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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

GulfMark Offshore, Inc.

Registrant’s telephone number, including area code: (713) 963-9522
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 Par Value
(Title of class)

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information Statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. Yes x

     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No

     Aggregate market value of the voting stock held by nonaffiliates of the Registrant based upon the price at which the stock was sold as of March 21, 2003: $169,106,043

     Number of shares of common stock outstanding as of March 21, 2003: 19,962,431.

DOCUMENTS INCORPORATED BY REFERENCE

The information called for by Part III Items 10,11,12 and 13 will be included in a proxy statement to be filed
pursuant to Regulation 14A, and is incorporated herein by reference.
Exhibit Index Located on Page 42.

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TABLE OF CONTENTS

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PART I

ITEMS 1. and 2. Business and Properties

GENERAL BUSINESS

     GulfMark Offshore, Inc. is a Delaware corporation that provides offshore marine services primarily to companies involved in offshore exploration and production of oil and natural gas. Our vessels transport drilling materials, supplies and personnel to offshore facilities, as well as move and position drilling structures. The majority of our operations are conducted in the North Sea, with the balance in offshore Southeast Asia, Brazil and West Africa. Periodically, we will charter vessels into other regions to meet our customers’ requirements.

     Our principal executive offices are located at 4400 Post Oak Parkway, Suite 1170, Houston, Texas 77027-3414, and our telephone number at that address is (713) 963-9522.

THE COMPANY

Offshore Marine Services Industry Overview

     Our customers employ our vessels to provide services supporting the construction, positioning and ongoing operation of offshore oil and natural gas drilling rigs and platforms (“Offshore Marine Services”). This industry employs various types of vessels, referred to broadly as offshore support vessels, that are used to transport materials, supplies, equipment and personnel. Offshore Marine Service providers are employed by oil companies that are engaged in the offshore exploration and production of oil and natural gas and related services. Services provided by companies in this industry are performed in numerous locations worldwide. The Gulf of Mexico, the North Sea, offshore Southeast Asia, offshore West Africa and offshore Brazil are each major markets that employ a significant number of vessels. Vessel usage is also significant in other international areas, including India, Australia, the Persian Gulf and the Mediterranean Sea. The industry is relatively fragmented, with more than 20 major participants and numerous small regional competitors. Historically, few of these competitors have participated in all five of these major markets. We operate our fleet of 56 offshore supply vessels in four of the five major markets: 38 in the North Sea, 12 in Southeast Asia, 4 in Brazil and 2 in West Africa.

     Our business is directly impacted by the level of activity in worldwide offshore oil and natural gas exploration, development and production, which, in turn, is influenced by trends in oil and natural gas prices. Oil and natural gas prices are affected by a host of geopolitical and economic forces, including the fundamental principles of supply and demand. Recent concern in regard to military action in the Middle East has led to significant increases in the price of both oil and natural gas; however, because of the degree of uncertainty, most of our customers have yet to significantly expand their operations to take advantage of the high prices. Each of the major geographic offshore oil and gas production regions has unique characteristics that influence the economics of exploration and production and consequently the market for vessels in support of these activities. While there is some vessel interchangeability between geographic regions, barriers such as mobilization costs and vessel suitability restrict migration of vessels between regions. This is most notably the case in the North Sea, where vessel design requirements dictated by the harsh operating environment restrict migration of vessels into that market and, to a lesser degree, high operating costs restrict migration out of the market. The effect of these restrictions on vessel migration is to segment various regions into separate markets.

Growth in Size of Vessel Fleet

     The size of our fleet has grown from 51 vessels on December 31, 2001, to 56 vessels on March 21, 2003, due primarily to our ongoing program of new construction. Four vessels were delivered in 2002, one was delivered on March 20, 2003 and one vessel was purchased in the open market. These acquisitions were partially offset by the sale of our only crewboat in July 2002. Our managed fleet remained constant at eight vessels. Our fleet expansion is expected to provide the opportunity for growth in future periods as an additional four vessels are scheduled for delivery over the upcoming 18 months. The following table summarizes the fleet growth since December 31, 2001:

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Vessel Classifications

     Offshore support vessels generally fall into seven functional classifications derived from their primary or predominant operating characteristics or capabilities. However, these classifications are neither precise nor rigid, and it is not unusual for a vessel to fit into more than one of the categories. These functional classifications are: (i) platform supply vessel, (ii) anchor handling, towing and supply vessel, (iii) construction support vessel, (iv) standby rescue vessel, (v) crewboat, (vi) specialty vessel and (vii) utility vessel.

•		Platform Supply Vessels (“PSVs”) serve drilling and production facilities and support offshore construction and maintenance work. They are differentiated from other offshore support vessels by their cargo handling capabilities, particularly their large capacity and versatility. PSVs utilize space on deck and below deck and are used to transport supplies such as fuel, water, drilling fluids, equipment and provisions. PSVs range in size from 150’ to 200’. Large PSVs (“LgPSVs”) range up to 275’ in length, with a few vessels somewhat larger, and are particularly suited for supporting large concentrations of offshore production locations because of their large, clear after deck and below deck capacities. The majority of the LgPSVs we operate function primarily in this classification but are also capable of service in construction support.
•		Anchor Handling, Towing and Supply Vessels (“AHTS”) are used to set anchors for drilling rigs and tow mobile drilling rigs and equipment from one location to another. In addition, these vessels typically can be used in limited supply roles when they are not performing anchor handling and towing services. They are characterized by shorter after decks and special equipment such as towing winches. Vessels of this type with less than 10,000 brake horsepower (“BHP”) are referred to as small AHTS vessels (“SmAHTS”), while AHTS vessels in excess of 10,000 BHP are referred to as large AHTS vessels (“LgAHTS”). The most powerful North Sea Class AHTS vessels have up to 25,000 BHP. From time to time, all of our AHTS vessels also function as PSVs.
•		Construction Support Vessels are vessels such as pipe-laying barges or specially designed vessels, such as pipe carriers, used to transport the large cargos of material and supplies required to support the construction and installation of offshore platforms and pipelines. A large number of our LgPSVs also function as pipe carriers. Our North Sea fleet has the distinction of being the only significant concentration of pipe carrier capable vessels outside of Scandinavian control.
•		Standby Rescue Vessels (“Stby”) perform a safety patrol function for an area and are required for all manned locations in the United Kingdom sector of the North Sea. These vessels typically remain on station to provide a safety backup to offshore rigs and production facilities and carry special equipment to rescue personnel. They are equipped to provide first aid and shelter and, in some cases, also function as supply vessels.
•		Crewboats (“Crew”) transport personnel and cargo to and from production platforms and rigs. Older crewboats (early 1980s build) are typically 100’ to 120’ in length and are designed for speed and to transport personnel. Newer crewboat designs are generally larger, 130’ to 165’ in length and can be longer with greater cargo carrying capacities. They are used primarily to transport cargo on a time-sensitive basis. We do not currently operate any vessels in this category.
•		Specialty Vessels (“SpV”) generally have special features to meet the requirements of specific jobs. The special features include large deck spaces, high electrical generating capacities, slow controlled speed and varied propulsion thruster configurations, extra berthing facilities and long-range capabilities. These vessels are primarily used to support floating production storing and offloading (“FPSOs”), diving operations, remotely operated vehicles (“ROVs”), survey operations and seismic data gathering, as well as oil recovery, oil spill response and well stimulation. Some of our owned vessels frequently provide specialty functions, and two managed vessels are currently chartered for specialty functions.
•		Utility Vessels are typically 90’ to 150’ in length and are used to provide limited crew transportation, some transportation of oilfield support equipment and, in some locations, standby functions. We do not operate any vessels in this category.

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The North Sea Market

     We define the North Sea market as offshore Norway, Denmark, the Netherlands, Germany, Great Britain and Ireland, the Norwegian Sea and the area West of Shetlands. Historically, this has been the most demanding of all exploration frontiers due to harsh weather, erratic sea conditions, significant water depth and long sailing distances. Exploration and production operators in the North Sea market have typically been large and well-capitalized entities (such as major oil companies and state-owned oil companies), in large part because of the significant financial commitment required in this market. Recently however, there have been a number of independent operators who have begun to develop fields in the North Sea or who have made significant acquisitions from the major oil companies with plans to further develop these properties. Projects in the North Sea tend to be fewer in number but larger in scope, with longer planning horizons than projects in regions with less demanding environments, such as the Gulf of Mexico. Due to these factors, vessel demand in the North Sea has generally been steadier and less susceptible to abrupt swings than vessel demand in other regions.

     This market can be broadly divided into three areas: exploration, production platform support and field development or construction. Support of the more volatile exploration segment of the market represents the primary demand for AHTS vessels. While supply vessels support the exploration segment, they also support the production and field construction segments, which generally are not affected by frequent short-term swings in demand. However, since AHTS vessels are capable of performing in a supply role, with the recent reduction in exploration and production activities in the North Sea, many AHTS vessels have been available to compete in the supply vessel market and thus contributed to lower day rates in the last half of 2002.

     Our North Sea fleet is oriented toward supply vessels which work in the more stable segments of production platform support and field development or construction, and includes 30 owned and bareboat chartered vessels (22 PSVs, 3 AHTS vessels, and 5 SpV) and 8 managed vessels (4 PSVs, 1 AHTS vessels and 3 SpVs). Onshore bases in Aberdeen, Scotland and Liverpool, England support these vessels.

     During the period of 1995-1998, the North Sea market experienced consistently high vessel utilization rates and increasing day rates. Increased drilling rig requirements during 1995 and 1996 led to a shortage of high specification drilling rigs. A number of long-term drilling contracts were signed during that period and, as demand increased in other regions, orders for new drilling rigs were placed. Accelerated activity in construction and development projects added to the demand for supply vessel services and by 1997 vessel demand was very strong. The positive market dynamics continued into the first quarter of 1998. A drop in oil prices in the latter half of 1998 and into the first quarter of 1999 resulted in significant reductions in spending plans for 1999 and caused demand for vessel services in 1999 to fall well below that experienced in 1997 and 1998. A number of the large integrated oil companies were merged and the consolidation process in the industry had an adverse near-term effect on the market for support vessel services. This slowdown in demand occurred in a period when a number of vessels entered the marketplace well ahead of the drilling rigs they were built to support. Most of these vessels were ordered in 1997 and 1998 in response to increased construction in the drilling industry and were delivered by the end of 1999. The vessel deliveries aggravated an oversupply condition caused by the reduction in development activity but was mitigated somewhat by vessels utilized in fiber optic cable installation and maintenance activity. In the second quarter of 2000, in response to higher commodity pricing and some increase in drilling activity, this market began to improve. This was at first evidenced by increased utilization rates for offshore support vessels and was followed by an improvement in day rates. The steady recovery continued throughout the balance of the year, with demand outside of the North Sea accelerating price recovery as deepwater locations in international markets competed for the available vessels. These factors allowed day rates and utilization to escalate to levels similar to those experienced during the high point of 1998. At the end of 2000 and throughout 2001, rates continued to improve, and, during the latter half of 2001, were at or above those experienced in the previous peak period of 1998, despite lower oil and natural gas prices. Subsequent to the terrorist attacks on September 11, 2001, both oil and natural gas prices have remained significantly higher. However, over the last year, the uncertainty surrounding any impact that a war in the Middle East or future terrorist activity might have on the existing production and pricing and a change in the tax regime in the United Kingdom have not led to increases in activity levels which have in the past been associated with higher commodity prices.

     The supply of vessels to the region has also been a factor in determining vessel utilization and day rates. This is occasioned by newbuild vessels delivered to the market and the migration of vessels to other markets, either permanently or for temporary assignments. The demand for existing vessels outside of the North Sea and the

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expanded role for deepwater projects in worldwide locations has continued to lead to migrations of vessels to other operating areas. As 2002 was coming to a close, we mobilized three vessels from the North Sea to other operating areas. The Highland Legend went to Southeast Asia, the Highland Piper went to Brazil and the newly delivered Highland Bugler went to India. Additionally, in the next several months of 2003, the North Crusader will depart for Brazil as a front-runner for the vessel under construction in Brazil. As we begin 2003, the number of new deliveries of vessels into this market is diminishing as construction programs begun in the 2000-2001 period are completing and the level of new orders for vessels is reduced. This should help to re-establish a more favorable market in the months ahead as demand increases.

The Southeast Asia Market

     We define the Southeast Asia market as offshore Asia bounded roughly on the west by the Indian subcontinent and on the north by China. This market includes offshore Brunei, Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. The design requirements for vessels in this market are generally similar to the requirements of the shallow water Gulf of Mexico. However, advanced exploration technology and rapid growth in energy demand among many Pacific Rim countries have led to more remote drilling locations, which has increased both the overall demand in this market and the technical requirements for vessels. We believe that a number of exploration and production projects planned or underway could increase the future demand for Offshore Marine Services in the Southeast Asia market. We currently have 12 vessels deployed in this market.

     The Southeast Asia market differs country by country, but the competitive environment is broadly characterized by a large number of small companies, in contrast to many of the other major offshore exploration and production areas of the world, where a few large operators dominate the market. Affiliations with local companies are generally necessary to maintain a viable marketing presence. Our management has been involved in the region since the mid-1970s, and we currently maintain long-standing business relationships with a number of local companies.

     Vessels in this market are typically smaller than those operating in areas such as the North Sea. Yet, the varying weather conditions, annual monsoons and long distances between supply centers in Southeast Asia have allowed for a variety of vessel designs to compete in this market, each suited for a particular set of operating parameters. Vessels designed for the Gulf of Mexico and other areas where moderate weather conditions prevail have historically made up the bulk of the Southeast Asian fleet. In the middle part of the 1990s there was pressure (most notably from Malaysia) to upgrade offshore vessel capabilities by establishing limits on the age of vessels working in certain countries’ territorial waters and encouraging construction of new vessels designed to operate in this region. Demand for larger, newer and higher specification vessels is developing in the region where deepwater projects occur or where oil and gas companies employ larger fleets of vessels. This development led us to mobilize the Highland Legend from the North Sea to this market in late 2002 in anticipation of these factors.

     Changes in supply and demand dynamics have led at times, most recently during 1999, to an excess number of vessels in markets such as the Gulf of Mexico. It is possible that vessels currently located in the Arabian/Persian Gulf area, West Africa or the Gulf of Mexico could relocate to Southeast Asia. Not all vessels currently located in those regions would be able to operate in Southeast Asia. Furthermore, transferring a vessel from the Gulf of Mexico to Southeast Asia would involve a significant cash and opportunity cost. Historically, there has been minimal movement between these operating areas, however, due to softness in other markets, vessel movements into the Southeast Asia vessel market are becoming more of a factor in the supply/demand equation.

     Indonesia is the only member of OPEC in the region. Oil and natural gas exploration activity in Indonesia has historically focused on oil exploration. Several large projects have now been identified that would exploit gas reserves. Indonesian-based operations utilize the largest number of service vessels in the region. Demand in Indonesia has seen a number of peaks and valleys during the past decade. In 1992, demand softened as exploration activities were reduced while some of the major oil companies renegotiated their production royalty and tax structures with local authorities. This reversed somewhat in 1993 and 1994, as some agreements were reached. However, in 1995, the oil companies pressed for further modifications to their production royalty and tax structures and reduced their exploration budgets, resulting in lower-than-expected activity in 1995 and only marginal improvement in 1996 and 1997. The market improved in early 1998 as part of a general improvement throughout Southeast Asia but turned lower in 1999 as a result of an overall worldwide slowdown in exploration

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and development expenditures. During 2000, as markets in other regions rebounded, this market lagged behind with several brief upturns only to be followed by contractions back to the previously reduced levels. During 2001, activity levels improved and both day rates and utilization were consistently higher than at any time in the prior two years. Subsequent to the end of 2001, activity levels have remained relatively high and day rates have also continued to be steady. We currently have two vessels operating in Indonesia for a major oil and natural gas company, one of our U.S. built PSVs and the vessel mobilized from the North Sea in the last quarter of 2002.

The Brazilian Market

     Similar to the North Sea, the Brazilian market requires highly sophisticated vessels due to the harsh operating environment. We have experienced success in meeting the market requirements through owned, managed and bareboat chartered vessels and will look to our existing and newbuild fleet to meet the expanding demand for vessels in this important market.

     Over the last several years, the Brazilian government has opened up the petroleum industry to private investment. The early bid rounds resulted in extensive commitments by major international oil companies and consortiums of independents, which have explored and will continue to explore the offshore blocks awarded in the lease sales. This has created a demand for deepwater AHTS and PSV vessels in support of the drilling and exploration activities that has been met primarily from mobilization of vessels from other regions. As this activity increases throughout 2002-2003 to meet the commitments of the oil companies to the Brazilian government, there will be a growing demand for offshore support vessels. In addition, Petróleo Brasiliero S.A. (“Petrobras”), the Brazilian national oil company, has announced expansion plans for the next several years which will create additional demand for offshore support vessels. We have been active in bidding on additional work with both Petrobras and the consortiums and believe we will be successful in the award of a contract for additional vessels in the region.

     The Seapower has been operating in Brazil since 1995 under a contract with Petrobras, which runs into October 2003. The Leopard Bay, an AHTS vessel built by Sanko Steamship Co. Ltd., (“Sanko”) and bareboat chartered by us through June 2003, has been contracted with Petrobras since November 1998. A third vessel, the Highland Scout has been contracted to Petrobras since January 2000 and is contracted into December 2004.

     Additionally, during 2002 we were awarded a contract with Enterprise Oil do Brasil Ltda., a subsidiary of the Royal Dutch/Shell Group, in support of its Brazilian program in the Campos Basin. The program is expected to last 8 years. The North Crusader will mobilize to Brazil in the second quarter of 2003 as a front-runner for the vessel we have under construction in Brazil that is scheduled for delivery in mid 2004.

The West African Market

     During January 2000, we mobilized a bareboat chartered vessel from the North Sea market to Equatorial Guinea under a two-year contract with a major international oil company which was subsequently extended into 2003. This marked our entry into this market and was viewed as an important step for us in meeting the growing demand for deepwater capable vessels in the emerging West African Offshore Marine Services market. In 2001, we mobilized one of our managed AHTS vessels to West Africa in support of a construction/cable installation program whereby we gained additional operating experience. The heightened level of offshore expenditures in the region has created an increase in the demand for vessels to support drilling operations in this region, as evidenced by the increase in vessel contracts awarded over the period 1999-2002. Further demand will be created for both AHTS vessels and PSVs as expenditures to further delineate and exploit the deepwater discoveries are initiated by the international oil companies. We therefore are of the belief that the market in this region has one of the highest potentials for attracting North Sea capable vessels, as the majority of bid tenders are for modern deepwater specification vessels. Bid activity has increased for projects in Nigeria, Angola and Equatorial Guinea over the last six months, but due to political events in the rest of the world, many projects have been delayed. We will look to our current fleet of vessels in addition to our newbuild vessels to meet the requirements of this market once projects are initiated.

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New Vessel Construction Program

     During 2000, we committed to the construction of nine new North Sea class vessels with a Norwegian shipbuilder. This shipyard previously constructed several of our other newbuilds including the UT 755 design PSVs. The newbuild program includes six PSVs and three AHTSs with all vessels designed to be multi-functional in that they will be capable of supporting underwater remotely operated vehicle (“ROV”) operations as well as traditional offshore support operations. All of the vessels are being built to Rolls Royce/Ulstein specifications and include two UT 745, four UT 755 PSVs and three UT 722L AHTS vessels. Additionally, we have contracted with the shipyard’s Brazilian affiliate for the construction of a multi-purpose, Multi Function Support Vessel (“MFSV”), for an estimated cost of $24 million. As of December 31, 2002, total payments of $7.0 million had been made on this Brazilian newbuild. To date, five vessels have been delivered under this program. As of the end of 2002, we have spent $117.0 million, including $81.2 million in 2002. The construction cost for the Norwegian built vessels is based on a fixed price contract denominated in Norwegian Kroner. We have systematically entered into forward contracts to minimize our foreign currency exchange risk. The following table outlines the cost and contracted delivery schedule of the program:

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Our Fleet

     Our existing fleet as of March 21, 2003 includes 56 vessels. Of these vessels, 44 are owned by us, 4 are bareboat chartered from other owners and 8 are under management for other owners. Additionally, there are four remaining vessels to be delivered as part of our newbuild program in Norway and Brazil. Certain of these vessels may replace the four bareboat chartered vessels, all of which will be returned during the years 2003-2004.

Note: Eight additional vessels are under management agreements for other owners.

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Customers, Contract Terms and Competition

     Our principal customers are major integrated oil companies and large independent oil and natural gas exploration, production companies working in international markets, and foreign government owned or controlled oil companies, as well as companies that provide logistic, construction and other services to such oil companies and foreign government organizations. During 2002, under multiple contracts in the ordinary course of business, two customers accounted for more than 10% of total consolidated revenues: Aberdeen Services Company (“ASCO”) at 22.0% and Conoco Phillips at 10.9%. ASCO is a logistics coordinator primarily serving major international oil companies. Conoco Phillips is a major worldwide operator that we worked for in both the UK and Norway during 2002. The contracts are industry standard time charters involving several of our vessels for periods ranging from a few days or months to more than a year. The contracts are generally not cancelable except for unsatisfactory performance by the vessel. The loss of a major customer could have a material adverse effect on our financial condition and results of operations if a replacement is not obtained.

     Contract or charter durations vary from single-day to multi-year in length, based upon many different factors that vary by market. Historically, term charters in the Offshore Marine Services industry have generally extended from six months to one year in length. Additionally, there are “evergreen” charters (also known as “life of field” or “forever” charters), and at the other end of the spectrum, there are “spot” charters and “short duration” charters, which can vary from single voyage to charters of less than six months. Longer duration charters are more common where equipment is not as readily available or specific equipment is required. In the North Sea, multi-year charters have been more common, and we believe that term charters constitute the majority of the market. Term charters in Southeast Asia are currently somewhat less common than in the North Sea and generally are two years or shorter in length. In the developing Brazil and West Africa markets, term charters are relatively common due to the harsh operating conditions, the scarcity of quality equipment and the distance to larger markets. In addition, charters for vessels in support of floating production, FPSOs are typically “life of field” or “full production horizon charters”. Because of frequent renewals, the stated duration of charters may have little correlation with the length of time the vessel is actually contracted to a particular customer.

     Bareboat charters are contracts for vessels, generally for a term in excess of one year, whereby the owner transfers all market exposure for the vessel to the charterer in exchange for an arranged fee. The charterer has the right to market the vessel without direction from the owner. In addition to bareboat charter fees paid to the owner, the charterer is responsible for providing the crew and all operating costs for the vessel. No depreciation expense is borne by the charterer. Bareboat chartered vessels, in comparison to identical owned vessels with the same day rate, generate the same revenue but less operating income since bareboat charter expense is generally higher than depreciation expense and less operating cash flow since bareboat charter expense is a cash cost.

     Managed vessels add to the market presence of the manager but provide limited direct financial contribution. Management fees are typically based on a per diem rate and are not subject to fluctuations in the charter hire rates. The manager is typically responsible for disbursement of funds for operating the vessel on behalf of the owner. Depending on the level of service provided by the manager, fees for services range from $5,000 to $10,000 per month per vessel.

     Substantially all of our charters are fixed in British pounds, Norwegian Kroner and U.S. dollars. We attempt to reduce currency risk by matching each vessel’s contract revenue to the currency matching its operating expenses. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Currency Fluctuations and Inflation.”

     We compete with approximately 15-20 companies in the North Sea market and numerous small and large competitors in the Southeast Asia market principally on the basis of suitability of equipment, price and service. Also, in certain foreign countries, preferences are given to vessels owned by local companies. We have attempted to mitigate some of the impact of such preferences through affiliations with local companies. Some of our competitors have significantly greater financial resources than we do.

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Fleet Availability

     A portion of our available fleet is committed under contracts of various terms. The following table outlines the percentage of our forward days under contract as of March 21, 2002 and 2003:

Environmental and Government Regulation

     We must comply with extensive government regulation in the form of international conventions, federal and state laws and regulations in jurisdictions where our vessels operate and/or are registered. These conventions, laws and regulations govern matters of environmental protection, worker health and safety, and the manning, construction and operation of vessels. We believe that we are in material compliance with all applicable laws and regulations. The International Maritime Organization recently made the regulations of the International Safety Management (“ISM”) Code mandatory. The ISM Code provides an international standard for the safe management and operation of ships, pollution prevention and certain crew and vessel certifications which became effective on July 1, 2002. The risks of incurring substantial compliance costs, liabilities and penalties for non-compliance are inherent in offshore marine operations. Compliance with environmental, health and safety laws and regulations increases our cost of doing business. Additionally, environmental, health and safety laws change frequently. Therefore, we are unable to predict the future costs or other future impact of environmental, health and safety laws on our operations. There is no assurance that we can avoid significant costs, liabilities and penalties imposed as a result of governmental regulation in the future.

Operational Risks and Insurance

     Our operations are subject to various operating hazards and risks, including:

	•		adverse sea and weather conditions;
	•		mechanical failure;
	•		navigation errors;
	•		collision;
	•		oil and hazardous substance spills, containment and clean up;
	•		labor shortages and strikes;
	•		damage to and loss of drilling rigs and production facilities; and
	•		war, sabotage and terrorism risks.

     These risks present a threat to the safety of personnel and to our vessels, cargo, equipment under tow and other property, as well as the environment. We could be required to suspend our operations or request that others suspend their operations as a result of these hazards. Third parties may have significant claims against us for damages due to personal injury, death, property damage, pollution and loss of business.

     We maintain customary insurance coverage for casualty and liability risks. We have renewed our primary insurance program for the insurance year 2003-2004. As a result of the events of September 11, 2001, the cost to cover war risks on our vessels has increased and could substantially increase over prior years’ policies. We will evaluate the need to maintain this coverage as it applies to our fleet in the future. There is no assurance that our insurance coverage will be available, or affordable in the future, and if available whether it will be adequate to cover future claims that may arise.

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Foreign Operations

     During the past five years, we derived substantially all of our revenues from foreign sources. We therefore face risks inherent in conducting business internationally, such as:

	•		foreign currency exchange fluctuations or imposition of currency exchange controls;
	•		legal and governmental regulatory requirements;
	•		potential vessel seizure or nationalization of assets;
	•		import-export quotas or other trade barriers;
	•		difficulties in collecting accounts receivable and longer collection periods;
	•		political and economic instability;
	•		politically adverse tax consequences;
	•		difficulties and costs of staffing and managing international operations; and
	•		language and cultural differences.

     In the past, these conditions or events have not materially affected our operations. However, we cannot predict whether any such conditions or events might develop in the future. Also, we organized our subsidiary structure and our operations in part based on certain assumptions about various foreign and domestic tax laws, currency exchange requirements, and capital repatriation laws. While we believe our assumptions are correct, there can be no assurance that taxing or other authorities will reach the same conclusion. If our assumptions are incorrect, or if the relevant countries change or modify such laws or the current interpretation of such laws, we may suffer adverse tax and financial consequences, including the reduction of cash flow available to meet required debt service and other obligations. Any of these factors could materially adversely affect our international operations and, consequently, our business, operating results and financial condition.

Seasonality of Business

     Our fleet operations are subject to seasonal factors. Operations in the North Sea are generally at their highest level during the months from April to August and at their lowest levels during November to February. Vessels operating in Southeast Asia are generally at their lowest utilization rates during the monsoon season, which moves across the Asian continent between September and early March. The actual monsoon season for a specific Southeast Asian location is about two months. In addition, operations in any market may be affected by unusually long or short construction seasons due to, among other things, abnormal weather conditions.

Employees

     At December 31, 2002, we had 479 employees located in the United States, the United Kingdom, Norway, Southeast Asia and Brazil. Additionally, through our contract with a crewing agency, we participate in collective bargaining arrangements with 647 contract crew members working on our North Sea vessels under evergreen employment agreements with wages renegotiated annually in June. We have no other collective bargaining agreements. Relations with our employees are considered satisfactory. To date, our operations have not been interrupted by strikes or work stoppages.

Properties

     Our principal executive offices are located in Houston, Texas, with operations in Lafayette, Louisiana. For local support, we have offices and warehouse facilities in Singapore; Aberdeen, Scotland; Sandnes, Norway and Macae, Brazil. All facilities except one owned facility in Aberdeen, Scotland are under lease. Our operations generally do not require highly specialized facilities, and suitable facilities are generally available on a lease basis as required.

Additional Information

     We file annual, quarterly, and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet on our website at http://www.gulfmark.com and at the

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SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s Public Reference Room at the following location: 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

ITEM 3. Legal Proceedings

General

     Various legal proceedings and claims that arise in the ordinary course of business may be instituted or asserted against us relating to the Offshore Marine Services operations. Additionally, we may be subject to claims for indemnification by Weatherford International, Inc. (“Weatherford”) under our indemnity obligations described below. Although the outcome of litigation cannot be predicted with certainty, we believe, based on discussions with legal counsel and in consideration of reserves recorded, that the outcome of these legal actions, if any, would not have a material adverse effect upon our consolidated financial position and results of our operations. We cannot predict whether any such claims may be made in the future.

Distribution Agreement Indemnities

     We were formed as a spin-off from our predecessor and began separate trading on May 1, 1997. The assets remaining with the predecessor included a domestic erosion control business known as “Ercon” and an investment in the common stock of Weatherford. In effecting the spin-off, we agreed to indemnify Weatherford and certain of its affiliates against:

	•		liabilities for all past and future claims and litigation against Weatherford stemming from the predecessor’s or our offshore marine services operations;
	•		liabilities for claims and litigation against Weatherford or its current or past subsidiaries and affiliates, including Ercon, arising out of acts or omissions prior to May 1, 1997; and
	•		any tax liabilities in the event the spin-off and related transactions are determined to be taxable.

     We have established an accrual on our financial statements and maintain insurance coverage, which we believe is adequate, to cover any contingent liabilities that may arise under the indemnity. During 2001, we reached an agreement with Ercon and Weatherford related to prior warranty claims asserted against Ercon by their customers. This had the effect of reducing the accrual we had established in 1997; however, there is no assurance that the remaining accrual is adequate. Any future successor of GulfMark would be required to assume these indemnity obligations, which may have the effect of delaying, deferring or preventing a change of control.

Other Claims

     One vessel acquired as part of the 2001 Sea Truck acquisition, was committed to be sold to its charterer under an agreement which would result on the transfer of the vessel on April 1, 2003. In December 2002, the charterer defaulted under the provisions of the charter agreement which terminated the purchase obligation and has subsequently filed for bankruptcy protection. Although no litigation has been filed, we are in the process of determining what remedies may exist.

ITEM 4. Submission of Matters to a Vote of Security Holders

NONE

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PART II

ITEM 5. Market for Registrant’s Common Equity and Related Stockholder Matters

     Our common stock is traded on the NASDAQ National Market under the symbol “GMRK.” The following table sets forth the range of high and low sales prices for our common stock for the periods indicated, as reported:

     All references to the number of shares of Common Stock (except for shares authorized), per share prices, and earnings per share amounts in the consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K have been adjusted to retroactively reflect a two-for-one stock split effected in the form of a stock dividend to stockholders of record as of the close of business on June 30, 2002.

     For the quarter ended March 31, 2003 (through March 21, 2003), the range of low and high sales prices was $12.50 and $15.70, respectively. On March 21, 2003, the closing sale price of our common stock as reported by the NASDAQ National Market was $14.18 per share. As of March 21, 2003, there were 747 shareholders of record.

     We have not declared or paid dividends during the past five years. Pursuant to the terms of the indenture under which the Notes (as hereinafter defined) are issued, we may be restricted from declaring or paying dividends; however, we currently anticipate that, for the foreseeable future, any earnings will be retained for the growth and development of our business. The declaration of dividends is at the discretion of our Board of Directors. Our dividend policy will be reviewed by the Board of Directors at such time as may be appropriate in light of future operating conditions, dividend restrictions of subsidiaries and investors, financial requirements, general business conditions and other factors.

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ITEM 6. Selected Consolidated Financial Data

     The Consolidated Financial Statements included herein, as well as the financial data presented in the table following, present the net assets and results of operations of Ercon and the common stock of Weatherford owned by our predecessor as discontinued operations for all periods presented. The data that follows should be read in conjunction with our Consolidated Financial Statements and the notes thereto included in Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Earnings per share information in the following table has been adjusted for the effect of the June 30, 2002, stock split.

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ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This information should be read in conjunction with our Consolidated Financial Statements, including the notes thereto, contained herein. See also “Selected Consolidated Financial Data.” Discussions relating to our Common Stock reflect the effects of the June 20, 2002, two-for-one Common Stock split.

General

     Our operations are affected primarily by day rates, fleet utilization and the number and type of vessels in our fleet. These factors are driven by trends within the oil and natural gas exploration and production industry, which generally affect the demand for vessels, as well as by trends impacting the broader economy and capital markets, which generally affect the supply of vessels. While offshore support vessels service existing oil and natural gas production platforms and exploration and development activities, incremental demand depends primarily upon drilling activity, which, in turn, is related to both short-term and long-term trends in oil and natural gas prices. As a result, trends in oil and natural gas prices may significantly affect fleet utilization and day rates. Currently, however, due to the high level of uncertainty surrounding the possibility of war in the Middle East, as well as other factors, the level of activity in the oil service sector has not reflected the increased price of oil and natural gas. This is contrary to historical precedents where oil and gas exploration and development activity increases when commodity prices are high and decreases when prices decline. It is our belief that once the uncertainty surrounding the Middle East is resolved, oil and gas companies will initiate new programs of exploration and production activities and/or begin programs that had been delayed pending the outcome of world political events. This will favorably impact the demand for marine support vessels not only in the European/Middle East region but also throughout the balance of the world as exploration and development activities escalate.

     An additional factor affecting operating earnings is the mix of vessels owned versus bareboat chartered by us. Owned and bareboat chartered vessels generate operating revenues and may incur expenses at similar rates. However, chartered vessels also incur bareboat charter hire expense instead of depreciation expense. Depreciation expense is generally less than bareboat charter expense. During 2003, three bareboat chartered vessels will be returned with the final vessel returned in 2004.

     In addition, we provide management services to other vessel owners for a fee. Only the management fee charged by us is included in our operating revenues. The day rates for these vessels are excluded for purposes of calculating fleet rates per day worked and utilization in all years.

     Our operating costs are primarily a function of fleet size and utilization levels. The most significant direct operating costs are wages paid to vessel crews, maintenance and repairs and marine insurance. Generally, fluctuations in vessel utilization affect only that portion of our direct operating costs that is incurred when the vessels are active. As a result, direct operating costs as a percentage of revenues may vary substantially due to changes in day rates and utilization.

     In addition to these variable costs, we incur fixed charges related to the depreciation of our fleet and costs for routine drydock inspections and maintenance and repairs designed to ensure compliance with applicable regulations and to maintain certifications for our vessels with various international classification societies. The aggregate number of drydockings and other repairs undertaken in a given period generally determines maintenance and repair expenses and marine inspection amortization charges. Costs incurred for drydock inspection and regulatory compliance are capitalized and amortized over 30 months, which approximates the period between required drydockings.

     Under applicable maritime regulations, vessels must be drydocked twice in a five-year period for inspection and certification. Should we undertake a large number of drydockings in a particular fiscal period, comparative results may be affected. For the year ended December 31, 2002, we completed the drydocking of 14 vessels at an aggregate cost of $6.2 million, versus 15 vessels at an aggregate cost of $4.9 million in 2001 and 11 vessels drydocked at an aggregate cost of $2.4 million in 2000.

     Over the last several years, we have been actively expanding our fleet through the construction of new vessels, acquisition of existing equipment from the resale market and by bareboat chartering vessels owned by others. We contracted with a Norwegian shipbuilder for the construction of nine North Sea class vessels for a total of

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approximately $185 million. During 2002, we contracted for an additional vessel to be built by the Brazilian affiliate of the Norwegian shipyard with projected delivery in mid 2004. Remaining projected cash outflows for 2003 are $82.3 million with an additional expenditure of $9.5 million in 2004 to complete the program.

Critical Accounting Policies and Estimates

     The Consolidated Financial Statements and Notes to Consolidated Financial Statements contain information that is pertinent to management’s discussion and analysis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of any contingent assets and liabilities. Management believes these accounting policies involve judgment due to the sensitivity of the methods, assumptions and estimates necessary in determining the related asset and liability amounts. We believe we have exercised proper judgment in determining these estimates based on the facts and circumstances available to management at the time the estimates were made.

Revenue Recognition

     Revenues from charters for offshore marine services are recognized as performed based on contractual charter rates. Currently, charter terms range from several days to as long as five years in duration. Management services revenue is recognized as performed in the period in which the services are provided.

Valuation Allowances

     Our valuation allowances, especially related to potential bad debts in accounts receivable, involve reviews of underlying details of these receivables, known trends in the marketplace and the application of historical factors that provide us with a basis for recording these allowances. If market conditions are less favorable than those projected by management, or if our historical experience is materially different from future experience, additional allowances may be required. We currently have not reflected a valuation allowance to reduce our deferred tax assets. We have considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event we were to determine that we would not be able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would be charged to expense in the period such determination was made

Deferred Drydocking and Deferred Financing Costs

     Costs incurred in connection with drydocking are capitalized and amortized over 30 months, which approximates the period between required drydockings. Deferred financing costs are capitalized as incurred and are amortized over the expected term of the related debt.

Goodwill

     Goodwill primarily relates to the 1998 acquisition of Brovig Supply and the June 2001 acquisition of Sea Truck and has been allocated based on the estimated fair market value of net tangible assets acquired. The determination of impairment of all long-lived assets, including goodwill, is conducted as indicators of impairment are present. If such indicators were present, the determination of the amount of impairment would be based on our judgments as to the future operating cash flows to be generated from these assets throughout their estimated useful lives. Our industry is highly cyclical and our estimates of the period over which future cash flows will be generated, as well as the predictability of these cash flows, can have a significant impact on the carrying value of these assets and, in periods of prolonged down cycles, may result in impairment charges.

Income Taxes

     A significant portion of our earnings originates in regions that provide for an alternative taxing structure created specifically for shipping companies. These alternative structures provide for tax at rates significantly lower than would apply if we were not a qualified shipping company. Should our organization change or should the laws that created the tax structure change, we would be required to provide for taxes at rates much higher than currently reflected in the financial statements.

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Commitments and Contingencies

     We have contingent liabilities and future claims for which we have made estimates of the amount of the eventual cost to liquidate these liabilities or claims. These liabilities and claims may involve threatened or actual litigation where damages have not been quantified and we have made an assessment of our exposure and recorded a provision in our accounts to cover an expected loss. Other claims or liabilities have been estimated based on our experience in these matters and, when appropriate, the advice of outside counsel or other outside experts. Upon the ultimate resolution of these uncertainties, our future reported financial results will be impacted by the difference between our estimates and the actual amounts paid to settle a liability. Examples of areas where we have made important estimates of future liabilities include litigation, taxes, postretirement benefits, warranty claims and contract claims

Results of Operations

Comparison of the Fiscal Years Ended December 31, 2002 and December 31, 2001.

     In spite of the weakness experienced in our two major markets of the North Sea and Southeast Asia, we were able to realize increases in revenue and total net income before the effect of the 2001 deferred tax recapture of $15.7 million. For the year ended December 31, 2002, we reported net income of $24.0 million, $1.22 per diluted share on revenues of $133.9 million compared to $22.2 million, or $1.32 per diluted share excluding the deferred tax recapture on revenues of $114.0 million for the preceding year.

     The weakness in exploration and development activities in 2002, despite higher oil and natural gas prices, did not follow historical patterns where expenditures increase with commodity prices and decline when commodity prices decrease. We believe this disconnect can be attributed to the general uncertainty surrounding the global instability caused by the terrorist attacks perpetrated on September 11, 2001 as well as concern about the effects of a prolonged war in the Middle East. In addition, tax regime changes in the United Kingdom have also had a dampening effect in the U.K. sector of the North Sea. These uncertainties, while pushing the prices of oil and natural gas to near record highs, did not translate into increased exploration activity, instead many programs were delayed or cancelled pending the resolution of the Middle East issues. This reticence to commit funds to programs by the oil and gas companies has resulted in a shorter term view of the market and caused term day rates for future work in the North Sea to decline. Although some term contracts have been available, we elected not to charter our vessels on long-term contracts at the prevailing rates as we believe the rates will escalate once the political issues are resolved. The result of this strategy was that in the third and fourth quarters our average utilization for the North Sea decreased when compared to the prior year and caused the overall utilization for the year to decrease slightly from the prior year.

     The increase in revenue was attributable primarily to the delivery of four new vessels during the year as well as the full year effect of vessels added to the fleet in 2001 from the June 2001 acquisition of Sea Truck Holdings, AS in Norway, the acquisition of two vessels operating in the Liverpool Bay and four newbuild vessels delivered over the course of 2001. These additions to capacity contributed more than $23.0 million in increased revenue offset by reductions in utilization in the North Sea and Southeast Asia. During 2002, dayrates, which are generally denominated in international currencies, experienced were lower than prior year; however, because of a weaker US dollar compared to these currencies, the total day rate effect on revenue was very minor. Operating expenses increased $14.6 million in 2002. This increase was due primarily to the increased number of vessels in the fleet as well as higher costs due to stronger currencies in the operating regions compared to the reporting currency. General and administrative expenses increased $2.4 million in 2002 primarily due to the full year effect of the addition of the Norwegian operating base acquired in the Sea Truck acquisition as well as higher costs due to the expanded fleet and an expanded presence in Brazil. Depreciation expense also increased in 2002 by $6.1 million when compared to 2001 as a result of the fleet increases and the currency effect. Net interest expense reflected a decrease of $0.6 million the repayment of borrowings under the credit facility with proceeds from our March 2002 sale of stock and lower interest rates on portions of our outstanding debt. Minority interest in 2002 reflected a benefit of $0.2 million related to losses on a joint venture vessel in 2002 before the July dissolution of the venture. Additionally, we reported a favorable variance in the other category related to the strengthening of the Norwegian Kroner versus our Sterling denominated debt in our Norwegian subsidiary. The following table summarizes average day rates, overall utilization and average vessels owned or chartered for the comparable periods:

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