SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 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 10,400,511 shares of Common Stock, par value $0.01 per share,
outstanding at October 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 nine months ended
September 30, 2001 and 2000........................................................................1
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2001 and 2000........................................................................2
Condensed Consolidated Balance Sheets at September 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..................................................25
Part II. Other Information
Item 1. Legal Proceedings.......................................................................................26
Item 6. Exhibits and Reports on Form 8-K........................................................................26
Signature........................................................................................................26
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.
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 Nine Months Ended
September 30, September 30,
-------------------------- -------------------------
2001 2000 2001 2000
------------ ------------ ------------ -----------
Revenue............................................................. $ 89,720 $ 81,623 $ 262,564 $ 240,441
Operating expenses:
Crew payroll and benefits........................................ 24,004 22,315 72,617 68,030
Charter hire..................................................... 1,803 3,520 4,723 10,947
Repairs and maintenance.......................................... 6,052 6,113 18,260 18,291
Insurance........................................................ 2,970 3,088 8,786 9,283
Fuel and consumables............................................. 7,760 9,269 25,333 31,550
Rent, utilities and other........................................ 4,810 6,630 15,114 19,585
----------- ----------- ----------- -----------
Total operating expenses....................................... 47,399 50,935 144,833 157,686
Overhead expenses:
Salaries and benefits............................................ 5,466 4,959 16,725 15,321
Office........................................................... 1,425 1,561 4,428 4,635
Professional fees................................................ 626 1,394 2,478 4,150
Other............................................................ 1,521 1,310 4,761 4,753
----------- ----------- ----------- -----------
Total overhead expenses........................................ 9,038 9,224 28,392 28,859
Depreciation, amortization and drydocking........................... 14,718 12,157 43,462 36,600
----------- ----------- ----------- -----------
Income from operations.............................................. 18,565 9,307 45,877 17,296
Other income (expense):
Interest expense................................................. (13,783) (15,904) (42,479) (46,792)
Interest income.................................................. 50 103 116 546
Minority interest in (income) losses of subsidiaries............. (90) 428 91 1,493
(Loss) gain on disposal of assets................................ (148) 4,185 6 4,828
Other............................................................ 29 (179) (273) 6,516
----------- ----------- ----------- -----------
Total other expense, net....................................... (13,942) (11,367) (42,539) (33,409)
----------- ----------- ----------- -----------
Income (loss) before provision for income taxes..................... 4,623 (2,060) 3,338 (16,113)
Provision for income taxes.......................................... 1,716 1,082 4,914 3,189
----------- ----------- ----------- -----------
Net income (loss).............................................. $ 2,907 $ (3,142) $ (1,576) $ (19,302)
=========== =========== =========== ===========
Earnings (loss) per common share:
Earnings (loss) per common share - basic......................... $ 0.28 $ (0.31) $ (0.15) $ (1.93)
=========== =========== =========== ===========
Earnings (loss) per common share - diluted....................... $ 0.27 $ (0.31) $ (0.15) $ (1.93)
=========== =========== =========== ===========
Weighted average common shares outstanding - basic............... 10,341 10,039 10,231 10,014
=========== =========== =========== ===========
Weighted average common shares outstanding - diluted............. 10,692 10,039 10,231 10,014
=========== =========== =========== ===========
See accompanying notes
Seabulk International, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Nine Months Ended
September 30,
-----------------------------
2001 2000
-------------- -------------
Operating activities:
Net loss.................................................................................. $ (1,576) $ (19,302)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of vessels and equipment............................... 33,783 31,858
Provision for bad debts.............................................................. 689 195
Gain on disposal of assets........................................................... (6) (4,828)
Amortization of drydocking costs..................................................... 9,679 4,742
Amortization of discount on long-term debt and financing costs....................... 3,979 4,235
Minority interest in losses of subsidiaries.......................................... (91) (1,493)
Other non-cash items................................................................. 103 885
Changes in operating assets and liabilities:
Accounts receivable.............................................................. (4,299) (2,118)
Other current and long-term assets............................................... 1,174 882
Payment of reorganization items.................................................. -- (4,494)
Accounts payable and other liabilities........................................... 12,740 4,002
------------ ------------
Net cash provided by operating activities...................................... 56,175 14,564
Investing activities:
Expenditures for drydocking............................................................... (17,758) (7,476)
Proceeds from disposals of assets......................................................... 6,095 22,249
Purchases of vessels and equipment........................................................ (6,297) (9,678)
Acquisition of minority interest.......................................................... (524) --
Redemption of restricted investments...................................................... 39 2,888
Purchase of restricted investments........................................................ (29) --
------------ ------------
Net cash (used in) provided by investing activities.................................... (18,474) 7,983
Financing activities:
Proceeds from revolving credit facility................................................... 33,000 23,203
Payments of revolving credit facility..................................................... (38,250) (17,003)
Payments of long-term borrowings.......................................................... (13,638) (27,924)
Payments of Title XI bonds................................................................ (5,188) (5,874)
Redemption of restricted cash............................................................. 331 9,402
Payments of financing costs............................................................... -- (596)
Payments of obligations under capital leases.............................................. (2,730) (2,628)
Proceeds from exercise of warrants........................................................ 3 1
------------ ------------
Net cash used in financing activities.................................................. (26,472) (21,419)
------------ ------------
Change in cash and cash equivalents....................................................... 11,229 1,128
Cash and cash equivalents at beginning of period.......................................... 14,233 19,046
------------ ------------
Cash and cash equivalents at end of period................................................ $ 25,462 $ 20,174
============ ============
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............................. $ 1,303 $ 922
============ ============
See accompanying notes
Seabulk International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except par value data)
September 30, December 31,
2001 2000
--------------- -------------
Assets
Current assets:
Cash and cash equivalents.............................................................. $ 25,462 $ 14,233
Restricted cash........................................................................ -- 331
Accounts receivable:
Trade, net of allowance for doubtful accounts of $6,014 and $6,398 in 2001 and
2000, respectively................................................................. 57,137 53,526
Insurance claims and other........................................................... 11,571 11,516
Marine operating supplies.............................................................. 9,219 9,638
Prepaid expenses....................................................................... 2,351 3,055
------------ ------------
Total current assets................................................................. 105,740 92,299
Vessels and equipment, net................................................................ 605,360 639,896
Deferred costs, net....................................................................... 43,235 38,159
Restricted investments.................................................................... 855 865
Other..................................................................................... 8,010 4,257
------------ ------------
Total assets......................................................................... $ 763,200 $ 775,476
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable....................................................................... $ 9,355 $ 12,906
Current maturities of long-term debt................................................... 37,620 33,270
Current obligations under capital leases............................................... 3,078 3,580
Accrued interest....................................................................... 8,807 1,677
Accrued liabilities and other.......................................................... 41,802 33,840
------------ ------------
Total current liabilities............................................................ 100,662 85,273
Long-term debt............................................................................ 409,504 426,849
Obligations under capital leases.......................................................... 32,490 34,718
Senior notes.............................................................................. 80,977 79,108
Other liabilities......................................................................... 3,845 4,195
------------ ------------
Total liabilities.................................................................... 627,478 630,143
Contingencies (Note 7)
Minority interest......................................................................... 786 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; 10,401 and 10,117 shares
issued and outstanding in 2001 and 2000, respectively............................... 104 101
Additional paid-in capital............................................................. 166,963 166,963
Accumulated other comprehensive loss................................................... (38) (33)
Accumulated deficit.................................................................... (32,093) (30,517)
------------ ------------
Total stockholders' equity........................................................... 134,936 136,514
------------ ------------
Total liabilities and stockholders' equity......................................... $ 763,200 $ 775,476
============ ============
See accompanying notes.
Seabulk International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
September 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 $108.0 million for fiscal 2001. The Company believes that
operating cash flow, proceeds from vessel sales 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. 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.
4. Income Taxes
For the three and nine months ended September 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 September 30, 2001
and 2000 to reduce the net deferred tax asset to zero. The current provision for
income taxes for the three- and nine-month periods ended September 30, 2001 and
2000 represent taxes withheld on foreign source revenue.
5. 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 Nine Months Ended
September 30, September 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............ $ 2,907 $ (3,142) $ (1,576) $ (19,302)
=========== =========== ========== ==========
Denominator:
Denominator for basic earnings per share-weighted average
shares........................................................ 10,341 10,039 10,231 10,014
Effects of dilutive securities:
Stock options................................................... -- -- -- --
Warrants........................................................ 351 -- -- --
---------- ---------- ---------- ----------
Dilutive potential common shares................................ 351 -- -- --
----------- ---------- ---------- ----------
Denominator for diluted earnings per share-adjusted weighted
average shares and assumed conversions........................ 10,692 10,039 10,231 10,014
========== ========== ========== ==========
Earnings (loss) per share - basic............................... $ 0.28 $ (0.31) $ (0.15) $ (1.93)
========== ========== ========== ==========
Earnings (loss) per share - diluted............................. $ 0.27 $ (0.31) $ (0.15) $ (1.93)
========== ========== ========== ==========
6. 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 schedules present segment and geographic information
about the Company's operations (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ -----------------------------------
2001 2000 2001 2000
----------------- ----------------- ----------------- ----------------
Revenue
Offshore energy support............................ $ 51,081 $ 39,067 $ 144,784 $ 110,796
Marine transportation services..................... 30,650 34,591 92,753 104,634
Towing............................................. 7,989 7,965 25,027 25,011
---------------- ---------------- ---------------- ----------------
Total........................................... $ 89,720 $ 81,623 $ 262,564 $ 240,441
================ ================ ================ ================
Operating expenses
Offshore energy support............................ $ 24,598 $ 23,412 $ 72,897 $ 70,751
Marine transportation services..................... 17,568 22,797 56,936 72,296
Towing............................................. 5,233 4,726 15,000 14,639
---------------- ---------------- ---------------- ----------------
Total........................................... $ 47,399 $ 50,935 $ 144,833 $ 157,686
================ ================ ================ ================
Depreciation, amortization and drydocking
Offshore energy support............................ $ 9,575 $ 7,683 $ 27,342 $ 23,115
Marine transportation services..................... 4,054 3,718 12,848 10,213
Towing............................................. 706 647 2,126 2,180
General corporate.................................. 383 109 1,146 1,092
---------------- ---------------- ---------------- ----------------
Total........................................... $ 14,718 $ 12,157 $ 43,462 $ 36,600
================ ================ ================ ================
Income from operations
Offshore energy support............................ $ 13,047 $ 4,577 $ 32,580 $ 5,588
Marine transportation services..................... 7,598 6,226 18,811 17,212
Towing............................................. 1,005 1,092 4,559 4,055
General corporate.................................. (3,085) (2,588) (10,073) (9,559)
---------------- ---------------- ---------------- ----------------
Total........................................... $ 18,565 $ 9,307 $ 45,877 $ 17,296
================ ================ ================ ================
Total income from operations for reportable
segments........................................... $ 18,565 $ 9,307 $ 45,877 $ 17,296
Interest expense..................................... (13,783) (15,904) (42,479) (46,792)
Other (expense) income............................... (159) 4,537 (60) 13,383
---------------- ---------------- ---------------- ----------------
Income (loss) before provision for income taxes.... $ 4,623 $ (2,060) $ 3,338 $ (16,113)
================ ================ ================ ================
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ -----------------------------------
2001 2000 2001 2000
----------------- ----------------- ----------------- ----------------
Revenue
Domestic........................................... $ 61,580 $ 55,724 $ 183,930 $ 164,528
Foreign:
West Africa..................................... 18,315 13,151 50,011 34,637
Middle East..................................... 5,392 8,455 16,482 30,409
Southeast Asia.................................. 4,433 4,293 12,141 10,867
---------------- ---------------- ---------------- ----------------
Consolidated revenue................................. $ 89,720 $ 81,623 $ 262,564 $ 240,441
================ ================ ================ ================
7. Contingencies
From time to time, the Company is 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.
8. Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting for
Asset Retirement Obligations. The Statement requires entities to record the fair
value of a liability for an asset retirement obligation and to capitalize this
cost by increasing the carrying amount of the related long-lived asset in the
period in which it is incurred. The Standard is effective for fiscal years
beginning after June 15, 2002. The Company does not expect that the adoption of
this standard will have a material effect on the Company's financial statements.
In October 2001, the Financial Accounting Standards Board issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
effective for fiscal years beginning after December 15, 2001. This Statement
establishes one accounting model to be used for long-lived assets to be disposed
of by sale and broadens the presentation of discontinued operations to include
more disposal transactions. SFAS No. 144 supercedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
and the accounting and reporting provisions of Accounting Principles Board
Opinion No. 30. The Company does not expect that the adoption of this standard
will have a material effect on the Company's financial statements.
9. Supplemental Condensed Consolidated Financial Information
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
(in thousands)
Three Months Ended September 30, 2001
-----------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
---------- ----------- ------------ ------------- ------------ ------------
Revenue...................................... $ 7,978 $ 46,658 $ 31,591 $ 19,039 $ (15,546) $ 89,720
Operating expenses........................... 5,735 29,117 14,490 9,544 (11,487) 47,399
Overhead expenses............................ 3,089 2,882 2,203 937 (73) 9,038
Depreciation, amortization and drydocking.... 1,323 4,862 5,730 2,803 -- 14,718
---------- ----------- ------------- ------------- ------------ ------------
(Loss) income from operations................ (2,169) 9,797 9,168 5,755 (3,986) 18,565
Other income (expense), net.................. 5,076 11,335 (8,462) (3,784) (18,107) (13,942)
---------- ----------- ------------- ------------- ------------ ------------
Income (loss) before provision income taxes.. 2,907 21,132 706 1,971 (22,093) 4,623
Provision for income taxes................... -- -- 1,716 -- -- 1,716
---------- ----------- ------------- ------------- ------------ ------------
Net income (loss)........................... $ 2,907 $ 21,132 $ (1,010) $ 1,971 $ (22,093) $ 2,907
========== =========== ============= ============= ============ ============
Condensed Consolidating Statement of Operations
(in thousands)
Three Months Ended September 30, 2000
-----------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ------------- ----------- ------------- ------------
Revenue...................................... $ 8,846 $ 39,724 $ 27,463 $ 19,615 $ (14,025) $ 81,623
Operating expenses........................... 6,866 29,289 15,219 10,976 (11,415) 50,935
Overhead expenses............................ 2,923 2,290 3,552 1,518 (1,059) 9,224
Depreciation, amortization and drydocking.... 817 3,233 4,773 3,334 -- 12,157
---------- ------------ ------------- ----------- ------------- ------------
(Loss) income from operations................ (1,760) 4,912 3,919 3,787 (1,551) 9,307
Other income (expense), net.................. (299) (767) (9,358) (7,031) 6,088 (11,367)
---------- ------------- ------------- ----------- ------------- ------------
(Loss) income before provision income taxes.. (2,059) 4,145 (5,439) (3,244) 4,537 (2,060)
Provision for income taxes................... 1,082 -- -- -- -- 1,082
---------- ------------ ------------- ----------- ------------- ------------
Net (loss) income............................ $ (3,141) $ 4,145 $ (5,439) $ (3,244) $ 4,537 $ (3,142)
========== ============ ============= =========== ============= ============
Condensed Consolidating Statement of Operations
(in thousands)
Nine Months Ended September 30, 2001
-----------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
----------- ------------ ------------ ------------ ------------- ------------
Revenue...................................... $ 24,084 $ 140,762 $ 84,622 $ 54,809 $ (41,713) $ 262,564
Operating expenses........................... 18,207 88,926 41,928 29,595 (33,823) 144,833
Overhead expenses............................ 9,806 9,184 6,856 2,765 (219) 28,392
Depreciation, amortization and drydocking.... 4,657 13,828 16,542 8,435 -- 43,462
----------- ------------ ------------ ------------ ------------ ------------
(Loss) income from operations................ (8,586) 28,824 19,296 14,014 (7,671) 45,877
Other income (expense), net.................. 7,010 24,390 (21,932) (13,430) (38,577) (42,539)
----------- ------------ ------------ ------------ ------------ ------------
(Loss) income before provision for income taxes (1,576) 53,214 (2,636) 584 (46,248) 3,338
Provision for income taxes................... -- -- 4,914 -- -- 4,914
----------- ------------ ------------ ------------ ------------ ------------
Net (loss) income............................ $ (1,576) $ 53,214 $ (7,550) $ 584 $ (46,248) $ (1,576)
=========== ============ ============ ============ ============ ============
Condensed Consolidating Statement of Cash Flows
(in thousands)
Nine Months Ended September 30, 2001
----------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
--------- ----------- ------------ ----------- ----------- -----------
Net cash provided by operating activities.... $ 17,191 $ 16,350 $ 3,921 $ 10,610 $ 8,102 $ 56,175
Investing activities:
Expenditures for drydocking................. (2,979) (6,525) (8,254) -- -- (17,758)
Proceeds from disposals of assets........... -- 1,513 4,583 -- -- 6,095
Purchases of vessels and equipment.......... (422) (4,375) (1,235) (105) (160) (6,297)
Acquisition of minority interest............ 8,346 -- -- (928) (7,942) (524)
Redemption of restricted investments........ -- -- -- 39 -- 39
Purchases of restricted investments......... -- -- -- (29) -- (29)
--------- ----------- ------------ ----------- ----------- -----------
Net cash provided by (used in) investing
activities............................... 4,945 (9,387) (4,906) (1,023) (8,102) (18,474)
Financing activities:
Proceeds from revolving credit facility....... 33,000 -- -- -- -- 33,000
Payments of revolving credit facility......... (38,250) -- -- -- -- (38,250)
Payments of long-term borrowings.............. (12,631) (1,007) -- -- -- (13,638)
Payments of Title XI bonds.................... (2,857) (324) -- (2,007) -- (5,188)
Redemption of restricted cash................. 331 -- -- -- -- 331
Payments of obligations under capital leases.. -- (2,730) -- -- -- (2,730)
Proceeds from exercise of warrants............ 3 -- -- -- -- 3
--------- ----------- ------------ ----------- ----------- -----------
Net cash used in financing activities........ (20,404) (4,061) -- (2,007) -- (26,472)
--------- ----------- ------------ ------------ ----------- -----------
Change in cash and cash equivalents............ 1,732 2,902 (985) 7,580 -- 11,229
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..... $ 3,134 $ 712 $ 5,395 $ 16,221 $ -- $ 25,462
========= =========== ============ =========== =========== ===========
Condensed Consolidating Statement of Operations
(in thousands)
Nine Months Ended September 30, 2000
-----------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ------------ ------------ ------------- -----------
Revenue...................................... $ 28,390 $ 119,027 $ 76,944 $ 52,834 $ (36,754) $ 240,441
Operating expenses........................... 21,301 90,654 45,991 32,021 (32,281) 157,686
Overhead expenses............................ 9,686 7,019 11,631 3,983 (3,460) 28,859
Depreciation, amortization and drydocking.... 2,281 11,841 14,411 8,067 -- 36,600
---------- ------------ ------------ ------------ ------------- ------------
(Loss) income from operations................ (4,878) 9,513 4,911 8,763 (1,013) 17,296
Other (expense) income, net.................. (11,234) (23,189) (23,565) (19,101) 43,680 (33,409)
---------- ------------ ------------ ------------ ------------- ------------
(Loss) income before provision for income taxes (16,112) (13,676) (18,654) (10,338) 42,667 (16,113)
Provision for income taxes................... 3,189 -- -- -- -- 3,189
---------- ------------ ------------ ------------ ------------- ------------
Net (loss) income............................ $ (19,301) $ (13,676) $ (18,654) $ (10,338) $ 42,667 $ (19,302)
========== ============ ============ ============ ============= ============
Condensed Consolidating Statement of Cash Flows
(in thousands)
Nine Months Ended September 30, 2000
-----------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ---------- ------------ ------------ ------------
Net cash provided by (used in) by operating
activities................................... $ 5,301 $ (7,871) $ 1,292 $ 15,698 $ 144 $ 14,564
Investing activities:
Expenditures for drydocking................... (2,041) (3,100) (1,415) (920) -- (7,476)
Proceeds from disposals of assets............. -- 20,835 1,414 -- -- 22,249
Purchases of vessels and equipment............ 8,541 (11,828) (2,664) (3,583) (144) (9,678)
Redemption of restricted investments.......... -- -- -- 2,888 -- 2,888
Capital contribution to affiliate............. -- 1,763 -- (1,763) -- --
---------- ----------- ---------- ------------ ------------ -----------
Net cash provided by (used in) investing
activities................................ 6,500 7,670 (2,665) (3,378) (144) 7,983
Financing activities:
Proceeds of revolving credit facility.......... 23,203 -- -- -- -- 23,203
Payments of revolving credit facility.......... (17,003) -- -- -- -- (17,003)
Payments of long-term borrowings............... (26,884) (1,040) -- -- -- (27,924)
Payments of Title XI bonds..................... (3,675) (323) -- (1,876) -- (5,874)
Redemption of restricted cash.................. 9,213 189 -- -- -- 9,402
Payments of financing costs.................... (596) -- -- -- -- (596)
Payments of obligations under capital leases... (563) (2,065) -- -- -- (2,628)
Proceeds from exercise of warrants............. 1 -- -- -- -- 1
---------- ----------- ---------- ------------ ------------ -----------
Net cash used in financing activities........ (16,304) (3,239) -- (1,876) -- (21,419)
---------- ----------- ---------- ------------ ------------ -----------
Change in cash and cash equivalents............ (4,503) (3,440) (1,373) 10,444 -- 1,128
Cash and cash equivalents at beginning of
period......................................... 4,830 2,908 7,816 3,492 -- 19,046
---------- ----------- ---------- ------------ ------------ -----------
Cash and cash equivalents at end of period..... $ 327 $ (532) $ 6,443 $ 13,936 $ -- $ 20,174
========== =========== ========== ============ ============ ===========
Condensed Consolidating Balance Sheet
(in thousands)
As of September 30, 2001
-------------------------------------------------------------------------------------
Domestic Foreign Non- Condensed
Guarantor Guarantor Guarantor Consolidated
Parent Subsidiaries Subsidiaries Subsidiaries Eliminations Total
---------- ------------ ------------- ------------- ------------ -----------
Assets
Current assets:
Cash and cash equivalents................ $ 3,134 $ 712 $ 5,395 $ 16,221 $ -- $ 25,462
Accounts receivable:
Trade, net............................ 264 27,025 25,378 4,676 (206) 57,137
Insurance claims and other............ 992 3,082 7,812 (315) -- 11,571
Marine operating supplies................ 603 2,346 3,363 3,067 (160) 9,219
Prepaid expenses......................... 762 557 630 402 -- 2,351
---------- ------------- ------------- ------------- ------------- -----------
Total current assets.................. 5,755 33,722 42,578 24,051 (366) 105,740
Vessels and equipment, net................. 46,172 177,740 111,232 270,055 161 605,360
Deferred costs, net........................ 16,573 9,981 9,080 7,601 -- 43,235
Restricted investments..................... -- -- -- 855 -- 855
Due (to) from affiliates................... (163,992) 74,983 125,061 (32,572) (3,480) --
Other...................................... 525,036 366,196 5,519 38,908 (927,649) 8,010
---------- ------------- ------------- ------------- ------------- -----------
Total assets............................. $ 429,544 $ 662,622 $ 293,470 $ 308,898 $ (931,334) $ 763,200
========== ============= ============= ============= ============= ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable......................... $ 1,621 $ 1,948 $ 5,237 $ 549 $ -- $ 9,355
Current maturities of long-term debt..... 31,481 1,914 -- 4,225 -- 37,620
Current obligations under capital leases. -- 3,078 -- -- -- 3,078
Accrued interest......................... 3,628 664 -- 4,515 -- 8,807
Accrued liabilities and other............ 6,695 7,227 22,375 5,711 (206) 41,802
---------- ------------- ------------- ------------- ------------- -----------
Total current liabilities............. 43,425 14,831 27,612 15,000 (206) 100,662
Long-term debt............................. 167,539 24,048 -- 217,917 -- 409,504
Obligations under capital leases........... -- 32,490 -- -- -- 32,490
Senior notes............................... 80,977 -- -- -- -- 80,977
Other liabilities.......................... 2,633 403 776 33 -- 3,845
---------- ------------- ------------- ------------- ------------- -----------
Total liabilities........................ 294,574 71,772 28,388 232,950 (206) 627,478
Contingencies (Note 7)..................... -- -- -- -- -- --
Minority interest.......................... -- -- -- -- 786 786
Total stockholders' equity (deficit)....... 134,970 590,850 265,082 75,948 (931,914) 134,936
---------- ------------- ------------- ------------- ------------- -----------
Total liabilities and stockholders' equity $ 429,544 $ 662,622 $ 293,470 $ 308,898 $ (931,334) $ 763,200
========== ============= ============= ============= ============= ===========
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 (to) 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 7) -- -- -- -- -- --
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 55% and 46% of Company revenue for the nine months
ended September 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 35% and 44% of Company revenue for the nine months ended September
30, 2001 and 2000, respectively. Seabulk Towing, the Company's domestic harbor
and offshore towing business, accounted for approximately 10% of Company revenue
for the nine months ended September 30, 2001 and 2000.
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 Q3 2001
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other
Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility
Domestic(1)
Vessels(2) (3) (4) 26 - 31 1 26 - 33 1 26 - 32 1
Bareboat-out(4) - - 2 1 - - 2 1 - - - 1
Laid-Up 1 - - 1 1 - - 1 - - - 1
Effective
Utilization(5) 75% - 87% - 90% - 87% - 83% - 83% -
Day Rate $6,946 - $2,709 - $7,397 - $2,929 - $7,486 - $3,061 -
West Africa
Vessels(2)(3)(6)(8) 27 3 6 1 27 4 5 1 27 4 6 1
Laid-Up - - - - - - - - - - - -
Effective
Utilization(5) 83% 46% 85% - 86% 41% 77% 84% 82% 63% 64% 84%
Day Rate $6,325 $4,491 $2,754 - $6,988 $5,528 $2,774 - $7,644 $6,097 $2,715 -
Middle East
Vessels(2)(3)(7)(9) 5 8 11 7 5 8 11 7 5 8 9 6
Laid-Up - - - - - - - - - - - -
Effective
Utilization(5) 77% 24% 66% 56% 92% 50% 59% 69% 86% 48% 65% 43%
Day Rate $3,003 $4,129 $1,421 $5,197 $2,855 $3,889 $1,434 $5,393 $2,954 $4,443 $1,611 $5,399
Southeast Asia
Vessels(2) (6) (10) 8 1 5 1 8 1 5 1 8 - 6 2
Laid-Up - - 1 - - - 1 - - - - -
Effective
Utilization(5) 87% 37% 89% 33% 83% 46% 73% 71% 79% - 69% 100%
Day Rate $5,347 - $1,429 - $4,277 - $1,443 - $4,762 - $1,708 -
(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 and bareboat-out 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 transferred 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. During Q3 2001, bareboat contracts for two
crewboats in the Domestic operating region were terminated and the vessels
were returned to the Company.
(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.
(8) During Q3 2001, one crewboat and one utility boat in Domestic region were
transferred to "held-for-sale" status. Additionally, the Company
transferred one crewboat from Domestic to West Africa. The reduction in the
Domestic Crew/Utility vessel count was offset in part by the addition of
two crewboats as bareboat-out contracts were terminated during Q3 2001.
(9) During Q3 2001, the Company transferred one crewboat and one specialty
vessel (Other) from the Middle East to Southeast Asia. Additionally, one
crewboat was transferred to "held-for-sale" status.
(10) During Q3 2001, one crewboat and one specialty vessel (Other) were
transferred from West Africa to Southeast Asia. Also, one vessel in the
AHT/Tugs category that worked in West Africa and Southeast Asia during Q2
2001 did not work in Southeast Asia during Q3. Additionally, the Company
reactivated one crewboat from laid-up status during Q3 2001.
-------------------------------------------------------------------------------------------------------------------
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.
Domestic offshore revenues during the first half of fiscal 2001
benefited from increased average day rates and fleet utilization. Third quarter
results, however, showed a modest downturn due to reduced drilling activity in
the Gulf of Mexico. The impact of this was largely felt in September as the
downward trend in natural gas prices accelerated and drillers laid off rigs. The
underlying market weakness has been largely due to a slowing U.S. economy and
moderate summer weather, both of which reduced the demand for energy. Since the
events of September 11, both the U.S. and world economies have been subject to
further downward pressure. As a result, the timing for a robust recovery in the
Gulf of Mexico is less certain. Nevertheless, the Company believes that the
energy fundamentals which drive this industry will lead to a recovery in the
U.S. offshore market by mid-2002. This should have a positive impact on offshore
vessel demand.
International offshore revenues for the nine months ended September 30,
2001 benefited from rising day rates, particularly in West Africa and Southeast
Asia, as major oil companies are moving ahead with aggressive oil exploration
and development programs outside the U.S. During the third quarter, both demand
and the price of oil remained relatively firm, although there is now evidence of
a softening trend. This, however, is unlikely to affect exploration and
development outlays in the key areas where the Company operates as most of the
activity there is controlled by the international oil majors, whose strategy
reflects a longer-term time horizon.
The Company's actual performance in West Africa and Southeast Asia was
affected by an aggressive drydocking and repair program, which reduced reported
utilization for the Company's vessels. The benefits of these actions should be
reflected in improved vessel performance, reliability and utilization in future
quarters.
Average day rates and utilization for the Company's anchor handling tug
supply vessels and supply boats as of October 31, 2001 for Domestic, West
Africa, the Middle East and Southeast Asia approximated $7,000/66%, $8,000/83%,
$3,400/83% and $5,900/71%, respectively.
The Company had 24, 16 and 14 offshore vessels in "held for sale"
status as of March 31, June 30 and September 30, 2001, respectively. Most of
these vessels were previously in lay-up. Subsequent to September 30, 2001, the
Company sold two crewboats in the held-for-sale category.
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 on production and refining levels as well
as on consumer and commercial consumption of petroleum products and chemicals.
The Company operated seven petroleum tankers as of September 30, 2001. Four of
these are double-hull, state-of-the-art vessels delivered in late 1998 and the
first half of 1999. The Company operates a fifth double-hull tanker in the
chemical transportation trade. At the end of December 2001, voyage charters for
three vessels will expire and be replaced by two multiyear time charters at time
charter-equivalent rates 55% above the returns achieved for these vessels in
2001. The third vessel is expected to show a similar year-over-year gain when
its new contract is signed in the fourth quarter of 2001. A fourth vessel also
secured a time charter, commencing in the fourth quarter of 2001, at a 25%
increase over the expiring rate. Under a time charter, fuel and port charges are
borne by the charterer and are therefore not reflected in the charter rates.
Consequently, both the revenue and cost side of time charter vessels are reduced
by the amount of fuel and port charges. Our Jones Act fleet is benefiting from a
tightening domestic tanker market, which should see a further strengthening as
OPA 90 forces out older, single-hull vessels.
Chemical Tankers. Demand for industrial chemical transportation
services generally coincides with overall economic activity. The Company
operated two chemical tankers and one multipurpose vessel in the chemical trade
as of September 30, 2001. The multi-purpose vessel is a double-hull,
state-of-the-art tanker delivered in the first half of 1999. The two chemical
tankers are double-bottom ships. The higher rate environment for petroleum
tankers is carrying over into the chemical tanker market. Higher spot market
rates have helped push time charter equivalents up substantially in the third
quarter and into the fourth quarter.
The following table sets forth the number of vessels and revenue for
the Company's petroleum and chemical product carriers:
Nine Months Ended September 30,
----------------------------------
2001 2000(1)(2)
----------------- ---------------
Number of vessels operated............ 10 12
Revenue (in thousands)................ $ 84,827 $ 97,108
--------------------------
(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 $9.4 million for the nine
months ended September 30, 2000.
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 expires in April 2002 and will not be renewed. Revenue is also
derived from Sun State's ship maintenance, repair, drydocking and construction
activities. Revenue from all of Sun State's operations totaled $7.9 and $7.6
million, respectively, for the nine months ended September 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 general
trade activity in the region served by the port. While the demand for tug
services normally tracks overall trade activity, it has increased in certain
areas in the wake of the terrorist attacks and the renewed focus on security in
U.S. ports.
The following table summarizes certain operating information for the
Company's tugs:
Nine Months Ended September 30,
----------------------------------
2001 2000
------------------ --------------
Number of tugs at end of period....... 31 33
Revenue (in thousands)................ $ 25,027 $ 25,011
Towing revenue was unchanged for the nine months ended September 30,
2001 compared to the same period in the prior year. The Company sold a total of
five towing vessels in 2000, one in the second quarter and four in the third
quarter; and two more 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.
In August 2001, the Broward County Board of Commissioners granted a
second Port Everglades tug franchise to a competitor. Since 1958, when the tug
operations commenced, the Company has operated the franchise as a sole provider
of docking services in the port. The competitor is expected to put two boats
into service in January 2002 and one in January 2003. As a result, the Company
expects that towing revenue will decrease in fiscal 2002. However, the decline
in towing revenue is not considered to be material to the Company as a whole.
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 September 30, Nine Months ended September 30,
------------------------------------------ ----------------------------------------
2001 2000 2001 2000
-------------------- ------------------- ------------------- ------------------
(in millions) (in millions)
Revenue.......................... $ 89.7 100% $ 81.6 100% $ 262.6 100% $ 240.4 100%
Operating expenses............... 47.4 53 50.9 62 144.8 55 157.7 66
Overhead expenses................ 9.0 10 9.2 11 28.4 11 28.9 12
Depreciation, amortization
and drydocking................. 14.7 16 12.2 15 43.5 17 36.6 15
-------- --------- -------- --------- -------- --------- -------- --------
Income from operations........... $ 18.6 21% $ 9.3 12% $ 45.9 17% $ 17.3 7%
======== ========= ======== ========= ======== ========= ======== ========
Interest expense, net............ $ 13.7 15% $ 15.8 19% $ 42.4 16% $ 46.2 19%
======== ========= ======== ========= ======== ========= ======== ========
Other income (expense)........... $ (0.2) 0% $ 4.4 5% $ (0.2) 0% $ 12.8 5%
======== ========= ======= ========= ======== ========= ======== ========
Net income (loss)................ $ 2.9 3% $ (3.1) 4% $ (1.6) 1% $ (19.3) 8%
======== ========= ======== ========= ======== ========= ======== ========
Three months ended September 30, 2001 compared with the three months ended
September 30, 2000
Revenue. Revenue increased 9.9% to $89.7 million for the three months
ended September 30, 2001 from $81.6 million for the three months ended September
30, 2000.
Offshore energy support revenue increased 30.8% to $51.1 million for
the three months ended September 30, 2001 from $39.1 million for the same period
in 2000, primarily due to higher day rates and utilization rates resulting from
the increase in offshore exploration and production activity.
Marine transportation revenue decreased 11.4% to $30.7 million for the
three months ended September 30, 2001 from $34.6 million for the three months
ended September 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 termination of a charter-in contract for one tanker. The decrease
in revenue also reflects the redeployment of three tankers from spot trading to
time charters whereby the cost of fuel and port charges are borne by the
charterer.
Towing revenue of $8.0 million was unchanged for the three months ended
September 30, 2001 compared to the three months ended September 30, 2000.
Operating Expenses. Operating expenses decreased 6.9% to $47.4 million
for the three months ended September 30, 2001 from $50.9 million for the same
period in 2000, primarily due to reduced charter hire, fuel and port charges,
offset in part by increases in domestic crew salaries and benefits. The
reduction in charter hire payments is due to the termination of a charter-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, termination of the charter-in contract for one tanker and the
mandatory retirement of one tanker. The increase in domestic offshore crew
salaries and benefits is primarily due to additional maritime staff resulting
from (1) the purchase of two crewboats in December 2000 and May 2001 and (2) the
termination of a bareboat-out contract for two crewboats. Under a bareboat
contract, the charterer is responsible for crewing the vessel. As a percentage
of revenue, operating expenses decreased to 52.8% for the three months ended
September 30, 2001 from 62.4% for the 2000 period. This favorable trend may be
affected in the future by possible increases in crewing and insurance costs.
Overhead Expenses. Overhead expenses decreased 2.0% to $9.0 million for
the three months ended September 30, 2001 from $9.2 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. Higher 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 lower charges for rent and other miscellaneous
items as a result of the elimination of non-essential services and the
consolidation of administrative functions. As a percentage of revenue, overhead
expenses decreased to 10.1% for the three months ended September 30, 2001
compared to 11.3% for the same period in 2000.
Depreciation, Amortization and Drydocking. Depreciation, amortization
and drydocking increased 21.1% to $14.7 million or 16.4% of revenue for the
three months ended September 30, 2001 from $12.2 million or 14.9% of revenue for
the three months ended September 30, 2000, primarily due to higher planned
drydocking expenditures for offshore energy support vessels.
Net Interest Expense. Net interest expense decreased 13.1% to $13.7
million or 15.3% of revenue for the three months ended September 30, 2001 from
$15.8 million or 19.4% of revenue for the same period in 2000. The decrease is
primarily due to the combination of lower interest rates on variable rate debt
and lower outstanding debt balances under our term loans and revolving credit
facility. This decrease is offset in part 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 (financed through borrowings under the
Company's revolving credit agreement).
Other (Expense) Income, Net. Other (expense) income, net decreased
104.7% to ($0.2) million for the three months ended September 30, 2001 from net
income of $4.4 million for the same period in 2000, primarily due to a gain on
asset sales in 2000 compared to a loss on asset sales in the 2001 period.
Nine months ended September 30, 2001 compared with the nine months ended
September 30, 2000
Revenue. Revenue increased 9.2% to $262.6 million for the nine months
ended September 30, 2001 from $240.4 million for the nine months ended September
30, 2000.
Offshore energy support revenue increased 30.7% to $144.8 million for
the nine months ended September 30, 2001 from $110.8 million for the same period
in 2000, primarily due to higher day rates and utilization rates resulting from
the increase in offshore exploration and production activity.
Marine transportation revenue decreased 11.4% to $92.8 million for the
nine months ended September 30, 2001 from $104.6 million for the nine months
ended September 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 Company's charter-in of one tanker in the first quarter of 2000
through October 2000. The decrease in revenue also reflects the redeployment of
three tankers from spot trading to time charters whereby the cost of fuel and
port charges are borne by the charterer.
Towing revenue of $25.0 million is unchanged for the nine months ended
September 30, 2001 compared to the nine months ended September 30, 2000.
Operating Expenses. Operating expenses decreased 8.2% to $144.8 million
for the nine months ended September 30, 2001 from $157.7 million for the same
period in 2000, due mainly to lower charter hire, fuel, and port charges, offset
in part by increases in domestic crew salaries and benefits. 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,
termination of a chartered-in contract for one tanker, and the mandatory
retirement of one tanker. The increase in the domestic offshore crew salaries
and benefits is primarily due to additional maritime staff resulting from (1)
the purchase of two crewboats in December 2000 and May 2001 and (2) the
termination of a bareboat-out contract for two crewboats. Under a bareboat
contract, the charterer is responsible for crewing the vessel. As a percentage
of revenue, operating expenses decreased to 55.2% for the nine months ended
September 30, 2001 from 65.6% for the same period in 2000. This favorable trend
may be affected in the future by possible increases in crewing and insurance
costs.
Overhead Expenses. Overhead expenses decreased 1.6% to $28.4 million
for the nine months ended September 30, 2001 from $28.9 million for the same
period in 2000, primarily due to lower professional fees and other overhead
expenses offset in part by increases in salaries and benefits. As a percentage
of revenue, overhead expenses decreased to 10.8% for the nine months ended
September 30, 2001 from 12.0% for the same period in 2000.
Depreciation, Amortization and Drydocking. Depreciation, amortization
and drydocking increased 18.7% to $43.5 million or 16.6% of revenue for the nine
months ended September 30, 2001 from $36.6 million or 15.2% of revenue for the
nine months ended September 30, 2000, primarily due to higher planned drydocking
expenditures for offshore energy support vessels.
Net Interest Expense. Net interest expense decreased 8.4% to $42.4
million or 16.1% of revenue for the nine months ended September 30, 2001 from
$46.2 million or 19.2% of revenue for the same period in 2000. The decrease is
primarily due to the combination of lower interest rates on variable rate debt
and lower outstanding debt balances under our term loans and revolving credit
facility. This decrease is offset in part 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 (financed through borrowings under the
Company's revolving credit agreement).
Other (Expense) Income, Net. Other (expense) income, net decreased
101.4% to ($0.2) million for the nine months ended September 30, 2001 from $12.8
million for the same period in 2000, primarily due to a net loss of $0.2 million
on asset sales in 2001 compared to a $7.0 million gain on the settlement of a
disputed liability and a net gain on asset sales of $4.8 million in 2000.
Liquidity and Capital Resources
Cash Flows. Net cash provided by operating activities totaled $56.2
million for the nine months ended September 30, 2001 compared to $14.6 million
for the same period in 2000. The significant increase in cash provided by
operating activities is primarily a result of (1) higher operating income before
non-cash charges in 2001 and (2) no reorganization costs in 2001.
Net cash used in investing activities was $18.5 million for the nine
months ended September 30, 2001 compared to $8.0 million for the same period in
2000. The use of cash for investing activities is due primarily to planned
drydocking expenditures for an additional 19 vessels and smaller proceeds from
disposal of assets held for sale.
Net cash used in financing activities for the nine months ended
September 30, 2001 was $26.5 million compared to $21.4 million for the same
period in 2000. The increase in cash used in financing activities is
attributable to a larger net decrease in the outstanding balance of the
revolving credit facility and smaller redemption of restricted cash. The
restricted cash represented proceeds from the exit financing which were
deposited into escrow in fiscal 1999 to fund certain of the Company's
contractual interest payments in 2000. The cash used in financing activities
includes payments, generated from vessel sales, on term debt during the year.
Proceeds from vessel sales decreased from $22.2 million in 2000 to $6.1 million
in 2001.
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 five double-hull petroleum and chemical tankers were
financed with U.S. government guaranteed Title XI ship financing bonds. The
Company is required to make deposits to a Title XI reserve fund based on a
percentage of net income attributable to the operations of the five double-hull
tankers, as defined by the Title XI Financial Agreement. To date, no deposits
have been required. Additionally, according to the Title XI Financial Agreement,
the Company is restricted from formally distributing excess cash from the
operations of the five double-hull tankers until certain working capital ratios
have been reached and maintained. Accordingly, at September 30, 2001, the
Company has approximately $16 million in cash and cash equivalents that are
restricted for use for the operations of the five double-hull tankers and cannot
be used to fund the Company's general working capital requirements. Based on
current projections, the Company expects to meet the working capital
requirements under the financial agreement in 2002 and may begin to formally
distribute any available excess cash.
The Company's current and future capital needs relate primarily to debt
service, vessel maintenance and fleet improvement costs. Principal obligations
for the first nine months of 2001 were $21.6 million. Cash interest obligations
were $29.7 million of $42.5 million in total interest expense, which includes
amortization of bank fees and discounts on senior notes. The Company's principal
payments for the remainder of 2001 are estimated at $7.6 million. Estimated cash
interest obligations for the remainder of 2001 total $18.6 million. The fourth
quarter cash interest obligations are higher than the average 2001 quarterly
cash interest obligations due to (1) scheduled semi-annual interest payments on
the Title XI debt for the double-hull tankers and (2) the timing of interest
payments for the senior debt.
During the first nine months of 2001, the Company incurred $24.1
million in capital expenditures for fleet improvements and drydocking costs. For
the remainder of 2001, these expenditures are expected to aggregate $6.4
million. Total 2001 expenditures of $30.5 million will substantially cover all
of the Company's drydocking requirements for 75 vessels.
The Company believes that operating cash flow, proceeds from vessel
sales and amounts available under its revolving credit facility will be
sufficient to meet its debt service obligations and other capital requirements
through 2001 and 2002. 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:
Outstanding Balance
Year-to-Date as of Interest Rate as of
Facility Payments September 30, 2001 Maturity October 31, 2001
-------- -------- ------------------ -------- ----------------
Tranche A term loan $6.7 million $54.2 million 2004 5.63%
Tranche B term loan $1.0 million $24.8 million 2005 6.13%
Tranche C term loan $3.2 million $78.6 million 2006 6.63%
Other $2.7 million $29.8 million Various Various
Revolving credit facility $5.3 million(1) $ 9.0 million 2004 5.63%
----------------------
(1) Represents net payments
At October 31, 2001, $10.0 million was outstanding under the revolving
credit facility. In addition to the revolver balance, there are $1.8 million in
outstanding letters of credit as of October 31, 2001. We have $5.7 million of
remaining credit on the revolver at October 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 $0.7 million have been issued for the nine months ended September 30, 2001.
The Company is currently seeking the required ratings that would return the
interest rate to 12.5%.
Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board issued the
Statement of Financial Accounting Standards ("SFAS") No. 143, Accounting for
Asset Retirement Obligations. The Statement requires entities to record the fair
value of a liability for an asset retirement obligation and to capitalize this
cost by increasing the carrying amount of the related long-lived asset in the
period in which it is incurred. The Standard is effective for fiscal years
beginning after June 15, 2002. The Company does not expect that the adoption of
this standard will have a material effect on the Company's financial statements.
In October 2001, the Financial Accounting Standards Board issued SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
effective for fiscal years beginning after December 15, 2001. This Statement
establishes one accounting model to be used for long-lived assets to be disposed
of by sale and broadens the presentation of discontinued operations to include
more disposal transactions. SFAS No. 144 supercedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
and the accounting and reporting provisions of APB Opinion No. 30. The Company
does not expect that the adoption of this standard will have a material effect
on its financial statements.
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.
26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For information concerning certain legal proceedings see Note 7 of the
financial statements.
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: November 14, 2001