SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
Commission File Number: 0-28732
SEABULK INTERNATIONAL, INC.
State of Incorporation: Delaware I.R.S. Employer I.D.: 65-0966399
Address and Telephone Number:
2200 Eller Drive
P.O. Box 13038
Ft. Lauderdale, Florida 33316
(954) 523-2200
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days. YES |X| NO
There were 10,212,914 shares of Common Stock, par value $0.01 per share,
outstanding at July 31, 2001.
SEABULK INTERNATIONAL, INC.
Index
Page
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)................................................. 1
Condensed Consolidated Statements of Operations for the three and six months ended
June 30, 2001 and 2000............................................................................. 1
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 2001 and 2000............................................................................. 2
Condensed Consolidated Balance Sheets at June 30, 2001 and December 31, 2000....................... 3
Notes to Condensed Consolidated Financial Statements............................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................14
Item 3. Quantitative and Qualitative Disclosure of Market Risk..................................................23
Part II. Other Information
Item 1. Legal Proceedings.......................................................................................24
Item 4. Submission of Matters to a Vote of Security Holders.....................................................24
Item 6. Exhibits and Reports on Form 8-K........................................................................24
Signature........................................................................................................24
As used in this Report, the term "Parent" means Seabulk International, Inc., and
the term "Company" means the Parent and/or one or more of its consolidated
subsidiaries.
14
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Seabulk International, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- --------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenue............................................................. $ 91,424 $ 80,211 $ 172,844 $ 158,818
Operating expenses:
Crew payroll and benefits........................................ 24,683 22,501 48,613 45,715
Charter hire..................................................... 1,429 3,193 2,920 7,427
Repairs and maintenance.......................................... 5,833 5,779 12,208 12,178
Insurance........................................................ 2,916 3,225 5,816 6,195
Fuel and consumables............................................. 8,608 11,015 17,573 22,281
Rent, utilities and other........................................ 5,096 6,528 10,304 12,955
----------- ----------- ----------- -----------
Total operating expenses....................................... 48,565 52,241 97,434 106,751
Overhead expenses:
Salaries and benefits............................................ 5,607 5,113 11,259 10,362
Office........................................................... 1,474 1,528 3,003 3,074
Professional fees................................................ 574 1,360 1,852 2,756
Other............................................................ 1,480 1,835 3,240 3,443
----------- ----------- ----------- -----------
Total overhead expenses........................................ 9,135 9,836 19,354 19,635
Depreciation, amortization and drydocking........................... 14,821 12,157 28,744 24,443
----------- ----------- ----------- -----------
Income from operations.............................................. 18,903 5,977 27,312 7,989
Other income (expense):
Interest expense................................................. (14,080) (16,436) (28,696) (30,888)
Interest income.................................................. 20 184 66 443
Minority interest in (income) losses of subsidiaries............. (27) 596 181 1,065
(Loss) gain on disposal of assets................................ (96) 643 154 643
Other............................................................ (186) 6,869 (302) 6,695
----------- ----------- ----------- -----------
Total other expense, net....................................... (14,369) (8,144) (28,597) (22,042)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes..................... 4,534 (2,167) (1,285) (14,053)
Provision for income taxes.......................................... 1,784 1,083 3,198 2,107
----------- ----------- ----------- -----------
Net income (loss).............................................. $ 2,750 $ (3,250) $ (4,483) $ (16,160)
=========== =========== =========== ===========
Earnings (loss) per common share:
Earnings (loss) per common share - basic......................... $ 0.27 $ (0.33) $ (0.44) $ (1.62)
=========== =========== =========== ===========
Earnings (loss) per common share - diluted....................... $ 0.25 $ (0.33) $ (0.44) $ (1.62)
=========== =========== =========== ===========
Weighted average common shares outstanding - basic............... 10,200 10,002 10,174 10,001
=========== =========== =========== ===========
Weighted average common shares outstanding - diluted............. 10,800 10,002 10,174 10,001
=========== =========== =========== ===========
See accompanying notes
Seabulk International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended
June 30,
-----------------------------
2001 2000
--------------- -------------
Operating activities:
Net loss.................................................................................. $ (4,483) $ (16,160)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization of vessels and equipment............................... 22,545 21,368
Provision for bad debts.............................................................. 544 143
Gain on disposal of assets........................................................... (154) (643)
Amortization of drydocking costs..................................................... 6,199 3,075
Amortization of discount on long-term debt and financing costs....................... 2,603 2,619
Minority interest in losses of subsidiaries.......................................... (181) (1,065)
Other non-cash items................................................................. 240 439
Changes in operating assets and liabilities:
Accounts receivable.............................................................. (3,388) (1,248)
Other current and long-term assets............................................... 1,725 (4,482)
Payment of reorganization items.................................................. -- (4,494)
Accounts payable and other liabilities........................................... (349) (5,915)
------------ ------------
Net cash provided by (used in) operating activities............................ 25,301 (6,363)
Investing activities:
Expenditures for drydocking............................................................... (11,950) (3,496)
Proceeds from disposals of assets......................................................... 4,700 7,598
Purchases of vessels and equipment........................................................ (4,739) (5,404)
Acquisition of minority interest.......................................................... (524) --
Redemption of restricted investments...................................................... 32 2,092
Purchase of restricted investments........................................................ (21) --
------------ ------------
Net cash (used in) provided by investing activities.................................... (12,502) 790
Financing activities:
Proceeds from revolving credit facility................................................... 27,000 14,353
Payments of revolving credit facility..................................................... (30,250) (4,000)
Payments of long-term borrowings.......................................................... (9,756) (11,059)
Payments of Title XI bonds................................................................ (4,739) (4,715)
Redemption of restricted cash............................................................. 331 6,433
Payments of financing costs............................................................... -- (596)
Payments of obligations under capital leases.............................................. (2,115) (1,839)
Proceeds from exercise of warrants........................................................ 1 --
------------ ------------
Net cash used in financing activities.................................................. (19,528) (1,423)
------------ ------------
Change in cash and cash equivalents....................................................... (6,729) (6,996)
Cash and cash equivalents at beginning of period.......................................... 14,233 19,046
------------ ------------
Cash and cash equivalents at end of period................................................ $ 7,504 $ 12,050
============ ============
Supplemental schedule of noncash investing and financing activities:
Notes payable issued for the acquisition of minority interest............................. $ 10,500 $ --
============ ============
Notes payable issued for payment of accrued interest and fees............................. $ 860 $ 514
============ ============
See accompanying notes
Seabulk International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except par value data)
June 30, December 31,
2001 2000
--------------- ------------
Assets
Current assets:
Cash and cash equivalents............................................................. $ 7,504 $ 14,233
Restricted cash....................................................................... -- 331
Accounts receivable:
Trade, net of allowance for doubtful accounts of $5,932 and $6,398 in 2001 and 2000,
respectively..................................................................... 56,370 53,526
Insurance claims and other.......................................................... 10,530 11,516
Marine operating supplies............................................................. 9,201 9,638
Prepaid expenses...................................................................... 2,893 3,055
------------ ------------
Total current assets................................................................ 86,498 92,299
Vessels and equipment, net............................................................... 615,246 639,896
Deferred costs, net...................................................................... 42,031 38,159
Restricted investments................................................................... 854 865
Other.................................................................................... 9,037 4,257
------------ ------------
Total assets........................................................................ $ 753,666 $ 775,476
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable...................................................................... $ 7,248 $ 12,906
Current maturities of long-term debt.................................................. 38,448 33,270
Current obligations under capital leases.............................................. 3,256 3,580
Accrued interest...................................................................... 1,295 1,677
Accrued liabilities and other......................................................... 37,945 33,840
------------ ------------
Total current liabilities........................................................... 88,192 85,273
Long-term debt........................................................................... 414,806 426,849
Obligations under capital leases......................................................... 32,927 34,718
Senior notes............................................................................. 80,338 79,108
Other liabilities........................................................................ 4,675 4,195
------------ ------------
Total liabilities................................................................... 620,938 630,143
Contingencies (Note 9)
Minority interest........................................................................ 695 8,819
Stockholders' equity:
Preferred stock, no par value--authorized 5,000; none issued and outstanding........... -- --
Common stock--$.01 par value, authorized 20,000 shares; 10,213 and 10,117 shares
issued and outstanding in 2001 and 2000, respectively.............................. 102 101
Additional paid-in capital............................................................ 166,963 166,963
Accumulated other comprehensive loss.................................................. (32) (33)
Accumulated deficit................................................................... (35,000) (30,517)
------------ ------------
Total stockholders' equity.......................................................... 132,033 136,514
------------ ------------
Total liabilities and stockholders' equity........................................ $ 753,666 $ 775,476
============ ============
See accompanying notes.
Seabulk International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2001
(Unaudited)
1. Organization and Basis of Presentation
On March 12, 2001, Hvide Marine Incorporated (the "Issuer") filed a
"Certificate of Ownership and Merger" with the Secretary of State of the State
of Delaware that merged the Issuer's newly organized, wholly-owned subsidiary
Seabulk International, Inc. into the Issuer. This Certificate of Ownership and
Merger provided that from and after the effective date of the merger, the name
of the merged companies would be Seabulk International, Inc. The merger and name
change became effective on March 19, 2001, and the Issuer's common stock began
trading on the Nasdaq National Market under its new symbol "SBLK" on March 21,
2001. The Company's Class A Warrants began trading on the OTC Bulletin Board
under their new symbol "SBLKW" on March 21, 2001.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and with
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. All
adjustments which, in the opinion of management, are considered necessary for a
fair presentation of the results of operations for the periods shown are of a
normal recurring nature and have been reflected in the unaudited condensed
consolidated financial statements. The results of operations for the periods
presented are not necessarily indicative of the results expected for the full
fiscal year or for any future period. The information included in these
unaudited condensed consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations contained in this report and the consolidated financial
statements and accompanying notes included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000.
The accompanying condensed consolidated financial statements include
the accounts of Seabulk International, Inc. and its majority-owned subsidiaries.
All material intercompany transactions and balances have been eliminated in the
condensed consolidated financial statements.
The Company has no material components of comprehensive income (loss)
except net income (loss).
Certain financial statement reclassifications have been made to conform
prior periods' data to the 2001 financial statement presentation.
2. Issues Affecting Liquidity
The Company's current and future capital requirements as they relate
primarily to debt service, vessel maintenance and fleet improvements total
approximately $109.8 million for fiscal 2001. The Company believes that
operating cash flow, proceeds from sales of vessels and amounts available under
its revolving credit facility will be sufficient to meet its debt service
obligations and other capital requirements through 2001. As the Company's
operating cash flow is dependent in part on factors beyond the Company's
control, however, including general economic conditions and conditions in the
markets the Company serves, there can be no assurance that actual operating cash
flow will meet expectations.
3. Vessel Acquisition
On May 1, 2001, the Company took delivery of a 152' crewboat. The
purchase price for the crewboat was $2.5 million, of which $50,000 was paid in
cash and the remaining balance of $2.45 million was paid through borrowings
under the Company's revolving credit facility.
4. Acquisition of Minority Interest
On January 15, 2001, the Company acquired the remaining 24.25% interest
in its five 46,000 dwt double-hull petroleum and chemical tankers. The purchase
price was approximately $11.0 million, of which $523,544 was paid in cash and
the remaining balance was paid by a promissory note in the principal amount of
$10.5 million. The note is guaranteed by certain securities of certain
subsidiaries of the Company. The note accrues interest at 8.5% per annum and is
paid quarterly. Principal is due in quarterly payments of $525,000 through
January 2006. This transaction resulted in the elimination of minority interest
and an increase to vessels and equipment of $3.1 million, representing the fair
value of assets acquired over the carrying value of the minority interest. The
increase in vessels and equipment is being depreciated over the remaining useful
lives of the tankers.
5. Senior Notes
The Company's senior secured notes have not received the bond rating
from the rating agencies required by the note indenture. As a result, the
interest rate on the senior notes increased from 12.5% to 13.5%. The additional
interest is payable quarterly in the form of additional senior notes, of which
notes in the principal amount of $239,982 and $240,582 were issued for the three
months ended March 31, 2001 and June 30, 2001, respectively. The Company is
currently seeking the bond ratings necessary to return the interest rate to
12.5%.
6. Income Taxes
For the three and six months ended June 30, 2001 and 2000, a gross
deferred tax benefit was computed using an estimated annual effective tax rate
of 36%. Management has recorded a valuation allowance at June 30, 2001 and 2000
to reduce the net deferred tax assets to zero. The current provision for income
taxes for the three and six month periods ended June 30, 2001 and 2000 represent
taxes withheld on foreign source revenue.
7. Earnings (Loss) Per Share
The following table sets forth the computation of basic and diluted
earnings (loss) per share for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
(in thousands, except for per share data)
Numerator:
Numerator for basic and diluted earnings (loss) per share
net income (loss) available to common shareholders........... $ 2,750 $ (3,250) $ (4,483) $ (16,160)
=========== =========== ========== ==========
Denominator:
Denominator for basic earnings per share-weighted average
shares....................................................... 10,200 10,002 10,174 10,001
Effects of dilutive securities:
Stock options.................................................. 62 -- -- --
Warrants....................................................... 538 -- -- --
----------- ----------- ---------- ----------
Dilutive potential common shares............................... 600 -- -- --
Denominator for diluted earnings per share-adjusted weighted
average shares and assumed conversions....................... 10,800 10,002 10,174 10,001
=========== =========== ========== ==========
Earnings (loss) per share - basic.............................. $ 0.27 $ (0.33) $ (0.44) $ (1.62)
=========== =========== ========== ==========
Earnings (loss) per share - diluted............................ $ 0.25 $ (0.33) $ (0.44) $ (1.62)
=========== =========== ========== ==========
8. Segment Information
The Company organizes its business principally into three segments. The
Company does not have significant intersegment transactions. These segments and
their respective operations are as follows:
Offshore Energy Support - Offshore energy support includes vessels
operating in U.S. and foreign locations used primarily to transport
materials, supplies, equipment and personnel to drilling rigs and to
support the construction, positioning and ongoing operations of oil and
gas production platforms.
Marine Transportation Services - Marine transportation services
includes oceangoing and inland-waterway vessels used to transport crude
oil, petroleum products and chemicals between ports and terminals
within the U.S.
Towing - Harbor and offshore towing services are provided by tugs to
vessels utilizing the seven ports in which the tugs operate, and to
vessels at sea.
The following schedule presents segment and geographic information
about the Company's operations (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------ -----------------------------------
2001 2000 2001 2000
----------------- ----------------- ----------------- ----------------
Revenue
Offshore energy support...................... $ 50,544 $ 37,510 $ 93,703 $ 71,729
Marine transportation services............... 32,299 34,386 62,103 70,043
Towing....................................... 8,581 8,315 17,038 17,046
---------------- ---------------- ---------------- ----------------
Total..................................... $ 91,424 $ 80,211 $ 172,844 $ 158,818
================ ================ ================ ================
Operating expenses
Offshore energy support...................... $ 23,691 $ 23,228 $ 48,299 $ 47,339
Marine transportation services............... 19,941 24,133 39,368 49,499
Towing....................................... 4,933 4,880 9,767 9,913
---------------- ---------------- ---------------- ----------------
Total..................................... $ 48,565 $ 52,241 $ 97,434 $ 106,751
================ ================ ================ ================
Depreciation, amortization and drydocking
Offshore energy support...................... $ 9,311 $ 7,711 $ 17,767 $ 15,432
Marine transportation services............... 4,435 3,250 8,794 6,495
Towing....................................... 691 767 1,420 1,533
General corporate............................ 384 429 763 983
---------------- ---------------- ---------------- ----------------
Total..................................... $ 14,821 $ 12,157 $ 28,744 $ 24,443
================ ================ ================ ================
Income from operations
Offshore energy support...................... $ 13,687 $ 2,814 $ 19,533 $ 1,011
Marine transportation services............... 6,543 5,382 11,213 10,986
Towing....................................... 1,831 1,310 3,554 2,963
General corporate............................ (3,158) (3,529) (6,988) (6,971)
---------------- ---------------- ---------------- ----------------
Total..................................... $ 18,903 $ 5,977 $ 27,312 $ 7,989
================ ================ ================ ================
Total income for reportable segments........... $ 18,903 $ 5,977 $ 27,312 $ 7,989
Interest expense............................... (14,080) (16,436) (28,696) (30,888)
Other (expense) income......................... (289) 8,292 99 8,846
---------------- ---------------- ---------------- ----------------
Income (loss) before provision for income
taxes..................................... $ 4,534 $ (2,167) $ (1,285) $ (14,053)
================ ================ ================ ================
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------ -----------------------------------
2001 2000 2001 2000
----------------- ----------------- ----------------- ----------------
Revenue
Domestic.................................... $ 64,680 $ 53,833 $ 122,350 $ 108,813
Foreign
West Africa.............................. 17,074 11,082 31,696 21,486
Middle East.............................. 6,088 11,085 11,090 21,945
Southeast Asia........................... 3,582 4,211 7,708 6,574
---------------- ---------------- ---------------- ----------------
Consolidated revenue.......................... $ 91,424 $ 80,211 $ 172,844 $ 158,818
================ ================ ================ ================
9. Contingencies
From time to time, the Company is also party to litigation arising in
the ordinary course of its business, most of which is covered by insurance,
subject to certain deductibles. Management does not believe such litigation will
have a material effect on the Company's financial position, results of
operations or cash flows.
10. Supplemental Condensed Consolidated Financial Information (Unaudited)
The senior secured notes are fully and unconditionally guaranteed on a
joint and several basis by certain of the Company's wholly-owned consolidated
subsidiaries. A substantial portion of the Company's cash flows are generated by
its subsidiaries. As a result, the funds necessary to meet the Company's
obligations are provided in substantial part by distributions or advances from
its subsidiaries. Under certain circumstances, contractual or legal
restrictions, as well as the financial and operating requirements of the
Company's subsidiaries, could limit the Company's ability to obtain cash from
its subsidiaries for the purpose of meeting its obligations, including the
payments of principal and interest on the senior notes.
The following is condensed consolidating financial information for the
Company, segregating the parent, the domestic and foreign guarantor
subsidiaries, the combined non-guarantor subsidiaries and eliminations.
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
Three Months Ended June 30, 2001
-------------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
------------- ------------- ------------- -------------- ------------- -------------
Revenue.............................. $ 7,830 $ 50,496 $ 29,812 $ 18,210 $ (14,924) $ 91,424
Operating expenses................... 6,141 30,263 13,509 9,847 (11,195) 48,565
Overhead expenses.................... 3,019 3,186 2,137 866 (73) 9,135
Depreciation, amortization
and drydocking..................... 1,720 4,728 5,570 2,803 -- 14,821
------------- ------------- ------------- ------------- ------------- -------------
(Loss) income from operations........ (3,050) 12,319 8,596 4,694 (3,656) 18,903
Other income (expense), net.......... 4,386 12,752 (6,745) (4,628) (20,134) (14,369)
------------- ------------- ------------- ------------- -------------- -------------
Income (loss) before income taxes.... 1,336 25,071 1,851 66 (23,790) 4,534
(Benefit) provision for income taxes. (1,414) -- 3,198 -- -- 1,784
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss)................... $ 2,750 $ 25,071 $ (1,347) $ 66 $ (23,790) $ 2,750
============= ============= ============= ============= ============= =============
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
Three Months Ended June 30, 2000
-------------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
------------- ------------- ------------- ------------ ------------ -------------
Revenue............................. $ 8,091 $ 38,775 $ 25,072 $ 16,674 $ (8,401) $ 80,211
Operating expenses.................. 7,017 29,109 14,914 9,953 (8,752) 52,241
Overhead expenses................... 3,532 2,376 3,559 1,333 (964) 9,836
Depreciation, amortization
and drydocking................. 676 4,066 4,830 2,585 -- 12,157
------------- ------------- ------------- ------------- ------------- -------------
(Loss) income from operations....... (3,134) 3,224 1,769 2,803 1,315 5,977
Other income (expense), net......... 967 (25,643) (5,370) (6,304) 28,206 (8,144)
------------- ------------- ------------- ------------- ------------- --------------
(Loss) income before income taxes... (2,167) (22,419) (3,601) (3,501) 29,521 (2,167)
Provision for income taxes.......... 1,083 -- -- -- -- 1,083
------------- ------------- ------------- ------------- ------------- -------------
Net (loss) income................... $ (3,250) $ (22,419) $ (3,601) $ (3,501) $ 29,521 $ (3,250)
============= ============= ============= ============= ============= =============
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
Six Months Ended June 30, 2001
-------------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
------------ ------------- ------------- ------------- ------------- -------------
Revenue............................. $ 16,106 $ 94,104 $ 53,031 $ 35,770 $ (26,167) $ 172,844
Operating expenses.................. 12,472 59,809 27,438 20,051 (22,336) 97,434
Overhead expenses................... 6,717 6,302 4,653 1,828 (146) 19,354
Depreciation, amortization
and drydocking.................. 3,334 8,966 10,812 5,632 -- 28,744
------------- ------------- ------------- ------------- ------------- -------------
(Loss) income from operations....... (6,417) 19,027 10,128 8,259 (3,685) 27,312
Other income (expense), net......... 1,934 13,055 (13,470) (9,646) (20,470) (28,597)
------------- ------------- ------------- ------------- -------------- -------------
(Loss) income before income taxes... (4,483) 32,082 (3,342) (1,387) (24,155) (1,285)
Provision for income taxes.......... -- -- 3,198 -- -- 3,198
------------- ------------- ------------- ------------- ------------- -------------
Net (loss) income................... $ (4,483) $ 32,082 $ (6,540) $ (1,387) $ (24,155) $ (4,483)
============= ============= ============= ============= ============= =============
Condensed Consolidating Statement of Cash Flows (unaudited)
(in thousands)
Six Months Ended June 30, 2001
----------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
---------- ----------- ------------ ------------ ------------- -------------
Net cash provided by (used in)
operating activities.....................$ 5,720 $ 13,780 $ 2,415 $ (4,561) $ 7,947 $ 25,301
Investing activities:
Expenditures for drydocking................ (656) (5,493) (5,801) -- -- (11,950)
Proceeds from disposals of assets.......... -- 820 3,880 -- -- 4,700
Purchases of vessels and equipment......... 37 (3,533) (1,133) (105) (5) (4,739)
Acquisition of minority interest........... 8,347 -- -- (929) (7,942) (524)
Redemption of restricted investments....... -- -- -- 32 -- 32
Purchases of restricted investments........ -- -- -- (21) -- (21)
--------- ------------ ------------ ------------- ------------ --------------
Net cash provided by (used in)
investing activities.................... 7,728 (8,206) (3,054) (1,023) (7,947) (12,502)
Financing activities:
Proceeds from revolving credit facility.... 27,000 -- -- -- -- 27,000
Payments of revolving credit facility...... (30,250) -- -- -- -- (30,250)
Payments of long-term borrowings........... (9,091) (665) -- -- -- (9,756)
Payments of Title XI bonds................. (2,409) (322) -- (2,008) -- (4,739)
Redemption of restricted cash.............. 331 -- -- -- -- 331
Payments of obligations under
capital leases........................... -- (2,115) -- -- -- (2,115)
Proceeds from exercise of warrants......... 1 -- -- -- -- 1
--------- ------------ ------------ ------------ ------------ -------------
Net cash used in financing activities..... (14,418) (3,102) -- (2,008) -- (19,528)
--------- ------------ ------------ ------------ ------------ -------------
Change in cash and cash equivalents......... (970) 2,472 (639) (7,592) -- (6,729)
Cash and cash equivalents at beginning of
period...................................... 1,402 (2,190) 6,380 8,641 -- 14,233
--------- ------------ ------------ ------------ ------------ -------------
Cash and cash equivalents at end of period..$ 432 $ 282 $ 5,741 $ 1,049 $ -- $ 7,504
========= ============ ============ ============ ============ =============
Condensed Consolidating Statement of Operations (unaudited)
(in thousands)
Six Months Ended June 30, 2000
-------------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
------------- ------------- ------------- ------------ ------------- -------------
Revenue............................... $ 19,544 $ 79,303 $ 49,481 $ 33,219 $ (22,729) $ 158,818
Operating expenses.................... 14,435 61,365 30,772 21,045 (20,866) 106,751
Overhead expenses..................... 6,763 4,729 8,079 2,465 (2,401) 19,635
Depreciation, amortization
and drydocking..................... 1,464 8,608 9,638 4,733 -- 24,443
------------- ------------- ------------- ------------- ------------- -------------
(Loss) income from operations......... (3,118) 4,601 992 4,976 538 7,989
Other (expense) income, net........... (10,935) (22,422) (14,207) (12,070) 37,592 (22,042)
------------- ------------- -------------- ------------- ------------- -------------
(Loss) income before income taxes..... (14,053) (17,821) (13,215) (7,094) 38,130 (14,053)
Provision for income taxes............ 2,107 -- -- -- -- 2,107
------------- ------------- ------------- ------------- ------------- -------------
Net (loss) income..................... $ (16,160) $ (17,821) $ (13,215) $ (7,094) $ 38,130 $ (16,160)
============= ============= ============= ============= ============= =============
Condensed Consolidating Statement of Cash Flows (unaudited)
(in thousands)
Six Months Ended June 30, 2000
---------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
----------- ------------ ------------ ------------ -------- --------------
Net cash (used in) provided by operating
activities.................................$ (18,331) $ 8,215 $ 279 $ 3,288 $ 186 $ (6,363)
Investing activities:
Expenditures for drydocking.................. (162) (1,428) (1,102) (804) -- (3,496)
Proceeds from disposal of assets............. 7,598 -- -- -- -- 7,598
Purchases of vessels and property............ 4,342 (8,276) (176) (1,108) (186) (5,404)
Redemption of restricted investments......... -- -- -- 2,092 -- 2,092
Capital contribution to affiliate............ -- 639 -- (639) -- --
---------- ------------ ------------ ------------- -------- -------------
Net cash provided by (used in) investing
activities.............................. 11,778 (9,065) (1,278) (459) (186) 790
Financing activities:
Proceeds of revolving credit facility........ 14,353 -- -- -- -- 14,353
Payments of revolving credit facility........ (4,000) -- -- -- -- (4,000)
Payments of long-term borrowings............. (10,546) (513) -- -- -- (11,059)
Payments of Title XI bonds................... (2,302) (537) -- (1,876) -- (4,715)
Redemption of restricted cash................ 6,243 190 -- -- -- 6,433
Payments of financing costs.................. (596) -- -- -- (596)
Payments of obligations under capital leases. (287) (1,552) -- -- -- (1,839)
----------- ------------ ------------ ------------ -------- -------------
Net cash provided by (used in) financing
activities.............................. 2,865 (2,412) -- (1,876) -- (1,423)
----------- ------------ ------------ ------------ -------- -------------
Change in cash and cash equivalents.......... (3,688) (3,262) (999) 953 -- (6,996)
Cash and cash equivalents at beginning of
period....................................... 4,830 2,908 7,816 3,492 -- 19,046
----------- ------------ ------------ ------------ -------- -------------
Cash and cash equivalents at end of period...$ 1,142 $ (354) $ 6,817 $ 4,445 $ -- $ 12,050
=========== ============ ============ ============ ======== =============
Condensed Consolidating Balance Sheet
(in thousands)
As of June 30, 2001
-------------------------------------------------------------------------------------------
Parent Domestic Foreign Non- Eliminations Condensed
Guarantor Guarantor Guarantor Consolidated
Subsidiaries Subsidiaries Subsidiaries Total
------------- ------------- ------------ ------------- ------------- ---------------
Assets
Current assets:
Cash and cash equivalents............ $ 432 $ 282 $ 5,741 $ 1,049 $ -- $ 7,504
Accounts receivable:
Trade, net........................ 1,105 28,092 23,286 4,586 (699) 56,370
Insurance claims and other........ 1,223 2,808 6,462 37 -- 10,530
Marine operating supplies............ 450 2,058 3,286 3,412 (5) 9,201
Prepaid expenses..................... 487 798 951 657 -- 2,893
------------- ------------- ------------- ------------- ------------- -------------
Total current assets.............. 3,697 34,038 39,726 9,741 (704) 86,498
Vessels and equipment, net............. 46,960 180,506 115,066 272,709 5 615,246
Deferred costs, net.................... 15,310 10,666 8,135 7,920 -- 42,031
Restricted investments................. -- -- -- 854 -- 854
Due from affiliates.................... (1,088) -- 110 (978) -- --
Other.................................. 520,499 351,044 6,227 36,913 (905,646) 9,037
------------- ------------- ------------- ------------- ------------- -------------
Total assets......................... $ 585,378 $ 576,254 $ 169,264 $ 329,115 $ (906,345) $ 753,666
============= ============= ============= ============= ============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable..................... $ 401 $ 1,919 $ 4,354 $ 574 $ -- $ 7,248
Current maturities of
long-term debt.................... 32,294 1,930 -- 4,224 -- 38,448
Current obligations under
capital leases.................... -- 3,256 -- -- -- 3,256
Accrued interest..................... 441 173 -- 681 -- 1,295
Accrued liabilities and other........ 7,603 6,198 20,439 4,404 (699) 37,945
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities......... 40,739 13,476 24,793 9,883 (699) 88,192
Long-term debt......................... 172,513 24,376 -- 217,917 -- 414,806
Obligations under capital leases....... -- 32,927 -- -- -- 32,927
Senior notes........................... 80,338 -- -- -- -- 80,338
Other liabilities...................... 159,723 (64,243) (121,623) 27,339 3,479 4,675
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities.................... 453,313 6,536 (96,830) 255,139 2,780 620,938
Contingencies (Note 9)
Minority interest...................... -- -- -- -- 695 695
Total stockholders' equity (deficit)... 132,065 569,718 266,094 73,976 (909,820) 132,033
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and
stockholders' equity............... $ 585,378 $ 576,254 $ 169,264 $ 329,115 $ (906,345) $ 753,666
============= ============= ============= ============= ============= =============
Condensed Consolidating Balance Sheet
(in thousands)
As of December 31, 2000
-----------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
------------- ------------- ------------- ------------- ------------- -------------
Assets
Current assets:
Cash and cash equivalents.......... $ 1,402 $ (2,190) $ 6,380 $ 8,641 $ -- $ 14,233
Restricted cash.................... 331 -- -- -- -- 331
Accounts receivable:
Trade, net...................... 1,607 24,011 24,298 4,314 (704) 53,526
Insurance claims and other...... 1,029 3,060 7,091 336 -- 11,516
Marine operating supplies.......... 393 2,466 3,503 3,276 -- 9,638
Prepaid expenses................... 568 920 1,177 390 -- 3,055
------------- ------------- ------------- ------------- ------------- -------------
Total current assets............ 5,330 28,267 42,449 16,957 (704) 92,299
Vessels and equipment, net........... 47,349 186,174 129,344 277,029 -- 639,896
Deferred costs, net.................. 17,268 7,926 4,427 8,538 -- 38,159
Restricted investments............... -- -- -- 865 -- 865
Due from affiliates.................. (143,041) 63,892 117,788 (35,159) (3,480) --
Other................................ 509,352 327,407 3,431 37,435 (873,368) 4,257
------------- ------------- ------------- ------------- ------------- -------------
Total assets....................... $ 436,258 $ 613,666 $ 297,439 $ 305,665 $ (877,552) $ 775,476
============= ============= ============= ============= ============= =============
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable................... $ 976 $ 4,847 $ 6,300 $ 783 $ -- $ 12,906
Current maturities of
long-term debt.................... 27,226 1,960 -- 4,084 -- 33,270
Current obligations under
capital leases................... -- 3,580 -- -- -- 3,580
Accrued interest................... 454 492 -- 731 -- 1,677
Accrued liabilities and other...... 7,552 4,676 17,719 4,597 (704) 33,840
------------- ------------- ------------- ------------- ------------- -------------
Total current liabilities....... 36,208 15,555 24,019 10,195 (704) 85,273
Long-term debt....................... 181,451 25,333 -- 220,065 -- 426,849
Obligations under capital leases..... -- 34,718 -- -- -- 34,718
Senior notes......................... 79,108 -- -- -- -- 79,108
Other liabilities.................... 2,944 424 785 42 -- 4,195
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities.................. 299,711 76,030 24,804 230,302 (704) 630,143
Contingencies (Note 9)
Minority interest.................... -- -- -- -- 8,819 8,819
Total stockholders' equity (deficit). 136,547 537,636 272,635 75,363 (885,667) 136,514
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities and
stockholders' equity............. $ 436,258 $ 613,666 $ 297,439 $ 305,665 $ (877,552) $ 775,476
============= ============= ============= ============= ============= =============
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations ("MD&A") should be read in conjunction with
the condensed consolidated financial statements and the related notes thereto
included elsewhere in this Report and the 2000 Form 10-K.
The MD&A contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements other than
statements of historical fact included in the MD&A are forward-looking
statements. Although the Company believes that the expectations and beliefs
reflected in such forward-looking statements are reasonable, it can give no
assurance that they will prove correct. For information regarding the risks and
uncertainties that could cause such forward-looking statements to prove
incorrect, see "Projections and Other Forward-Looking Information" in Item 1 of
the 2000 Form 10-K.
Revenue Overview
The Company derives its revenue from three main lines of business -
offshore energy support, marine transportation, and towing. Seabulk Offshore,
the Company's domestic and international offshore energy support business,
accounted for approximately 54% and 45% of Company revenue for the six months
ended June 30, 2001 and 2000, respectively. Marine transportation, under the new
name Seabulk Tankers, consists of (1) the Company's Jones Act tanker business,
in which it operates ten petroleum product and chemical product carriers in the
domestic coastwise trade, and (2) its inland tug and barge operation and
shipyard, Sun State Marine Services. Together, they accounted for approximately
36% and 44% of Company revenue for the six months ended June 30, 2001 and 2000,
respectively. Seabulk Towing, the Company's domestic harbor and offshore towing
business, accounted for approximately 10% and 11% of Company revenue for the six
months ended June 30, 2001 and 2000, respectively.
Offshore Energy Support
Revenue from the Company's offshore energy support operations is
primarily a function of the size of the Company's fleet, vessel day rates or
charter rates, and fleet utilization. Rates and utilization are primarily a
function of offshore exploration, development, and production activities, which
are in turn heavily dependent upon the price of crude oil and natural gas.
Further, in certain areas where the Company conducts offshore energy support
operations (particularly the U.S. Gulf of Mexico), contracts for the utilization
of offshore energy support vessels commonly include termination provisions with
three- to five-day notice requirements and no termination penalty. As a result,
companies engaged in offshore energy support operations (including the Company)
are particularly sensitive to changes in market demand.
The following tables set forth, by primary area of operation, average
day rates achieved by the offshore energy fleet owned or operated by the Company
and their average utilization for the periods indicated. Average day rates are
calculated by dividing total revenue by the number of days worked. Utilization
percentages are based upon the number of working days over a 365/366-day year
and the number of vessels in the fleet on the last day of the quarter.
-------------------- ---------------------------- ----------------------------
Q1 2001 Q2 2001
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/
Supply Tugs Utility Supply Tugs Utility Other
----------------------------------------------------------
Domestic(1)
Vessels(2) (3) 26 - 31 1 26 - 33 1
Bareboat-out(4) - - 2 1 - - 2 1
Laid-Up 1 - - 1 1 - - 1
Effective
Utilization(5) 75% - 87% - 90% - 87% -
Day Rate $6,946 - $2,709 - $7,397 - $2,929 -
West Africa
Vessels(2) (3) (6) 27 3 6 1 27 4 5 1
Laid-Up - - - - - - - -
Effective
Utilization(5) 83% 46% 85% - 86% 41% 77% 84%
Day Rate $6,325 $4,491 $2,754 - $6,988 $5,528 $2,774 -
Middle East
Vessels(2) (3) (7) 5 8 11 7 5 8 11 7
Laid-Up - - - - - - - -
Effective
Utilization(5) 77% 24% 66% 56% 92% 50% 59% 69%
Day Rate $3,003 $4,129 $1,421 $5,197 $2,855 $3,889 $1,434 $5,393
Southeast Asia
Vessels(2) (6) 8 1 5 1 8 1 5 1
Laid-Up - - 1 - - - 1 -
Effective
Utilization(5) 87% 37% 89% 33% 83% 46% 73% 71%
Day Rate $5,347 - $1,429 - $4,277 - $1,443 -
------------------------------------------------------------------------------
(1) Domestic consists of vessels operating in the United States, the U.S. Gulf
of Mexico, Mexico, the Caribbean and South America.
(2) Held-for-sale vessels are excluded from the vessel count.
(3) During Q1 2001, one AHTS, one supply boat, and one specialty vessel
(Other), transferred from the Middle East to West Africa. During Q2 2001,
the Company purchased a crewboat and changed the reporting area of one
vessel in the Crew/Utility category from West Africa to Domestic.
(4) Bareboat-out chartered vessels are not included in the day rate and
utilization statistics.
(5) Effective utilization excludes laid-up vessels.
(6) One vessel in the AHT/Tugs category worked in West Africa and Southeast
Asia during Q2 2001 and earned sufficient revenue to be included in the
statistics for both regions.
(7) The Middle East - Other category includes a vessel that is in a 50/50 joint
venture and not included in the day rate and utilization statistics.
-------------------------------------------------------------------------------------------------------------------
Q1 2000 Q2 2000 Q3 2000 Q4 2000
AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/
Supply Tugs Utility Other Supply Tugs Utility Other Supply Tugs Utility Other Supply Tugs Utility Other
-------------------------------------------------------------------------------------------------------------------
Domestic(1)
Vessels(2)(3) 25 - 33 2 26 - 33 2 26 - 31 2 26 - 32 2
Bareboat-out(4) - - 6 1 - - 2 1 - - 2 1 - - 2 1
Laid-Up 3 - 1 2 5 - 2 2 3 - - 2 2 - - 2
Effective
Utilization(5) 80% - 79% - 79% - 81% - 76% - 86% - 68% - 86% -
$
Day Rate $3,663 - $1,894 - $4,024 - $1,921 - 4,821 - $2,117 - $6,174 - $2,403 -
West Africa
Vessels(3) 24 4 5 1 25 4 5 1 26 4 6 1 26 4 6 1
Laid-Up 2 1 1 1 2 1 1 1 1 2 1 1 1 2 1 1
Effective
Utilization(5) 85% 57% 53% - 83% 60% 59% - 85% 81% 62% - 87% 95% 84% -
Day Rate $5,304 $4,289 $2,450 - $5,618 $5,200 $2,460 - $5,887 $5,122 $2,809 - $5,820 $5,103 $2,978 -
Middle East
Vessels(6) 24 21 29 8 21 21 29 8 18 21 24 8 12 16 19 8
Laid-Up 10 5 15 - 10 5 12 - 10 6 12 - 6 5 8 -
Effective
Utilization(5) 62% 72% 69% 69% 83% 74% 61% 70% 83% 50% 61% 55% 69% 45% 63% 55%
Day Rate $2,899 $2,809 $1,373 $6,988 $2,995 $2,960 $1,446 $6,302 $2,634 $3,345 $1,483 $5,510 $3,544 $3,841 $1,543 $5,669
Southeast Asia
Vessels 9 2 5 2 9 2 5 2 10 2 5 2 10 2 5 2
Laid-Up 3 - - 1 2 1 - - 2 1 - - 2 1 - -
Effective
Utilization(4) 49% 7% 46% 33% 90% 96% 66% 85% 85% 60% 69% 83% 68% 41% 83% 61%
Day Rate $4,031 $8,516 $1,540 $8,086 $4,358 $4,569 $1,549 $5,268 $3,765 $7,364 $1,330 $5,474 $5,380 $4,775 $1,655 $5,085
(1) Domestic consists of vessels operating in the United States, the U.S. Gulf
of Mexico, Mexico, the Caribbean and South America.
(2) One vessel was sold in Q4 2000 from the Crew/Utility category. Since the
vessel earned substantial revenue during the quarter, it was included in
the statistics.
(3) One vessel in the Crew/Utility category changed reporting area from
Domestic to West Africa after Q2 2000. The statistics reflected this move.
(4) Bareboat-out chartered vessels are not included in the day rate and
utilization statistics.
(5) Effective utilization excludes laid-up vessels.
(6) The Middle East-AHT/Tugs and Other categories include a vessel that is a
44-foot harbor tug and in a 50/50 joint venture, respectively, which are
not included in the day rate and utilization statistics.
The increase in offshore revenue is primarily due to increased day
rates in the Domestic and West Africa regions which are due to increased demand
for our services as energy prices are higher in 2001 compared to 2000. As a
result of the higher oil and natural gas prices, there has been increased
deepwater oil and gas exploration. In order to meet the increasing demand, the
Company took delivery of two 152' crewboats in December 2000 and May 2001.
Additionally, the Company reactivated certain vessels and repositioned vessels
from the Middle East and Southeast Asia regions to take advantage of the
increased demand.
The increase in revenue is partially offset by decreases in revenue
primarily from the Middle East operating region. The decrease in day rates in
the Middle East region relates to lower boat demand due to production cutbacks
by the Organization of Petroleum Exporting Countries (OPEC) and increased
competition from local operators. Average day rates for the Company's anchor
handling tug supply vessels and supply boats at July 31, 2001 for Domestic, West
Africa, the Middle East and Southeast Asia were approximately $7,600, $7,000,
$2,800, and $4,900, respectively.
Utilization increased in almost every region for the second quarter of
2001 due to increased drilling activity and greater demand for vessels. As a
result, in the second quarter of 2001, the Company returned to service certain
vessels drydocked in the first quarter of 2001. Additionally, there were no
significant scheduled drydockings in the second quarter of 2001.
The Company had 24 and 16 vessels in "held-for-sale" status as of March
31, 2001 and June 30, 2001, respectively. The majority of these vessels was in
the Middle East region and previously laid up. Subsequent to June 30, 2001, the
Company has sold one tug and one utility boat and added one crewboat to
"held-for-sale" in the Middle East region. An operating utility boat in the
Domestic region was also sold during this period.
Management continuously evaluates the profitability of the fleet and
may lay up or dispose of certain vessels if the cost to maintain and operate
them is not economically justified. As of June 30, 2001, the Company had two
vessels in lay-up which are scheduled for reactivation during 2001 at a cost of
approximately $0.8 million.
The Company expects continued growth in the offshore energy support
market, particularly in the U.S. Gulf, West Africa and Southeast Asia. Despite
the recent lull in drilling activity since the end of the second quarter in the
U.S. Gulf, we anticipate renewed demand for drilling rigs and increased drilling
activity as the winter heating season approaches and natural gas inventories are
depleted. In West Africa, the demand for vessels, and hence day rates, remains
strong as this is an oil-driven deepwater market with longer time horizons and
increasing exploration and production budgets. Day rates in Southeast Asia are
moving up in the face of a tightening supply and demand market for vessels.
Marine Transportation
Revenue from the Company's marine transportation services is derived
principally from the operations of 10 tankers carrying crude oil, petroleum
products and chemical products in the U.S. Jones Act trade, and to a lesser
extent from towboat and fuel barge operations in Green Cove Springs, Florida.
Petroleum Tankers. Demand for crude oil and petroleum product
transportation services is dependent both on the level of production and
refining and on consumer and commercial use of petroleum-based products. The
Company operated seven petroleum tankers at June 30, 2001. Four of the Company's
petroleum tankers are double-hull, state-of-the-art vessels delivered in late
1998 and the first half of 1999. A fifth double-hull tanker also has
chemical-carrying capabilities. In December 2001, three affreightment contracts
will expire, and the Company expects to enter into time charters under more
favorable rates. Higher rates have been due to increased energy consumption and
growth in transportation requirements coupled with a shrinking Jones Act fleet.
Chemical Tankers. Demand for industrial chemical transportation
services coincides with overall economic activity. The Company operated two
chemical tankers and one multipurpose vessel in the chemical trade as of June
30, 2001. The multi-purpose vessel is a double-hull, state-of-the-art vessel
delivered in the first half of 1999. The two straight chemical tankers are
double-bottom ships.
The following table sets forth the number of vessels and revenue for
the Company's chemical and product carriers:
Six Months Ended June 30,
------------------------------------
2001 2000(1)(2)
------------------- ---------------
Number of vessels owned.................. 10 11
Revenue (in thousands)................... $ 56,495 $ 65,612
--------------------------
(1) During the third quarter of 2000, the Company scrapped one tanker that was
at the end of its OPA 90-mandated useful life.
(2) Includes revenue from chartered-in vessels of $0.0 million and $6.0 million
for the six months ended June 30, 2001 and 2000, respectively.
Inland Tugs and Barges. Revenue from the Company's Sun State Marine
Services subsidiary has been derived primarily from contracts of affreightment
with Colonial Oil Industries (formerly known as Steuart Petroleum Co.) and
Florida Power & Light (FPL) that require the Company to transport fuel as
needed. On January 31, 2001, Sun State renewed the contract with Colonial for
four years with an additional seven-year renewal option. The renewal option in
2005 is contingent on Colonial's ability to renew a related contract. The
contract with FPL will not be renewed. Revenue is also derived from Sun State's
ship maintenance, repair, drydocking and construction activities. The revenue
from all of Sun State's operations totaled $5.6 and $4.4 million, respectively,
for the six months ended June 30, 2001 and 2000.
Towing
Revenue from the Company's tug operations is primarily a function of
the number of tugs available to provide services, the rates charged for their
services, and the volume of vessel traffic requiring docking and other
ship-assist services. Vessel traffic, in turn, is largely a function of the
general trade activity in the region served by the port.
The following table summarizes certain operating information for the
Company's tugs:
Six Months Ended June 30,
------------------------------
2001 2000
--------------- -------------
Number of tugs at end of period......... 31 37
Revenue (in thousands).................. $ 17,038 $ 17,046
Towing revenue remained consistent for the six months ended June 30,
2001 compared to the same period in the prior year. The Company sold a total of
five vessels in 2000, one in the second quarter and four in the third quarter;
and two vessels in the first quarter of 2001. The associated proceeds were used
to pay down debt. In addition, the Company took delivery of its fourth SDM(TM)
in the second quarter of 2000.
Overview of Operating Expenses and Capital Expenditures
The Company's operating expenses are primarily a function of fleet size
and utilization. The most significant expense categories are crew payroll and
benefits, maintenance and repairs, fuel, insurance and charter hire. For general
information concerning these categories of operating expenses as well as capital
expenditures, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations, Overview of Operating Expenses and Capital
Expenditures" in the 2000 Form 10-K.
Results of Operations
The following table sets forth certain selected financial data and
percentages of revenue for the periods indicated:
Three Months ended June 30, Six Months ended June 30,
---------------------------------------- ---------------------------------------
2001 2000 2001 2000
------------------ ------------------ ------------------ -----------------
(in millions) (in millions)
Revenue.......................... $ 91.4 100% $ 80.2 100% $ 172.8 100% $ 158.8 100%
Operating expenses............... 48.6 53 52.2 65 97.4 56 106.8 67
Overhead expenses................ 9.1 10 9.8 12 19.4 11 19.6 12
Depreciation, amortization
and drydocking expense......... 14.8 16 12.2 15 28.7 17 24.4 16
-------- -------- -------- -------- -------- -------- -------- ------
Income from operations........... $ 18.9 21% $ 6.0 8% $ 27.3 16% $ 8.0 5%
======== ======== ======== ======== ======== ======== ======== ======
Interest expense, net............ $ 14.1 15% $ 16.3 20% $ 28.6 17% $ 30.4 19%
======== ======== ======== ======== ======== ======= ======== =======
Other income (expense)........... $ (0.3) 0% $ 8.1 10% $ 0 0% $ 8.4 5%
======= ========= ======== ======= ========= ======== ======== ========
Net income (loss)................ $ 2.8 3% $ (3.3) (4)% $ (4.5) (3)% $ (16.2) (10)%
======= ========= ======= ======== ======== ======== ======= =======
Three months ended June 30, 2001 compared with the three months ended June 30,
2000
Revenue. Revenue increased 14.0% to $91.4 million for the three months
ended June 30, 2001 from $80.2 million for the three months ended June 30, 2000.
This increase is primarily due to an increase in utilization and day rates in
the Company's offshore energy support operations offset by a small decrease in
revenue in the marine transportation segment.
Offshore energy support revenue increased 34.7% to $50.5 million for
the three months ended June 30, 2001 from $37.5 million for the same period in
2000, primarily due to higher day rates and utilization resulting from the
increase in offshore exploration and production activity.
Marine transportation revenue decreased 6.1% to $32.3 million for the
three months ended June 30, 2001 from $34.4 million for the three months ended
June 30, 2000. This decrease is primarily due to the mandated retirement of one
of the Company's Jones Act tankers in the third quarter of 2000, and the
redeployment of three tankers from spot trading to time charters. Under a time
charter, the cost of fuel and port charges are borne by the charterer; however,
rates under time charters tend to be lower than spot trading.
Towing revenue increased 3.2% to $8.6 million for the three months
ended June 30, 2001 from $8.3 million for the three months ended June 30, 2000
due to increased demand for services.
Operating Expenses. Operating expenses decreased 7.0% to $48.6 million
for the three months ended June 30, 2001 from $52.2 million for the same period
in 2000, primarily due to reduced charter hire payments, fuel, and port charges.
The reduction in charter hire payments is due to the termination of a
chartered-in contract for one tanker in October 2000. The reduction in fuel and
port charges is primarily due to the change of three tankers from spot trading
to time charters. As a percentage of revenue, operating expenses decreased to
53.1% for the three months ended June 30, 2001 from 65.1% for the 2000 period.
Overhead Expenses. Overhead expenses decreased 7.1% to $9.1 million for
the three months ended June 30, 2001 from $9.8 million for the same period in
2000, primarily due to decreased professional fees and other overhead expense
offset in part by increases in salaries and benefits. The increased headcount
and related salary expense for corporate activity resulted in savings on
third-party consulting fees and services. The decrease in other overhead
expenses is primarily due to reduced expenses for travel, entertainment,
employee moving and new business promotion as a result of our elimination of
non-essential services and the consolidation of administrative functions. As a
percentage of revenue, overhead expenses decreased to 10.0% for the three months
ended June 30, 2001 compared to 12.2% for the same period in 2000.
Depreciation, Amortization and Drydocking Expense. Depreciation,
amortization and drydocking expense increased 21.9% to $14.8 million for the
three months ended June 30, 2001 from $12.2 million for the three months ended
June 30, 2000, primarily due to increased planned drydocking expenditures.
Income from Operations. Income from operations totaled $18.9 million or
20.7% of revenue for the three months ended June 30, 2001 compared to $6.0
million or 7.5% of revenue for the three months ended June 30, 2000.
Net Interest Expense. Net interest expense decreased 13.5% to $14.1
million or 15.4% of revenue for the three months ended June 30, 2001 from $16.3
million or 20.3% of revenue for the same period in 2000. The decrease is
primarily due to the combination of lower interest rates and lower outstanding
debt balances under our term loans and revolving credit facility. This decrease
is offset by interest expense on additional borrowings in 2001 for the remaining
24.25% interest in the five double-hull tankers and the purchase of two
crewboats.
Other (Expense) Income, Net. Other (expense) income, net decreased
104.0% to net other expense of $0.3 million for the three months ended June 30,
2001 from net income of $8.1 million for the same period in 2000, primarily due
to a net loss of $0.1 million on the disposal of assets held for sale compared
to a $7.0 million gain on the settlement of a disputed liability and a net gain
on asset sales of $0.6 million in 2000.
Net Income (Loss). The Company had net income of $2.8 million for the
three months ended June 30, 2001 compared to a net loss of $3.3 million for the
three months ended June 30, 2000.
Six months ended June 30, 2001 compared with the six months ended June 30, 2000
Revenue. Revenue increased 8.8% to $172.8 million for the six months
ended June 30, 2001 from $158.8 million for the six months ended June 30, 2000.
This increase is primarily due to an increase in utilization and day rates in
the Company's offshore energy support operations offset by a small decrease in
revenue from marine transportation.
Offshore energy support revenue increased 30.6% to $93.7 million for
the six months ended June 30, 2001 from $71.7 million for the same period in
2000, primarily due to higher day rates and utilization resulting from the
increase in offshore exploration and production activity.
Marine transportation revenue decreased 11.3% to $62.1 million for the
six months ended June 30, 2001 from $70.0 million for the six months ended June
30, 2000. This decrease is primarily due to the mandated retirement of one of
the Company's Jones Act tankers in the third quarter of 2000, the Company's
chartering in of one tanker in the first quarter of 2000 through October 2000,
and the redeployment of three tankers from spot trading to time charters.
Towing revenue of $17.0 million is unchanged for the six months ended
June 30, 2001 compared to the six months ended June 30, 2000.
Operating Expenses. Operating expenses decreased 8.7% to $97.4 million
for the six months ended June 30, 2001 from $106.8 million for the same period
in 2000, due mainly to lower charter hire payments, fuel, and port charges. The
reduction in charter hire payments is due to the termination of a chartered-in
contract for one tanker in October 2000. The reduction in fuel and port charges
is primarily due to the change of three tankers from spot trading to time
charters. As a percentage of revenue, operating expenses decreased to 56.4% for
the six months ended June 30, 2001 from 67.2% for the same period in 2000.
Overhead Expenses. Overhead expenses decreased 1.5% to $19.4 million
for the six months ended June 30, 2001 from $19.6 million for the same period in
2000, primarily due to decreased professional fees and other overhead expenses
offset by increases in salaries and benefits. As a percentage of revenue,
overhead expenses decreased to 11.2% for the six months ended June 30, 2001 from
12.4% for the same period in 2000.
Depreciation, Amortization and Drydocking Expense. Depreciation,
amortization and drydocking expense increased 17.6% to $28.7 million for the six
months ended June 30, 2001 from $24.4 million for the six months ended June 30,
2000, primarily due to higher drydocking expenditures.
Income from Operations. Income from operations totaled $27.3 million or
15.8% of revenue for the six months ended June 30, 2001 compared to $8.0 million
or 5.0% of revenue for the six months ended June 30, 2000.
Net Interest Expense. Net interest expense decreased 6.0% to $28.6
million or 16.6% of revenue for the six months ended June 30, 2001 from $30.4
million or 19.2% of revenue for the same period in 2000. The decrease is
primarily due to the combination of lower interest rates and lower outstanding
debt balances under our term loans and revolving credit facility. This decrease
is offset by interest expense on additional borrowings in 2001 for the remaining
24.25% interest in the five double-hull tankers and the purchase of two
crewboats.
Other (Expense) Income, Net. Other (expense) income, net decreased
100.0% to $0.0 million for the three months ended June 30, 2001 from $8.4
million for the same period in 2000, primarily due to a net loss of $0.2 million
on the disposal of assets held for sale compared to a $7.0 million gain on the
settlement of a disputed liability and a net gain on asset sales of $0.6 million
in 2000.
Net Loss. The Company had a net loss of $4.5 million for the six months
ended June 30, 2001 compared to a net loss of $16.2 million for the six months
ended June 30, 2000.
Liquidity and Capital Resources
Cash Flows. Net cash provided by operating activities totaled $25.3
million for the six months ended June 30, 2001 compared to net cash (used in)
operating activities of $(6.4) million for the same period in 2000. The
significant increase in cash provided by operating activities is primarily a
result of (1) the lower net loss to date in 2001 compared to 2000, and (2) no
reorganization costs in 2001 as all reorganization expenses were paid in fiscal
2000.
Net cash (used in) investing activities was $(12.5) million for the six
months ended June 30, 2001 compared to net cash provided by investing activities
of $0.8 million for the same period in 2000. The use of cash for investing
activities is due primarily to increased drydocking expenditures. Other uses of
cash for investing activities result from smaller proceeds from disposals of
assets held for sale and the reduction of restricted investments related to
double-hull tanker escrow funds.
Net cash used in financing activities for the six months ended June 30,
2001 was $19.5 million compared to $1.4 for the same period in 2000. The
increase in cash used in financing activities is attributable to increased
payments on our term debt due to proceeds from the sales of vessels, larger
payments on the outstanding balance of the revolving credit facility and smaller
redemption of restricted cash.
Recent Expenditures and Future Cash Requirements. With the market
upswing during the second half of 2000, the Company elected to purchase two
modern 152' crewboats for a total price of $5.0 million. Deposits totaling
$175,000 were made during October 2000. In December 2000, the first crewboat was
delivered and the remaining balance of $2.38 million was paid out of funds
available under the revolver. The second crewboat was delivered on May 1, 2001,
and the Company made a cash payment of $2.45 million out of funds available
under the revolver.
In December 2000, the Company signed an agreement to purchase the
remaining 24.25% equity interest in its five 46,000 dwt double-hull petroleum
and chemical tankers. The purchase was completed in January 2001 and was funded
by $0.5 million in cash and a promissory note in the principal amount of $10.5
million at an interest rate of 8.5%. The aggregate cost of the five carriers was
approximately $280.0 million, a substantial portion of which was financed with
the proceeds of U.S. government-guaranteed Title XI ship financing bonds. The
Company now has 100% equity ownership of all five double-hull tankers.
The Company's current and future capital needs relate primarily to debt
service, vessel maintenance and fleet improvement costs. Principal obligations
for the first six months of 2001 were $16.6 million. Cash interest obligations
were $25.4 million of $28.7 million in total interest expense, which includes
amortization of bank fees and discounts on notes. The Company's principal
payments for the remainder of 2001 are estimated at $11.6 million. Estimated
cash interest obligations for the remainder of 2001 total $23.2 million.
During the first six months of 2001, the Company incurred $14.2 million
in capital expenditures for fleet improvements and drydocking costs for 33
vessels. For the remainder of 2001, these expenditures are expected to aggregate
$18.8 million for 50 vessels.
The Company believes that operating cash flow, proceeds from sales of
vessels and amounts available under its revolving credit facility will be
sufficient to meet its debt service obligations and other capital requirements
through 2001. As the Company's operating cash flow is dependent on factors
largely beyond the Company's control, including general economic conditions and
conditions in the markets the Company serves, there can be no assurance that
actual operating cash flow will meet expectations. However, the Company expects
to generate excess cash flow in the future from operations, which we expect to
use primarily to reduce existing debt. The Company continues to evaluate
financing alternatives to support future growth and enhance shareholder value.
The terms of the term loans and revolving credit facility are contained
in a credit agreement between the Company and the financial institutions. For
general information concerning the term loans and revolving credit facility, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations, Liquidity and Capital Resources" in the 2000 Form 10-K. The credit
agreement provides for the following facilities:
Year-to-Date Outstanding Balance Interest Rate as of
Facility Payments as of June 30, 2001 Maturity July 31, 2001
-------- -------- ------------------- -------- -------------
Tranche A term loan $4.7 million $56.3 million 2004 7.06%
Tranche B term loan $0.8 million $25.1 million 2005 7.56%
Tranche C term loan $2.4 million $79.6 million 2006 8.06%
Revolving credit facility $3.3 million(1) $11.0 million 2004 7.06%
----------------------
(1) Represents net payments
At July 31, 2001, $4.5 million was outstanding under the revolving
credit facility. We have $13.0 million of remaining credit on the revolver at
July 31, 2001. In addition to the revolver balance, there are $1.8 million in
outstanding letters of credit as of July 31, 2001.
The senior secured notes did not receive by April 15, 2000 the minimum
credit rating from the rating agencies required under the note indenture. As a
result, the interest rate on the notes increased from 12.5% to 13.5% effective
December 15, 1999. The indenture requires that such additional interest be paid
in the form of additional notes, which notes in the aggregate principal amount
of $1.5 million have been paid in quarterly amounts between June 30, 2000 and
June 30, 2001. The Company is currently seeking the required ratings that would
return the interest rate to 12.5%.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
Information about the Company's exposure to market risk was disclosed
in its 2000 Annual Report on Form 10-K, which was filed with the Securities and
Exchange Commission on March 30, 2001. There have been no material quantitative
or qualitative changes in market risk exposures since the date of that filing.
25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning certain legal proceedings see Note 9 of the
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of shareholders on May 17, 2001. At
the meeting, the shareholders elected the following individuals to three-year
terms as Class II members of the Board of Directors: John F. McGovern and Thomas
P. Moore, Jr.
The results of voting on the election of directors and the appointment
of Ernst & Young LLP as independent certified public accountants for the year
2001 are as follows:
Election of Directors:
Authority
Nominee Votes For Withheld
John F. McGovern 8,946,402 18,684
Thomas P. Moore, Jr. 8,946,502 18,584
To ratify the appointment of Ernst & Young LLP as the Company's
independent certified public accountants for the year ending December 31, 2001:
Votes For Votes Against Votes Abstaining
8,946,158 18,528 400
Item 6. Exhibits and Reports on Form 8-K
None.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEABULK INTERNATIONAL, INC.
/s/ J. STEPHEN NOUSS
J. Stephen Nouss
Senior Vice President and Chief Financial Officer
Date: August 13, 2001