disclosure should be read in conjunction with the
condensed consolidated financial statements.
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
AS OF SEPTEMBER 30, 2006 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary subsidiary non Consolidating consolidated
Parent guarantors guarantors adjustments amounts
-----------------------------------------------------------------------------------
Current assets
Receivables from related parties $ 143,799 $ 3,270 $ 8,777 $ (151,544) $ 4,302
Other current assets 8,120 14,734 34,672 - 57,526
-----------------------------------------------------------------------------------
Total current assets 151,919 18,004 43,449 (151,544) 61,828
-----------------------------------------------------------------------------------
Noncurrent assets
Property and equipment, net - 131,818 174,386 (1,882) 304,322
Investment in affiliates 144,756 - 2,515 (144,756) 2,515
Other noncurrent assets 7,249 11,188 17,802 - 36,239
-----------------------------------------------------------------------------------
Total noncurrent assets 152,005 143,006 194,703 (146,638) 343,076
-----------------------------------------------------------------------------------
Total assets $ 303,924 $ 161,010 $ 238,152 $ (298,182) $ 404,904
-----------------------------------------------------------------------------------
Current liabilities
Payables to related parties $ 60,597 $ 120,351 $ 30,096 $ (151,544) $ 59,500
Other financial debt 5,670 - 11,478 - 17,148
Other current liabilities 911 6,230 12,925 - 20,066
-----------------------------------------------------------------------------------
Total current liabilities 67,178 126,581 54,499 (151,544) 96,714
-----------------------------------------------------------------------------------
Noncurrent liabilities
Long-term debt 180,000 - - - 180,000
Other financial debt, net of current portion - - 55,352 - 55,352
Other noncurrent liabilities - - 1,900 - 1,900
-----------------------------------------------------------------------------------
Total noncurrent liabilities 180,000 - 57,252 - 237,252
-----------------------------------------------------------------------------------
Total liabilities 247,178 126,581 111,751 (151,544) 333,966
Minority interests - - - 5,715 5,715
Minority interests subject to put right - - - 4,986 4,986
Redeemable preferred shares - - 3,491 - 3,491
Shareholders' equity $ 56,746 $ 34,429 $ 122,910 $ (157,339) $ 56,746
-----------------------------------------------------------------------------------
Total liabilities, minority interests and
shareholders' equity $ 303,924 $ 161,010 $ 238,152 $ (298,182) $ 404,904
-----------------------------------------------------------------------------------
Combined Combined Total
subsidiary subsidiary non Consolidating consolidated
Parent guarantors guarantors adjustments amounts
-----------------------------------------------------------------------------------
Current assets
Receivables from related parties $ 150,558 $ 4,147 $ 5,580 $ (142,341) $ 17,944
Other current assets 3,207 11,200 17,945 - 32,352
-----------------------------------------------------------------------------------
Total current assets 153,765 15,347 23,525 (142,341) 50,296
-----------------------------------------------------------------------------------
Noncurrent assets
Property and equipment, net - 128,589 54,696 (1,216) 182,069
Investment in affiliates 68,150 - 15,698 (68,150) 15,698
Other noncurrent assets 6,260 14,128 9,296 - 29,684
-----------------------------------------------------------------------------------
Total noncurrent assets 74,410 142,717 79,690 (69,366) 227,451
-----------------------------------------------------------------------------------
Total assets $ 228,175 $ 158,064 $ 103,215 $ (211,707) $ 277,747
-----------------------------------------------------------------------------------
Current liabilities
Payables to related parties $ 3,056 $ 119,972 $ 21,321 $ (142,341) $ 2,008
Other financial debt 1,620 - 6,702 - 8,322
Other current liabilities 25 6,433 7,155 - 13,613
-----------------------------------------------------------------------------------
Total current liabilities 4,701 126,405 35,178 (142,341) 23,943
-----------------------------------------------------------------------------------
Noncurrent liabilities
Long-term debt 180,000 - - - 180,000
Other financial debt, net of current portion - - 22,953 - 22,953
-----------------------------------------------------------------------------------
Total noncurrent liabilities 180,000 - 22,953 - 202,953
-----------------------------------------------------------------------------------
Total liabilities 184,701 126,405 58,131 (142,341) 226,896
Minority interests - - - 2,479 2,479
Minority interests subject to put right - - - 4,898 4,898
Shareholders' equity 43,474 31,659 45,084 (76,743) 43,474
-----------------------------------------------------------------------------------
Total liabilities, minority interests and
shareholders' equity $ 228,175 $ 158,064 $ 103,215 $ (211,707) $ 277,747
-----------------------------------------------------------------------------------
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary subsidiary non Consolidating consolidated
Parent guarantors guarantors adjustments amounts
----------------------------------------------------------------------------------
Revenues $ - $ 70,501 $ 71,500 $ (14,291) $ 127,710
Operating expenses (1,395) (55,536) (56,060) 14,248 (98,743)
----------------------------------------------------------------------------------
Operating profit (loss) (1,395) 14,965 15,440 (43) 28,967
Investment in affiliates 15,276 - 674 (15,276) 674
Other income (expenses) (603) (11,530) (2,822) - (14,955)
----------------------------------------------------------------------------------
Income before income tax and minority 13,278 3,435 13,292 (15,319) 14,686
interest
Income taxes - (665) 267 - (398)
Minority interest - - - (1,010) (1,010)
----------------------------------------------------------------------------------
Net income $ 13,278 $ 2,770 $ 13,559 $ (16,329) $ 13,278
----------------------------------------------------------------------------------
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary subsidiary non Consolidating consolidated
Parent guarantors guarantors adjustments amounts
----------------------------------------------------------------------------------
Revenues $ - $ 58,253 $ 47,908 $ (5,006) $ 101,155
Operating expenses (1,117) (33,103) (23,169) 2,728 (54,661)
----------------------------------------------------------------------------------
Operating profit (loss) (1,117) 25,150 24,739 (2,278) 46,494
Investment in affiliates 25,285 - (462) (25,285) (462)
Other income (expenses) (1,799) (11,677) (134) - (13,610)
----------------------------------------------------------------------------------
Income before income tax and minority 22,369 13,473 24,143 (27,563) 32,422
interest
Income taxes - (50) (209) - (259)
Minority interest - - - (9,794) (9,794)
----------------------------------------------------------------------------------
Net income $ 22,369 $ 13,423 $ 23,934 $ (37,357) $ 22,369
----------------------------------------------------------------------------------
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2006 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary subsidiary non Consolidating consolidated
Parent guarantors guarantors adjustments amounts
-------------------------------------------------------------------------------------
Net income $ 13,278 $ 2,770 $ 13,559 $ (16,329) $ 13,278
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities (12,864) 22,015 (12,538) 16,329 12,942
-------------------------------------------------------------------------------------
Net cash provided by operating activities 414 24,785 1,021 - 26,220
-------------------------------------------------------------------------------------
Intercompany sources (3,132) - - 3,132 -
Non-subsidiary sources 11,391 (13,952) (4,572) - (7,133)
-------------------------------------------------------------------------------------
Net cash provided by (used in) investing 8,259 (13,952) (4,572) 3,132 (7,133)
activities
-------------------------------------------------------------------------------------
Intercompany sources (2,000) (11,550) 16,682 (3,132) -
Non-subsidiary sources (1,698) - (6,635) - (8,333)
-------------------------------------------------------------------------------------
Net cash provided by (used in)
financing activities (3,698) (11,550) 10,047 (3,132) (8,333)
-------------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents $ 4,975 $ (717) $ 6,496 $ - $ 10,754
-------------------------------------------------------------------------------------
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary subsidiary non Consolidating consolidated
Parent guarantors guarantors adjustments amounts
-------------------------------------------------------------------------------------
Net income $ 22,369 $ 13,422 $ 23,935 $ (37,357) $ 22,369
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities (24,769) 13,117 (23,082) 37,357 2,623
-------------------------------------------------------------------------------------
Net cash (used in) provided by operating (2,400) 26,539 853 - 24,992
activities
-------------------------------------------------------------------------------------
Intercompany sources 665 (6,835) 1,557 4,613 -
Non-subsidiary sources (9,722) (32,862) 28,231 - (14,353)
-------------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities (9,057) (39,697) 29,788 4,613 (14,353)
-------------------------------------------------------------------------------------
Intercompany sources 3,000 13,170 (11,557) (4,613) -
Non-subsidiary sources 24,090 (10) (22,143) - 1,937
Net cash provided by (used in) financing
activities 27,090 13,160 (33,700) (4,613) 1,937
-------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents $ 15,633 $ 2 $ (3,059) $ - $ 12,576
-------------------------------------------------------------------------------------
15. SUBSEQUENT EVENTS
Initial Public Offering
On October 18, 2006 the Company closed on the sale of 12,500,000 shares of
our common stock at $11.00 per share through an initial public offering.
The proceeds of $137,500 were used:
- to repay the note we issued to LAIF, a related company, in connection
with our purchase of its 66.67% interest in UP Offshore for $48,000,
- to repay the notes we issued to Crosstrade Maritime Inc. and
Crosstrees Maritime Inc., related companies, in connection with our
purchase of 100% of Ravenscroft for $11,500,
- to redeem UP Offshore's redeemable preferred shares issued to IFC for
$4,303,
- to discharge the obligations to IFC resulting from our purchase of its
interest in our River Business for $6,225,
- to repay some of our variable interest rate indebtedness owed to IFC
and other lenders for $26,763 and,
- to pay underwriters fees and additional fees and incremental expenses
amounting to approximately $12,125, with the remaining $28,000 set
aside as follows: $20,000 for funding a portion of the balance of the
construction costs of the two PSVs being built in Brazil and $8,000
for general corporate purpose.
Ultrapetrol common share is now traded on the NASDAQ Global Market under
the symbol "ULTR".
Underwriters option
On November 10, 2006, the underwriters exercised their over-allotment
option to purchase an additional 232,712 shares of common stock from the
Original Shareholders of the Company.
Acquisition of vessels
In October 2006, the Company signed Memorandum of Understanding Agreement
to purchase the product tanker, named M/T Rea, with a carrying capacity of
39,530 dwt, for a total purchase price of $19,100.
Also, in October 2006, the Company has entered into an agreement to buy a
9,219 dwt oil tanker for a purchase price of $17,000.
Tax claim in Bolivia
On November 3, 2006 the Bolivian Tax Authority (Departamento de
Inteligencia Fiscal de la Gerencia Nacional de Fiscalizacion) issued a
notice in the Bolivian press advising that UABL International S.A. (a
Panamanian subsidiary of the Company) would owe taxes to that authority in
the amount of approximately $ 2,500 (including interest) together with
certain fines that have not been determined yet. We believe that this
finding is incorrect and UABL International S.A. will formally reply to the
Bolivian Tax Authority contesting the allegations of the finding. We have
been advised by our local counsel in the case that there is only a remote
possibility that UABL International S.A. would be found liable for any of
these taxes or fines.
SIGNATURES
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.
ULTRAPETROL (BAHAMAS) LIMITED
(registrant)
Dated: November 13, 2006 By: /s/ Felipe Menendez R.
----------------------
Felipe Menendez R.
President & Chief
Executive Officer
SK 02351 0010 721227