-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pi40ph/P9bd0oKAtLUrf80KHQYOD1XKArEVuyl5J9bg2Ih7HLwqWnKsMQ6cMH+9S yUqPvXVAUvZo1Gd62xNQcg== 0000925328-00-000045.txt : 20000516 0000925328-00-000045.hdr.sgml : 20000516 ACCESSION NUMBER: 0000925328-00-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HVIDE MARINE INC CENTRAL INDEX KEY: 0000922341 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 650524593 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28732 FILM NUMBER: 634118 BUSINESS ADDRESS: STREET 1: 2200 ELLER DR BLDG 27 STREET 2: PO BOX 13038 CITY: FORT LAUDERDALE STATE: FL ZIP: 33316 BUSINESS PHONE: 3055232200 MAIL ADDRESS: STREET 1: 2200 ELLER DR BLDG 27 CITY: FT LAUDERDALE STATE: FL ZIP: 33316 10-Q 1 FORM 10-Q 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 March 31, 2000 Commission File Number: 0-28732 HVIDE MARINE INCORPORATED State of Incorporation: Delaware I.R.S. Employer I.D. 65-0966399 2200 Eller Drive P.O. Box 13038 Ft. Lauderdale, Florida 33316 (954) 523-2200 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements for the past ninety days. Yes X No There were 10,001,696 shares of Class A Common Stock, par value $0.01 per share outstanding at May 1, 2000. HVIDE MARINE INCORPORATED Quarter ended March 31, 2000 Index
Page Part I. Financial Information Item 1. Financial Statements.................................................................................. 1 Condensed Consolidated Balance Sheets at December 31, 1999 and March 31, 2000 (Unaudited)............................................................ 2 Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 1999 (Predecessor Company) and 2000 (Successor Company)..................................... 4 Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 1999 (Predecessor Company) and 2000 (Successor Company)...................................... 5 Notes to Condensed Consolidated Financial Statements......................................................... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................................19 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K.......................................................................28 Signature.......................................................................................................28
As used in this Report, the term "Parent" means Hvide Marine Incorporated, and the term "Company" means the Parent and/or one or more of its consolidated subsidiaries. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Hvide Marine Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (in thousands)
December 31, March 31, 1999 2000 (Unaudited) ASSETS Current assets: Cash and cash equivalents................................................ $ 19,046 $ 12,825 Restricted cash.......................................................... 15,217 12,211 Accounts receivable: Trade, net of allowance for doubtful accounts of $5,799 and $5,677, respectively...................................... 47,555 49,995 Insurance claims and other............................................. 6,775 7,882 Marine operating supplies................................................ 10,632 10,892 Prepaid expenses......................................................... 4,013 6,154 Other current assets..................................................... -- 4,000 ------------ ----------- Total current assets................................................. 103,238 103,959 Property: Construction-in-progress................................................. 1,345 511 Vessels and improvements................................................. 698,979 696,906 Furniture and equipment.................................................. 11,643 11,720 Less accumulated depreciation............................................ (22,087) (32,806) ------------ ----------- Net property......................................................... 689,880 676,331 Other assets: Deferred costs, net...................................................... 29,464 30,205 Restricted investments................................................... 3,752 3,792 Other.................................................................... 4,406 5,392 ------------ ----------- $ 830,740 $ 819,679 ============= ===========
Continued. Hvide Marine Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (in thousands, except par value amounts)
December 31, March 31, 1999 2000 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable......................................................... $ 10,895 $ 12,344 Current maturities of long-term debt..................................... 17,775 22,777 Current obligations under capital leases................................. 3,332 3,399 Accrued interest......................................................... 3,102 5,861 Accrued liabilities and other............................................ 37,489 35,016 ------------ ---------- Total current liabilities.............................................. 72,593 79,397 Long-term debt.............................................................. 465,769 462,613 Obligations under capital leases............................................ 33,934 33,050 Senior notes................................................................ 76,709 76,905 Other....................................................................... 5,952 5,324 Minority interest........................................................... 10,457 9,988 Commitments and contingencies Stockholders' equity: Class A Common Stock -- $.01 par value, 20,000 shares authorized, 10,000 shares issued and outstanding...................... 100 100 Additional paid-in capital............................................... 166,791 166,776 Accumulated deficit...................................................... (1,565) (14,474) ------------ ---------- Total stockholders' equity............................................. 165,326 152,402 ------------ ---------- $ 830,740 $ 819,679 ============ ==========
See accompanying notes. Hvide Marine Incorporated and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data)
Predecessor Successor Company Company Three Months Ended March 31, 1999 2000 Revenues............................................................. $ 90,399 $ 78,607 Operating expenses: Crew payroll and benefits....................................... 24,844 23,214 Charter hire and bond guarantee fee............................. 3,561 4,234 Repairs and maintenance......................................... 6,338 6,398 Insurance....................................................... 3,497 2,970 Fuel............................................................ 3,619 7,957 Consumables..................................................... 5,239 3,308 Rent and utilities.............................................. 7,739 6,428 --------- ------- Total operating expenses...................................... 54,837 54,509 Selling, general and administrative expenses: Salaries and benefits........................................... 5,373 5,249 Office.......................................................... 1,867 1,546 Professional fees............................................... 1,397 1,396 Other........................................................... 2,164 1,607 --------- ------- Total overhead expenses....................................... 10,801 9,798 Depreciation, amortization and drydocking............................ 20,333 12,287 --------- ------- Income from operations............................................... 4,428 2,013 Other income (expense): Interest expense................................................ (18,303) (14,451) Interest income................................................. 62 259 Minority interest and equity in earnings of subsidiaries........ (1,017) 294 Other........................................................... 181 -- --------- ------- Total other expense, net...................................... (19,077) (13,898) --------- ------- Loss before provision for (benefit from) income taxes................ (14,649) (11,885) Provision for (benefit from) income taxes............................ (5,581) 1,024 --------- ------- Net loss........................................................ $ (9,068) $(12,909) ========= ======= Net loss per common share - basic and diluted........................ * $ (1.29) ========= ======= Weighted average common shares outstanding - basic and diluted ...... * 10,000 ========= =======
* Earnings per share is not presented for the three months ended March 31, 1999 because such presentation would not be meaningful. The old common stock was cancelled and new common stock was issued pursuant to the Plan. See accompanying notes. Hvide Marine Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands)
Predecessor Successor Company Company Three Months Ended March 31, 1999 2000 Operating activities: Net loss...................................................................... $ (9,068) $ (12,909) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization of property................................. 16,395 10,716 Amortization of drydocking costs.......................................... 3,125 1,548 Amortization of goodwill.................................................. 813 -- Amortization of discount on long-term debt and financing costs............ 401 958 Provision for bad debts................................................... 300 62 Deferred income tax benefit............................................... (5,581) -- Minority partners' equity in earnings of subsidiaries, net................ -- (469) Undistributed earnings losses of affiliates............................... (626) -- Other non-cash items...................................................... (146) (45) Changes in operating assets and liabilities: Accounts receivable..................................................... 4,236 (3,813) Other current and long-term assets...................................... (1,285) (6,398) Accounts payable and other liabilities.................................. (2,802) 1,364 --------------- ------------- Net cash provided by (used in) operating activities................... 5,762 (8,986) Investing activities: Purchases of property....................................................... (26,548) (1,166) Payments on vessels under construction...................................... (5,102) -- --------------- ------------- Net cash used in investing activities..................................... (31,650) (1,166) Financing activities: Proceeds from short-term borrowings......................................... 5,000 -- Proceeds from revolving credit facility..................................... -- 6,975 Repayment of revolving credit facility...................................... -- (2,000) Proceeds from long-term borrowings.......................................... 45,479 -- Repayment of long-term borrowings........................................... (16,240) (1,762) Proceeds from issuance of Title XI bonds, net of offering costs............. 2,095 -- Repayment of Title XI bonds................................................. -- (1,366) Redemption of (deposit to) restricted cash.................................. -- 3,464 Payment of financing costs.................................................. (207) (563) Payment of obligations under capital leases................................. (633) (817) Proceeds from issuance of common stock...................................... 213 -- Repayment of short-term debt................................................ (5,000) -- --------------- ------------- Net cash provided by financing activities................................. 30,707 3,931 --------------- ------------- Change in cash and cash equivalents.............................................. 4,819 (6,221) Cash and cash equivalents at beginning of period................................. 10,106 19,046 --------------- ------------- Cash and cash equivalents at end of period....................................... $ 14,925 $ 12,825 =============== ==============
See accompanying notes. HVIDE MARINE INCORPORATED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2000 (Unaudited) 1. Organization and Basis of Presentation Hvide Marine Incorporated and subsidiaries (collectively, the "Company") is a provider of marine support and transportation services, serving primarily the energy and chemical industries. The Company operates offshore energy support vessels, principally in the U.S. Gulf of Mexico, the Arabian Gulf, offshore West Africa and Southeast Asia. The Company's fleet of tankers transports petroleum products and specialty chemicals in the U.S. domestic trade. The Company also provides commercial tug services in several ports in the southeastern U.S. The accompanying condensed consolidated financial statements include the accounts of Hvide Marine Incorporated and its majority-owned subsidiaries. All material intercompany transactions and balances have been eliminated in the condensed consolidated financial statements. The condensed consolidated financial statements in this Report are unaudited for the period indicated herein. In accordance with the rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures have been condensed or omitted; therefore, such financial statements should be read in conjunction with the consolidated financial statements in the Parent's Annual Report on Form 10-K for the year ended December 31, 1999, as amended on Form 10-K/A (the "1999 Form 10-K"). The condensed consolidated financial statements in this Report reflect all adjustments and accruals that, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented; all such adjustments were of a normal recurring nature. The results of operations for the three-month interim period ended March 31, 2000 are not necessarily indicative of the results of operations for the year ending December 31, 2000. Hvide Marine Incorporated and substantially all of its wholly-owned subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") on September 8, 1999. The Bankruptcy Court confirmed the Company's Joint Plan of Reorganization (the "Plan") on December 9, 1999, and the Plan became effective on December 15, 1999 (the "Effective Date"). The Company emerged from bankruptcy on December 15, 1999 (see Note 3 for additional information). The unaudited consolidated financial statements reflect accounting principles and practices set forth in American Institute of Certified Public Accountants Statement of Position ("SOP") 90-7, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, which provides guidance for financial reporting by entities that have filed voluntary petitions for relief under, and have reorganized in accordance with the Bankruptcy Code, and as such, the Company adopted "fresh start reporting" as of December 15, 1999. The Company's emergence from its Chapter 11 proceedings resulted in a new reporting entity. Accordingly, the accompanying condensed consolidated statements of operations and cash flows for periods prior to the Company's emergence from bankruptcy (the "Predecessor Company") are not comparable to the results of operations and cash flows of the Company subsequent to emergence from bankruptcy and the adoption of fresh-start reporting (the "Successor Company"). In June 1998, the Company paid $18.5 million to increase its equity interest in five double-hull carriers (collectively the "Lightship Tankers") from 0.8% to 50.8%. Three of these carriers were delivered in the fourth quarter of 1998, and two others were delivered during 1999. At the time of the increase in its equity interest, the Company intended to reduce its equity interest to less than 50% and accounted for this investment under the equity method. During 1999, the Company was not able to reduce its equity investment in Lightship Tankers and was required to consolidate the Lightship Tankers as of September 30, 1999, in accordance with the Financial Accounting Standards Board Statement No. 94, Consolidation of All Majority-Owned Subsidiaries. The consolidation of the Lightship Tankers was accounted for as a change in reporting entity and the financial statements have been retroactively restated to include the accounts of the Lightship Tankers as if they were consolidated as of the date majority ownership was obtained. The Successor Company increased its ownership in the Lightship Tankers at December 30, 1999 from 50.8% to 75.8%. The Lightship Tankers were not a party to the Chapter 11 proceedings. Certain amounts in the 1999 condensed consolidated financial statements have been reclassified to conform with the 2000 presentation. These reclassifications had no effect on the Company's net income. 2. Issues Affecting Liquidity As a result of a decline in revenues, the Company was not in compliance as of March 31, 2000 with certain covenants contained in its Credit Facility and anticipated that it would not be in compliance with certain covenants throughout 2000. Accordingly, on April 14, 2000, the Company has entered into an amendment to the Credit Facility with the lending banks under which the relevant covenants have been modified through March 31, 2001 and the Company is required to prepay principal under the term loans of $10.0 million before June 30, 2000, $25.0 million before August 31, 2000, and $25.0 million before January 1, 2001, or an aggregate of $60.0 million. The Company intends to sell vessels and other assets to obtain the funds with which to make these payments and may sell certain vessels at amounts below their carrying values. The amended Credit Facility further provides that, in the event the Company has not made the required principal payments as scheduled or achieved certain target levels of EBITDA for the third and fourth quarters of 2000, the lending banks may require the Company to sell additional vessels, to be selected by the lending banks, with an aggregate fair market value of $35.0 million. The amounts that the Company has agreed to prepay in 2000 have not been reclassified to current maturities of long-term debt because the prepayments will be made with the proceeds from sales of long-term assets. Additionally, the Company is required to obtain the consent of the lending banks to borrow in excess of $17.5 million under the revolving loan portion of the Credit Facility. The Company paid a fee of $4.5 million to the lending banks in connection with the amendment in the form of a promissory note, accruing interest at 15% per annum, due the earlier of (i) April 2002 or (ii) the date on which the ratio of funded indebtedness to EBITDA for any quarter is less than four to one. The Company believes that it will remain in compliance with the Credit Facility, as amended. Additionally, the Company believes that operating cash flow and amounts available under its revolving credit facility will be sufficient to meet current obligations and capital requirements through 2000 and that net proceeds from planned asset sales will be sufficient to satisfy prepayments of debt as set forth above. As the Company's operating cash flow is dependent on factors beyond the Company's control, however, including general economic conditions and conditions in the markets the Company serves, there can be no assurance that actual operating cash flow and the proceeds from sales of vessels will equal or exceed management's expectations. 3. Plan of Reorganization In September 1999, the Company filed the Plan with the Bankruptcy Court which set forth a plan for repaying or otherwise compensating the Company's creditors in order of relative seniority of their respective claims while seeking to maintain the Company as a going concern. The Plan specifically provided for the conversion of the Company's previously outstanding senior notes and preferred securities into equity interests in the Successor Company and cancellation of all of the prepetition equity interests, as more fully described in the Plan. Substantially all of the Company's other pre- and post petition unsecured liabilities were unaffected by the Plan. 4. Income Taxes For the three months ended March 31, 1999, the benefit from income taxes was computed using estimated annual effective tax rates of 38%, adjusted principally for depreciation on vessels built with capital construction funds. For the three months ended March 31, 2000, the benefit for income taxes was computed using an estimated annual effective tax rate of 36%. Management has determined that a tax valuation allowance is necessary at March 31, 2000 to reduce the deferred tax assets to the amount that will more likely than not be realized. After application of the valuation allowance, the Company's net deferred tax assets and liabilities are zero. The provision for income taxes represents taxes withheld on foreign source revenue. 5. Earnings Per Share (EPS) Pursuant to the Plan, 10,000,000 new common shares were granted at the Effective Date. These shares were issued on January 21, 2000. Common stock equivalents outstanding during the period ending March 31, 2000, have not been included in the computation of diluted loss per share as their effect is antidilutive for this period. 6. Segments Revenues by segment and geographic area consist only of services provided to external customers, as reported in the condensed consolidating statements of operations. Income from operations by geographic area represents net revenues less applicable costs and expenses related to those revenues. The Company does not have significant intersegment transactions. The following schedule presents information about the Company's operations in its three segments (in thousands): Predecessor Successor Company Company Three Months Ended March 31, 1999 2000 Revenues: Offshore energy support.............. $ 45,738 $ 34,219 Harbor and offshore towing........... 11,149 8,731 Marine transportation services....... 33,512 35,657 -------------- ------------- Consolidated revenues..................... $ 90,399 $ 78,607 ============== ============= Income (loss) from operations: Offshore energy support.............. $ 878 $ (1,803) Harbor and offshore towing........... 3,102 1,653 Marine transportation services....... 4187 5,604 General corporate.................... (3,739) (3,441) -------------- ------------- Consolidated income from operations....... $ 4,428 $ 2,013 ============== ============= Income (loss) before income taxes: Offshore energy support.............. $ (165) $ (2,755) Harbor and offshore towing........... 3,117 1,665 Marine transportation services....... 886 1,992 General corporate.................... (18,487) (12,787) -------------- ------------- Consolidated loss before income taxes..... $ (14,649) $ (11,885) ============== ============= 7. Supplemental Condensed Consolidated Financial Information The Senior Notes are fully and unconditionally guaranteed on a joint and several basis by certain of the Company's consolidated subsidiaries. A substantial portion of the Company's cash flows are generated by these subsidiaries. As a result, the funds necessary to meet the Company's obligations are provided in substantial part by distributions or advances from these subsidiaries. Under certain circumstances, contractual or legal restrictions, as well as the financial and operating requirements of the Company's subsidiaries, could limit the Company's ability to obtain cash from these subsidiaries for the purpose of meeting its obligations, including the payments of principal and interest on the Senior Notes. The following is summarized condensed consolidating financial information for the Company, segregating the Parent, the combined guarantor subsidiaries, the combined non-guarantor subsidiaries and eliminations. Condensed Consolidating Balance Sheet (in thousands)
December 31, 1999 Condensed Guarantor Non Guarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Assets Current assets Cash and cash equivalents............. $ 4,830 $ 10,724 $ 3,492 $ -- $ 19,046 Restricted cash....................... 15,027 190 -- -- 15,217 Accounts receivable: Trade, net.......................... 1,804 41,307 5,132 (688) 47,555 Insurance claims and other.......... 1,866 5,178 516 (785) 6,775 Marine operating supplies............. (465) 6,291 4,806 -- 10,632 Prepaid expenses...................... 933 2,593 487 -- 4,013 ----------- --------------- --------------- ------------- -------------- Total current assets................ 23,995 66,283 14,433 (1,473) 103,238 Property: Construction-in-progress.............. -- 1,205 140 -- 1,345 Vessels and improvements.............. 9,292 384,702 304,985 -- 698,979 Furniture and equipment............... 5,822 5,186 635 -- 11,643 Less accumulated depreciation......... (196) (1,204) (20,687) -- (22,087) ----------- --------------- --------------- ------------- -------------- Net property........................ 14,918 389,889 285,073 -- 689,880 Other assets: Deferred costs, net...................... 14,962 6,069 8,433 -- 29,464 Restricted investments................... -- -- 3,752 -- 3,752 Other.................................... 455,560 477,480 8,303 (936,937) 4,406 ----------- --------------- --------------- ------------- -------------- $ 509,435 $ 939,721 $ 319,994 $ (938,410) $ 830,740 =========== =============== =============== ============= ============== Liabilities and stockholders' equity Current liabilities: Accounts payable...................... $ 1,383 $ 8,565 $ 947 $ -- $ 10,895 Current maturities of long-term debt.. 12,065 1,891 3,820 (1) 17,775 Current obligations under capital leases 555 2,777 -- -- 3,332 Accrued interest...................... 2,418 -- 684 -- 3,102 Accrued liabilities and other......... 18,685 17,214 3,063 (1,473) 37,489 ----------- --------------- --------------- ------------- -------------- Total current liabilities........... 35,106 30,447 8,514 (1,474) 72,593 Long-term debt........................... 214,212 27,410 224,147 -- 465,769 Obligations under capital leases......... 13,662 20,272 -- -- 33,934 Senior notes............................. 76,709 -- -- -- 76,709 Other.................................... 4,425 1,299 226 2 5,952 Minority interest........................ -- -- -- 10,457 10,457 Commitments and contingencies Stockholders' equity: Common stock............................. 100 -- -- -- 100 Additional paid-in capital............... 166,786 633,985 11,143 (645,123) 166,791 ----------- --------------- --------------- ------------- -------------- Retained earnings (accumulated deficit).. (1,565) 226,308 75,964 (302,272) (1,565) Total stockholders' equity.......... 165,321 860,293 87,107 (947,395) 165,326 ----------- --------------- --------------- ------------- -------------- $ 509,435 $ 939,721 $ 319,994 $ (938,410) $ 830,740 =========== =============== =============== ============= ==============
Condensed Consolidating Balance Sheet (unaudited) (in thousands)
March 31, 2000 Condensed Non-Guarantor Consolidated Guarantor Parent Subsidiaries Subsidiaries Eliminations Total Assets Current assets: Cash and cash equivalents................ $ 132 $ 5,247 $ 7,446 $ -- $ 12,825 Restricted cash.......................... 11,736 475 -- -- 12,211 Accounts receivable: Trade, net............................. 663 43,779 5,756 (203) 49,995 Insurance claims and other............. 2,107 5,215 560 -- 7,882 Marine operating supplies................ (433) 7,458 3,867 -- 10,892 Prepaid expenses......................... 756 4,036 1,362 -- 6,154 Other current assets..................... -- 4,000 -- -- 4,000 ------------ ------------ ------------ ------------- ----------- Total current assets................... 14,961 70,210 18,991 (203) 103,959 Property: Construction-in-progress................. 71 323 78 39 511 Vessels and improvements................. 9,292 382,156 305,458 -- 696,906 Furniture and equipment.................. 5,828 5,257 635 -- 11,720 Less accumulated depreciation............ (991) (8,493) (23,322) -- (32,806) ------------ ------------ ------------ ------------- ----------- Net property........................... 14,200 379,243 282,849 39 676,331 Other assets: Deferred costs, net...................... 14,832 7,199 8,174 -- 30,205 Restricted investments................... -- -- 3,792 -- 3,792 Other.................................... 447,889 480,476 5,826 (928,799) 5,392 ------------ ------------ ------------ ------------- ----------- Total................................. $ 491,882 $ 937,128 $ 319,632 $ (928,963) $ 819,679 ============ ============ ============ ============= =========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable......................... $ 1,910 $ 9,987 $ 447 $ -- $ 12,344 Current maturities of long-term debt..... 17,040 1,917 3,820 -- 22,777 Current obligations under capital leases. 563 2,836 -- -- 3,399 Accrued interest......................... 1,243 -- 4,618 -- 5,861 Accrued liabilities and other............ 13,107 18,458 3,616 (165) 35,016 ------------ ------------ ------------ ------------- ----------- Total current liabilities.............. 33,863 33,198 12,501 (165) 79,397 Long-term debt............................ 211,390 27,076 224,147 -- 462,613 Obligations under capital leases.......... 13,513 19,537 -- -- 33,050 Senior notes.............................. 76,905 -- -- -- 76,905 Other .................................... 3,723 1,363 238 -- 5,324 Minority interest......................... -- -- -- 9,988 9,988 Commitment and contingencies Stockholders equity: Common stock............................. 100 20 -- (20) 100 Additional paid-in capital............... 166,786 634,261 10,756 (645,103) 166,776 Retained earnings (accumulated deficit).. (14,398) 221,673 71,990 (293,663) (14,474) ------------ ------------ ------------ ------------- ----------- Total stockholders' equity............. 152,488 855,954 82,746 (938,786) 152,402 ------------ ------------ ------------ ------------- ----------- $ 491,882 $ 937,128 $ 319,632 $ (928,963) $ 819,679 ============ ============ ============ ============= ===========
Condensed Consolidating Statement of Operations (unaudited) (in thousands)
Three Months Ended March 31, 1999 Condensed Guarantor Non-Guarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Predecessor Company Revenues................................ $ 13,138 $ 85,707 $ 12,512 $ (20,958) $ 90,399 Operating expenses: Crew payroll......................... 4,635 17,158 3,059 (8) 24,844 Charter hire......................... 471 16,723 -- (13,633) 3,561 Repairs and maintenance............... 470 5,784 99 (15) 6,338 Insurance............................. 419 2,764 314 -- 3,497 Fuel.................................. 673 2,418 528 -- 3,619 Consumables........................... 332 4,858 185 (136) 5,239 Rent and utilities.................... 929 6,097 1,714 (1,001) 7,739 ------------- ------------ ------------- ------------- ------------- Total operating expenses.......... 7,929 55,802 5,899 (14,793) 54,837 Selling, general and administrative expenses: Salaries and benefits................. 1,784 2,922 667 -- 5,373 Office................................ 838 668 361 -- 1,867 Professional fees..................... 666 2,132 88 (1,489) 1,397 Other................................. 662 1,418 75 9 2,164 ------------- ------------ ------------- ------------- ------------- Total overhead expenses............ 3,950 7,140 1,191 (1,480) 10,801 Depreciation, amortization and drydocking....................... 3,415 14,927 1,991 -- 20,333 ------------- ------------ ------------- ------------- ------------- Income (loss) from operations........... (2,156) 7,838 3,431 (4,685) 4,428 Other income (expense): Interest expense...................... (15,911) (66) (4,823) 2,497 (18,303) Interest income....................... 632 1,923 4 (2,497) 62 Minority interest and equity in earnings of subsidiaries......... 1,676 (2,190) 702 (1,205) (1,017) Other................................. 1,110 (5,598) (16) 4,685 181 ------------- ------------ ------------- ------------- ------------- Total other expense, net.......... (12,493) (5,931) (4,133) 3,480 (19,077) ------------- ------------ ------------- ------------- ------------- Income (loss) before income taxes....... (14,649) 1,907 (702) (1,205) (14,649) Benefit from income taxes............... (5,581) -- -- -- (5,581) ------------- ------------ ------------- ------------- ------------- Net income (loss)....................... $ (9,068) $ 1,907 $ (702) $ (1,205) $ (9,068) ============= ============ ============= ============= =============
Condensed Consolidating Statement of Operations (unaudited) (in thousands)
Three Months Ended March 31, 2000 Condensed Guarantor Non-Guarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Successor Company Revenues................................ $ 11,453 $ 62,452 $ 19,030 $ (14,328) $ 78,607 Operating expenses: Crew payroll and benefits............. 4,144 14,111 4,969 (10) 23,214 Charter hire and bond guarantee fee... 491 13,628 1,000 (10,885) 4,234 Repairs and maintenance............... 421 5,364 622 (9) 6,398 Insurance............................. 397 2,242 331 -- 2,970 Fuel.................................. 1,228 4,762 1,967 -- 7,957 Consumables........................... 260 2,898 260 (110) 3,308 Rent and utilities.................... 476 3,935 3,117 (1,100) 6,428 ------------- ------------ ------------ ----------- ------------ Total operating expenses............ 7,417 46,940 12,266 (12,114) 54,509 Selling, general and administrative expenses: Salaries and benefits.................. 1,465 3,068 716 -- 5,249 Office................................. 485 2,332 167 (1,438) 1,546 Professional fees...................... 926 373 97 -- 1,396 Other.................................. 355 845 406 1 1,607 ------------- ------------ ------------ ----------- ------------ Total overhead expenses............... 3,231 6,618 1,386 (1,437) 9,798 Depreciation, amortization and drydocking................... ........ 788 8,799 2,700 -- 12,287 ------------- ------------ ------------ ----------- ------------ Income from operations.................. 17 95 2,678 (777) 2,013 Other income (expense): Interest expense...................... (10,331) (1) (4,724) 605 (14,451) Interest income....................... 824 (5) 45 (605) 259 Minority interest and equity in earnings of subsidiaries...... (3,165) (3,029) (1,945) 8,609 294 Other................................. 770 (1,723) -- 777 -- ------------- ------------ ------------ ----------- ------------ Total other expense, net.......... (11,902) (4,758) (6,624) 9,386 (13,898) ------------- ------------ ------------ ----------- ------------ Loss before income taxes................ (11,885) (4,663) (3,946) 8,609 (11,885) Provision for income taxes.............. 1,024 -- -- -- 1,024 ------------- ------------ ------------ ----------- ------------ Net loss................................ $ (12,909) $ (4,663) $ (3,946) $ 8,609 $ (12,909) ============= ============ ============ =========== ============
Condensed Consolidating Statement of Cash Flows (unaudited) (in thousands)
Three Months Ended March 31, 1999 Condensed Guarantor Non-Guarantor Consolidated Parent Subsidiaries Subsidiaries Eliminations Total Predecessor Company Operating activities: Net income (loss)................................ $ (9,068) $ 1,907 $ (702) $ (1,205) $ (9,068) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization of property...... 2,602 11,862 1,931 -- 16,395 Amortization of drydocking costs............... 810 2,255 60 -- 3,125 Amortization of goodwill....................... 3 810 -- -- 813 Amortization of discount on long-term debt and financing costs.......................... 336 8 57 -- 401 Provision for bad debts........................ 9 291 -- -- 300 Deferred income tax benefit.................... (5,581) -- -- -- (5,581) Minority partners' equity in earnings loss of subsidiaries, net........................... -- -- -- (626) (626) Undistributed earnings of affiliates........... (1,676) 2,190 (702) 188 -- Other non-cash items........................... 47 -- (193) -- (146) Changes in operating assets and liabilities: Accounts receivable......................... 2,335 3,532 (1,142) (489) 4,236 Other current and long-term assets.......... 2,353 (2,992) 549 (1,195) (1,285) Accounts payable and other liabilities...... (11,130) (7,849) 12,615 3,562 (2,802) ------------ ------------ ------------- ------------- ------------ Net cash provided by (used in) operating activities..................... (18,960) 12,014 12,473 235 5,762 Investing activities: Purchases of property.......................... 2,771 (22,627) (8,848) 2,156 (26,548) Payments on vessels under construction......... -- (5,102) -- -- (5,102) ------------ ------------ ------------- ------------- ------------ Net cash provided by (used in) investing activities...................... 2,771 (27,729) (8,848) 2,156 (31,650) Financing activities: Proceeds from short-term borrowings............ -- 5,000 -- -- 5,000 Proceeds from long-term borrowings............. 31,008 14,471 -- -- 45,479 Repayment of long-term borrowings.............. (16,114) (126) -- -- (16,240) Proceeds from issuance of Title XI bonds, net of offering costs........................ -- -- 2,095 -- 2,095 Payment of financing costs..................... (50) -- (157) -- (207) Payment of obligations under capital leases.... (201) (432) -- -- (633) Proceeds from issuance of common stock......... 213 -- -- -- 213 Repayments of short-term borrowings............ -- (5,000) -- -- (5,000) Capital contributions from parent/parents...... 313 5,166 (3,088) (2,391) -- ------------ ------------ ------------- ------------- ------------ Net cash provided by (used in) financing activities................................. 15,169 19,079 (1,150) (2,391) 30,707 Change in cash and cash equivalents.............. (1,020) 3,364 2,475 -- 4,819 Cash and cash equivalents at beginning of period. 1,401 7,101 1,604 -- 10,106 ------------ ------------ ------------- ------------- ------------ Cash and cash equivalents at end of period....... $ 381 $ 10,465 $ 4,079 $ -- $ 14,925 ============ ============ ============= ============= ============
Condensed Consolidating Statement of Cash Flows (unaudited) (in thousands)
Three Months Ended March 31, 2000 Condensed Consolidated Guarantor Non-Guarantor Parent Subsidiaries Subsidiaries Eliminations Total Successor Company Operating activities: Net loss......................................... $ (12,909) $ (4,663) $ (3,946) $ 8,609 $ (12,909) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization of property... 609 7,497 2,610 -- 10,716 Amortization of drydocking costs............ 179 1,304 65 -- 1,548 Amortization of discount on long-term debt and financing costs...................... 661 (10) 307 -- 958 Provision for bad debts........................ (11) (8) 81 -- 62 Minority partners' equity in earnings of subsidiaries, net......................... 3,165 3,030 1,945 (8,609) (469) Other non-cash items........................... -- 342 (387) -- (45) Changes in operating assets and liabilities: Accounts receivable......................... 911 (2,705) (749) (1,270) (3,813) Other current and long-term assets.......... (597) (6,028) 188 39 (6,398) Accounts payable and other liabilities...... (5,875) 1,970 3,999 1,270 1,364 ------------ ------------ ------------- ------------- ----------- Net cash provided by (used in) operating activities.................... (13,867) 729 4,113 39 (8,986) Investing activity: Purchases of property.......................... 109 (850) (386) (39) (1,166) Capital contribution to affiliate.............. 4,611 (4,866) 255 -- -- ------------ ------------ ------------- ------------- ----------- Net cash provided by (used in) investing activity........................ 4,720 (5,716) (131) (39) (1,166) Financing activities: Proceeds from revolving credit facility........ 6,975 -- -- -- 6,975 Repayment of revolving credit facility......... (2,000) -- -- -- (2,000) Repayment of long-term borrowings.............. (3,849) 2,115 (28) -- (1,762) Repayment of Title XI bonds.................... -- (1,366) -- -- (1,366) Redemption of restricted cash.................. 3,464 -- -- -- 3,464 Payment of financing costs..................... (141) (422) -- -- (563) Payment of obligations under capital leases.... -- (817) -- -- (817) ------------ ------------ ------------- ------------- ----------- Net cash provided by (used in) financing activities...................... 4,449 (490) (28) -- 3,931 Change in cash and cash equivalents.............. (4,698) (5,477) 3,954 -- (6,221) Cash and cash equivalents at beginning of period 4,830 10,724 3,492 -- 19,046 ------------ ------------ ------------- ------------- ----------- Cash and cash equivalents at end of period....... $ 132 $ 5,247 $ 7,446 $ -- $ 12,825 ============ ============ ============= ============= ============
8. Contingencies Under United States law, "United States persons" are prohibited from performing contracts in support of an industrial, commercial, public utility or governmental project in the Republic of Sudan, or facilitating such activities. During 1999, two vessels owned by subsidiaries of the Company performed services for third parties in support of energy exploration activities in Sudan; one of these vessels continued to perform such services until January 31, 2000. The Company has reported these activities to the Office of Foreign Assets Control of the United States Department of the Treasury and to the Bureau of Export Administration of the United States Department of Commerce. Should either of the agencies determine that these activities constituted violations of the laws or regulations administered by them, civil and/or criminal 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 any such penalties. In Marine Towing of Tampa, Inc. v. Hvide Marine Towing, No. 8:00-CV-444-T-26C, a civil action filed in March 2000 in the U.S. District Court for the Middle District of Florida, the plaintiff seeks unspecified treble damages from the Company as a result of alleged violations of federal and state antitrust laws. The plaintiff, Marine Towing of Tampa, Inc., has been a competitor of the Company in the harbor towing business in the port of Tampa, Florida since October 1999 and alleges that the Company has obtained an unlawful monopoly in providing tug services in Tampa Bay and has unlawfully used its monopoly power and engaged in a conspiracy in restraint of trade to restrain others, including the plaintiff, from competing in the port and to maintain prices at artificially high levels. The specific acts of which the plaintiff complains include the non-exclusive franchise granted by the Tampa Port Authority to the Company, the Company's reduction of its rates and granting of discounts to specific customers when confronted with competition, the Company's one-year exclusive-provider agreements with customers, and the Company's alleged disparagement of the plaintiff's service. The Company believes that it has not engaged in any unlawful conduct, that the plaintiff has not been restrained from competing in the market, and that the suit has no merit. The Company intends to vigorously defend the suit. In J. Erik Hvide and Betsy Hvide v. Hvide Marine Incorporated, No. 5640-02, a civil action filed in March 2000 in the Circuit Court of Broward County, Florida, the Company's former chief executive officer and his wife allege that the Company has breached an agreement to provide Mr. Hvide with severance benefits valued at approximately $1.0 million. In addition, Mr. and Mrs. Hvide allege that the Company's conduct, in obtaining the return of certain of the Company's property from Mr. Hvide and in discontinuing the payment of life insurance premiums, constituted an intentional course of conduct calculated to cause them severe emotional distress and public humiliation for which they seek unspecified punitive damages. The Company believes that it never reached any agreement with Mr. Hvide concerning compensation relating to his severance, that it engaged in no conduct intended to cause harm to Mr. or Mrs. Hvide, and that the suit has no merit. The Company intends to vigorously defend the suit. From time to time the Company is also party to litigation arising in the ordinary course of its business, most of which is covered by insurance. 9. Subsequent Events On April 14, 2000, the Company amended its primary banking facility (See Note 2). During the Company's Chapter 11 Bankruptcy proceeding, the Company cancelled the construction contracts for several vessels and recorded approximately $7 million in accrued liabilities for the payment of damages to a shipyard that were upheld by the Bankruptcy Court. On April 25, 2000, the Company settled substantially all outstanding claims to a shipyard by agreeing to purchase one of the vessels previously under construction and completed by the shipyard. The Company acquired the vessel pursuant to a capital lease obligation. In connection with the settlement on April 25, 2000, the Company recorded a reduction in amounts previously accrued, which will be reflected as a reorganization item in the Company's June 30, 2000 Consolidated Statement of Operations. 19 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 1999 Form 10-K, as amended 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 1999 Form 10-K, as amended on Form 10-K/A. 21 Revenue Overview Marine Support Services Revenue derived from vessels providing marine support services is attributable to the Company's offshore energy support fleet and its offshore and harbor towing operations. Offshore Energy Support. Revenue derived from the Company's offshore energy support services 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 drilling, production, and construction activities, which are in turn heavily dependent upon the price of crude oil. Further, in many areas where the Company conducts offshore energy support operations (particularly the U.S. Gulf of Mexico), contracts for the utilization of offshore service vessels commonly include termination provisions with three- to five-day notice requirements and no termination penalty. As a result, companies engaged in offshore energy support operations (including the Company) are particularly sensitive to changes in market demand. The following table sets forth average day rates achieved by the offshore supply boats and crew boats owned and/or operated by the Company in the U.S. Gulf of Mexico and their average utilization for the periods indicated.
1999 2000 ------------------------------------------- ---------- Q1 Q2 Q3 Q4 Q1 Number of supply boats at end of period...... 21 21 21 21 21 Average supply boat day rates (1) ........... $4,530 $4,049 $3,596 $3,379 $3,740 Average supply boat utilization (2).......... 70% 69% 75% 73% 71% Number of crew boats at end of period (3).... 33 33 33 33 33 Average crew boat day rates (1)(3)........... $2,097 $1,864 $1,754 $1,827 $1,850 Average crew boat utilization (2)(3)......... 69% 72% 75% 87% 78%
(1) Average day rates are calculated based on vessels operating domestically by dividing total vessel revenue by the total number of days of vessel utilization. (2) Utilization is based on vessels operating domestically and determined on the basis of a 365-day year. Vessels are considered utilized when they are generating charter revenue. (3) Excludes utility boats. As indicated in the above table, average supply boat day rates continued to decline in 1999 and improved slightly in the first quarter of 2000. Supply boat utilization improved slightly in the third and fourth quarters of 1999 due to the increase in offshore exploration activities in the U.S. Gulf of Mexico, but has declined slightly in the first quarter of 2000. At May 10, 2000, supply boat day rates averaged approximately $3,900, which reflects a continued increase over levels experienced in the first quarter of 2000 and results from increased exploration and production activities. The current low level of supply boat day rates is expected to continue until energy exploration and production activities return to higher levels, which in turn is dependent upon a sustained improvement in energy prices. Crew boat day rates declined during the first three quarters of 1999 but improved slightly through the first quarter of 2000. Utilization improved throughout 1999 due to a slight increase in offshore exploration activities indicated above, but has decreased in the first quarter of 2000 due to a seasonal decline in demand for the services of smaller vessels. At May 10, 2000, crew boat day rates averaged approximately $1,800. As is the case with supply boat rates, no substantial improvement in crew boat day rates is anticipated until energy exploration and production activities return to higher levels. The following table shows rate and utilization information for foreign operations:
1999 2000 ------------------------------------------- ---------- Q1 Q2 Q3 Q4 Q1 Number of anchor handling tug/supply boats........... 67 69 67 67 67 Average anchor handling tug/supply boat day rates ... $4,817 $5,433 $4,662 $4,803 $4,290 Average anchor handling tug/supply boat utilization(1) 61% 49% 49% 47% 56% Number of crew/utility boats......................... 38 39 39 39 39 Average crew/utility boat day rates(1)............... $1,543 $1,559 $1,629 $1,749 $1,551 Average crew/utility boat utilization(2)............. 65% 48% 47% 52% 40%
- -------------------- (1) Average day rates are calculated based on vessels operating internationally by dividing total vessel revenue by the total number of days of vessel utilization. (2) Utilization is based on vessels operating internationally and determined on the basis of a 365-day year. Vessels are considered utilized when they are generating charter revenue. As indicated in the above table, foreign anchor handling tug/supply boats experienced declining utilization rates during 1999, with an increase the first quarter 2000 primarily due to increased activity in the Middle East and West Africa. Day rates fluctuated during 1999, and declined in the first quarter 2000, primarily due to lower rates in West Africa. Foreign crew/utility boats experienced increased day rates during 1999, with a decline in the first quarter 2000. The decline in foreign crew/utility boat average day rates and utilization is primarily due to the political and civil unrest in Nigeria and other parts of Africa. At May 10, 2000, day rates averaged approximately $4,000 per day for foreign anchor handling tug/supply boats and approximately $1,500 per day for foreign crew/utility boats. Harbor and Offshore Towing. Revenue derived from the Company's tug operations is primarily a function of the number of tugs available to provide services, the rates charged for their services, and the volume of vessel traffic requiring docking and other ship-assist services. Vessel traffic, in turn, is largely a function of the general trade activity in the region served by the port. Marine Transportation Services Generally, demand for industrial petrochemical transportation services coincides with overall economic activity. Revenue from the Company's towboats and fuel barges has been derived primarily from contracts of affreightment with FPL and Steuart Petroleum Co. that require the Company to transport fuel as needed by those two customers, with the FPL contract having a guaranteed minimum utilization. The principal contract with FPL expired in September 1998. The Company has since entered into a new contract, expiring in September 2002, to provide similar services to FPL at similar rates. However, the extent of the services to be provided under the new contract is substantially less than under the prior contract. 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, charter hire, maintenance and repairs, fuel, and insurance. 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, Area of Operations Overview, Overview of Operating Expenses and Capital Expenditures" in the 1999 Form 10-K, as amended on Form 10-K/A. Results of Operations Upon emergence from its Chapter 11 proceeding the adopted Fresh Start Accounting. See Note 1 to the Company's condensed consolidated financial statements. Thus the Company's balance sheets and statements of operation and cash flows after the Effective Date reflect a new reporting Company and are not comparable to periods to the Effective Date. The three months ended March 31, 1999 and 2000 include the results of the Predecessor Company and the Successor Company, respectively. The principal difference between these periods relate to reporting changes regarding the Company's capital structure, changes in indebtedness and the revaluation of the Company's long-term assets to reflect reorganization value at the Effective Date. These changes primarily affect depreciation and amortization expense and interest expense in the Company's result of operations. The following table sets forth certain selected financial data and percentages of net revenue for the periods indicated:
For Period ended March 31, 1999 2000 (in millions) Revenues.................................................. $ 90.4 100% $ 78.6 100% Operating expenses........................................ 54.8 60 54.5 69 Overhead expenses......................................... 10.8 12 9.8 12 Depreciation, amortization and drydocking................. 20.3 23 12.3 16 ---------- -------- ---------- ------ Income from operations.................................... $ 4.5 5% $ 2.0 3% ========== ======== ========== ====== Interest expense, net..................................... $ 18.2 20% $ 14.2 18% ========== ======== ========== ====== Net loss.................................................. $ (9.1) (10)% $ (12.9) (16)% ========== ======== ========== ======
Three months ended March 31, 2000 compared with the three months ended March 31, 1999 Revenues. Revenues decreased 13% to $78.6 million for the three months ended March 31, 2000, from $90.4 million for the three months ended March 31, 1999, primarily due to lower revenue from the Company's offshore energy support operations. Revenue from offshore energy operations decreased 25% for the three months ended March 31, 2000 compared to the 1999 period, primarily due to generally lower utilization and day rates resulting from the decline in offshore exploration and production activity. During the 2000 period, domestic day rates for supply boats owned, operated, or managed by the Company declined 17% from the 1999 period, while domestic day rates for crew boats owned, operated, or managed by the Company fell 12% from the 1999 period. Internationally, day rates for anchor handling tug/supply boats fell 11% to $4,290 from $4,817. Harbor and offshore towing revenue decreased 22% to $8.7 million for the three months ended March 31, 2000 from $11.1 million for the three months ended March 31, 1999, primarily due to the decline in the Company's offshore towing operations (resulting from a decline in exploration activity in Mexico) and increased competition in the Port of Tampa. Marine transportation revenue increased 6% to $35.6 million for the three months ended March 31, 2000 from $33.5 million for the three months ended March 31, 1999, primarily due to two new double-hull tankers that were fully operating in the 2000 period offset by two older tankers that were retired in the fourth quarter of 1999. Operating Expenses. Operating expenses decreased slightly to $54.5 million for the three months ended March 31, 2000 from $54.8 million for the three months ended March 31, 1999, primarily due to decreases in crew payroll and benefits, maintenance and repair, and supplies and consumables resulting from decreased business activity. As a percentage of revenue, operating expenses increased to 69% for the three months ended March 31, 2000 from 60% for the three months ended March 31, 1999, due to the decline in revenues from lower day rates and utilization in the offshore energy support business. Overhead Expenses. Overhead expenses decreased 9% to $9.8 million for the three months ended March 31, 2000 from $10.8 million for the three months ended March 31, 1999, primarily due to a reduction in administrative expenses. As a percentage of revenue, overhead expenses remained equal at 12% for both the three month periods ended March 31, 2000 and March 31, 1999, due to the decrease in revenues from lower day rates and utilization in the offshore energy support business. Depreciation and Amortization Expense. Depreciation and amortization expense decreased 39% to $12.3 million for the three months ended March 31, 2000, compared with $20.3 million for the three months ended March 31, 1999 due to the decrease in book value of property, goodwill and deferred costs as a result of the reorganization on December 15, 1999. Income from Operations. Operations resulted in income of $2.0 million, or 3% of revenue, for the three months ended March 31, 2000 versus income of $4.5 million, or 5% of revenue, for the three months ended March 31, 1999 as a result of the factors noted above. Net Interest Expense. Net interest expense decreased 22% to $14.2 million, or 18% of revenue, for the three months ended March 31, 2000 from $18.2 million, or 20% of revenue, for the three months ended March 31, 1999, primarily as a result of the reorganization and conversion of the Predecessor Company senior notes and preferred securities to 9.8 million and 0.2 million shares of the Successor Company's common stock, respectively. Net Loss. The Company had a net loss of $12.9 million for the three months ended March 31, 2000, compared to a net loss of $9.1 million for the three months ended March 31, 1999, primarily as a result of the factors noted above. Liquidity and Capital Resources Background. The Company's capital requirements have historically arisen primarily from its working capital needs, acquisitions of and improvements to vessels, and debt service requirements. The Company's principal sources of cash have been bank borrowings, cash provided by operations, and proceeds from public offerings of securities, consisting of the initial public offering of common stock in August 1996, a second offering of common stock in February 1997, an offering of 6 1/2% Trust Convertible Preferred Securities (the "preferred securities") in 1997, and an offering of 8 3/8% Senior Notes (the "senior notes") in February 1998. In addition, the Company has financed various vessel acquisitions through U.S. government-guaranteed Title XI ship financing bonds and capital lease obligations. In addition to these securities offerings, the Company has established various bank credit facilities from time to time. The Company entered into a revolving credit and term loan agreement with a group of banks in February 1998. The agreement provided for (i) a $175.0 million revolving credit facility maturing in 2003, and (ii) a $150.0 million term loan maturing in 2005, payable in equal quarterly installments beginning in June 1998. The agreement required the Company to maintain specified ratios relating to leverage, debt service and indebtedness; limited the Company's ability to create or incur certain liens; limited the incurrence of certain indebtedness; restricted the Company's ability to make certain investments; and restricted certain payments, including dividends on the Company's capital stock. As a result of the declines in rates and utilization of its offshore energy support vessels beginning in 1998 (discussed more fully under "Liquidity Concerns" below), the Company entered into an amendment of the agreement, effective September 30, 1998. In the absence of the amendment, the Company would not have been in compliance with the covenant in the loan agreement that required it to maintain a maximum "Leverage Ratio" (as defined in the Agreement) of 4.0:1.0. The amendment modified that and other covenants in the agreement, generally imposing restraints on future capital and other expenditures. In addition, the amendment (i) reduced the revolving credit facility to $150.0 million, increasing to $166.0 million subsequent to March 1, 1999, subject to repayment of a portion of the term loan with proceeds from a sale and leaseback transaction, and then increasing to $175.0 million, subject to compliance with a specified leverage ratio; (ii) provided that borrowings thereunder be secured by Company-owned vessels having an appraised value of at least $600.0 million and by substantially all other assets of the Company; and (iii) increased the rate of interest on borrowings and fees payable under the Agreement. The Company's current and future capital needs relate primarily to debt service and maintenance and improvements of its fleet. The Company's principal and interest payment obligations for the last three quarters of 2000 are estimated to be approximately $100.1 million, and operating lease obligations for the last three quarters 2000 are estimated to be approximately $2.8 million. Capital requirements for fleet maintenance and improvements are currently expected to aggregate $16.5 million during the remainder of 2000. In view of declines in average day rates compared to prior years, particularly in the U.S. Gulf of Mexico, and the possibility that rates will remain at low levels, the Company has curtailed or deferred certain capital and other expenditures. The above amounts do not include capital and other expenditures relating to five 45,300 dwt double-hull product and chemical carriers in which the Company currently holds a 75.8% equity interest (see Note 1 to the condensed consolidated financial statements). During 2000, an estimated $19.5 million of principal and interest payments are due on the Title XI ship financing bonds for these carriers. In the event that the operations of the carriers do not generate sufficient cash to fund those payments and other operating and capital expenses of the carriers on a cumulative basis from May 1, 1999, the Company has the right to require the current holder of the 24.2% minority interest to fund up to $5.0 million of the cumulative operating shortfall through June 1, 2000. During the first three months of 2000, the Company used $9.0 million of cash from operations primarily reflecting the net loss for the period, after elimination of noncash items. Cash used in investing activities was approximately $1.2 million for the period, primarily reflecting the costs of capital improvements to vessels. Cash provided by financing activities was approximately $3.9 million consisting primarily of proceeds from the revolving credit facility, offset by repayments of borrowings. Liquidity Concerns. As a result of the severe worldwide downturn in offshore oil and gas exploration, development and production activities beginning in 1998 and continuing and deepening during 1999, substantial declines in offshore energy support vessel day rates and utilization adversely affected the Company's operating results during 1999. The results for the first three months of 2000 continue to be adversely affected by the weak market conditions in the offshore markets. See "Results of Operations" above for additional information. The Reorganization. The Company's reorganization plan became effective on December 15, 1999. The details of the plan are reported in the 1999 Form 10-K, as amended on Form 10-K/A. In connection with the restructuring 10,000,000 shares of common stock were issued. The 9,800,000 shares received by the holders of the senior notes represent 98.0% of the Company's currently outstanding common stock and 89.3% of its common stock on a fully diluted basis after assuming exercise of all the Class A warrants and the noteholder warrants. The 200,000 shares received by holders of the trust preferred securities represent 2.0% of the Company's currently outstanding common stock and 1.8% of its common stock on a fully diluted basis. The Company also obtained new credit facilities from a group of financial institutions. The new facilities, totaling $320.0 million, consist of $200.0 million in term loans, a $25.0 million revolving credit facility, and $95.0 million in aggregate principal amount at maturity of new 12 1/2% senior secured notes due 2007. A portion of the proceeds from these facilities was used to repay all outstanding borrowings under the Company's bank loans and to pay administrative and other fees and expenses. The balance of the proceeds will be used for working capital and general corporate purposes. The terms of the term loans and revolving credit facility are contained in a credit agreement between the Company and the financial institutions. The credit agreement provides for the following facilities:
Facility. Amount Maturity Interest Rate as of May 11, 2000 Tranche A term loan $75 million 2004 9.47% Tranche B term loan $30 million 2005 9.97% Tranche C term loan $95 million 2006 10.47% Revolving credit facility $25 million 2004 9.47%
The interest rate for borrowings under the credit agreement is set from time to time at the Company's option, subject to certain conditions set forth in the credit agreement, at either: o the higher of the rate that the administrative agent announces from time to time as its prime lending rate and 1/2 of 1% in excess of the overnight federal funds rate, plus a margin ranging from 2.25% to 4.25% or o a rate based on a percentage of the administrative agent's quotation to first-class banks in the New York interbank Eurodollar market for dollar deposits, plus a margin ranging from 3.25% to 4.25%. Borrowings under the credit agreement are secured by first priority perfected security interests in equity of certain of the Company's subsidiaries and by first priority perfected security interests in certain of the vessels and other assets owned by the Company and its subsidiaries. In addition, certain of the Company's subsidiaries have guaranteed its obligations under the credit agreement. The credit agreement contains customary covenants that require the Company, among other things, to meet certain financial ratios and that prohibit it from taking certain actions and entering into certain transactions. At March 31, 2000, approximately $5.0 million was outstanding under the revolving credit facility. On March 31, 2000, the Company made the following payments under the term loans Tranche A, $75,000, Tranche B, $30,000 and Tranche C, $95,000. The senior secured notes are senior obligations and are secured by a second priority lien on the assets that secure borrowings under the credit agreement. The notes are unconditionally guaranteed by all of the Company's subsidiaries that have guaranteed borrowings under the credit agreement. The notes were issued at 90.0% of their face value for gross proceeds of $85.5 million. The notes were issued under an indenture among the Company, the subsidiary guarantors and financial institutions serving as trustee and collateral agent. The indenture contains customary covenants that, among other things, restrict the Company's ability to incur additional debt, sell assets, and engage in mergers and transactions with affiliates. As consideration for the purchase of the notes and as compensation for certain financial services, we issued to the purchasers of the notes noteholder warrants to purchase 6.75% of the Company's common stock on a fully diluted basis after giving effect to the exercise of these warrants at an exercise price of $.01 per share for a term of seven and one-half years. Since the Company has not yet received the necessary rating from the rating agencies required under this indenture, beginning April 15, the interest rate has increased from 12 1/2% to 13 1/2%. The incremental interest is to be paid by the issuance of additional securities. The Company is currently seeking the appropriate ratings, which would return the interest rate to 12 1/2%. Recent Developments. Due to continuing weakness in day rates and utilization in the offshore energy support business, as well as adverse market conditions in the Company's towing and transportation businesses, the Company anticipated that earnings would be lower than expected in the first quarter of 2000. As a result, the Company was not in compliance with certain covenants in its bank credit agreement as of March 31, 2000, and anticipated that it would not be in compliance on future dates if market conditions did not improve. The Company entered into an amendment to the credit agreement with the lending banks under which the relevant covenants have been modified through March 31, 2001 and the Company is required to prepay principal under the term loans of $10.0 million before June 30, 2000, $25.0 million before August 31, 2000, and $25.0 million before January 1, 2001, or an aggregate of $60.0 million. The Company intends to sell vessels and other assets to obtain the funds with which to make these payments. Some of these sales may be at less than book value. The amended credit agreement further provides that, in the event the Company has not made the required principal payments as scheduled or achieved certain target levels of EBITDA for the third and fourth quarters of 2000, the lending banks may require the Company to sell additional vessels, to be selected by the lending banks, with an aggregate fair market value of $35.0 million on a timetable specified by the lending banks. Additionally, the Company is required to obtain the consent of the lending banks to borrow in excess of $17.5 million under the revolving loan portion of the credit facility. The Company paid a fee of $4.5 million to the lending banks in connection with the amendment of the credit agreement in the form of a promissory note, accruing interest at 15% per annum, due the earlier of (i) April 2002 or (ii) the date on which the ratio of funded indebtedness to EBITDA for any quarter is less than four to one. As of May 11, 2000, the Company has completed asset sales of $5.9 million and expects to complete at least an additional $5 million by the end of June. The Company believes that operating cash flow, amounts available under its revolving credit facility and anticipated proceeds from the sale of vessels will be sufficient for it to meet its debt service, including the prepayments described above, and other capital requirements through 2000. As the Company's operating cash flow is dependent on factors beyond the Company's control, however, including general economic conditions and conditions in the markets the Company serves, there can be no assurance that actual operating cash flow will meet expectations. Impact of the "Year 2000 Issue" In prior years, the Predecessor Company discussed the nature and progress of its plans to become Year 2000 ready. In late 1999, the Successor Company substantially completed its remediation and testing of systems. As a result of those planning and implementation efforts, the Successor Company experienced no significant disruptions in mission-critical information technology and non-information technology systems and believes those systems successfully responded to the Year 2000 date change. The Successor Company is not aware of any material problems resulting from Year 2000 issues, either with its products, its internal systems, or the products and services of third parties. The Company will continue to monitor its mission-critical computer applications and those of its suppliers and vendors throughout the year 2000 to ensure that any latent Year 2000 matters that may arise are addressed promptly. PART II. OTHER INFORMATION Item 1. Legal Proceedings. For information concerning certain legal proceedings see Note 8 of the financial statements. Item 6. Exhibits and Reports on Form 8-K. None Signature Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HVIDE MARINE INCORPORATED /s/ JOHN J. KRUMENACKER John J. Krumenacker Controller and Chief Accounting Officer Date: May 15, 2000 EX-27.1 2 FDS --
5 1000 U.S. DOLLARS 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 1 12,825 0 55,672 (5,677) 0 103,959 709,137 (32,806) 819,679 79,397 539,518 0 0 100 152,302 819,679 0 78,607 0 54,509 0 62 14,451 (11,885) 1,024 (12,909) 0 0 0 (12,909) (1.29) (1.29)
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