SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2001 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number 1-12289
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SEACOR SMIT INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3542736
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
11200 Richmond, Suite 400, Houston, Texas 77082
- ---------------------------------------------- ----------------------
(Address of Principal Executive Offices) (Zip Code)
(713) 782-5990
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The total number of shares of common stock, par value $.01 per share,
outstanding as of August 9, 2001 was 20,075,601. The Registrant has no other
class of common stock outstanding.
SEACOR SMIT INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
June 30, 2001 and December 31, 2000.........................................1
Condensed Consolidated Statements of Operations for each of the
Three and Six Months Ended June 30, 2001 and 2000...........................2
Condensed Consolidated Statements of Cash Flows
for each of the Six Months Ended June 30, 2001 and 2000.....................3
Notes to Condensed Consolidated Financial Statements.............................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................10
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........................21
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds...........................................22
Item 4. Submission of Matters to a Vote of Security Holders.................................22
Item 6. Exhibits and Reports on Form 8-K....................................................22
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
June 30, December 31,
2001 2000
----------------- ------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 140,437 $ 224,219
Marketable securities (available-for-sale) - 4,997
Trade and other receivables, net of allowance for
doubtful accounts of $1,076 and $1,310, respectively 112,635 87,687
Prepaid expenses and other 7,090 5,103
----------------- ------------------
Total current assets 260,162 322,006
----------------- ------------------
Investments, at Equity, and Receivables from 50% or Less Owned Companies 152,304 137,694
Available-for-Sale Securities 53,650 77,184
Property and Equipment 949,281 712,511
Less - Accumulated depreciation (197,146) (185,433)
----------------- ------------------
Net property and equipment 752,135 527,078
----------------- ------------------
Restricted Cash 46,582 40,759
Other Assets 49,531 28,009
----------------- ------------------
$ 1,314,364 $ 1,132,730
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 42,438 $ 2,553
Accounts payable and accrued expenses 28,695 25,746
Other current liabilities 48,010 38,084
----------------- ------------------
Total current liabilities 119,143 66,383
----------------- ------------------
Long-term Debt 322,283 377,955
Deferred Income Taxes 150,430 119,545
Deferred Gains and Other Liabilities 13,589 14,371
Minority Interest in Subsidiaries 1,935 1,924
Stockholders' Equity:
Common stock, $.01 par value, 24,020,893 and 21,426,969 shares issued at
June 30, 2001 and December 31, 2000, respectively 240 214
Additional paid-in capital 392,385 278,567
Retained earnings 431,658 402,142
Less 3,945,292 and 4,310,505 shares held in treasury at June 30, 2001 and
December 31, 2000, respectively, at cost (109,755) (125,968)
Less unamortized restricted stock compensation (3,028) (1,301)
Accumulated other comprehensive loss (4,516) (1,102)
----------------- ------------------
Total stockholders' equity 706,984 552,552
----------------- ------------------
$ 1,314,364 $ 1,132,730
================= ==================
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
1
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
Three Months Ended June Six Months Ended
30, June 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Operating Revenues $ 112,428 $ 85,144 $ 205,628 $ 158,088
------------ ------------ ------------ ------------
Costs and Expenses:
Operating expenses 59,267 51,075 115,691 93,608
Administrative and general 12,241 9,579 23,654 19,014
Depreciation and amortization 14,587 13,088 26,755 24,989
------------ ------------ ------------ ------------
86,095 73,742 166,100 137,611
------------ ------------ ------------ ------------
Operating Income 26,333 11,402 39,528 20,477
------------ ------------ ------------ ------------
Other Income (Expense):
Interest on debt (5,356) (7,412) (10,995) (14,354)
Interest income 3,413 4,133 7,887 8,121
Gain from equipment sales and retirements, net 1,917 2,572 3,847 5,108
Derivative income (loss), net 62 (679) (35) (1,079)
Other, net 1,123 (113) 1,841 1,260
------------ ------------ ------------ ------------
1,159 (1,499) 2,545 (944)
------------ ------------ ------------ ------------
Income Before Income Taxes, Minority Interest, Equity in Earnings
(Losses) of 50% or Less Owned Companies, and Extraordinary Item 27,492 9,903 42,073 19,533
Income Tax Expense 9,630 3,049 14,745 6,419
------------ ------------ ------------ ------------
Income Before Minority Interest, Equity in Earnings (Losses) of
50% or Less Owned Companies, and Extraordinary Item 17,862 6,854 27,328 13,114
Minority Interest in Income of Subsidiaries (86) (1,438) (164) (1,210)
Equity in Earnings (Losses) of 50% or Less Owned Companies 502 (376) 3,248 (384)
------------ ------------ ------------ ------------
Income Before Extraordinary Item 18,278 5,040 30,412 11,520
Extraordinary Item - Loss on Debt Extinguishment, net of tax (896) - (896) -
------------ ------------ ------------ ------------
Net Income $ 17,382 $ 5,040 $ 29,516 $ 11,520
============ ============ ============ ============
Basic Earnings Per Common Share:
Income before extraordinary item $ 0.92 $ 0.30 $ 1.60 $ 0.68
Extraordinary item (0.04) - (0.05) -
------------ ------------ ------------ ------------
Net income $ 0.88 $ 0.30 $ 1.55 $ 0.68
============ ============ ============ ============
Diluted Earnings Per Common Share:
Income before extraordinary item $ 0.88 $ 0.29 $ 1.50 $ 0.68
Extraordinary item (0.04) - (0.04) -
------------ ------------ ------------ ------------
Net income $ 0.84 $ 0.29 $ 1.46 $ 0.68
============ ============ ============ ============
Weighted Average Common Shares:
Basic 19,832,918 16,885,675 18,979,203 16,845,429
Diluted 21,225,122 17,114,389 21,385,449 17,057,075
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
2
SEACOR SMIT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Six Months Ended June 30,
2001 2000
-------------------- -------------------
Net Cash Provided by Operating Activities $ 32,088 $ 19,618
-------------------- -------------------
Cash Flows from Investing Activities:
Purchase of property and equipment (61,113) (34,319)
Proceeds from sale of marine vessels and equipment 9,851 12,581
Purchase of available-for-sale securities (44,461) (17,388)
Proceeds from sale of available-for-sale securities 88,137 19,477
Proceeds from sale of investment in 50% or less owned companies 1,932 -
Investments in and advances to 50% or less owned companies (5,124) (927)
Principal payments on notes due from 50% or less owned companies 1,594 231
Dividends received from 50% or less owned companies 1,087 6,250
Net (increase) decrease in restricted cash (5,823) 11,162
Cash settlement from commodity price hedging arrangements (60) (803)
Acquisitions, net of cash acquired (99,218) (14,666)
Other, net 64 (13)
-------------------- -------------------
Net cash used in investing activities (113,134) (18,415)
-------------------- -------------------
Cash Flows from Financing Activities:
Payments of long-term debt (38,212) (15,396)
Payments of capital lease obligations (872) (826)
Payments of stockholders' loans (278) (258)
Proceeds from issuance of long-term debt 27,221 99
Proceeds from issuance of common stock 10,000 -
Proceeds from exercise of stock options 118 379
Common stock acquired for treasury - (4,776)
Proceeds from membership interest offering of Chiles Offshore LLC - 17,651
Other (1) (102)
-------------------- -------------------
Net cash used in financing activities (2,024) (3,229)
-------------------- -------------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents (712) (629)
-------------------- -------------------
Net Decrease in Cash and Cash Equivalents (83,782) (2,655)
Cash and Cash Equivalents, Beginning of Period 224,219 178,509
-------------------- -------------------
Cash and Cash Equivalents, End of Period $ 140,437 $ 175,854
==================== ===================
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
3
SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION --
The condensed consolidated financial information for the three and six-month
periods ended June 30, 2001 and 2000 has been prepared by the Company and was
not audited by its independent public accountants. In the opinion of management,
all adjustments have been made to present fairly the financial position, results
of operations, and cash flows of the Company at June 30, 2001 and for all
reported periods. Results of operations for the interim periods presented are
not necessarily indicative of the operating results for the full year or any
future periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
related notes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000.
Unless the context otherwise indicates, any references in this Quarterly Report
on Form 10-Q to the "Company" refer to SEACOR SMIT Inc. and its consolidated
subsidiaries, and any references in this Quarterly Report on Form 10-Q to
"SEACOR" refer to SEACOR SMIT Inc.
Certain reclassifications of prior year information have been made to conform
with the current year presentation.
2. RECENT ACCOUNTING PRONOUNCEMENTS --
Effective January 1, 2001, the Company adopted Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities", as amended. The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair market value. SFAS
133 requires that changes in the derivative's fair market value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. The cumulative effect of adopting
SFAS 133 resulted in other comprehensive income of $71,000.
The Company has foreign currency exchange risks primarily related to its
offshore marine service vessel operations that are conducted from ports located
in the United Kingdom, where its functional currency is Pounds Sterling. To
protect the U.S. dollar value of certain Pounds Sterling denominated net assets
of the Company from the effects of volatility in foreign currency exchange rates
that might occur prior to their conversion to U.S. dollars, the Company has
entered into forward exchange contracts. The Company considers these forward
exchange contracts as economic hedges of its net investment in the United
Kingdom and resulting gains or losses from those transactions are charged to
Accumulated Other Comprehensive Income in Stockholders' Equity. During the six
months ended June 30, 2001, the Company settled several Pounds Sterling forward
exchange contracts, which resulted in a realized gain of $131,000. At June 30,
2001, the Company had no outstanding Pounds Sterling forward exchange contracts
for which hedge accounting criteria were met.
In July 2001, the Financial Accounting Standards Board approved two new
accounting standards related to the accounting for business combinations and
goodwill and other intangible assets. The standards, which are numbered SFAS No.
141 and 142, among other requirements, (i) prohibit the use of the
pooling-of-interests method of accounting for business combinations, (ii)
require that goodwill not be amortized in any circumstance, and (iii) require
that goodwill be tested for impairment annually or when events or circumstances
occur between annual tests indicating that goodwill for a reporting unit might
be impaired. The standards will establish a new method for testing goodwill for
impairment based on a fair value concept. Management's current policy is to
periodically evaluate the amortization periods for goodwill to determine if
later events or circumstances warrant revised estimates of useful lives. It is
also management's policy to review goodwill for impairment whenever events or
4
changes in circumstances indicate that the carrying value of goodwill may not be
recoverable. As of and subsequent to June 30, 2001, there have been no events or
changes in circumstances surrounding purchased businesses to indicate that the
carrying value of the allocated goodwill may not be recoverable. The standards
will take effect for the fiscal year beginning after December 31, 2001, which
would be the Company's fiscal year beginning January 1, 2002. Upon adoption, the
Company will be required to cease amortization of its remaining goodwill balance
and will be required to perform an impairment test based on a fair value concept
of its existing goodwill. The Company has not completed an analysis of the
potential impact upon adoption of the impairment test of goodwill, however,
amortization of existing goodwill, which was approximately $922,000 and
$1,438,000 for the three and six-month periods ended June 30, 2001,
respectively, will cease upon adoption.
3. COMPREHENSIVE INCOME --
For the three-month periods ended June 30, 2001 and 2000, total comprehensive
income was $14,928,000 and $4,833,000, respectively. For the six-month periods
ended June 30, 2001 and 2000, total comprehensive income was $26,102,000 and
$13,360,000, respectively. Other comprehensive losses in 2001 primarily included
losses from foreign currency translation adjustments and unrealized holding
losses on available-for-sale securities and other comprehensive income in 2000
primarily included unrealized holding gains on available-for-sale securities and
losses from foreign currency translation adjustments.
4. VESSEL DISPOSITIONS --
In the six-month period ended June 30, 2001, the Company sold 11 offshore marine
vessels. Net pre-tax gains from those sales and the disposition of other
equipment, totaled $3,847,000. Proceeds from certain vessel sales this year and
in the fourth quarter of 2000, totaling $21,879,000, were deposited into joint
depository construction reserve funds with the U.S. Maritime Administration
during the first six months of 2001. Construction reserve fund accounts,
reported as Restricted Cash in the Condensed Consolidated Balance Sheets, have
been established for purposes of acquiring newly constructed U.S.-flag vessels
and qualifying for the Company's temporary deferral of taxable gains realized
from the sale of certain vessels.
5. ACQUISITIONS --
In January 2001, the Company acquired all of the issued share capital of
Plaisance Marine, Inc. ("Plaisance") that owns two mini-supply vessels and
acquired four additional mini-supply vessels from companies affiliated with
Plaisance (collectively the "Plaisance Fleet'"). Aggregate consideration paid
for the Plaisance Fleet and certain related spares and other assets was
approximately $20,100,000, including approximately $16,200,000 paid in cash, the
assumption of approximately $700,000 of debt, and the issuance of 71,577 shares
of SEACOR's common stock valued at approximately $3,700,000 on the closing date.
The Plaisance Fleet operates in the U.S. Gulf of Mexico.
In February 2001, the Company acquired two U.S. based towing supply vessels from
Rincon Marine, Inc., a U.S. based operator ("Rincon"). Aggregate consideration
paid Rincon was approximately $19,700,000, including approximately $6,100,000 in
cash and the assumption of approximately $13,600,000 of debt.
In February 2001, the Company completed the acquisition of all of the issued
share capital of Gilbert Cheramie Boats, Inc. and related companies
(collectively, "Cheramie"). Purchase consideration was approximately $62,800,000
in cash. Through its acquisition of Cheramie, the Company acquired 11
mini-supply, 11 utility, and 2 offshore supply vessels operating in the U.S.
Gulf of Mexico.
On May 4, 2001, the Company completed the acquisition of all of the outstanding
share capital of Stirling Shipping Holdings Limited ("Stirling Shipping").
Purchase consideration was determined by the estimated adjusted net assets of
Stirling Shipping at closing and totaled approximately (pound)54,300,000
($77,100,000 based on exchange rates in effect and the price of SEACOR's common
stock on the closing date). Purchase consideration consisted of
(pound)29,900,000, or $43,000,000, in cash, (pound)14,700,000, or $21,200,000,
in one-year loan notes, and 285,852 shares of SEACOR's common stock, valued at
$12,900,000, and is subject to adjustment based on finalization of Stirling
Shipping's closing balance sheet. Stirling Shipping's long term debt at closing
was approximately (pound)43,000,000, or $61,900,000. To fund a portion of the
Stirling acquisition, the Company borrowed $25,000,000 under its unsecured
reducing revolving credit facility with Den norske Bank ASA (the "DnB Credit
Facility") that was established in November 1998. Subsequent to June 30, 2001,
5
the Company repaid the $25,000,000 principal amount, plus accrued interest,
borrowed under the DnB Credit Facility. Through its acquisition of Stirling
Shipping, the Company acquired 12 offshore support vessels currently working in
the North Sea, including 9 supply and 3 anchor handling towing supply vessels,
and contracts for the construction of 2 anchor handling towing supply vessels.
The new construction vessels are being built in the UK and are scheduled for
delivery during the first half of 2002.
The costs of the Plaisance, Cheramie, and Stirling Shipping acquisitions were
allocated under the purchase method of accounting based upon the fair value of
the assets acquired and liabilities assumed, plus amounts of transaction costs
and the related deferred tax effect of the acquisitions. Goodwill of
approximately $500,000 and $22,300,000 was recorded in connection with the
Plaisance and Cheramie acquisitions, respectively, and is being amortized to
expense over 12 to 22 years.
The pro forma effect of the Plaisance and Cheramie acquisitions on the results
of operations was not material; however, the pro forma effect of the Stirling
Shipping acquisition was material and therefore the following unaudited pro
forma information has been prepared as if the acquisition had occurred at the
beginning of each of the periods presented, in thousands of dollars except per
share data. This pro forma information has been prepared for comparative
purposes only and is not necessarily indicative of what would have occurred had
the acquisition taken place on the dates indicated, nor does it purport to be
indicative of the future operating results of the Company.
For the Three Months Ended For the Six Months Ended
6/30/01 6/30/00 6/30/01 6/30/00
------------- -------------- ------------- --------------
Revenue $ 117,608 $ 95,787 $ 222,166 $ 177,929
Income Before Extraordinary Item 20,014 5,657 32,960 12,314
Net Income 19,118 5,657 32,064 12,314
Basic Earnings Per Share 0.95 0.33 1.66 0.72
6. EARNINGS PER SHARE --
Basic earnings per share were computed based on the weighted average number of
common shares issued and outstanding during the relevant periods. Diluted
earnings per share were computed based on the weighted average number of common
shares issued and outstanding plus all potentially dilutive common shares that
would have been outstanding in the relevant periods assuming the vesting of
restricted stock grants and the issuance of common shares for stock options and
convertible subordinated notes through the application of the treasury stock and
if-converted methods. The computation of diluted earnings per share for the
three and six-month periods ended June 30, 2001 excludes certain options and
share awards, totaling 83,480 and 30,000, respectively, as the effect would have
been antidilutive. In the three and six-month periods ended June 30, 2000, the
assumed conversion of the Company's convertible subordinated notes and certain
of its stock options and restricted stock grants into 4,127,270, and 4,157,270
shares, respectively, of its common stock and the add-back to income of interest
charges on the convertible subordinated notes, totaling $1,650,000, and
$3,301,000, respectively, were excluded from the computation of diluted earnings
per share as the effect would have been antidilutive.
6
For the Three Months Ended For the Six Months Ended
June 30, June 30,
--------------------------------------- ---------------------------------------
Per Per
Income Shares Share Income Shares Share
-------------- --------------- -------- -------------- --------------- --------
2001
- ----
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item $ 18,278,000 19,832,918 $ 0.92 $ 30,412,000 18,979,203 $ 1.60
======== ========
EFFECT OF DILUTIVE SECURITIES, NET OF TAX:
Options and Restricted Stock - 252,200 - 266,424
Convertible Securities 470,000 1,140,004 1,733,000 2,139,822
-------------- --------------- -------------- ---------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions $ 18,748,000 21,225,122 $ 0.88 $ 32,145,000 21,385,449 $ 1.50
============== =============== ======== ============== =============== ========
2000
- ----
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item $ 5,040,000 16,885,675 $ 0.30 $ 11,520,000 16,845,429 $ 0.68
======== ========
EFFECT OF DILUTIVE SECURITIES, NET OF TAX:
Options and Restricted Stock - 228,714 - 211,646
Convertible Securities - - - -
-------------- --------------- -------------- ---------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions $ 5,040,000 17,114,389 $ 0.29 $ 11,520,000 17,057,075 $ 0.68
============== =============== ======== ============== =============== ========
7. SEGMENT DATA --
The Company aggregates its business activities into three primary operating
segments: offshore marine, environmental, and drilling. These operating segments
represent strategic business units that offer different services. The offshore
marine business segment charters support vessels to owners and operators of
offshore drilling rigs and production platforms both domestically and
internationally. The Company's offshore marine business segment also offers
logistics services, which include shorebase, marine transport, and other supply
chain management services in support of offshore exploration and production
operations. The environmental business segment provides contractual oil spill
response and other related training and consulting services. The drilling
business segment, which owns and operates jackup drilling rigs, conducted its
business affairs through Chiles Offshore LLC ("Chiles Offshore"), an entity in
which the Company owned a majority ownership interest until its conversion into
a corporation (with Chiles Offshore renamed "Chiles Offshore Inc.") and
completion of its initial public offering of its common stock (the "Chiles IPO")
on September 22, 2000. As a consequence of the Chiles IPO, the Company's
ownership interest in Chiles Offshore was reduced to 27.3%. With less than 50%
ownership interest, the Company no longer consolidates Chiles Offshore and its
consolidated subsidiaries' financial condition, results of operations and cash
flows and, as of September 22, 2000, began accounting for its interest in Chiles
Offshore using the equity method.
The Company evaluates the performance of each operating business segment based
upon the operating profit of the segment and includes gains and losses from the
sale of equipment and interests in 50% or less owned companies and equity
interests in the earnings (losses) of 50% or less owned companies but excludes
minority interest in subsidiaries, interest income and expense, gains and losses
from derivative transactions and the sale of marketable securities, corporate
expenses, and income taxes. Operating profit is defined as Operating Income as
reported in the Consolidated Statements of Operations excluding corporate
expenses and including certain other income and expense items. The accounting
policies of the operating business segments have not changed from those
previously described in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2000. The table presented below sets forth operating
revenue and profit by the Company's various business segments, in thousands of
dollars, and these results may differ from separate financial statements of
subsidiaries of the Company due to certain elimination entries required in
consolidation.
7
Other and
Marine Environmental Drilling Corporate Total
----------- ------------- ------------ --------------- -------------
FOR THE THREE MONTHS ENDED JUNE 30, 2001:
Operating Revenues -
External Customers $ 102,870 $ 7,285 $ - $ 2,273(a) $ 112,428
Intersegment 294 - - (294) -
----------- ------------ ------------- --------------- -------------
Total $ 103,164 $ 7,285 $ - $ 1,979 $ 112,428
=========== ============ ============= =============== =============
Operating Profit $ 27,149 $ 990 $ - $ 364 $ 28,503
Gains (Losses) from Equipment Sales and Retirements, net 2,074 - - (157) 1,917
Equity in Earnings (Losses) of 50% or Less Owned Companies 975 4 1,380 (1,693) 666
Minority Interest in Subsidiaries - - - (86) (86)
Interest Income - - - 3,413 3,413
Interest Expense - - - (5,356) (5,356)
Derivative Income, net - - - 62 62
Gains from Sale of Marketable Securities, net - - - 1,272 1,272
Corporate Expenses - - - (2,319) (2,319)
Income Taxes - - - (9,794) (9,794)
----------- ------------ ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 30,198 $ 994 $ 1,380 $ (14,294) $ 18,278
====================================================================================================================================
FOR THE THREE MONTHS ENDED JUNE 30, 2000:
Operating Revenues -
External Customers $ 64,429 $ 6,406 $ 14,309 $ - $ 85,144
Intersegment 74 - - (74) -
----------- ------------ ------------- --------------- -------------
Total $ 64,503 $ 6,406 $ 14,309 $ (74) $ 85,144
=========== ============ ============= =============== =============
Operating Profit (Loss) $ 5,847 $ 566 $ 5,901 $ (3) $ 12,311
Gains from Equipment Sales and Retirements, net 2,569 3 - - 2,572
Equity in Earnings (Losses) of 50% or Less Owned Companies 668 94 - (1,635) (873)
Minority Interest in Subsidiaries - - - (1,438) (1,438)
Interest Income - - - 4,133 4,133
Interest Expense - - - (7,412) (7,412)
Derivative Losses, net - - - (678) (678)
Gains from Sale of Marketable Securities, net - - - 393 393
Corporate Expenses - - - (1,417) (1,417)
Income Taxes - - - (2,551) (2,551)
----------- ------------ ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 9,084 $ 663 $ 5,901 $ (10,608) $ 5,040
====================================================================================================================================
Marine Environmental Drilling Other Total
----------- ------------- ------------ --------------- -------------
FOR THE SIX MONTHS ENDED JUNE 30, 2001:
Operating Revenues -
External Customers $ 187,343 $ 14,261 $ - $ 4,024(a) $ 205,628
Intersegment 440 - - (440) -
----------- ------------ ------------- --------------- -------------
Total $ 187,783 $ 14,261 $ - $ 3,584 $ 205,628
=========== ============ ============= =============== =============
Operating Profit $ 41,295 $ 1,570 $ - $ 706 $ 43,571
Gains (Losses) from Equipment Sales and Retirements, net 4,002 2 - (157) 3,847
Equity in Earnings (Losses) of 50% or Less Owned Companies 3,218 3 2,837 (2,367) 3,691
Gain from Sale of Interest in a 50% or Less Owned Company 100 - - - 100
Minority Interest in Subsidiaries - - - (164) (164)
Interest Income - - - 7,887 7,887
Interest Expense - - - (10,995) (10,995)
Derivative Losses, net - - - (35) (35)
Gains from Sale of Marketable Securities, net - - - 2,399 2,399
Corporate Expenses - - - (4,702) (4,702)
Income Taxes - - - (15,187) (15,187)
----------- ------------ ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 48,615 $ 1,575 $ 2,837 $ (22,615) $ 30,412
====================================================================================================================================
FOR THE SIX MONTHS ENDED JUNE 30, 2000:
Operating Revenues -
External Customers $ 124,508 $ 10,925 $ 22,655 $ - $ 158,088
Intersegment 211 - - (211) -
----------- ------------ ------------- --------------- -------------
Total $ 124,719 $ 10,925 $ 22,655 $ (211) $ 158,088
=========== ============ ============= =============== =============
Operating Profit (Loss) $ 12,571 $ 842 $ 8,730 $ (3) $ 22,140
Gains from Equipment Sales and Retirements, net 5,102 6 - - 5,108
Equity in Earnings (Losses) of 50% or Less Owned Companies 1,371 270 - (2,816) (1,175)
Minority Interest in Subsidiaries - - - (1,210) (1,210)
Interest Income - - - 8,121 8,121
Interest Expense - - - (14,354) (14,354)
Derivative Losses, net - - - (1,079) (1,079)
Gains from Sale of Marketable Securities, net - - - 2,351 2,351
Corporate Expenses - - - (2,754) (2,754)
Income Taxes - - - (5,628) (5,628)
----------- ------------ ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 19,044 $ 1,118 $ 8,730 $ (17,372) $ 11,520
====================================================================================================================================
(a) Operating revenues are attributable to the Company's inland barge business
that commenced operation in the third quarter of 2000.
8
8. LONG-TERM DEBT --
During the six-month period ended June 30, 2001, SEACOR called for redemption
$100,000,000 of the $181,600,000 aggregate principal amount outstanding of its 5
3/8% Convertible Subordinated Notes Due November 15, 2006 (the "5 3/8% Notes").
The redemption price was $1,029.90 per $1,000 principal amount of notes plus
accrued interest to the applicable redemption date. Holders of notes being
called were able to convert any or all of their notes into 22.7272 shares of
SEACOR's common stock per $1,000 principal amount of notes. The call, together
with certain privately negotiated transactions, resulted in the conversion of
$99,166,000 principal amount of the 5 3/8% Notes into 2,285,878 shares of
SEACOR's common stock and redemption of $36,114,000 principal amount of the 5
3/8% Notes for approximately $37,970,000.
Pursuant to an amended and restated standby purchase agreement between Credit
Suisse First Boston ("CSFB") and SEACOR, CSFB was obligated, subject to several
conditions, to purchase from SEACOR, at a purchase price of $46.26 per share,
the number of shares of SEACOR's common stock necessary to provide SEACOR with
the proceeds to pay the aggregate total redemption price of up to $100,000,000
face amount of the 5 3/8% Notes that SEACOR redeemed. In the second quarter,
CSFB purchased 216,170 shares of SEACOR's common stock to provide SEACOR with
proceeds to redeem $10,000,000 principal amount of the 5 3/8% Notes that were
called but not converted. Related underwriting and legal and professional fees
expensed in the three and six-month periods ended June 30, 2001 totaled $147,000
and $586,000, respectively.
SEACOR also entered into an equity forward transaction with Credit Suisse First
Boston International ("CSFBi"), an affiliate of CSFB, with respect to shares of
SEACOR's common stock that CSFB purchased from SEACOR under the standby purchase
agreement. The equity forward transaction provides that at maturity, which will
occur twelve months following this purchase by CSFB of shares of SEACOR's common
stock, SEACOR will elect, as described below, to either purchase the shares
covered by the equity forward transaction from CSFBi or cash settle the
transaction. If SEACOR elects to purchase the shares from CSFBi, it will pay a
purchase price equal to $46.26 (the purchase price under the standby purchase
agreement) plus interest calculated at LIBOR plus 115 basis points, from the
date that CSFB purchased those shares from SEACOR to the date that SEACOR
purchases those shares from CSFBi. If SEACOR elects to cash settle the
transaction, then if the value of the shares at maturity (determined on the
basis of the net proceeds that CSFBi is able to receive upon the sale of those
shares in the open market) exceeds the purchase price described above, then
CSFBi will pay to SEACOR the amount of such excess in cash at maturity. If the
purchase price exceeds the value of the shares at maturity, then SEACOR will pay
to CSFBi the amount of such excess in cash at maturity. SEACOR has the right to
accelerate the maturity of the equity forward transaction in whole or in part at
any time upon prior written notice to CSFBi. The equity forward transaction also
contains customary events of default and termination events following which
either one or both parties would have the right to terminate the transaction and
make net cash payments based on the net value of the transaction at the time of
termination.
9. COMMITMENTS AND CONTINGENCIES --
As of June 30, 2001, the Company was committed to the construction of 13
offshore support vessels for an approximate aggregate cost of $102,271,000 of
which $29,310,000 has been expended. These vessels are expected to enter service
within the next twelve months.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements discussed in Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations) and Item 3 (Quantitative and
Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
concerning Management's expectations, strategic objectives, business prospects,
anticipated economic performance and financial condition and other similar
matters involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of
results to differ materially from any future results, performance or
achievements discussed or implied by such forward-looking statements. Such
risks, uncertainties and other important factors include, among others: general
economic and business conditions, the cyclical nature of our business, adequacy
of insurance coverage, currency exchange fluctuations, changes in foreign
political, military and economic conditions, the ongoing need to replace aging
vessels, dependence of spill response revenue on the number and size of spills
and upon continuing government regulation in this area and our ability to comply
with such regulation and other governmental regulation, industry fleet capacity,
changes in foreign and domestic oil and gas exploration and production activity,
competition, regulatory initiatives, customer preferences, marine-related risks,
and various other matters, many of which are beyond the Company's control and
other factors as are described at the end of Item 7 (Management's Discussion and
Analysis of Financial Condition and Results of Operations) of the Company's Form
10-K for the fiscal year ended December 31, 2000. Forward-looking statements
speak only as of the date of the document in which they are made. We disclaim
any obligation or undertaking to provide any updates or revisions to any
forward-looking statement to reflect any change in our expectations or any
change in events, conditions or circumstances on which the forward-looking
statement is based.
OFFSHORE MARINE SERVICES
The Company provides marine transportation, logistics, and related services
largely dedicated to supporting offshore oil and gas exploration and production.
Marine transportation services are provided through the operation, domestically
and internationally, of offshore support vessels. The Company's vessels deliver
cargo and personnel to offshore installations, tow and handle the anchors of
drilling rigs and other marine equipment, support offshore construction and
maintenance work, and provide standby safety support. The Company's vessels are
also used for special projects, such as well stimulation, seismic data
gathering, freight hauling, line handling, salvage, and oil spill emergencies.
Logistics services include shorebase, marine transport, and other supply chain
management services in support of offshore exploration and production
operations.
Operating revenues are primarily affected by the number of vessels owned and
bareboat and time chartered-in as well as rates per day worked and utilization
of the Company's fleet.
Opportunities to buy and sell vessels are actively monitored by the Company to
maximize overall fleet utility and flexibility. Expansion has been achieved
principally through the purchase of offshore support vessels from its
competitors, construction of new vessels, and equity holdings in joint ventures
that own offshore support vessels. The Company has also sold many vessels from
its fleet, particularly those that were less marketable in the Company's
ordinary operations. Since 1997, proceeds from certain vessel sales have been
deposited into restricted cash accounts for purposes of acquiring newly
constructed U.S.-flag vessels and thereby qualifying the Company for temporary
deferral of taxable gains realized from vessel sales. During the first six
months of 2001, the Company continued fleet expansion with the acquisition and
construction of 17 mini-supply, 13 supply and towing supply, 11 utility, 3
anchor handling towing supply, and 1 crew vessel. During the six months ended
June 30, 2001, the Company also sold 4 utility, 4 crew, 2 towing supply, and 1
standby safety vessel and removed 3 standby safety vessels from service that are
held for sale.
From time to time, the Company bareboat or time charters-in vessels. A bareboat
charter is a vessel lease under which the lessee ("charterer") is responsible
for all crewing, insurance, and other operating expenses, as well as the payment
of bareboat charter hire to the providing entity. A time charter is a lease
under which the entity providing the vessel is responsible for all crewing,
insurance, and other operating expenses and the charterer only pays a time
charter hire fee to the providing entity. Operating revenues for vessels owned
and bareboat or time chartered-in are incurred at similar rates. However,
operating expenses associated with vessels bareboat and time chartered-in
include charter hire expenses that, in turn, are included in vessel expenses,
but exclude depreciation expense.
10
From time to time, the Company provides management services to other vessel
owners. Charter revenues and vessel expenses of such managed vessels are not
generally included in the Company's operating results, but the Company does earn
a management fee that is reported in operating revenue.
The Company also bareboat charters-out vessels. Operating revenues for these
vessels are lower than for vessels owned and operated or bareboat chartered-in
by the Company, because vessel expenses, normally recovered through charter
revenue, are the burden of the charterer. Operating expenses include
depreciation expense if the vessels chartered-out are owned. At June 30, 2001,
there were 14 vessels bareboat chartered-out, including 5 and 2 vessels operated
by certain of the Company's offshore marine joint ventures and environmental
service segment, respectively.
The table below sets forth the Company's offshore marine fleet structure at the
dates indicated:
AT JUNE 30,
--------------------------------------
FLEET STRUCTURE 2001 2000
- --------------------------------------------------------------------- ----------------- ------------------
Owned 258(a) 234
Bareboat and Time Chartered-In 18 22
Managed 7 7
Joint Ventures and Pools:
TMM Joint Venture 17 14
SMIT Joint Venture 14 15
Pelican Joint Venture 7 -
Other Joint Ventures 6 8
SEAVEC Pool 5 5
Avian Fleet Pool - 4
----------------- ------------------
Overall Fleet 332 309
================= ==================
- -----------------
(a) 2001 excludes three standby safety vessels that were removed from
service and are held for sale.
Rates per day worked and utilization of the Company's fleet are a function of
demand for and availability of marine vessels, which are closely aligned with
the level of exploration and development of offshore areas. The level of
exploration and development of offshore areas is affected by both short-term and
long-term trends in oil and gas prices which, in turn, are related to the demand
for petroleum products and the current availability of oil and gas resources.
The table below sets forth rates per day worked and utilization data for the
Company during the periods indicated.
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
2001 2000 2001 2000
------------- -------------- ------------- --------------
RATES PER DAY WORKED ($): (1) (2)
Supply and Towing Supply 7,742 4,798 7,370 4,822
Anchor Handling Towing Supply 13,667 11,157 13,235 11,351
Crew 3,323 2,526 3,221 2,523
Standby Safety 5,351 5,466 5,273 5,518
Utility and Line Handling 1,925 1,592 1,841 1,612
Mini-Supply(3) 3,178 2,004 3,012 2,015
Geophysical, Freight, and Other 5,446 5,880 5,427 5,880
Overall Fleet 4,987 3,643 4,780 3,658
OVERALL UTILIZATION (%): (1)
Supply and Towing Supply 90.4 67.8 88.2 64.1
Anchor Handling Towing Supply 83.3 65.0 81.5 66.8
Crew 95.3 95.1 96.2 94.1
Standby Safety 86.9 75.5 86.3 68.6
Utility and Line Handling 60.3 56.3 55.2 54.7
Mini-Supply(3) 94.5 100.0 93.8 94.7
Geophysical, Freight, and Other 50.0 33.3 57.0 41.6
Overall Fleet(4) 83.2 74.1 81.4 72.0
- -------------------------
(1) Rates per day worked is the ratio of total charter revenue to the total
number of vessel days worked. Rates per day worked and overall
utilization figures exclude owned vessels that are bareboat
chartered-out, vessels owned by corporations that participate in
pooling arrangements with the Company, joint venture vessels, and
managed/operated vessels and include vessels bareboat and time
chartered-in by the Company.
(2) Revenues for certain of the Company's vessels, primarily operating in
the North Sea, are earned in foreign currencies, primarily Pounds
Sterling, and have been converted to U.S. dollars at the weighted
average exchange rate for the periods indicated.
11
(3) Effective January 1, 2001, the Company began reporting a new class of
vessel denoted Mini-Supply. As a result, seven utility and one supply
vessel in the three and six-month periods ended June 30, 2000 were
reclassified as Mini-Supply.
(4) Excluding the impact of utility vessels stacked in the U.S. Gulf of
Mexico, most of which are intended to be sold, the Company's overall
fleet utilization was 91.9% and 91.2% in the three and six-month
periods ended June 30, 2001, respectively.
Vessel operating expenses are primarily a function of fleet size and utilization
levels. The most significant vessel operating expense items are wages paid to
marine personnel, maintenance and repairs, and marine insurance. In addition to
variable vessel operating expenses, the offshore marine business segment incurs
fixed charges related to the depreciation of property and equipment.
Depreciation is a significant operating expense, and the amount related to
vessels is the most significant component.
Certain of the Company's revenues and expenses, primarily related to the
Company's North Sea operations, are received or paid in foreign currencies. For
financial statement reporting purposes, these amounts are translated into U.S.
dollars at the weighted average exchange rates during the relevant period.
Overall, approximately 38% and 35% of the Company's offshore marine operating
revenues were derived from foreign operations (in U.S. dollars or foreign
currencies) in the six-month periods ended June 30, 2001 and 2000, respectively.
The Company's foreign offshore marine operations are subject to various risks
inherent in conducting business in foreign nations. These risks include, among
others, political instability, potential vessel seizure, nationalization of
assets, fluctuating currency values, hard currency shortages, controls of
currency exchange, the repatriation of income or capital, import-export quotas,
and other forms of public and governmental regulation, all of which are beyond
the control of the Company. Although, historically, the Company's operations
have not been affected materially by such conditions or events, it is not
possible to predict whether any such conditions or events might develop in the
future. The occurrence of any one or more of such conditions or events could
have a material adverse effect on the Company's financial condition and results
of operations.
Regulatory drydockings, which are a substantial component of marine maintenance
and repair costs, are expensed when incurred. Under applicable maritime
regulations, vessels must be drydocked twice in a five-year period for
inspection and routine maintenance and repair. The Company follows an asset
management strategy pursuant to which it defers required drydocking of selected
marine vessels and voluntarily removes these marine vessels from operation
during periods of weak market conditions and low rates per day worked. Should
the Company undertake a large number of drydockings in a particular fiscal
quarter or six-month period or put through survey a disproportionate number of
older vessels, which typically have higher drydocking costs, comparative results
may be affected. For the six-month periods ended June 30, 2001 and 2000,
drydocking costs totaled $6.6 million and $2.8 million, respectively. During
those same periods, the Company completed the drydocking of 58 and 32 marine
vessels, respectively. At June 30, 2001, the Company had 26 vessels out of
service, including 23 U.S. based utility vessels that require drydocking prior
to re-entering operations.
Operating results are also affected by the Company's participation in various
joint ventures. The Company has formed or acquired interests in offshore marine
joint ventures and entered into pooling arrangements with various third parties
to enter new markets, enhance its marketing capabilities, and facilitate
operations in certain foreign markets. These arrangements allow the Company to
expand its fleet while diversifying the risks and reducing the capital outlays
associated with independent fleet expansion. The Company also participates in a
logistics joint venture whose mission has been to provide shorebase, marine
transport, and other supply chain management services in support of offshore
exploration and production operations principally in the U.S. Gulf of Mexico.
Exploration and drilling activities, which affect the demand for vessels, are
influenced by a number of factors, including the current and anticipated prices
of oil and natural gas, the expenditures by oil and gas companies for
exploration and development, and the availability of drilling rigs. In addition,
demand for drilling services remains dependent on a variety of political and
economic factors beyond the Company's control, including worldwide demand for
oil and natural gas, the ability of the Organization of Petroleum Exporting
Countries ("OPEC") to set and maintain production levels and pricing, the level
of production of non-OPEC countries, and the policies of various governments
regarding exploration and development of their oil and natural gas reserves.
ENVIRONMENTAL SERVICES
The Company's environmental service business provides contractual oil spill
response and other related training and consulting services. The Company's
clients include tank vessel owner/operators, refiners and terminal operators,
exploration and production facility operators, and pipeline operators. The
Company charges a retainer fee to its customers for ensuring by contract the
availability (at predetermined rates) of its response services and equipment.
12
Retainer services include employing a staff to supervise response to an oil
spill emergency and maintaining specialized equipment, including marine
equipment, in a ready state for emergency and spill response as contemplated by
response plans filed by the Company's customers in accordance with the Oil
Pollution Act of 1990, as amended, and various state regulations. The Company
maintains relationships with numerous environmental sub-contractors to assist
with response operations, equipment maintenance, and provide trained personnel
for deploying equipment in a spill response.
Pursuant to retainer agreements entered into with the Company, certain vessel
owners pay in advance to the Company an annual retainer fee based upon the
number and size of vessels in each such owner's fleet and in some circumstances
pay the Company additional fees based upon the level of each vessel owner's
voyage activity in the U.S. The Company recognizes the greater of revenue earned
by voyage activity or the portion of the retainer earned in each accounting
period. Certain vessel and facility owners pay a fixed fee or a fee based on
volume of petroleum product transported for the Company's retainer services and
such fee is recognized ratably throughout the year. The Company's retainer
agreements with vessel owners generally range from one to three years while
retainer arrangements with facility owners are as long as ten years.
Spill response revenue is dependent on the number of spill responses within a
given fiscal period and the magnitude of each. Consequently, spill response
revenue can vary greatly between comparable periods and the revenue from any one
period is not indicative of a trend or of anticipated results in future periods.
Costs of oil spill response activities relate primarily to (i) payments to
subcontractors for labor, equipment, and materials, (ii) direct charges to the
Company for equipment and materials, (iii) participation interests of others in
gross profits from oil spill response, and (iv) training and exercises related
to spill response preparedness.
The Company charges consulting fees to customers for customized training
programs, its planning of and participation in customer oil spill response drill
programs and response exercises, and other special projects.
The principal components of the Company's operating costs are salaries and
related benefits for operating personnel, payments to sub-contractors, equipment
maintenance, and depreciation. These expenses are primarily a function of
regulatory requirements and the level of retainer business.
In 1996, NRC expanded its coverage area to include the West Coast of the United
States through Clean Pacific Alliance ("CPA"), a joint venture with Crowley
Marine Services. On November 30, 2000, NRC purchased Crowley Marine Service's
50% interest in CPA and began a termination and winding up process. As of that
date, all of CPA's obligations under existing contracts were assumed by NRC. CPA
will be dissolved upon completion of the termination and winding up of its
affairs.
INVESTMENT IN DRILLING SERVICES BUSINESS
The Company consolidated the reporting of financial information of drill rig
operator Chiles Offshore LLC, due to the Company's majority ownership, from its
inception in 1997 until its initial public offering of common stock (the "Chiles
IPO") on September 22, 2000. On that date, Chiles Offshore LLC converted into a
corporation, was renamed Chiles Offshore Inc. ("Chiles Offshore"), and completed
the Chiles IPO. As a consequence of the Chiles IPO, the Company's ownership
interest in Chiles Offshore was reduced from 55.4% to 27.3%. Because its
ownership interest declined below 50%, the Company no longer consolidates Chiles
Offshore and its consolidated subsidiaries' (together, "Chiles") financial
condition, results of operations, and cash flows and, as of September 22, 2000,
began accounting for its interest in Chiles using the equity method.
Chiles operated as a development stage company from its inception and until July
1999, devoting substantially all its efforts constructing rigs, raising capital,
and securing contracts for its rigs. In 1997, Chiles commenced construction of
two ultra-premium jackup drilling rigs, the Chiles Columbus and the Chiles
Magellan, which were delivered to Chiles in May 1999 and October 1999,
respectively. From its delivery and final commissioning in April 2000, Chiles
bareboat chartered-in and operated the jackup drilling rig, Tonala, until
acquiring it in July 2001. The consideration paid for the rig consisted of
2,679,723 shares of Chiles' common stock and the assumption of $58.8 million of
aggregate principal amount of debt. Following the acquisition, the Tonala was
renamed Chiles Coronado. In July 2001, Chiles executed a three-year contract
with BP Trinidad and Tobago LLC for the use of the Chiles Coronado and the rig
is currently undergoing limited modifications and upgrades before leaving the
Gulf of Mexico for Trinidad. It is expected to arrive in Trinidad during the
month of September.
13
The number of rigs Chiles operates is a function of rigs delivered to service
through its capital construction program and rigs placed in operation under
charter. Chiles typically operates its rigs on well-to-well contracts that last
30 to 90 days. Presently, Chiles contracts and operates its rigs in the U.S.
Gulf of Mexico. Chiles has two rigs under construction, which are expected to be
completed during the second and third quarters of 2002. Chiles has contracted to
operate the rig scheduled to be completed during the second quarter of 2002 for
a major independent oil and gas operator for a term that will last for a minimum
of 600 days.
Chiles derives its revenue primarily from drilling wells for oil and gas
operators pursuant to drilling contracts. These drilling contracts typically
provide for base day rates, which may be subject to adjustments based on
performance incentives. Fees and expenses for transporting Chiles' rigs between
sites are included in revenues and expenses. For the three and six-month periods
ended June 30, 2001 and 2000, the effective average day rate for Chiles' rigs
was $71,895 and $70,419 and $55,374 and $50,789, respectively, and utilization
was 100%. In calculating the effective average day rates, Chiles divides
revenues earned by its rigs during the period by the total number of days in the
period. In addition, Chiles' effective average day rates include any bonuses,
which may be triggered by achieving performance and safety targets in some of
Chiles' contracts and mobilization revenue.
Chiles' rig operating expenses primarily consist of crew, insurance, and repair
and maintenance costs. General and administrative expenses primarily consist of
management, administration, marketing, finance, and legal expenses.
OTHER INVESTMENTS
In 1998, the Company acquired an interest in the predecessor of Globe Wireless
LLC ("Globe Wireless") and now owns approximately 38% of its voting units. Globe
Wireless is a provider of advanced marine telecommunication services using
satellite and high frequency radio technologies. It owns and operates a
worldwide network of high frequency radio stations to offer email, data
transfer, and telex services to ships at a much lower cost than competing
satellite services. The Company believes that Globe Wireless offers the only
such service combining radio, satellite, and internet communications to the
maritime community.
In the fourth quarter of 2000, the Company acquired 23 newly constructed inland
river hopper barges ("barges") and SCF Corporation, a company that owned and
operated barges. In 2001, the Company acquired an additional 52 newly
constructed barges at an approximate cost of $12.9 million. At June 30, 2001,
the Company owned 118 barges and a 50% interest in a partnership that owned 11
barges and managed 209 barges for third parties.
In addition, the Company, from time to time, makes investments in other related
businesses.
RESULTS OF OPERATIONS
The following table sets forth operating revenue and operating profit by the
Company's various business segments for the periods indicated, in thousands of
dollars.
Marine Environmental Drilling Other Total
----------- ------------ ------------ --------------- -------------
FOR THE THREE MONTHS ENDED JUNE 30, 2001:
Operating Revenues -
External Customers $ 102,870 $ 7,285 $ - $ 2,273(a) $ 112,428
Intersegment 294 - - (294) -
----------- ----------- ------------- --------------- -------------
Total $ 103,164 $ 7,285 $ - $ 1,979 $ 112,428
=========== =========== ============= =============== =============
Operating Profit $ 27,149 $ 990 $ - $ 364 $ 28,503
Gains (Losses) from Equipment Sales and Retirements, net 2,074 - - (157) 1,917
Equity in Earnings (Losses) of 50% or Less Owned Companies 975 4 1,380 (1,693) 666
Minority Interest in Subsidiaries - - - (86) (86)
Net Interest Expense - - - (1,943) (1,943)
Derivative Income, net - - - 62 62
Gains from Sale of Marketable Securities, net - - - 1,272 1,272
Corporate Expenses - - - (2,319) (2,319)
Income Taxes - - - (9,794) (9,794)
----------- ----------- ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 30,198 $ 994 $ 1,380 $ (14,294) $ 18,278
===================================================================================================================================
FOR THE THREE MONTHS ENDED JUNE 30, 2000:
Operating Revenues -
External Customers $ 64,429 $ 6,406 $ 14,309 $ - $ 85,144
Intersegment 74 - - (74) -
----------- ----------- ------------- --------------- -------------
Total $ 64,503 $ 6,406 $ 14,309 $ (74) $ 85,144
=========== =========== ============= =============== =============
14
Operating Profit (Loss) $ 5,847 $ 566 $ 5,901 $ (3) $ 12,311
Gains from Equipment Sales and Retirements, net 2,569 3 - - 2,572
Equity in Earnings (Losses) of 50% or Less Owned Companies 668 94 - (1,635) (873)
Minority Interest in Subsidiaries - - - (1,438) (1,438)
Net Interest Expense - - - (3,279) (3,279)
Derivative Losses, net - - - (678) (678)
Gains from Sale of Marketable Securities, net - - - 393 393
Corporate Expenses - - - (1,417) (1,417)
Income Taxes - - - (2,551) (2,551)
----------- ----------- ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 9,084 $ 663 $ 5,901 $ (10,608) $ 5,040
===================================================================================================================================
Marine Environmental Drilling Other Total
----------- ------------ ------------ --------------- -------------
FOR THE SIX MONTHS ENDED JUNE 30, 2001:
Operating Revenues -
External Customers $ 187,343 $ 14,261 $ - $ 4,024(a) $ 205,628
Intersegment 440 - - (440) -
----------- ----------- ------------- --------------- -------------
Total $ 187,783 $ 14,261 $ - $ 3,584 $ 205,628
=========== =========== ============= =============== =============
Operating Profit $ 41,295 $ 1,570 $ - $ 706 $ 43,571
Gains (Losses) from Equipment Sales and Retirements, net 4,002 2 - (157) 3,847
Equity in Earnings (Losses) of 50% or Less Owned Companies 3,218 3 2,837 (2,367) 3,691
Gain from Sale of Interest in a 50% or Less Owned Company 100 - - - 100
Minority Interest in Subsidiaries - - - (164) (164)
Net Interest Expense - - - (3,108) (3,108)
Derivative Losses, net - - - (35) (35)
Gains from Sale of Marketable Securities, net - - - 2,399 2,399
Corporate Expenses - - - (4,702) (4,702)
Income Taxes - - - (15,187) (15,187)
----------- ----------- ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 48,615 $ 1,575 $ 2,837 $ (22,615) $ 30,412
===================================================================================================================================
FOR THE SIX MONTHS ENDED JUNE 30, 2000:
Operating Revenues -
External Customers $ 124,508 $ 10,925 $ 22,655 $ - $ 158,088
Intersegment 211 - - (211) -
----------- ----------- ------------- --------------- -------------
Total $ 124,719 $ 10,925 $ 22,655 $ (211) $ 158,088
=========== =========== ============= =============== =============
Operating Profit (Loss) $ 12,571 $ 842 $ 8,730 $ (3) $ 22,140
Gains from Equipment Sales and Retirements, net 5,102 6 - - 5,108
Equity in Earnings (Losses) of 50% or Less Owned Companies 1,371 270 - (2,816) (1,175)
Minority Interest in Subsidiaries - - - (1,210) (1,210)
Net Interest Expense - - - (6,233) (6,233)
Derivative Losses, net - - - (1,079) (1,079)
Gains from Sale of Marketable Securities, net - - - 2,351 2,351
Corporate Expenses - - - (2,754) (2,754)
Income Taxes - - - (5,628) (5,628)
----------- ----------- ------------- --------------- -------------
Income (Loss) before Extraordinary Item $ 19,044 $ 1,118 $ 8,730 $ (17,372) $ 11,520
===================================================================================================================================
(a) Operating revenues are attributable to the Company's inland barge
business that commenced operation in the third quarter of 2000.
OFFSHORE MARINE SERVICES
OPERATING REVENUES. The Company's offshore marine service segment's operating
revenues increased $38.7 million, or 60%, and $63.1 million, or 51%, in the
three and six-month periods ended June 30, 2001, respectively, compared to the
three and six-month periods ended June 30, 2000. Operating revenues rose due
primarily to the entry into service of vessels acquired by and constructed for
the Company and higher rates per day worked and fleet utilization. These
increases were partially offset by a decline in operating revenues due to vessel
dispositions.
The acquisition and construction of 17 standby safety, 17 mini-supply, 16 supply
and towing supply, 11 utility, 4 anchor handling towing supply, and 3 crew
vessels resulted in a $20.7 million and $34.9 million increase in operating
revenues between comparable three and six-month periods, respectively.
Higher rates per day worked resulted in an increase in operating revenues of
approximately $10.9 million and $18.6 million between comparable three and
six-month periods, respectively. The increases resulted primarily from higher
rates per day worked earned by the Company's U.S. supply and towing supply and
crew vessels. Rates also increased in the U.S. utility and mini-supply fleets,
in the West African anchor handling towing supply and crew fleets, in the North
Sea supply and towing supply fleets, and for anchor handling towing supply and
15
supply and towing supply vessels working in other foreign regions. These
increases were partially offset by a decline in rates per day worked earned by
the U.S. anchor handling towing supply and North Sea standby safety fleets.
Higher utilization resulted in an increase in operating revenues of
approximately $9.7 million and $14.9 million between comparable three and
six-month periods, respectively. The increase resulted primarily from an
improvement in the utilization of the West African supply and towing supply
vessels, U.S. anchor handling towing supply fleets, North Sea standby safety
fleets, and anchor handling towing supply and supply and towing supply vessels
operating in other foreign regions. Utilization also improved in the U.S.
mini-supply and project fleets.
The sale and charter-in termination of 10 supply and towing supply, 3 anchor
handling towing supply, 3 crew, 3 utility, and 3 standby safety vessels resulted
in a decline in operating revenues of approximately $2.4 million and $5.9
million between comparable three and six-month periods, respectively.
OPERATING PROFIT. The Company's offshore marine business segment's operating
profit increased $21.3 million, or 364%, and $28.7 million, or 228%, in the
three and six-month periods ended June 30, 2001, respectively, compared to the
three and six-month periods ended June 30, 2000 due primarily to those factors
affecting operating revenues outlined above. The increases in operating profit
were offset by higher operating expenses that resulted primarily from (i) an
increase in crew wages paid to seamen working domestically in response to
competition for qualified personnel, (ii) the sale and leaseback of several
vessels, (iii) a greater number of vessels undergoing drydockings, and (iv)
higher costs associated with repairs and maintenance of main engines and deck
and winch equipment. An increase in U.S. seamen wages to be implemented by the
Company in the third quarter of 2001 will escalate operating expenses in future
periods.
GAINS FROM EQUIPMENT SALES OR RETIREMENTS, NET. Net gains from equipment sales
or retirements decreased $0.5 million and $1.1 million in the three and
six-month periods ended June 30, 2001, respectively, compared to the three and
six-month periods ended June 30, 2000. During the six-month period ended June
30, 2001, four crew, four utility, two towing supply, and one standby safety
vessel were sold. During the six-month period ended June 30, 2000, the vessels
sold included five utility, two towing supply, two supply, and one crew vessel.
EQUITY IN EARNINGS (LOSSES) OF 50% OR LESS OWNED COMPANIES. Equity earnings
increased $0.3 million and $1.8 million in the three and six-month periods ended
June 30, 2001, respectively, compared to the three and six-month periods ended
June 30, 2000. Equity earnings rose due primarily to higher profits (including a
gain from the sale of a vessel) earned by certain joint ventures in which the
Company acquired an interest pursuant to a 1996 transaction with SMIT
Internationale N.V. ("SMIT") and an increase in profits earned by the Company's
Mexican joint venture. Results in 2001 also rose due to the commencement of
operations of a joint venture in Southeast Asia. In December 2000, the Company
entered into a joint venture owned 50% by each of the Company and Penguin Boat
International Limited, a Singapore corporation. The joint venture, Pelican
Offshore Services Pte Ltd, also a Singapore corporation, owns six and
charters-in one newly built fast support intervention vessel (also known as
multipurpose crew vessels).
ENVIRONMENTAL SERVICES
OPERATING REVENUES. The environmental business segment's operating revenues
increased $0.9 million, or 14%, and $3.3 million, or 31%, in the three and
six-month periods ended June 30, 2001, respectively, compared to the three and
six-month periods ended June 30, 2000 due primarily to the increase in the
severity of oil spills managed by the Company and the addition of a major West
Coast terminal client, which generated additional retainer revenue.
OPERATING PROFIT. The environmental business segment's operating profit
increased $0.4 million, or 75%, and $0.7 million, or 86%, in the three and
six-month periods ended June 30, 2001, respectively, compared to the three and
six-month periods ended June 30, 2000 due primarily to the factors affecting
operating revenues as outlined above.
EQUITY IN EARNINGS (LOSSES) OF 50% OR LESS OWNED COMPANIES. Equity earnings
decreased $0.1 million and $0.3 million in the three and six-month periods ended
June 30, 2001, respectively, compared to the three and six-month periods ended
June 30, 2000. On November 30, 2000, NRC purchased Crowley Marine Service's 50%
interest in CPA and began a termination and winding up process. As of that date,
all of CPA's obligations under existing contracts were assumed by NRC. CPA will
be dissolved upon completion of the termination and winding up of its affairs.
16
DRILLING SERVICES
As a consequence of the Chiles IPO, the Company's ownership interest in Chiles
Offshore was reduced from 55.4% to 27.3% and consequently, because its ownership
interest declined below 50%, the Company no longer consolidates Chiles'
financial condition, results of operations, and cash flows. As of September 22,
2000, the Company began accounting for its interest in Chiles using the equity
method.
OTHER
EQUITY IN LOSSES OF 50% OR LESS OWNED COMPANIES. Equity losses increased $0.1
million and decreased $0.4 million in the three and six-month periods ended June
30, 2001, respectively, compared to the three and six-month periods ended June
30, 2000. Six-month results improved due to a gain realized from the sale of a
Handymax Dry-Bulk ship. In the second quarter of 2001, the Company began
recording its proportionate share of net losses of Strategic Software Limited,
an equity investee whose principal activity is to develop and sell software to
the ship brokerage and shipping industry.
NET INTEREST EXPENSE. Net interest expense decreased $1.3 million and $3.1
million in the three and six-month periods ended June 30, 2001, respectively,
compared to the three and six-month periods ended June 30, 2000. These decreases
were due primarily to a decline in outstanding indebtedness following the
deconsolidation of Chiles Offshore in September 2000 and SEACOR's redemption of
$135.3 million principal amount of the 5 3/8% Convertible Subordinated Notes Due
2006 (the "5 3/8% Notes") during the first six months of 2001. See "Liquidity
and Capital Resources -- Credit Facilities -- 5 3/8% Notes" for additional
discussion. These savings were partially offset by the effect of additional
indebtedness and lower cash balances available for investments resulting
primarily from the acquisition of offshore marine vessels.
DERIVATIVE INCOME (LOSSES), NET. During the three and six-month periods ended
June 30, 2001, the Company recognized a net gain of $0.1 million and a net loss
of $0.03 million, respectively, from derivative transactions. In the three and
six-month periods ended June 30, 2000, the Company recognized a net loss of $0.7
million and $1.1 million, respectively, from derivative transactions. During the
three and six-month periods ended June 30, 2001, the Company recognized a net
loss from foreign currency forward exchange contracts. The Company enters into
these forward contracts to hedge against the fluctuations in certain currency
exchange rates. These net losses were offset by net gains from commodity price
hedging arrangements due primarily to the contract prices exceeding the
settlement prices quoted on the New York Mercantile Exchange ("NYMEX") for
various natural gas and crude oil positions. During the three and six-month
month periods ended June 30, 2000, the net losses were due primarily to the
settlement prices quoted on the NYMEX exceeding the contract prices for various
natural gas and crude oil positions.
GAINS FROM SALE OF MARKETABLE SECURITIES, NET. Net gains from the sale of
marketable securities increased $0.9 million and $0.1 in the three and six-month
periods ended June 30, 2001, respectively, compared to the three and six-month
periods ended June 30, 2000. In all periods presented, the Company realized net
gains primarily from the sale of equity securities.
CORPORATE EXPENSES. In the three and six-month periods ended June 30, 2001
compared to the three and six-month periods ended June 30, 2000, corporate
expenses increased $0.9 million and $1.9 million, respectively. 2001 included
underwriting fees and legal and professional expenses relating to unused
availability under a standby purchase agreement with Credit Suisse First Boston
("CSFB") in connection with the redemption of certain of the Company's 5 3/8%
Notes and higher costs resulting from an increase in the number of filings with
the Securities and Exchange Commission. See "Liquidity and Capital Resources --
Credit Facilities -- 5 3/8% Notes" for additional discussion. Corporate expenses
also increased between comparable periods due to an increase in wage and related
benefit costs.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's ongoing liquidity requirements arise primarily from its need to
service debt, fund working capital, acquire, construct, or improve equipment and
make other investments. Management believes that cash flow from operations will
provide sufficient working capital to fund the Company's operating needs. The
17
Company may, from time to time, issue shares of its common stock, preferred
stock, debt or a combination thereof, or sell vessels to finance the acquisition
of equipment and businesses or make improvements to existing equipment.
The Company's cash flow levels and operating revenues are determined primarily
by the size of the Company's offshore marine fleet, rates per day worked and
overall utilization of the Company's offshore marine fleet, and retainer, spill
response, and consulting activities of the Company's environmental service
business. The Company's offshore marine business is directly affected by the
volatility of oil and gas prices, the level of offshore production and
exploration activity, and other factors beyond the Company's control.
CASH AND MARKETABLE SECURITIES
Since December 31, 2000, the Company's cash and investments in marketable
securities decreased by $106.5 million. At June 30, 2001, cash and marketable
securities totaled $240.7 million, including $140.4 million of unrestricted cash
and cash equivalents, $53.7 million of marketable securities, and $46.6 million
of restricted cash. Restricted cash at June 30, 2001 is intended for use in
defraying costs to construct U.S.-flag offshore marine vessels for the Company.
At June 30, 2001, the Company had funded $21.7 million in offshore marine vessel
construction costs from unrestricted cash balances, and subject to prior written
approval from the U.S. Maritime Administration, the Company expects such amounts
to be reimbursed from its restricted cash accounts.
CASH GENERATION AND DEPLOYMENT
OPERATING ACTIVITIES. Cash flow provided from operating activities during the
six-month period ended June 30, 2001 totaled $32.1 million and increased 63.6%
from the comparable period in 2000 due primarily to an increase in the size,
rates per day worked, and utilization of the Company's offshore marine fleet.
INVESTING AND FINANCING ACTIVITIES. During the six-month period ended June 30,
2001, the Company generated $140.0 million from investing and financing
activities. Available-for-sale securities were sold for $88.1 million. The
Company borrowed $25.0 million under its revolving credit facility with Den
norske Bank ASA ("DnB") (the "DnB Credit Facility"). See "Credit Facilities --
DnB Credit Facility" for discussion. Pursuant to a standby purchase agreement
between CSFB and SEACOR, CSFB purchased 216,170 shares of SEACOR's common stock
for $10.0 million. See "Credit Facilities -- 5 3/8% Notes" for discussion. Cash
proceeds from the sale of eleven offshore support vessels totaled $9.9 million.
Additional cash was generated primarily from the sale of the Company's
investment in a 50% or less owned offshore marine service segment subsidiary,
principal payments received on notes due from 50% or less owned subsidiaries,
and dividends received from 50% or less owned subsidiaries.
During the six-month period ended June 30, 2001, the Company used $255.2 million
in its investing and financing activities. To acquire corporations that own
offshore support vessels, the Company paid $98.8 million, net of cash acquired.
Capital expenditures for property and equipment, primarily related to the
acquisition and construction of offshore marine vessels and barges, totaled
$61.1 million. Marketable securities were acquired for $44.5 million. The
Company paid $38.0 million for the redemption of $36.1 million principal amount
of the 5 3/8% Notes. Restricted cash balances rose by $5.8 million due to
deposits into vessel joint depository construction reserve fund accounts
generated from the sale of offshore support vessels exceeding reimbursements to
the Company. Investments in and advances to 50% or less owned companies,
primarily for the purchase of vessels, totaled $5.1 million. Additional cash was
used primarily for scheduled repayments of outstanding indebtedness.
STOCK AND DEBT REPURCHASE PROGRAM
Pursuant to a stock and debt repurchase program, the Company may repurchase its
common stock, 5 3/8% Notes, and 7.2% Senior Notes Due 2009 (the "7.2% Notes")
(collectively, the "SEACOR Securities"). Repurchases of SEACOR Securities will
be effected from time to time through open market purchases, privately
negotiated transactions, or otherwise, depending on market conditions. At June
30, 2001, the Company had approximately $36.9 million of available authority for
the repurchase of SEACOR Securities.
CAPITAL STRUCTURE
At June 30, 2001, the Company's capital structure was comprised of $364.7
million in long-term debt, including the current portion, and $707.0 million in
stockholders' equity. Since year end, long-term debt declined due primarily to
the conversion of $99.2 million principal amount of the 5 3/8% Notes in exchange
for 2,285,878 shares of SEACOR's common stock and redemption of $36.1 million
18
principal amount of the 5 3/8% Notes (see "Credit Facilities -- 5 3/8% Notes"
for discussion) for approximately $38.0 million and the Company's regularly
scheduled repayment of certain outstanding indebtedness. These decreases were
partially offset by increases in outstanding indebtedness of $83.1 million in
connection with the acquisition of Stirling Shipping and $13.6 million in
connection with the acquisition of two offshore support vessels. The Company
also borrowed $25.0 million under its DnB Credit Facility in connection with the
acquisition of Stirling Shipping. Stockholders' equity rose since year end due
primarily to the conversion of certain of the 5 3/8% Notes into SEACOR's common
stock, an increase in retained earnings from net income, the issuances of
SEACOR's common stock from treasury in connection with the acquisitions of two
offshore support vessel owning corporations and the issuance of SEACOR's common
stock shares to CSFB pursuant to a standby purchase agreement between SEACOR and
CSFB. See "Credit Facilities -- 5 3/8% Notes" for discussion. These increases
were partially offset by an increase in other comprehensive losses that resulted
primarily from losses from foreign currency translation adjustments and the
amortization of restricted stock.
CAPITAL EXPENDITURES
As of June 30, 2001, the Company was committed to the construction of 13
offshore support vessels for an approximate aggregate cost of $102.3 million of
which $29.3 million has been expended. These vessels are expected to enter
service within the next twelve months.
CREDIT FACILITIES
DNB CREDIT FACILITY. Under the terms of an unsecured reducing revolving credit
facility (the "DnB Credit Facility") with Den norske Bank ASA that was
established in November 1998, the Company may borrow up to $100.0 million
aggregate principal amount (the "Maximum Committed Amount") of unsecured
reducing revolving credit loans maturing on November 17, 2004. The Maximum
Committed Amount will automatically decrease semi-annually by 4.54% beginning
November 17, 1999, with the balance payable at maturity. Outstanding borrowings
will bear interest at annual rates ranging from 45 to 110 basis points (the
"Margin") above LIBOR. The Margin is determined quarterly and varies based upon
the percentage the Company's funded debt bears to earnings before interest,
taxes, depreciation, and amortization ("EBITDA"), as defined, and/or the credit
rating maintained by Moody's and Standard & Poor's, if any. The DnB Credit
Facility requires the Company, on a consolidated basis, to maintain a minimum
ratio of vessels' values to Maximum Committed Amount, as defined, a minimum cash
and cash equivalent level, a specified interest coverage ratio, specified debt
to capitalization ratios, and a minimum net worth. The DnB Credit Facility
limits the amount of secured indebtedness that the Company and its subsidiaries
may incur, provides for a negative pledge with respect to certain activities of
the Company's vessel owning/operating subsidiaries, and restricts the payment of
dividends. In May 2001, the Company borrowed $25.0 million under the DnB Credit
facility to fund a portion of the acquisition of Stirling Shipping. On behalf of
the Company, DnB issued a letter of credit, totaling (pound)15.3 million, which
represents a guarantee on the loan notes issued by the Company in connection
with the acquisition of Stirling Shipping. At June 30, 2001, the outstanding
letter of credit totaled $21.9 million and the amount available for future
borrowings under the DnB Credit Facility totaled $34.9 million. Subsequent to
June 30, 2001, the Company repaid the $25.0 million principal amount borrowed
under the DnB Credit Facility, plus accrued interest.
5.467% NOTES. Pursuant to a February 1998 letter agreement between the Company
and SMIT, the Company agreed to prepay certain contingent obligations for
additional purchase consideration that would otherwise have been payable to SMIT
in 1999 pursuant to a certain Asset Purchase Agreement dated December 19, 1996,
by and among the Company and SMIT (the "SMIT Transaction"). The prepayment
included the issuance, effective January 1, 1999, of five-year subordinated
promissory notes in the aggregate principal amount of $23.2 million, which notes
will bear interest at 5.467% per annum payable quarterly in arrears.
7.2% NOTES. At June 30, 2001, the Company had outstanding $147.5 million
aggregate principal amount of its 7.2% Notes. Interest on the 7.2% Notes is
payable semi-annually on March 15 and September 15 of each year commencing March
15, 1998. The 7.2% Notes may be redeemed at any time at the option of the
Company, in whole or from time to time in part, at a price equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of redemption plus a Make-Whole Premium, if any, relating to the then prevailing
Treasury Yield and the remaining life of the 7.2% Notes. The 7.2% Notes were
issued under an indenture that contains covenants including, among others,
limitations on liens and sale and leasebacks of certain Principal Properties, as
defined therein, and certain restrictions on the Company consolidating with or
merging into any other Person.
19
5 3/8% NOTES. At June 30, 2001, the Company had outstanding $46.3 million
aggregate principal amount of its 5 3/8% Notes that were issued pursuant to a
private placement and the SMIT Transaction in 1996. The 5 3/8% Notes are
convertible, in whole or part, at the option of the holder at any time prior to
the close of business on the business day next preceding November 15, 2006,
unless previously converted into shares of common stock at a conversion price of
$44.00 per share (equivalent to a conversion rate of 22.7272 shares of common
stock per $1,000 principal amount of the 5 3/8% Notes), subject to adjustment in
certain circumstances. The 5 3/8% Notes are redeemable at the Company's option
at any time on or after November 24, 1999 at the redemption prices specified
therein, together with accrued and unpaid interest to the repurchase date. The 5
3/8% Notes are general unsecured obligations of the Company, subordinated in
right of payment to all senior indebtedness of the Company and effectively
subordinated in right of payment to all indebtedness and other obligations and
liabilities and any preferred stock of the Company's subsidiaries. Also,
pursuant to the SMIT Transaction, the Company entered into certain lease
purchase agreements which obligate the Company to purchase two vessels from SMIT
with cash and $6.75 million principal amount of the 5 3/8% Notes in December
2001.
During the six-month period ended June 30, 2001, SEACOR called for redemption
$100.0 million of the $181.6 million aggregate principal amount outstanding of
its 5 3/8% Notes. The call, together with certain privately negotiated
transactions, resulted in the conversion of $99.2 million principal amount of
the 5 3/8% Notes into 2,285,878 shares of SEACOR's common stock and redemption
of $36.1 million principal amount of the 5 3/8% Notes for approximately $38.0
million.
Pursuant to an amended and restated standby purchase agreement between CSFB and
SEACOR, CSFB was obligated, subject to several conditions, to purchase from
SEACOR, at a purchase price of $46.26 per share, the number of shares of
SEACOR's common stock necessary to provide SEACOR with the proceeds to pay the
aggregate total redemption price of up to $100.0 million face amount of the 5
3/8% Notes that SEACOR redeemed. In the second quarter, CSFB purchased 216,170
shares of SEACOR's common stock to provide SEACOR with proceeds to redeem $10.0
million principal amount of the 5 3/8% Notes that were called but not converted.
Related underwriting and legal and professional fees expensed in the three and
six-month periods ended June 30, 2001 totaled $0.2 million and $0.6 million,
respectively.
SEACOR also entered into an equity forward transaction with Credit Suisse First
Boston International ("CSFBi"), an affiliate of CSFB, with respect to shares of
SEACOR's common stock that CSFB purchased from SEACOR under the standby purchase
agreement. The equity forward transaction provides that at maturity, which will
occur twelve months following this purchase by CSFB of shares of SEACOR's common
stock. SEACOR will elect, as described below, to either purchase the shares
covered by the equity forward transaction from CSFBi or cash settle the
transaction. If SEACOR elects to purchase the shares from CSFBi, it will pay a
purchase price equal to $46.26 (the purchase price under the standby purchase
agreement) plus interest calculated at LIBOR plus 115 basis points, from the
date that CSFB purchased those shares from SEACOR to the date that SEACOR
purchases those shares from CSFBi. If SEACOR elects to cash settle the
transaction, then if the value of the shares at maturity (determined on the
basis of the net proceeds that CSFBi is able to receive upon the sale of those
shares in the open market) exceeds the purchase price described above, then
CSFBi will pay to SEACOR the amount of such excess in cash at maturity. If the
purchase price exceeds the value of the shares at maturity, then SEACOR will pay
to CSFBi the amount of such excess in cash at maturity. SEACOR has the right to
accelerate the maturity of the equity forward transaction in whole or in part at
any time upon prior written notice to CSFBi. The equity forward transaction also
contains customary events of default and termination events following which
either one or both parties would have the right to terminate the transaction and
make net cash payments based on the net value of the transaction at the time of
termination.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2001, the Company adopted Financial Accounting Standards
No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities", as amended. The Statement establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair market value. SFAS
133 requires that changes in the derivative's fair market value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
20
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. The cumulative effect of adopting
SFAS 133 resulted in other comprehensive income of $0.1 million.
The Company has foreign currency exchange risks primarily related to its
offshore marine service vessel operations that are conducted from ports located
in the United Kingdom, where its functional currency is Pounds Sterling. To
protect the U.S. dollar value of certain Pounds Sterling denominated net assets
of the Company from the effects of volatility in foreign currency exchange rates
that might occur prior to their conversion to U.S. dollars, the Company has
entered into forward exchange contracts. The Company considers these forward
exchange contracts as economic hedges of its net investment in the United
Kingdom and resulting gains or losses from those transactions are charged to
Accumulated Other Comprehensive Income in Stockholders' Equity. During the six
months ended June 30, 2001, the Company settled several Pounds Sterling forward
exchange contracts, which resulted in a realized gain of $0.1 million. At June
30, 2001, the Company had no outstanding Pounds Sterling forward exchange
contracts for which hedge accounting criteria were met.
In July 2001, the Financial Accounting Standards Board approved two new
accounting standards related to the accounting for business combinations and
goodwill and other intangible assets. The standards, which are numbered SFAS No.
141 and 142, among other requirements, (i) prohibit the use of the
pooling-of-interests method of accounting for business combinations, (ii)
require that goodwill not be amortized in any circumstance, and (iii) require
that goodwill be tested for impairment annually or when events or circumstances
occur between annual tests indicating that goodwill for a reporting unit might
be impaired. The standards will establish a new method for testing goodwill for
impairment based on a fair value concept. Management's current policy is to
periodically evaluate the amortization periods for goodwill to determine if
later events or circumstances warrant revised estimates of useful lives. It is
also management's policy to review goodwill for impairment whenever events or
changes in circumstances indicate that the carrying value of goodwill may not be
recoverable. As of and subsequent to June 30, 2001, there have been no events or
changes in circumstances surrounding purchased businesses to indicate that the
carrying value of the allocated goodwill may not be recoverable. The standards
will take effect for the fiscal year beginning after December 31, 2001, which
would be the Company's fiscal year beginning January 1, 2002. Upon adoption, the
Company will be required to cease amortization of its remaining goodwill balance
and will be required to perform an impairment test based on a fair value concept
of its existing goodwill. The Company has not completed an analysis of the
potential impact upon adoption of the impairment test of goodwill, however,
amortization of existing goodwill which was approximately $0.9 million and $1.4
million for the three and six-month periods ended June 30, 2001, respectively,
will cease upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has foreign currency exchange risks primarily related to its
offshore marine service vessel operations that are conducted from ports located
in the United Kingdom where its functional currency is Pounds Sterling. To
protect certain of the U.S. dollar value of Pound Sterling denominated net
assets of the Company from the effects of volatility in foreign exchange rates
that might occur prior to their conversion to U.S. dollars, the Company has
entered into forward exchange contracts. The forward exchange contracts enable
the Company to sell Pounds Sterling in the future at fixed exchange rates to
offset the consequences of changes in foreign exchange on the amount of U.S.
dollar cash flows to be derived from the net assets. The Company considers these
forward exchange contracts as economic hedges of a net investment as the
translation adjustments resulting from the forward exchange contracts move in
the opposite direction from the translation adjustments resulting from the
restatement of its United Kingdom subsidiaries' net assets. At June 30, 2001,
the Company had no outstanding contracts for which hedge accounting criteria
were met.
The Company has entered into and settled various positions in natural gas and
crude oil via swaps, options, and futures contracts pursuant to which, on each
applicable settlement date, the Company receives or pays an amount, if any, by
which a contract price for a swap, an option, or a futures contract exceeds the
settlement price quoted on the NYMEX or receives or pays the amount, if any, by
which the settlement prices quoted on the NYMEX exceeds the contract price. The
general purpose of these hedge transactions is to provide value to the Company
21
should the price of natural gas and crude oil decline, which, if sustained,
would lead to a decline in the Company's offshore assets' market values and cash
flows. For accounting purposes, the Company records the change in market value
of its commodity contracts at the end of each month and recognizes a related
gain or loss. At June 30, 2001, the Company's positions in commodity contracts
were not material.
22
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(c) On May 4, 2001, the Company issued a total of 285,852 shares
of SEACOR common stock, par value $.01 per share, to former
shareholders of Stirling Shipping Holdings Limited
("Stirling") in connection with its acquisition of all of the
issued share capital of Stirling. The sale of these securities
was deemed to be exempt from registration under the Securities
Act of 1933, as amended, in reliance on Section 4(2) thereof
as a transaction by an issuer not involving a public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of stockholders of SEACOR SMIT Inc. was held on May 16, 2001.
At that meeting the following directors were elected to terms to expire at the
annual meeting in 2002 or until their successors are duly elected and qualified:
Charles Fabrikant, Granville E. Conway, Michael E. Gellert, Stephen Stamas,
Richard M. Fairbanks III, Pierre de Demandolx, Antoon Kienhuis, Andrew R. Morse,
and John C. Hadjipateras
The following table gives a brief description of each matter voted upon at the
above referenced annual meeting and, as applicable, the number of votes cast
for, against or withheld, as well as the number of abstentions and broker
nonvotes.
BROKER
DESCRIPTION OF MATTER FOR AGAINST WITHHELD ABSTENTIONS NON-VOTES
------------------------- ----------- ----------- ----------- ----------- ---------
1. Election of Directors
Charles Fabrikant 15,279,829 N/A 647,406 N/A N/A
Granville E. Conway 15,882,921 N/A 44,314 N/A N/A
Michael E. Gellert 15,890,421 N/A 36,814 N/A N/A
Stephen Stamas 15,882,921 N/A 44,314 N/A N/A
Richard M. Fairbanks III 15,890,421 N/A 36,814 N/A N/A
Pierre de Demandolx 15,620,668 N/A 306,567 N/A N/A
Antoon Kienhuis 15,620,668 N/A 306,567 N/A N/A
Andrew Morse 15,890,421 N/A 36,814 N/A N/A
John C. Hadjipateras 15,882,471 N/A 44,764 N/A N/A
2. Ratification of the appointment of
Arthur Andersen LLP to serve as
SEACOR's independent auditors for
the fiscal year ending
December 31, 2001. 15,866,762 59,825 648 N/A 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
4.1 Instrument, dated May 4, 2001, setting forth terms of
(pound)14,668,942 in aggregate principal amount of Fixed
Rate Abatable Loan Notes (including form of Loan Note
Certificate as a Schedule thereto) (incorporated by
reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K, filed with the Commission on May 17, 2001).
10.1 Stock Purchase Agreement, dated as of May 4, 2001, by and
between SEACOR SMIT Inc. and the Stirling Vendors
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed with the Commission on
May 17, 2001).
10.2 Tax Deed, dated as of May 4, 2001, by and between SEACOR
SMIT Inc. and the Stirling Vendors (incorporated by
reference to Exhibit 10.2 to the Company's Current Report
on Form 8-K, filed with the Commission on May 17, 2001).
23
B. Reports on Form 8-K:
(1) Current Report on Form 8-K, dated May 17, 2001 and filed on
May 17, 2001, reporting, under Item 5, the Company's acquisition
of all of the issued share capital of Stirling Shipping Holdings
Limited.
24
SIGNATURES
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.
SEACOR SMIT Inc.
(Registrant)
DATE: AUGUST 14, 2001 By: /s/ Charles Fabrikant
------------------------------------------
Charles Fabrikant, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
DATE: AUGUST 14, 2001 By: /s/ Randall Blank
------------------------------------------
Randall Blank, Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
25
INDEX TO EXHIBITS
QUARTERLY REPORT ON FORM 10-Q
QUARTERLY PERIOD ENDED JUNE 30, 2001
4.1 Instrument, dated May 4, 2001, setting forth terms of
(pound)14,668,942 in aggregate principal amount of Fixed Rate
Abatable Loan Notes (including form of Loan Note Certificate
as a Schedule thereto) (incorporated by reference to Exhibit
4.1 to the Company's Current Report on Form 8-K, filed with
the Commission on May 17, 2001).
10.1 Stock Purchase Agreement, dated as of May 4, 2001, by and
between SEACOR SMIT Inc. and the Stirling Vendors
(incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K, filed with the Commission on May
17, 2001).
10.2 Tax Deed, dated as of May 4, 2001, by and between SEACOR SMIT
Inc. and the Stirling Vendors (incorporated by reference to
Exhibit 10.2 to the Company's Current Report on Form 8-K,
filed with the Commission on May 17, 2001).
26