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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, 2002
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 23,123,938 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE,
OUTSTANDING AT NOVEMBER 1, 2002.
SEABULK INTERNATIONAL, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)..................................................1
Condensed Consolidated Balance Sheets at September 30, 2002 and December 31, 2001
(as restated) ......................................................................................1
Condensed Consolidated Statements of Operations for the three and nine months ended
September 30, 2002 and 2001.........................................................................2
Condensed Consolidated Statements of Cash Flows for the nine months ended
September 30, 2002 and 2001.........................................................................3
Notes to Condensed Consolidated Financial Statements................................................4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...................12
Item 3. Quantitative and Qualitative Disclosure of Market Risk..................................................25
Item 4. Controls and Procedures.................................................................................25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................................26
Item 2. Changes in Securities ..................................................................................26
Item 3. Defaults Upon Senior Securities.........................................................................26
Item 4. Submission of Matters to a Vote of Security Holders.....................................................26
Item 5. Other Information.......................................................................................27
Item 6. Exhibits and Reports on Form 8-K........................................................................27
Signature........................................................................................................28
Certifications...................................................................................................29
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 BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT PAR VALUE DATA)
SEPTEMBER 30, DECEMBER 31,
2002 2001
------------- ------------
(AS RESTATED)
ASSETS
Current assets:
Cash and cash equivalents $ 44,504 $ 11,631
Restricted cash 1,337 1,337
Trade accounts receivable, net of allowance for doubtful accounts of
$4,731 and $5,919 in 2002 and 2001, respectively 45,509 50,088
Other receivables 11,399 16,282
Marine operating supplies 8,159 10,049
Prepaid expenses and other 1,117 2,984
--------- ---------
Total current assets 112,025 92,371
Vessels and equipment, net 556,815 589,371
Deferred costs, net 38,236 48,899
Other 4,975 14,124
--------- ---------
Total assets $ 712,051 $ 744,765
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,273 $ 18,171
Current maturities of long-term debt 23,795 38,367
Current obligations under capital leases 2,951 2,972
Accrued interest 5,924 1,455
Accrued liabilities and other 41,258 38,719
--------- ---------
Total current liabilities 82,201 99,684
Long-term debt 417,032 399,974
Obligations under capital leases 29,514 31,768
Senior notes -- 81,635
Other liabilities 3,924 6,175
--------- ---------
Total liabilities 532,671 619,236
Commitments and Contingencies (Note 8)
Minority interest 903 842
Stockholders' equity:
Preferred stock, no par value--authorized 5,000; none issued and
outstanding -- --
Common stock--$.01 par value, authorized 40,000 shares; 23,124 and
10,506 shares issued and outstanding in 2002 and 2001, respectively 231 105
Additional paid-in capital 258,090 167,259
Accumulated other comprehensive loss (10) (1)
Unearned compensation (123) (198)
Accumulated deficit (79,711) (42,478)
--------- ---------
Total stockholders' equity 178,477 124,687
--------- ---------
Total liabilities and stockholders' equity $ 712,051 $ 744,765
========= =========
SEE ACCOMPANYING NOTES.
1
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,
------------------------- -------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Revenue $ 80,369 $ 89,720 $ 245,207 $ 262,564
Operating expenses:
Crew payroll and benefits 22,098 24,004 66,728 72,617
Charter hire 2,162 1,803 5,871 4,723
Repairs and maintenance 6,768 6,052 21,573 18,260
Insurance 2,408 2,970 7,784 8,786
Fuel and consumables 6,707 7,760 21,622 25,333
Port charges and other 3,773 4,810 12,819 15,114
--------- --------- --------- ---------
Total operating expenses 43,916 47,399 136,397 144,833
Overhead expenses:
Salaries and benefits 5,545 5,466 17,099 16,725
Office 1,180 1,425 3,773 4,428
Professional fees 1,064 626 2,507 2,478
Other 2,232 1,521 5,300 4,761
--------- --------- --------- ---------
Total overhead expenses 10,021 9,038 28,679 28,392
Depreciation, amortization and drydocking 16,407 14,718 49,598 43,462
--------- --------- --------- ---------
Income from operations 10,025 18,565 30,533 45,877
Other (expense) income:
Interest expense (11,617) (13,783) (36,695) (42,479)
Interest income 71 50 208 116
Minority interest in losses (gains) of subsidiaries 56 (90) (61) 91
Gain (loss) on disposal of assets 287 (148) 1,641 6
Other 23 29 (26) (273)
--------- --------- --------- ---------
Total other expense, net (11,180) (13,942) (34,933) (42,539)
--------- --------- --------- ---------
Income (loss) before income taxes and extraordinary item (1,155) 4,623 (4,400) 3,338
Provision for income taxes 1,602 1,716 5,010 4,914
--------- --------- --------- ---------
Income (loss) before extraordinary item (2,757) 2,907 (9,410) (1,576)
Loss on early extinguishment of debt, net of applicable income
taxes (27,823) -- (27,823) --
--------- --------- --------- ---------
Net income (loss) $ (30,580) $ 2,907 $ (37,233) $ (1,576)
========= ========= ========= =========
Net income (loss) per common share:
Income (loss) before extraordinary item $ (0.21) $ 0.28 $ (0.83) $ (0.15)
Loss on early extinguishment of debt (2.16) -- (2.46) --
--------- --------- --------- ---------
Net income (loss) per common share - basic $ (2.37) $ 0.28 $ (3.29) $ (0.15)
========= ========= ========= =========
Net income (loss) per common share - diluted $ (2.37) $ 0.27 $ (3.29) $ (0.15)
========= ========= ========= =========
Weighted average common shares outstanding - basic 12,899 10,341 11,304 10,231
========= ========= ========= =========
Weighted average common shares outstanding - diluted 12,899 10,692 11,304 10,231
========= ========= ========= =========
SEE ACCOMPANYING NOTES.
2
SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2002 2001
--------- ---------
OPERATING ACTIVITIES:
Net loss $ (37,233) $ (1,576)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of vessels and equipment 32,975 33,783
Amortization of drydocking costs 16,623 9,679
Provision for (recovery of) bad debts (100) 689
Gains on disposal of assets (1,641) (6)
Loss on early extinguishment of debt 27,823 --
Amortization of discount on long-term debt and financing costs 3,876 3,979
Minority interest in gains (losses) of subsidiaries 61 (91)
Senior and notes payable issued for payment of accrued interest and fees 626 1,303
Other non-cash items 281 103
Changes in operating assets and liabilities:
Trade accounts and other receivables 10,364 (4,299)
Other current and long-term assets 3,905 1,174
Accounts payable and other liabilities (2,551) 11,437
--------- ---------
Net cash provided by operating activities 55,009 56,175
INVESTING ACTIVITIES:
Expenditures for drydocking (16,573) (17,758)
Proceeds from disposals of assets 11,587 6,095
Purchases of vessels and equipment (3,066) (6,297)
Acquisition of minority interest -- (524)
Redemption of restricted investments -- 39
Purchase of restricted investments -- (29)
--------- ---------
Net cash used in investing activities (8,052) (18,474)
FINANCING ACTIVITIES:
Net payments of revolving credit facility (9,000) (5,250)
Proceeds of New Credit Facility 178,800 --
Payments of long-term debt (163,457) (13,638)
Payments of Senior Notes (101,499) --
Proceeds of Private Placement, net of issuance costs 91,250 --
Payments of Title XI bonds (3,997) (5,188)
Redemption of restricted cash -- 331
Payments of obligations under capital leases (2,275) (2,730)
Payment of deferred financing costs for New Credit Facility (3,949) --
Proceeds from exercise of warrants 1 3
Proceed from exercise of stock options 42 --
--------- ---------
Net cash used in financing activities (14,084) (26,472)
--------- ---------
Change in cash and cash equivalents 32,873 11,229
Cash and cash equivalents at beginning of period 11,631 14,233
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 44,504 $ 25,462
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Notes payable issued for the acquisition of minority interest $ -- $ 10,500
--------- =========
Vessels exchanged for drydock expenditures $ 900 $ --
========= =========
SEE ACCOMPANYING NOTES.
3
SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
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/A for the fiscal year ended December 31, 2001.
The Company has restated its consolidated financial statements as of
and for the year ended December 31, 2001 and as of and for the quarter ended
March 31, 2002. The restatements are primarily related to a $4.1 million accrual
in additional insurance calls in the fourth quarter of 2001.
Except for net loss, the Company has no other material components of
comprehensive loss. Certain financial statement reclassifications have been made
to conform data for prior periods to the 2002 financial statement presentation.
2. LIQUIDITY AND FINANCING TRANSACTIONS
The Company's capital requirements arise primarily from its need to
service debt, fund working capital and maintain and improve its vessels. The
Company's expected capital requirements for debt service, vessel maintenance and
fleet improvements for 2002 and 2003 is approximately $94 million and $81
million, respectively. The Company's expected capital requirements for the
remainder of 2002 is approximately $20 million. The Company expects that cash
flow from operations will continue to be a significant source of funds for our
working capital and capital requirements.
On September 13, 2002, the Company completed the private placement of
12.5 million shares of newly issued Seabulk common stock at a cash price of
$8.00 per share (the "Private Placement") to a group of investors including an
entity associated with DLJ Merchant Banking Partners III, L.P., an affiliate of
CSFB Private Equity, and entities associated with Carlyle/Riverstone Global
Energy and Power Fund I, L.P., an affiliate of The Carlyle Group of Washington,
D.C. The stock issuance was previously approved by the Company's shareholders at
a Special Meeting held on September 5, 2002.
The new investors also purchased, for $8.00 per share, 5.1 million of
the Company's common stock and common stock purchase warrants beneficially owned
by accounts managed by Loomis, Sayles & Co., L.P., an SEC-registered investment
advisor. Taken together, the two transactions give the new investors
approximately 72% of the pro forma, fully diluted shares of the Company's common
stock. Pursuant to the agreement with the investors, the Company's Board of
Directors has been restructured to permit the new investors to hold a majority
of seats on the Board.
4
On September 13, 2002, the Company completed an agreement with Fortis
Capital Corp. and NIB Capital Bank N.V., as arrangers, for a $180 million senior
secured credit facility (the "New Credit Facility"), which replaced the
Company's existing facility. The New Credit Facility consists of an $80 million
term loan and a $100 million revolving credit facility and has a five-year
maturity.
The revolving portion of the New Credit Facility is subject to
semi-annual reductions commencing six months after closing. The term loan
portion is subject to semi-annual reductions commencing 36 months after closing.
Interest on the loans is payable monthly, with a variable interest rate. The
rate is either a LIBOR or base rate plus a margin based upon certain financial
ratios of the Company. The interest rate margin may be adjusted in the
syndication process.
The New Credit Facility is secured by first ship mortgages on
substantially all of the Company's vessels (excluding vessels financed with U.S.
Maritime Administration Title XI financing) and is guaranteed by most of the
subsidiaries of the Company. The New Credit Facility is also secured by second
ship mortgages on two of the Company's tankers and three of the Company's tugs.
The New Credit Facility is subject to various financial covenants,
including minimum adjusted tangible net worth requirements, minimum ratios of
adjusted EBITDA to adjusted interest expense, and a maximum ratio of adjusted
funded debt to adjusted EBITDA. The Company is required to maintain a minimum
fair market value of collateralized assets of at least 175% of outstanding
borrowings under the New Credit Facility, based upon appraisals which may be
requested not more than once during any 12-month period.
Proceeds from the Private Placement and New Credit Facility of
approximately $266.1 million, net of $12.7 million of fees and expenses of the
transaction, were used primarily to repay the Company's prior bank debt of
approximately $151.5 million and redeem its outstanding Senior Notes for
approximately $101.5 million.
On September 13, 2002, the Company deposited $101.5 million to State
Street Bank & Trust as Paying Agent for the redemption of the Senior Notes. As a
result, the Company was released and discharged from all of its obligations
under the Notes and they were effectively discharged at that date. The Senior
Notes were administratively discharged on October 15, 2002.
Management recognizes that unforeseen events or business conditions,
including deterioration in its markets, could prevent the Company from meeting
targeted operating results.
3. SALE OF ASSETS OF SUN STATE AND PORT ARTHUR
On March 22, 2002, the Company closed on the sale of the marine
transportation assets and trade name of Sun State for $3.8 million in cash. The
assets consisted of tugs, barges and fuel inventory with a carrying value of
$4.3 million. The name of this company was subsequently changed to Seabulk
Marine Services, Inc. As a result, the Company recognized a loss on the disposal
of these assets of approximately $470,000. The proceeds from the sale of these
assets were used for working capital purposes as permitted by the Company's
credit facility that existed prior to the refinancing in September 2002.
On May 20, 2002, the Company closed on the sale of the marine terminal
facility assets at Port Arthur, Texas for $3.0 million. Fifty percent of the
proceeds ($1.5 million) were received at closing in cash and the remainder will
be deferred and received over the next three years in the form of either cash or
shipyard repair credits from the buyer. The assets consisted of land, an office
5
building, docks and parking and warehouse storage facilities with a carrying
value of $1.3 million. As a result, the Company recognized a gain of $1.7
million. The proceeds from the sale of these assets were used to repay a portion
of the Company's term loans that existed prior to the refinancing in September
2002.
On July 9, 2002, the Company closed on the sale of the drydock and
related shipyard equipment assets of Seabulk Marine Services, Inc. (formerly Sun
State Marine Services, Inc.) for $450,000. The proceeds from the sale of these
assets were used for working capital purposes as permitted by the Company's
prior credit facility. The Company has no remaining operations at the Sun State
location.
4. EARLY EXTINGUISHMENT OF DEBT
In connection with the closing of the new equity investment and new
bank credit facility (see Note 2), the Company redeemed all of its 12.5% Secured
Notes due 2007 and repaid its existing bank debt.
The carrying value of the Senior Notes and bank debt at the time of the
redemption and repayment was $225.2 million, net of unamortized discount and
unamortized financing costs. The price paid to retire the Senior Notes and bank
debt was $253.0 million. As a result, $27.8 million was recorded as a loss on
early extinguishment of debt, consisting of the write-off of the unamortized
financing costs on the Senior Notes and bank debt of $9.7 million, unamortized
original issue discount on the Senior Notes of $14.1 million and contractual
redemption premiums on the Senior Notes of $4.0 million.
The income tax effect of the loss is a tax benefit of approximately
$10.0 million. However, management has recorded a valuation allowance to offset
the benefit (see Note 5).
5. INCOME TAXES
For the three months ended September 30, 2002 and 2001, 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, 2002 and
2001 to reduce the net deferred tax assets to an amount currently expected to be
realized. After application of the valuation allowance, the net deferred tax
assets are zero. The current provision for income taxes for the three-month
periods ended September 30, 2002 and 2001 represents taxes withheld on foreign
source revenue.
6
6. NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted net
income (loss) per share for the periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
2002 2001 2002 2001
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Numerator for basic and diluted net income (loss) per share:
Income (loss) before extraordinary item $ (2,757) $ (2,907) $ (9,410) $ (1,576)
Loss on early extinguishment of debt (27,823) -- (27,823) --
-------- -------- -------- --------
Net income (loss) available to common shareholders $(30,580) $ (2,907) $(37,233) $ (1,576)
======== ======== ======== ========
Denominator for basic net income per share-weighted
average shares 12,899 10,341 11,304 10,231
Effects of dilutive securities:
Stock options -- -- -- --
Warrants -- 351 -- --
-------- -------- -------- --------
Dilutive potential common shares -- 351 -- --
-------- -------- -------- --------
Denominator for basic and diluted net income per
share-adjusted
weighted average shares and assumed conversions 12,899 10,692 11,304 10,231
======== ======== ======== ========
Income (loss) before extraordinary item $ (0.21) $ 0.28 $ (0.83) $ (0.15)
Loss on early extinguishment of debt (2.16) -- (2.46) --
-------- -------- -------- --------
Net income (loss) per share - basic $ (2.37) $ 0.28 $ (3.29) $ (0.15)
======== ======== ======== ========
Net income (loss) per share - diluted $ (2.37) $ 0.27 $ (3.29) $ (0.15)
======== ======== ======== ========
Common stock equivalents include 796,000 stock options and 459,775
warrants as of September 30, 2002 and have not been included in the computation
of diluted loss per common share as their effect is antidilutive.
7
7. 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 (Seabulk Offshore) - 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 (Seabulk Tankers) - Marine
transportation services include oceangoing vessels used to transport
crude oil, petroleum products and chemicals between ports and terminals
within the U.S.
TOWING (Seabulk 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 Company evaluates performance by operating segment. Also, within
the offshore energy support segment, the Company also performs evaluations of
vessels in the U.S. and foreign locations. Resources are allocated based on
segment profit or loss from operations, before interest and taxes.
Revenue by segment and geographic area consists only of services
provided to external customers, as reported in the Statements of Operations.
Income from operations by geographic area represents net revenue less applicable
costs and expenses related to that revenue. Unallocated expenses are primarily
comprised of general and administrative expenses of a corporate nature.
8
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,
-------------------------- --------------------------
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUE
Offshore energy support $ 42,968 $ 51,081 $ 130,341 $ 144,784
Marine transportation services 30,443 30,650 92,023 92,753
Towing(1) 6,958 7,989 22,843 25,027
--------- --------- --------- ---------
TOTAL $ 80,369 $ 89,720 $ 245,207 $ 262,564
========= ========= ========= =========
OPERATING EXPENSES
Offshore energy support $ 24,522 $ 24,598 $ 73,206 $ 72,897
Marine transportation services(1) 14,970 17,568 49,171 56,936
Towing 4,379 5,233 13,666 15,000
General Corporate 45 -- 354 --
--------- --------- --------- ---------
TOTAL $ 43,916 $ 47,399 $ 136,397 $ 144,833
========= ========= ========= =========
DEPRECIATION, AMORTIZATION AND DRYDOCKING
Offshore energy support $ 10,721 $ 9,575 $ 32,440 $ 27,342
Marine transportation services 4,432 4,054 13,494 12,848
Towing 830 706 2,400 2,126
General corporate 424 383 1,264 1,146
--------- --------- --------- ---------
TOTAL $ 16,407 $ 14,718 $ 49,598 $ 43,462
========= ========= ========= =========
INCOME (LOSS) FROM OPERATIONS
Offshore energy support $ 3,489 $ 13,047 $ 11,925 $ 32,580
Marine transportation services 9,909 7,598 25,334 18,811
Towing 781 1,005 3,703 4,559
General corporate (4,154) (3,085) (10,429) (10,073)
--------- --------- --------- ---------
TOTAL $ 10,025 $ 18,565 $ 30,533 $ 45,877
========= ========= ========= =========
NET INCOME (LOSS)
Offshore energy support $ (3,414) $ 4,301 $ (10,858) $ 5,709
Marine transportation services 5,298 1,970 12,087 2,546
Towing (450) (487) (141) 209
General Corporate (32,014) (2,877) (38,321) (10,040)
--------- --------- --------- ---------
TOTAL $ (30,580) $ 2,907 $ (37,233) $ (1,576)
========= ========= ========= =========
GEOGRAPHIC REVENUE
Domestic $ 48,589 $ 61,580 $ 151,511 $ 183,930
Foreign
West Africa 22,178 18,315 65,049 50,011
Middle East 5,523 5,392 17,362 16,482
Southeast Asia 4,079 4,433 11,285 12,141
--------- --------- --------- ---------
CONSOLIDATED GEOGRAPHIC REVENUE $ 80,369 $ 89,720 $ 245,207 $ 262,564
========= ========= ========= =========
- --------------------
(1) Net of elimination of intersegment towing revenue and intersegment marine
transportation operating expense of $0.1 million and $0.5 million for the
three months ended September 30, 2002 and 2001, and $0.2 million and $1.6
million for the nine months ended September 30, 2002 and 2001,
respectively.
9
8. COMMITMENTS AND CONTINGENCIES
Under United States law, "United States persons" are prohibited from
business activities and contracts in certain countries, including Sudan and
Iran. In this regard, the Company has filed three reports with, and submitted
documents to, the Office of Foreign Asset Control of the U.S. Department of
Treasury. One of the reports was also filed with the Bureau of Export
Administration of the U.S. Department of Commerce. The reports and documents
relate to certain limited charters with third parties involving three of the
Company's vessels which called in Sudan for several months in 1999 and January
2000, and charters with third parties involving several of the Company's vessels
which called in Iran in 1998. Should either of the agencies determine that these
activities constituted violations of the laws or regulations administered by
them, civil penalties, including fines, could be assessed against the Company
and/or certain individuals who knowingly participated in such activities. The
Company cannot predict whether any such penalties will be imposed or the nature
or extent of such penalties; however, management does not believe the outcome of
these matters will have a material impact on its financial position, results of
operations or cash flows.
The Company was sued by Maritime Transportation Development Corporation
in January 2002 alleging broker commissions due from charters on two of its
tanker vessels, the SEABULK MAGNACHEM and SEABULK CHALLENGER, since 1998. The
Plaintiff is seeking approximately $550,000. The Company is vigorously defending
such charges, but cannot predict the ultimate outcome of the matter.
The Company is sometimes named as a defendant in litigation, usually
relating to claims for bodily injury, or property damage. The Company maintains
insurance coverage against such claims to the extent deemed prudent by
management, and applicable deductible amounts are accrued at the time of the
incident. The Company believes that these claims do not have a material impact
on the Company's financial position, results of operations or cash flows.
In connection with the closing of the Private Placement and New Credit
Facility, President and Chief Executive Officer Gerhard E. Kurz has agreed to a
five-year extension of his employment contract with the Company.
9. RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS, which requires companies to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and a corresponding increase in the carrying amount of the related
long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. The Company adopted SFAS No. 143 as of January 1, 2002 with no
material financial statement impact.
In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which 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 supersedes SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF, and the accounting and
reporting provisions of APB Opinion No. 30. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. The Company adopted SFAS No. 144 as of
January 1, 2002 with no material financial statement impact.
10
In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB
STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB STATEMENT NO. 14, AND TECHNICAL
CORRECTIONS, which eliminates the requirement that gains and losses from the
extinguishment of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect, and eliminates an
inconsistency between the accounting for sale-leaseback transactions and certain
lease modifications that have economic effects that are similar to
sale-leaseback transactions. Subsequent to the January 1, 2003 adoption date of
the standard, the Company will be required to reclassify to continuing
operations amounts previously reported as extinguishments of debt.
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES, which addresses the financial
accounting and reporting for costs associated with exit or disposal activities.
SFAS No. 146 is effective for fiscal years beginning after December 31, 2002.
The adoption of the standard is not expected to have a significant impact on the
Company.
In June 2001, the Accounting Executive Committee of the American
Institute of Certified Public Accountants issued an exposure draft of a proposed
Statement of Position ("SOP") entitled ACCOUNTING FOR CERTAIN COSTS AND
ACTIVITIES RELATED TO PROPERTY, PLANT AND EQUIPMENT. Under the proposed SOP, the
Company would expense major maintenance costs as incurred and prohibit the use
of the deferral of the entire cost of a planned major maintenance activity.
Currently, the costs incurred to drydock the Company's vessels are deferred and
amortized on a straight-line basis over the period to the next drydocking,
generally 30 to 36 months. The proposed SOP would be effective for fiscal years
beginning after June 15, 2002. Management has determined that this SOP, if
issued as proposed, would have a material effect on the consolidated financial
statements. In the year of adoption, the Company would write-off the net book
value of the deferred drydocking costs and record the write off as a change in
accounting principle ($26.9 million as of September 30, 2002). Additionally, all
drydock expenditures incurred after the adoption of the SOP would be expensed as
incurred.
11
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 2001 Annual Report on Form 10-K.
References to the "2001 Form 10-K" in this Quarterly Report are to a restated
and amended Annual Report on Form 10-K/A.
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 2001 Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
For general information concerning critical accounting policies as well
as estimates, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations, Critical Accounting Policies and Estimates" in the
2001 Form 10-K.
In June 2001, the Accounting Executive Committee of the American
Institute of Certified Public Accountants issued an exposure draft of a proposed
Statement of Position ("SOP") entitled ACCOUNTING FOR CERTAIN COSTS AND
ACTIVITIES RELATED TO PROPERTY, PLANT AND EQUIPMENT. Under the proposed SOP, the
Company would expense major maintenance costs as incurred and prohibit the use
of the deferral of the entire cost of a planned major maintenance activity.
Currently, the costs incurred to drydock the Company's vessels are deferred and
amortized on a straight-line basis over the period to the next drydocking,
generally 30 to 36 months. The proposed SOP would be effective for fiscal years
beginning after June 15, 2002. Management has determined that this SOP, if
issued as proposed, would have a material effect on the consolidated financial
statements. In the year of adoption, the Company would write off the net book
value of the deferred drydocking costs and record the write off as a change in
accounting principle ($26.9 million as of September 30, 2002). Additionally, all
drydock expenditures incurred after the adoption of the SOP would be expensed as
incurred.
PRIVATE PLACEMENT AND REFINANCING
On September 13, 2002, the Company completed the private placement of
12.5 million shares of newly issued Seabulk common stock at a cash price of
$8.00 per share (the "Private Placement") to a group of investors including an
entity associated with DLJ Merchant Banking Partners III, L.P., an affiliate of
CSFB Private Equity, and entities associated with Carlyle/Riverstone Global
Energy and Power Fund I, L.P., an affiliate of The Carlyle Group of Washington,
D.C. The stock issuance was previously approved by the Company's shareholders at
a Special Meeting held on September 5, 2002.
On September 13, 2002, the Company completed an agreement with Fortis
Capital Corp. and NIB Capital Bank N.V., as arrangers, for a $180 million senior
secured credit facility (the "New Credit Facility"), which replaced the
Company's existing facility. The New Credit Facility consists of an $80 million
term loan and a $100 million revolving credit facility and has a five-year
maturity. For more information, see Note 2 as well as the Liquidity and Capital
Resources section of the Management's Discussion and Analysis of Financial
Condition and Results of Operations.
12
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 53% and 57% of Company revenue for the three months
ended September 30, 2002 and 2001, respectively. Marine transportation consists
of the Company's Jones Act domestic tanker business, in which it owns eight
petroleum and chemical product carriers in the domestic coastwise trade, has a
67.3% ownership interest in a ninth, and is the bareboat charterer with a
purchase option on a tenth. Marine transportation accounted for approximately
38% and 34% of Company revenue for the three months ended September 30, 2002 and
2001, respectively. Seabulk Towing, the Company's domestic harbor and offshore
towing business, accounted for approximately 9% of Company revenue for the three
months ended September 30, 2002 and 2001.
SEABULK OFFSHORE
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
very short 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.
As the Company's offshore energy support fleet gets older, the
Company's strategy is to look for opportunities to upgrade its offshore fleet to
higher value, newer vessels and to reduce the number of older and smaller
crewboats in its fleet. The Company has sold 14 offshore energy support vessels
during 2002 for an aggregate total of $5.7 million.
Periods for collection of receivables in certain foreign areas of
operation in the offshore business tend to be longer than is usual for the
United States. The Company regularly monitors all such receivables accounts and
believes that it has accrued adequate reserves where necessary.
13
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 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 2002 Q2 2002 Q3 2002
---------------------------- --------------------------- ----------------------------
AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/
Supply Tugs Utility Other Supply Tugs Utility Other Supply Tugs Utility Other
---------------------------------------------------------------------------------------
DOMESTIC(1)
Vessels(2) (3) (4) (8) (9) 24 - 30 2 21 - 31 2 21 - 31 2
Bareboat-out(4) - - - - - - - - - - - -
Laid-Up - - - 1 - - - 1 - - - 1
Effective Utilization(5) 59% - 65% - 63% - 58% - 63% - 62% -
Day Rate $6,687 - $2,666 - $6,005 - $2,469 - $5,581 - $2,530 -
WEST AFRICA
Vessels(2) (3) (6) (7) (8) 29 5 7 1 30 5 6 1 30 5 6 1
Laid-Up - 1 - - - 1 - - - 1 - -
Effective Utilization(5) 84% 86% 89% 97% 85% 97% 84% - 80% 87% 76% -
Day Rate $7,368 $6,613 $3,124 - $8,042 $6,522 $2,722 - $7,787 $6,234 $2,976 -
MIDDLE EAST
Vessels(2) 6 8 8 5 6 8 8 5 6 8 8 5
Laid-Up - 1 1 1 - 1 1 1 - 1 1 1
Effective Utilization(5) 83% 75% 81% 77% 79% 62% 85% 66% 92% 49% 88% 65%
Day Rate $3,265 $4,571 $1,649 $4,502 $3,250 $5,048 $1,668 $4,475 $3,496 $4,556 $1,646 $4,181
SOUTHEAST ASIA
Vessels(2) (7) (10) 8 - 5 2 8 - - 2 8 - - 2
Laid-Up - - - - - - - - - - - -
Effective Utilization(5) 59% - 53% 44% 68% - - - 66% - - -
Day Rate $5,510 - $1,472 - $6,320 - - - $5,584 - - -
- ------------------------------------
(1) Domestic consists of vessels operating in the United States, the U.S.
Gulf of Mexico and Mexico.
(2) Held-for-sale and bareboat-out vessels are excluded from the vessel
count.
(3) During Q1 2002, two Anchor Handling Tug Supply Vessels were transferred
from Domestic to West Africa.
(4) During Q1 2002, a bareboat contract for one Geophysical Vessel in the
Domestic operating region expired and the vessel was returned to the
Company.
(5) Effective utilization excludes laid-up vessels.
(6) During Q1 2002, the Company reactivated one AHT from "held-for-sale"
status. This vessel was placed into service in West Africa.
(7) During Q1 2002, the Company reactivated one Anchor Handling Tug Supply
Vessel from "held-for-sale" status and placed the vessel into service in
Southeast Asia. Additionally during Q1 2002, the Company transferred one
utility boat from Southeast Asia to West Africa.
(8) During Q2 2002, two Anchor Handling Tug Supply Vessels were sold.
Additionally during Q2 2002, the Company transferred one supply vessel
to West Africa.
(9) During Q2 2002, one Crewboat was returned to Domestic from West Africa.
(10) During Q2 2002, five Crewboats in Southeast Asia were sold.
14
Q1 2001 Q2 2001 Q3 2001 Q4 2001
--------------------------- --------------------------- --------------------------- ----------------------------
AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other AHTS/ AHT/ Crew/ Other
Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility Supply Tugs Utility
-------------------------------------------------------------------------------------------------------------------
DOMESTIC(1)
Vessels(2)(3)(4) 26 - 31 1 26 - 33 1 26 - 32 1 26 - 32 1
Bareboat-out(4) - - 2 1 - - 2 1 - - - 1 - - - 1
Laid-Up 1 - - 1 1 - - 1 - - - 1 - - - 1
Effective
Utilization(5) 75% - 87% - 90% - 87% - 83% - 83% - 63% - 72% -
Day Rate $6,946 - $2,709 - $7,397 - $2,929 - $7,486 - $3,061 - $7,141 - $2,928 -
WEST AFRICA
Vessels(2)(3)
(6)(8) 27 3 6 1 27 4 5 1 27 4 6 1 27 4 6 1
Laid-Up - - - - - - - - - - - - - - - -
Effective
Utilization(5) 83% 46% 85% - 86% 41% 77% 84% 82% 63% 64% 84% 76% 86% 80% 96%
Day Rate $6,325 $4,491 $2,754 - $6,988 $5,528 $2,774 $6,160 $7,644 $6,097 $2,715 $7,363 $7,829 $8,041 $3,358 $9,246
MIDDLE EAST
Vessels(2)(3)
(7)(9)(11)(12) 5 8 11 7 5 8 11 7 5 8 9 6 6 8 8 5
Laid-Up(12) - - - - - - - - - - - - - 1 1 1
Effective
Utilization(5) 77% 24% 66% 56% 92% 50% 59% 69% 86% 48% 65% 43% 81% 60% 86% 64%
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 $3,121 $4,937 $1,671 $3,986
SOUTHEAST ASIA
Vessels(2)(6)
(10)(11) 8 1 5 1 8 1 5 1 8 - 6 2 7 - 6 2
Laid-Up - - 1 - - - 1 - - - - - - - - -
Effective
Utilization(5) 87% 37% 89% 33% 83% 46% 73% 71% 79% - 69% 100% 69% - 51% 52%
Day Rate $5,347 $3,929 $1,429 $6,614 $4,277 $4,255 $1,443 $6,630 $4,762 - $1,708 $8,298 $5,285 - $1,674 $7,302
- ------------------------------------
(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.
(11) During Q4 2001, one supply vessel was transferred from Southeast Asia to
Middle East. 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.
(12) During Q4 2001, the Company transferred one crewboat to "held-for-sale"
status. Additionally, three vessels were laid-up during Q4 2001.
15
Domestic revenue for the nine months ended September 30, 2002 was
adversely affected by the slowdown in natural gas drilling activity in the U.S.
Gulf of Mexico as a result of somewhat lower natural gas prices and high
inventories. The lower level of natural gas prices resulted from above-average
inventory buildups and reduced demand due to one of the mildest winters on
record and a general slowdown in economic activity. Exploration and production
companies in the U.S. Gulf of Mexico responded by cutting back their level of
spending as evidenced by the significant drop in offshore rig fleet utilization
rates during the last half of calendar year 2001 and in the first nine months of
2002. Although there is still uncertainty in the market, the recent rise in both
crude oil and natural gas prices, driven by concern over a potential Middle East
conflict, the temporary shutoff of Iraqi and Venezuelan imports and other
factors, should eventually aid a recovery in the Gulf of Mexico offshore vessel
market.
As the demand for vessels in the domestic market is primarily driven by
natural gas exploration and production, it is difficult to predict what effect
the current fluctuation in natural gas prices and the uncertainty in the
economic environment will have on demand for the Company's vessels in the
domestic market.
International offshore revenues for the nine months ended September 30,
2002 benefited from increases in vessel count and utilization. In West Africa,
the demand for vessels, and hence utilization, remained strong as this is an
oil-driven market with longer time horizons and increasing exploration and
production budgets primarily from oil company majors. The Company redeployed
five vessels to its West African operations during the nine months ended
September 30, 2002.
International vessel demand is primarily driven by crude oil
production. During the quarter crude oil prices and demand remained firm. The
Company expects international exploration and production spending to continue to
increase in West Africa, which should strengthen vessel demand in that area.
Revenue and utilization were also up for the Company's Middle East operations.
In Southeast Asia, revenue declined from the year-earlier period due to reduced
utilization caused by vessel downtimes as well as the sale of five crewboats in
the second quarter.
Average day rates and utilization for the Company's anchor handling tug
supply vessels and supply boats at October 31, 2002 for Domestic, West Africa,
the Middle East and Southeast Asia were approximately $5,150/52%, $7,150/77%,
$3,400/83% and $6,750/50%, respectively.
The Company had four offshore vessels in "held-for-sale" status as of
September 30, 2002. The majority of these vessels were previously laid up.
SEABULK TANKERS
Revenue from the Company's marine transportation services is derived
principally from the operations of ten tankers carrying crude oil, petroleum
products and chemical products in the Jones Act trade and, to a lesser extent,
from the Sun State towboat and fuel barge operations in Green Cove Springs,
Florida, which were sold in March 2002.
The Company's tanker fleet operates on either long-term time charters,
bareboat charters, or pursuant to short-term contracts of affreightment. The
Company currently has six tankers operating under long-term time charters, three
on short-term contracts of affreightment and one under a bareboat charter.
16
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,
------------------------------
2002 2001
------- -------
Number of vessels owned 10 10
Revenue (in thousands) $88,138 $84,827
Tanker revenue increased by 3.9% as a result of improved rates for the
Company's three chemical carriers operating under short-term contracts of
affreightment, as well as better rates on the long-term time charters.
PETROLEUM TANKERS. Demand for crude oil and petroleum product
transportation services is dependent both on production and refining levels as
well as on consumer and commercial consumption of petroleum products and
chemicals. The Company owned eight petroleum product tankers at September 30,
2002. Five of these are double-hull, state-of-the-art vessels, of which two have
chemical-carrying capability. At the end of December 2001, voyage charters for
three vessels expired and were replaced by two multi-year time charters at time
charter-equivalent rates 55% above the returns achieved for these vessels in
2001. For the third vessel, the Company entered into a ten-year bareboat charter
agreement with a major oil company. Beginning in January 2002, the oil company
charterer has exclusive possession and control of the vessel and is responsible
for all operating and drydocking expenses of the vessel. The Company also
entered into a time charter securing a fourth vessel, commencing in the fourth
quarter of 2001 at a 25% increase over the expiring rate. In the third quarter
of 2002, a vessel previously trading under a short-term contract of
affreightment entered into a three-year time charter with a major oil company,
and two of our existing time charters were extended through July 10, 2010. Under
a time charter, fuel and port charges are borne by the charterer customer 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 the 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. None of our single-hull vessels is scheduled for
retirement under OPA 90 before 2007.
CHEMICAL TANKERS. Demand for industrial chemical transportation
services generally coincides with overall economic activity. The Company
operated two chemical tankers and one of the five double-hull vessels in the
chemical trade as of September 30, 2002. The chemical tankers are double-bottom
ships. The higher day rate environment for petroleum tankers is carrying over
into the chemical tanker market as charterers look for quality tonnage to
replace older single-hull vessels.
INLAND TUGS AND BARGES. Revenue from the Company's Sun State Marine
Services subsidiary was derived primarily from contracts of affreightment with
Colonial Oil Industries (formerly known as Steuart Petroleum Co.) and Florida
Power & Light (FPL) and from ship maintenance, repair, drydocking and
construction activities. Revenue from all of Sun State's operations totaled $3.9
and $7.7 million, respectively, for the nine months ended September 30, 2002 and
2001. The decrease in Sun State revenue is due to the sale of its marine
transportation tug and barge assets on March 22, 2002. On July 9, 2002, the
Company also closed on the sale of drydock and related shipyard equipment of Sun
State for $450,000, resulting in a gain of approximately $88,000.
17
SEABULK 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.
The following table summarizes certain operating information for the
Company's tugs:
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2002 2001
------- -------
Number of tugs at end of period 31 31
Revenue (in thousands) $22,843 $25,027
Towing revenue decreased by 8.7% for the nine months ended September
30, 2002 compared to the same period in the prior year. The decrease in revenue
is due to reduced vessel traffic in certain of the Company's ports, reflecting
the slowdown in international trade and reduced demand for towing services in
the offshore market. The Company expects that towing revenue in fiscal 2002 will
decrease marginally compared to fiscal 2001 due to competition and a less than
robust economy.
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 2001 Form 10-K.
The Company and other vessel owners in the marine industry are facing
potential increases in premiums for the upcoming renewal period in early 2003
for protection and indemnity insurance. It is possible that premiums and
deductibles may increase.
18
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,
-------------------------------------------
2002 2001
----------------- -----------------
(IN MILLIONS)
Revenue $80.4 100% $89.7 100%
Operating expenses 43.9 55 47.4 53
Overhead expenses 10.1 12 9.0 10
Depreciation, amortization and
drydocking 16.4 20 14.7 17
----- ---- ----- ----
Income from operations $10.0 13% $18.6 20%
Interest expense, net $11.5 14% $13.7 15%
Other income (expense), net $ 0.4 0% $(0.3) 0%
----- ---- ----- ----
Net income (loss) before income taxes
and extraordinary item $(1.1) (1)% $ 4.6 5%
===== ==== ===== ====
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THE THREE MONTHS ENDED
SEPTEMBER 30, 2001
REVENUE. Revenue decreased 10.4% to $80.4 million for the three months
ended September 30, 2002 from $89.7 million for the three months ended September
30, 2001.
Offshore energy support revenue decreased 15.9% to $43.0 million for
the three months ended September 30, 2002 from $51.1 million for the same period
in 2001, primarily due to reduced revenue from the U.S. Gulf of Mexico offset in
part by increased revenue from the West Africa operating region. Revenue from
the U.S. Gulf of Mexico decreased during the three months ended September 30,
2002 compared to the same period in 2001 primarily due to reduced exploration
and production activity in response to somewhat low natural gas prices, high
inventories and reduced demand. The increase in West Africa revenue was driven
by higher day rates and an expanded vessel count as offshore exploration and
production activity remained strong.
Marine transportation revenue remained substantially the same at $30.4
million for the three months ended September 30, 2002 compared to $30.7 million
for the three months ended September 30, 2001. Revenue increased in the tanker
fleet as a result of improved rates for the Company's three chemical carriers
operating under short-term contracts of affreightment and higher rates for the
Company's long-term time charters. This was offset by a decrease in revenue for
Sun State as a result of discontinuing operations in March 2002.
Towing revenue decreased 12.9% to $7.0 million for the three months
ended September 30, 2002 from $8.0 million for the three months ended September
30, 2001. The decrease in revenue was due to reduced vessel traffic in certain
of the Company's ports, reflecting the slowdown in international trade, as well
as reduced demand for towing services in the offshore market. The Company
expects that towing revenue in fiscal 2002 will decrease marginally compared to
fiscal 2001 due to competition and a less than robust economy.
19
OPERATING EXPENSES. Operating expenses decreased 7.3% to $43.9 million
for the three months ended September 30, 2002 from $47.4 million for the same
period in 2001. The decrease is primarily due to the change from spot trading to
time charters for two tankers and the bareboat charter of a third tanker, and
the sale of Sun State's marine transportation assets in the first quarter. The
decrease in expenditures is partially offset by an increase in operating
expenses in the West Africa region due to higher crew payroll and repair and
maintenance expenditures. As a percentage of revenue, operating expenses
increased to 54.6% for the three months ended September 30, 2002 from 52.8% for
the 2001 period.
OVERHEAD EXPENSES. Overhead expenses increased 10.9% to $10.1 million
for the three months ended September 30, 2002 from $9.0 million for the same
period in 2001, primarily due to an increase in professional fees and insurance
expense. As a percentage of revenue, overhead expenses increased to 12.5% for
the three months ended September 30, 2002 compared to 10.1% for the same period
in 2001.
DEPRECIATION, AMORTIZATION AND DRYDOCKING. Depreciation, amortization
and drydocking increased 11.5% to $16.4 million for the three months ended
September 30, 2002 from $14.7 million for the three months ended September 30,
2001, primarily due to more planned drydocking expenditures for offshore energy
support vessels and tankers during the second half of 2001 and the first nine
months of 2002. As a result, drydock amortization expense is also higher as
drydock costs are amortized on a straight-line basis over the period to the next
drydocking (generally 30 months).
NET INTEREST EXPENSE. Net interest expense decreased 15.9% to $11.5
million for the three months ended September 30, 2002 from $13.7 million for the
same period in 2001. 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. Interest expense also decreased as
a result of the debt and equity transaction in September 2002 (see Note 2). The
interest rate on the New Credit Facility is substantially less than the rate on
Company's Senior Notes, which were redeemed on October 15, 2002.
OTHER INCOME, NET. Other income, net increased to $0.4 million for the
three months ended September 30, 2002 compared to other expense, net of $0.3
million for the same period in 2001, primarily due to a gain on asset sales in
2002 compared to a loss on asset sales in the 2001 period.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 2001
REVENUE. Revenue decreased 6.6% to $245.2 million for the nine months
ended September 30, 2002 from $262.6 million for the nine months ended September
30, 2001.
Offshore energy support revenue decreased 10.0% to $130.3 million for
the nine months ended September 30, 2002 from $144.8 million for the same period
in 2001, primarily due to reduced revenue from the U.S. Gulf of Mexico. This was
offset in part by higher revenue from the West Africa operating region. Revenue
from the U.S. Gulf of Mexico decreased during the nine months ended September
30, 2002 compared to the same period in 2001 primarily due to reduced
exploration and production activity in response to low natural gas prices, high
inventories and reduced demand. The increase in West Africa revenue was driven
by higher day rates and an expanded vessel count as offshore exploration and
production activity remained strong. The Company took advantage of the expanding
West Africa market by (1) mobilizing three of its Gulf of Mexico supply boats
and one Southeast Asia utility boat for redeployment to West Africa and (2)
reactivating one anchor-handling tug from "held-for-sale" status to active
status in West Africa during the first half of 2002.
20
Marine transportation revenue remained substantially the same at $92.0
million for the nine months ended September 30, 2002 as compared to $92.8
million for the nine months ended September 30, 2001. Tanker revenue increased
by 3.9% as a result of improved rates for the Company's three chemical carriers
operating under short term arrangements, as well as better rates on the
long-term time charters. This was offset by a decrease in revenue for Sun State
as a result of discontinuing operations in March 2002.
Towing revenue decreased by 8.7% to $22.8 million for the nine months
ended September 30, 2002 from $25.0 million for the nine months ended September
30, 2001. The decrease in revenue was due to reduced vessel traffic in certain
of the Company's ports, reflecting the slowdown in international trade, as well
as reduced demand for towing services in the offshore market. The Company
expects that towing revenue in fiscal 2002 will decrease marginally compared to
fiscal 2001 due to competition and a less than robust economy.
OPERATING EXPENSES. Operating expenses decreased 5.8% to $136.4 million
for the nine months ended September 30, 2002 from $144.8 million for the same
period in 2001, primarily due to the change from spot trading to time charters
for two tankers, the bareboat charter of a third tanker, and the sale of Sun
State's marine transportation assets in the first quarter. As a percentage of
revenue, operating expenses increased to 55.6% for the nine months ended
September 30, 2002 from 55.2% for the 2001 period.
OVERHEAD EXPENSES. Overhead expenses remained substantially the same at
$28.7 million for the nine months ended September 30, 2002 as compared to $28.4
million for the same period in 2001. The decrease in office 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. The increase in other overhead expenses is due to an
increase in insurance expenses. As a percentage of revenue, overhead expenses
increased to 11.7% for the nine months ended September 30, 2002 compared to
10.8% for the same period in 2001.
DEPRECIATION, AMORTIZATION AND DRYDOCKING. Depreciation, amortization
and drydocking increased 14.1% to $49.6 million for the nine months ended
September 30, 2002 from $43.5 million for the nine months ended September 30,
2001, primarily due to more planned drydocking expenditures for offshore energy
support vessels and tankers during the second half of 2001 and the first nine
months of 2002. As a result, drydock amortization expense is also higher as
drydock costs are amortized on a straight-line basis over the period to the next
drydocking (generally 30 months).
NET INTEREST EXPENSE. Net interest expense decreased 13.9% to $36.5
million for the nine months ended September 30, 2002 from $42.4 million for the
same period in 2001. 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. Interest expense also decreased as
a result of the debt and equity transaction in September (see Note 2). The
interest rate on the New Credit facility is substantially less than the rate on
the Company's former Senior Notes, which were redeemed on October 15, 2002.
OTHER INCOME, NET. Other income, net increased to $1.6 million for the
nine months ended September 30, 2002 compared to other expense, net of $0.2
million for the same period in 2001, primarily due to a gain on asset sales in
2002 of $1.6 million.
21
LIQUIDITY AND CAPITAL RESOURCES
RECAPITALIZATION On September 13, 2002, the Company completed the
private placement of 12.5 million shares of newly issued Seabulk common stock at
a cash price of $8.00 per share (the "Private Placement") to a group of
investors including an entity associated with DLJ Merchant Banking Partners III,
L.P., an affiliate of CSFB Private Equity, and entities associated with
Carlyle/Riverstone Global Energy and Power Fund I, L.P., an affiliate of The
Carlyle Group of Washington, D.C. The stock issuance was previously approved by
the Company's shareholders at a Special Meeting held on September 5, 2002.
The new investors also purchased, for $8.00 per share, 5.1 million of
the Company's common stock and common stock purchase warrants beneficially owned
by accounts managed by Loomis, Sayles & Co., L.P., an SEC-registered investment
advisor. Taken together, the two transactions give the new investors
approximately 72% of the pro forma, fully diluted shares of the Company's common
stock. Pursuant to the agreement with the investors, the Company's Board of
Directors has been restructured to permit the new investors to hold a majority
of seats on the Board.
On September 13, 2002, the Company completed an agreement with Fortis
Capital Corp. and NIB Capital Bank N.V., as arrangers, for a $180 million senior
secured credit facility (the "New Credit Facility"), which replaced the
Company's existing facility. The New Credit Facility consists of an $80 million
term loan and a $100 million revolving credit facility and has a five-year
maturity.
The revolving portion of the New Credit Facility is subject to
semi-annual reductions commencing six months after closing. The term loan
portion is subject to semi-annual reductions commencing 36 months after closing.
Interest on the loans is payable monthly, with a variable interest rate. The
rate is either a LIBOR or base rate plus a margin based upon certain financial
ratios of the Company. The interest rate margin may be adjusted in the
syndication process.
The New Credit Facility is secured by first ship mortgages on
substantially all of the Company's vessels (excluding vessels financed with U.S.
Maritime Administration Title XI financing) and is guaranteed by most of the
subsidiaries of the Company. The New Credit Facility is also secured by second
ship mortgages on two of the Company's tankers and three of the Company's tugs.
The New Credit Facility is subject to various financial covenants,
including minimum adjusted tangible net worth requirements, minimum ratios of
adjusted EBITDA to adjusted interest expense, and a maximum ratio of adjusted
funded debt to adjusted EBITDA. The Company is required to maintain a minimum
fair market value of collateralized assets of at least 175% of outstanding
borrowings under the New Credit Facility, based upon appraisals which may be
requested not more than once during any 12-month period.
Proceeds from the Private Placement and New Credit Facility of
approximately $266.1 million, net of $12.7 million of fees and expenses of the
transaction, were used primarily to repay the Company's prior bank debt of
approximately $151.5 million and redeem its outstanding Senior Notes for
approximately $101.5 million.
On September 13, 2002, the Company deposited $101.5 million to State
Street Bank & Trust as Paying Agent for the redemption of the Senior Notes. As a
result, the Company was released and discharged from all of its obligations
under the Notes and they were effectively discharged at that date. The Senior
Notes were administratively discharged on October 15, 2002.
22
CASH FLOWS. Net cash provided by operating activities totaled $55.0
million for the nine months ended September 30, 2002 compared to $56.2 million
for the same period in 2001. The decrease in cash provided by operating
activities is primarily the result of a net loss before extraordinary item of
$9.4 million for the nine months ended September 30, 2002 as compared to a net
loss of $1.6 million for the same period in 2001.
Net cash used in investing activities was $8.1 million for the nine
months ended September 30, 2002 compared to $18.5 million for the same period in
2001. The reduction of cash used in investing activities is due primarily to a
larger amount of proceeds from asset sales. In particular, on March 22, 2002,
the Company closed on the sale of the towboat/barge assets of Sun State for $3.8
million in cash.
Net cash used in financing activities for the nine months ended
September 30, 2002 was $14.1 million compared to $26.5 million for the same
period in 2001. The decrease in cash used in financing activities is
attributable to excess cash generated from the recapitalization and refinancing
completed in September 2002.
RECENT EXPENDITURES AND FUTURE CASH REQUIREMENTS. During the first nine
months of 2002, the Company incurred $19.6 million in capital expenditures for
fleet improvements and drydocking costs. For the remainder of 2002, these
capital expenditures are expected to aggregate $4.4 million. The total expected
expenditures of $24.0 million will substantially cover all of the Company's
drydocking and capital expenditure requirements.
Long-term debt consisted of the following at September 30, 2002 (in
millions):
OUTSTANDING
2002 BALANCE INTEREST RATE
YEAR-TO-DATE AS OF AS OF
FACILITY PAYMENTS SEPTEMBER 30, 2002 MATURITY NOVEMBER 1, 2002
-------------------------- ----------------------------------------------- ------------- ------------------
Fortis Tranche A revolver $ 0.00 $98.80 2007 4.80%
Fortis Tranche B term loan $ 0.00 $80.00 2007 5.30%
Amendment fee note $ 4.79(2) $ 0.00 2002 --
Tranche A term loan $52.36 $ 0.00(1) 2004 --
Tranche B term loan $24.63 $ 0.00(1) 2005 --
Tranche C term loan $78.00 $ 0.00(1) 2006 --
Revolving Credit Facility $ 9.00(2) $ 0.00(1) 2004 --
Senior Notes $97.44 $ 0.00(1) 2007 --
Title XI Financing Bonds $ 4.00 $237.60 2005 to 2024 5.86% to 10.10%
Other notes payable $ 3.54 $ 24.40 2003 to 2011 8.09% to 8.50%
- -----------------------
(1) Retired as a result of refinancing transaction dated September 13, 2002
(see Note 2).
(2) Represents net payments
In addition to the revolver balance of $98.8 million, there are $1.2
million in outstanding letters of credit as of September 30, 2002. The Company
is required to make semi-annual principal repayments on the revolver commencing
six months after closing with the final payment due in September, 2007. The
Company is also required to make semi-annual principal repayments on the term
loan commencing 36 months after closing with the final payment due 54 months
after closing.
The Company's capital requirements arise primarily from its need to
service debt, fund working capital and maintain and improve its vessels. The
Company's expected capital requirements for debt service, vessel maintenance and
fleet improvements for 2002 and 2003 is approximately $94 million and $81
million, respectively. The Company's expected capital requirements for the
remainder of 2002 is approximately $20 million. The Company expects that cash
flow from operations will continue to be a significant source of funds for our
working capital and capital requirements.
The Company is required to make deposits to a U.S. Maritime
Administration ("MARAD") Title XI reserve fund based on a percentage of net
income attributable to the operations of its five double-hull tankers, as
23
defined by the Title XI Reserve Fund and Financial Agreement. Cash held in the
Title XI reserve fund is invested by the trustee of the fund, and any income
earned thereon is either paid to the Company or retained in the reserve fund.
Withdrawals from the Title XI reserve fund may be made for limited purposes,
subject to prior approval from MARAD. To date, no deposits have been required to
be made to the reserve fund. Additionally, according to the Title XI Reserve
Fund and Financial Agreement, the Company is restricted from formally
distributing excess cash from the operations of the five double-hull tankers
until certain working capital amounts have been reached. Accordingly, at
September 30, 2002, the Company had approximately $22.2 million in cash and cash
equivalents that are restricted for use from the operations of the five
double-hull tankers and cannot be used to fund the Company's general working
capital requirements without MARAD approval. Based on current projections, the
Company expects to meet the working capital requirements under the Title XI
Reserve Fund and Financial Agreement in the first quarter of 2003 and at such
time the cash shall became unrestricted cash.
Management recognizes that unforeseen events or business conditions,
including deterioration in its markets, could prevent the Company from meeting
targeted operating results.
INFLATION
The rate of inflation has not had a material impact on our operations.
Moreover, if inflation remains at its recent levels, it is not expected to have
a material impact on our operations for the foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued SFAS No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS, which establishes a new method of
testing goodwill for impairment using a fair value-based approach and does not
permit amortization of goodwill as previously required by Accounting Principles
Board (APB) Opinion No. 17, INTANGIBLE ASSETS. An impairment loss would be
recorded if the recorded goodwill exceeds its implied fair value. The Company
adopted SFAS No. 142 effective January 1, 2002. As the Company does not have any
recorded goodwill or other intangible assets, the adoption of this statement had
no impact on its financial statements.
Also in July 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS, which requires companies to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred and a corresponding increase in the carrying amount of the related
long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. The Company adopted SFAS No. 143 as of January 1, 2002 with no
material financial statement impact.
In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE
IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS, which 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 supersedes SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS TO BE DISPOSED OF, and the accounting and
reporting provisions of APB Opinion No. 30. SFAS No. 144 is effective for fiscal
years beginning after December 15, 2001. The Company adopted SFAS No. 144 as of
January 1, 2002 with no material financial statement impact.
24
In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB
STATEMENTS NO. 4, 44 AND 64, AMENDMENT OF FASB STATEMENT NO. 14, AND TECHNICAL
CORRECTIONS, which eliminates the requirement that gains and losses from the
extinguishment of debt be aggregated and, if material, classified as an
extraordinary item, net of the related income tax effect, and eliminates an
inconsistency between the accounting for sale-leaseback transactions and certain
lease modifications that have economic effects that are similar to
sale-leaseback transactions. Generally, SFAS No. 145 is effective for
transactions occurring after May 15, 2002. The adoption of the standard will
have no impact to the Company.
In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES, which addresses the financial
accounting and reporting for costs associated with exit or disposal activities.
SFAS No. 146 is effective for fiscal years beginning after December 31, 2002.
The adoption of the standard will have no impact on the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
Information about the Company's exposure to market risk was disclosed
in its 2001 Annual Report on Form 10-K/A. There have been no material
quantitative or qualitative changes in market risk exposures since the date of
that filing.
The Jones Act restricts the U.S. coastwise trade to vessels owned,
operated and crewed substantially by U.S. citizens. The Jones Act continues to
be in effect and supported by Congress and the Administration. However, it is
possible that the Company's advantage as a U.S. citizen operator of Jones Act
vessels could be somewhat eroded over time as there continues to be periodic
efforts and attempts by foreign interests to circumvent certain aspects of the
Jones Act.
ITEM 4. CONTROLS AND PROCEDURES
Within the 90-day period prior to the filing of this quarterly report
on Form 10-Q, the Company performed an evaluation, under the supervision and
participation of management, of the effectiveness of the design and operation of
its disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.
Based upon that evaluation, the Chief Executive Officer and the Chief Financial
Officer have concluded that these disclosure controls are effective in providing
them with material information relating to the Company as required to be
disclosed in the Company's periodic SEC filings.
There were no significant changes in the Company's internal controls or
in other factors that could significantly affect these controls subsequent to
the evaluation date.
25
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information concerning certain legal proceedings see Note 8 of the
financial statements.
ITEM 2. CHANGES IN SECURITIES
On September 13, 2002, the Company completed the private placement of
12.5 million shares of newly issued Seabulk common stock at a cash price of
$8.00 per share (the "Private Placement") to a group of investors including an
entity associated with DLJ Merchant Banking Partners III, L.P., an affiliate of
CSFB Private Equity, and entities associated with Carlyle/Riverstone Global
Energy and Power Fund I, L.P., an affiliate of The Carlyle Group of Washington,
D.C. This issuance of securities was made in reliance upon the exemptions from
registration set forth in Section 4(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held a special meeting of shareholders on September 5,
2002. At the meeting, the shareholders approved the issuance of 12.5 million
shares of our common stock at $8.00 per share to certain investors.
The shareholders also approved an increase in the number of authorized
shares of common stock from 20,000,000 to 40,000,000, removed the classification
of the Board into three classes of directors, and added certain minority
stockholder protection provisions.
The voting results of the issuance of common stock, increase in
authorized shares, removing the Board classification, and adding minority
stockholder protection provisions are as follows:
To approve the issuance of 12,500,000 shares of common stock:
VOTES FOR VOTES AGAINST VOTES ABSTAINING
--------- --------------- ----------------
6,502,763 2,440,868 200
To approve the increase in the number of authorized shares of common
stock from 20,000,000 to 40,000,000:
VOTES FOR VOTES AGAINST VOTES ABSTAINING
--------- --------------- ----------------
6,502,863 2,440,768 200
To approve the removal of the classification of the Board into three
classes of Directors:
VOTES FOR VOTES AGAINST VOTES ABSTAINING
--------- --------------- ----------------
8,941,462 2,026 343
To approve certain minority stockholder protection provisions:
VOTES FOR VOTES AGAINST VOTES ABSTAINING
--------- --------------- ----------------
8,941,462 2,073 400
26
ITEM 5. OTHER INFORMATION
Accompanying the filing of this Form 10-Q for the quarterly period
ended September 30, 2002, we have provided to the Securities and Exchange
Commission the Certifications of the Chief Executive Officer and the Chief
Financial Officer required pursuant to 18 U.S.C. Section 1359, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the
quarter ended September 30, 2002:
1. The Company filed a Current Report on Form 8-K dated
August 8, 2002. Items 5 and 9 were reported and no
financial statements were filed.
2. The Company filed a Current Report on Form 8-K dated
August 14, 2002. Item 9 was reported and no financial
statements were filed.
3. The Company filed a Current Report on Form 8-K dated
September 5, 2002. Items 5 and 9 were reported and no
financial statements were filed.
4. The Company filed a Current Report on Form 8-K dated
September 13, 2002. Items 1, 5 and 7 were reported
and no financial statements were filed.
27
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/ MICHAEL J. PELLICCI
- ---------------------------------------
Michael J. Pellicci
VP - Finance and Corporate Controller
(Principal Accounting Officer)
Date: November 14, 2002
28
CERTIFICATION OF
GERHARD E. KURZ, CHIEF EXECUTIVE OFFICER
OF SEABULK INTERNATIONAL, INC.
PURSUANT TO 18 U.S.C. SS.. 1350
1. I have reviewed this quarterly report on Form 10-Q of Seabulk
International, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002
/s/ GERHARD E. KURZ
------------------------------
Name: Gerhard E. Kurz
Title: Chairman, President and
Chief Executive Officer
29
CERTIFICATION OF
VINCENT J. deSOSTOA, CHIEF FINANCIAL OFFICER
OF SEABULK INTERNATIONAL, INC.
PURSUANT TO 18 U.S.C. . SS.. 1350
1. I have reviewed this quarterly report on Form 10-Q of Seabulk
International, Inc.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002
/s/ VINCENT J. deSOSTOA
-----------------------------------
Name: Vincent J. deSostoa
Title: Senior Vice President and
Chief Financial Officer
30