SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 1-12289
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 (I.R.S. Employer Identification No.)
Incorporation or Organization)
11200 Westheimer, Suite 850, Houston, Texas 77042
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (713) 782-5990
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Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock, par value New York Stock Exchange
$.01 per share
Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
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 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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of March 23, 1999 was approximately $236,800,000. The
total number of shares of Common Stock issued and outstanding as of March
23, 1999 was 12,117,523 .
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with the
Commission pursuant to Regulation 14A within 120 days after the end of the
Registrant's last fiscal year is incorporated by reference into Items 10
through 13, Part III of this Annual Report on Form 10-K.
SEACOR SMIT INC.
FORM 10-K
TABLE OF CONTENTS
PART I
Page
Item 1. Business................................................................................ 1
Offshore Marine Services................................................................ 3
Environmental Services.................................................................. 7
Drilling Services....................................................................... 9
Employees............................................................................... 10
Glossary of Selected Offshore Marine Industry Terms..................................... 11
Item 2. Properties.............................................................................. 12
Item 3. Legal Proceedings....................................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders..................................... 12
Item 4A. Executive Officers of the Registrant.................................................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters................... 14
Item 6. Selected Financial Data................................................................. 15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................................ 16
Offshore Marine Services................................................................ 16
Environmental Services.................................................................. 18
Drilling Services....................................................................... 18
Results of Operations................................................................... 19
Liquidity and Capital Resources......................................................... 23
Item 8. Financial Statements and Supplementary Data............................................. 29
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure................................................................. 29
PART III
Item 10. Directors and Executive Officers of the Registrant...................................... 30
Item 11. Executive Compensation.................................................................. 30
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 30
Item 13. Certain Relationships and Related Transactions.......................................... 30
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 31
When included in this Annual Report on Form 10-K or in documents
incorporated herein by reference, the words "expects," "intends,"
"anticipates," "believes," "estimates," and analogous expressions are
intended to identify forward-looking statements. Such statements
inherently are subject to a variety of risks and uncertainties that could
cause actual results to differ materially from those projected. Such
risks and uncertainties include, among others, general economic and
business conditions, industry fleet capacity, changes in foreign and
domestic oil and gas exploration and production activity, competition,
changes in foreign political, social and economic conditions, regulatory
initiatives and compliance with governmental regulations, customer
preferences and various other matters, many of which are beyond the
Company's control. These forward-looking statements speak only as of the
date of this Annual Report on Form 10-K. The Company expressly disclaims
any obligation or undertaking to release publicly any updates or any
change in the Company's expectations with regard thereto or any change in
events, conditions, or circumstances on which any statement is based.
ITEM 1. BUSINESS
GENERAL
The Company is a major provider of offshore marine services to the oil
and gas exploration and production industry, is one of the leading
providers of oil spill response services to owners of tank vessels and
oil storage, processing, and handling facilities, and owns a majority
equity interest in a company that is building two state-of-the-art
premium jackup offshore drilling rigs.
The Company's offshore marine service business operates a diversified
fleet of vessels, 303 as of March 1, 1999, primarily dedicated to
servicing offshore oil and gas exploration and production facilities
mainly in the U.S. Gulf of Mexico, offshore West Africa, the North Sea,
the Far East, Latin America, and the Mediterranean. The Company's
offshore marine fleet, including owned, chartered-in, joint ventured,
pooled, and managed vessels, delivers cargo and personnel to offshore
installations, handles anchors for drilling rigs and other marine
equipment, supports offshore construction and maintenance work, and
provides standby safety support and oil spill response services. The
Company also furnishes vessels for special projects such as well
stimulation, seismic data gathering, salvage, freight hauling, and line
handling. In connection with its offshore marine services, the Company
offers logistics services for the offshore industry including the
coordination and provision of marine, air, and land transportation and
materials handling and storage.
The Company's environmental service business provides contractual oil
spill response and other professional services to those who store,
transport, produce, or handle petroleum and certain non-petroleum oils as
required by the Oil Pollution Act of 1990, as amended ("OPA 90"), and
various state regulations. The Company's environmental services, provided
primarily through its wholly owned subsidiaries, National Response
Corporation ("NRC"), International Response Corporation ("IRC"), and
ERST/O'Brien's Inc. ("ERST"), include training, consulting and
supervision for emergency preparedness, response and crisis management
associated with oil or hazardous material spills, fires, and natural
disasters, and the maintenance of specialized equipment for immediate
deployment in response to spills and other events. NRC has acted as the
principal oil spill response contractor on several of the largest oil
spills that have occurred in the United States since the enactment of OPA
90.
The Company owns a 55.4% membership interest in Chiles Offshore LLC, a
Delaware limited liability company ("Chiles Offshore"), that was formed
for purposes of constructing, owning, and operating state-of-the-art
premium jackup offshore drilling rigs. Chiles Offshore commenced
construction of two state-of-the-art premium jackup offshore drilling
rigs at the AMFELS, Inc. ("AMFELS") shipyard in Brownsville, Texas under
fixed-price contracts in 1997. The first rig, the Chiles Columbus, is a
LeTourneau Enhanced 116-C design, and the second, the Chiles Magellan, is
a LeTourneau Super 116 design (together, the "Rigs"). Construction and
outfitting of the Rigs are expected to cost an aggregate $171.3 million,
excluding capitalized interest. References herein to "Chiles" shall mean
Chiles Offshore together with its wholly owned subsidiaries, Chiles
Columbus LLC and Chiles Magellan LLC (the "Rig Owners"), both of which
are Delaware limited liability companies and owners of the Chiles
Columbus and Chiles Magellan, respectively.
SEACOR was incorporated in Delaware in December 1989 and conducts its
business principally through wholly owned and majority owned
subsidiaries, many of which have been organized to facilitate vessel
acquisitions and various financing transactions in connection therewith
and to satisfy foreign and domestic vessel certification requirements.
SEACOR's principal executive offices are located at 11200 Westheimer,
Suite 850, Houston, Texas 77042, where its telephone number is (713)
782-5990.
1
Unless the context indicates otherwise, any reference in this Annual
Report on Form 10-K to the "Company" refers to SEACOR SMIT Inc. and its
consolidated subsidiaries, "SEACOR" refers to SEACOR SMIT Inc., and
"Common Stock" refers to the common stock, par value $.01 per share, of
SEACOR SMIT Inc. Certain industry terms used in the description of the
Company's offshore marine business are defined or described under
"Glossary of Selected Offshore Marine Industry Terms" appearing at the
end of this Item 1.
RECENT DEVELOPMENTS
On March 3, 1998, the Company repurchased from SMIT International
Overseas B.V. ("SMIT Overseas"), a subsidiary of SMIT Internationale N.V.
("SMIT"), 712,000 shares of Common Stock for approximately $37.0 million
(the "SMIT Stock Repurchase Transaction"). The Common Stock was issued to
SMIT Overseas as part of the purchase consideration paid for the
Company's acquisition of SMIT's offshore supply vessel fleet in December
1996 (the "SMIT Transaction"). The Company also satisfied its obligation
to pay up to an additional $47.2 million of purchase consideration that
would otherwise be payable to SMIT in 1999 through the payment to SMIT of
$20.88 million in cash and through the issuance in January 1999 of $23.2
million principal amount of five-year unsecured promissory notes that
bear interest at a rate of 5.467% per annum (the "SMIT Additional
Consideration Transaction"). As part of the SMIT Additional Consideration
Transaction, the Company and SMIT also have agreed to extend the three
year term of the salvage and maritime contracting and non-compete
agreements first established in December 1996 through December 2001.
On April 29, 1998, Chiles completed the sale of $110.0 million aggregate
principal amount of its 10.0% Senior Notes Due 2008 (the "Chiles 10.0%
Notes") which will mature May 1, 2008. The offering was made to qualified
institutional buyers and to certain persons in offshore transactions
exempt from registration under U.S. federal securities laws. Pursuant to
an exchange offer that was consummated on September 28, 1998, all holders
of the Chiles 10.0% Notes exchanged such notes for new notes identical in
form and terms, that were registered under the Securities Act of 1933, as
amended. Interest on the Chiles 10.0% Notes is payable semi-annually on
May 1 and November 1 of each year commencing November 1, 1998. The
proceeds from the issuance of the Chiles 10.0% Notes were placed in
escrow to be used to (a) partially fund the construction of the Rigs, (b)
pay interest on the Chiles 10.0% Notes through the first two semi-annual
interest payment dates, and (c) provide working capital. All obligations
with respect to the Chiles 10.0% Notes are limited exclusively to Chiles
and are nonrecourse to SEACOR.
Also on April 29, 1998, Chiles entered into a bank credit agreement that
provides for a $25.0 million revolving credit facility (the "Chiles Bank
Facility") maturing December 31, 2004. Borrowings under the Chiles Bank
Facility may be repaid and reborrowed during the term thereof and will
bear interest at a per annum rate equal to LIBOR plus a margin of 1.25%.
Subject to satisfaction of customary conditions precedent, including that
there shall have occurred no material adverse change with respect to
Chiles or its business, assets, properties, conditions (financial or
otherwise), or prospects since the date of execution of the Chiles Bank
Facility, availability under the Chiles Bank Facility will commence upon
delivery of a rig being constructed by Chiles. All obligations with
respect to the Chiles Bank Facility are limited exclusively to Chiles and
are nonrecourse to SEACOR. Presently, management has no reason to believe
that credit under the facility will not be available.
During 1998, the Company purchased 1,305,100 shares of Common Stock and
$17.1 million principal amount of the Chiles 10.0% Notes at an aggregate
cost of $74.6 million. SEACOR's Board of Directors also during 1998
expanded its previously announced securities repurchase authority to
include, in addition to Common Stock and its 5 3/8% Convertible
Subordinated Notes due 2006 (the "5 3/8% Notes"), its 7.2% Senior Notes
due 2009 (the "7.2% Notes") and the Chiles 10.0% Notes (collectively, the
"SEACOR Securities") and increased its securities repurchase authority by
$65.0 million. During February 1999, security repurchase authority was
again increased by $25.0 million. The repurchase of SEACOR Securities
will be effected from time to time through open market purchases,
privately negotiated transactions, or otherwise depending on market
conditions.
During 1998, the Company completed the sale of 34 offshore marine vessels
that operated domestically and internationally and other property and
equipment for aggregate consideration of $144.0 million. Of the vessels
sold during the year, 11 have subsequently been bareboat chartered-in by
the Company under operating leases that range in duration from 2 to 4
years. Proceeds from the sale of certain of these offshore marine vessels
were deposited into escrow and construction reserve fund bank accounts
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 the vessels. Also during the year, the Company completed
construction and accepted delivery of 10 offshore marine vessels.
On November 17, 1998, the Company entered into an agreement for a $100.0
million unsecured reducing revolving credit facility (the "Credit
2
Facility") with Den norske Bank ASA ("DnB"), as agent for itself and
other lenders named therein, that replaced an existing revolving credit
facility with DnB.
OFFSHORE MARINE SERVICES
GEOGRAPHIC MARKETS SERVED
The operations of the Company's offshore marine service business are
concentrated in five geographic regions of the world. The table below
sets forth, at the dates indicated, the number of vessels operated
directly by the Company or through its joint ventures and pooling
arrangements in each of those regions.
At December 31, At March 1,
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Geographic Market 1996 1997 1998 1999
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Domestic, principally the U.S. Gulf of Mexico 175 195 177 177
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Foreign:
Offshore West Africa................... 34 31 39 38
North Sea.............................. 34 31 28 25
Far East............................... 19 17 14 14
Latin America.......................... 12 20 34 34
Other.................................. 12 12 15 15
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Total Foreign....................... 111 111 130 126
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Total Fleet(1)................... 286 306 307 303
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(1) Excludes oil spill response vessels operated by the Company's
environmental service business.
DOMESTIC. The Company is a major provider of offshore marine services to
the oil and gas exploration and production industry that operates
primarily in the U.S. Gulf of Mexico. Larger supply, towing supply, and
anchor handling towing supply vessels generally support exploration
activity, which has expanded into deeper water regions of the U.S. Gulf
of Mexico. At December 31, 1998, the Company operated 30 of approximately
340 of these larger vessels currently operating in the U.S. Gulf of
Mexico. Similar vessels and smaller crew and utility vessels also support
production activity. At December 31, 1998, the Company operated 141 of
approximately 400 estimated crew and utility vessels operating in the
U.S. Gulf of Mexico. The Company also operated or bareboat chartered-out
6 specially equipped vessels that provide well stimulation, seismic data
gathering, oil spill response, and freight services from shore bases
primarily in the U.S. Gulf of Mexico region.
Exploration and drilling activities in the U.S. Gulf of Mexico, which
affects the demand for vessels, are largely a function of the short-term
and long-term trends in the levels of oil and gas prices. Demand for
vessels and rates per day worked in the U.S. Gulf of Mexico have been
declining for certain of the Company's vessels due to reduced drilling
and production support activities as a result of lower oil and gas
prices.
OFFSHORE WEST AFRICA. The Company is one of the largest offshore marine
operators serving the West African coast. At December 31, 1998, the
Company and its joint venture partners operated 39 of the approximately
225 offshore support vessels working in this market. Competition is more
concentrated in this market than in the U.S. Gulf of Mexico in that 6
companies operate most of the vessels currently active in the region. The
need for offshore support vessels in this market is primarily dependent
upon multi-year offshore oil and gas exploration and development projects
and production support. The Company's offshore West African operations
have been adversely affected by recent declines in oil prices. If low oil
prices continue, management believes that rates per day worked and
utilization of the Company's fleet in this region will be adversely
affected.
NORTH SEA. The Company provides standby safety, supply, towing supply,
and anchor handling towing supply vessel services to customers in the
North Sea. At December 31, 1998, there were approximately 150 vessels
certified to provide standby safety services in the North Sea, and the
Company owns and operates 11 of those vessels. Twelve additional standby
safety vessels are marketed by the Company or its managing agent under
pooling arrangements with U.K. companies. See "Joint Ventures and Pooling
Arrangements." Demand in this market for standby safety service developed
in 1991 after the United Kingdom promulgated increased safety legislation
requiring offshore operations to maintain higher specification standby
safety vessels. The legislation generally requires a vessel to "stand by"
to provide a means of evacuation and rescue for platform and rig
personnel in the event of an emergency at an offshore installation. The
Company believes that it was one of the first companies to convert
certain offshore marine service vessels for use as standby safety service
vessels. Demand for standby safety vessels in the North Sea has recently
declined due to reduced drilling activities as a result of lower oil and
gas prices.
Also, at December 31, 1998, the Company owned 5 of the approximately 215
offshore support vessels working in the North Sea. Two towing supply and
1 supply vessel were working on the Netherlands' Continental Shelf and 2
towing supply vessels were employed in the U.K. sector. At December 31,
1998, 83 mobile drilling rigs were positioned in the North Sea of which 7
were unemployed. At present, there are an estimated 37 offshore support
vessels under construction in the region that are expected to enter
operation in the North Sea during 1999 and 2000. Should low oil prices
3
continue and offshore support vessel capacities expand as expected, the
Company believes that rates per day worked will likely decline during
1999.
FAR EAST. At December 31, 1998, 6 owned, 2 bareboat chartered-in, and 1
managed vessel of the Company and 5 vessels owned by a joint venture
corporation in which the Company has an equity interest (9 anchor
handling towing supply and 5 towing supply vessels) operated in this
region. See "Joint Ventures and Pooling Arrangements." At December 31,
1998, there were approximately 285 offshore support vessels principally
owned by approximately 20 companies supporting exploration, production,
construction, and special project activities in approximately 16
countries in the Far East. Drilling activities have declined in this
region in direct response to low oil prices; however, production services
have remained relatively steady.
LATIN AMERICA. The Company provides offshore marine services in Latin
America for both exploration and production activities. At December 31,
1998, 23 of the Company's 34 vessels operating in this region were based
in Mexican ports, and the remaining 11 vessels were based in ports in
Chile, Venezuela, Trinidad, Brazil, and Argentina. Thirty-two of the
Company's vessels working in Latin America were operated by joint
ventures. See "Joint Ventures and Pooling Arrangements."
Operating conditions in Mexico are, in many respects, similar to those in
the U.S. Gulf of Mexico; however, demand for offshore support vessels in
Mexico historically has been affected to a significant degree by Mexican
government policies, particularly those relating to Petroleos Mexicanos
("PEMEX"), the Mexican national oil company. Offshore exploration and
production activity increased in 1998 due mainly to large infrastructure
projects contracted in 1997 and carried forward into 1998. These projects
had been previously deferred by PEMEX due to currency and political
problems prior to 1997. At December 31, 1998, there were approximately
160 offshore support vessels, including tugs and barges, operating in the
Mexican offshore market.
Recent declines in oil prices are expected to negatively affect drilling
and production activities in Latin America, and rates per day worked and
utilization of certain of the Company's vessels operating in this region
are expected to decrease.
FLEET
The offshore marine service industry supplies vessels to owners and
operators of offshore drilling rigs and production platforms. Two of the
largest groups of offshore support vessels which the Company operates are
crew boats, which transport personnel and small loads of cargo when
expedited deliveries are required, and utility boats, which support
offshore production by delivering general cargo and facilitating infield
transportation of personnel and materials. Two other significant classes
of vessels operated by the Company are towing supply and anchor handling
towing supply vessels. These vessels have more powerful engines, a deck
mounted winch and are capable of towing and positioning offshore drilling
rigs as well as providing supply vessel services. The Company also
operates supply vessels, which transport drill pipe, drilling fluids, and
construction materials, and special service vessels, which support well
stimulation, seismic data gathering, line handling, freight hauling, oil
spill response, salvage, and standby safety. As of December 31, 1998, the
average age of the Company's owned offshore marine fleet was
approximately 13.6 years.
The following table sets forth, at the dates indicated, certain summary
fleet information for the Company. For a description of vessel types, see
"Glossary of Selected Offshore Marine Industry Terms" at the end of this
Item 1.
At December 31, At March 1,
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Type of Vessels 1996 1997 1998 1999
- - --------------------------------------------- ------------- ------------- -------------------------------
Crew....................................... 77 83 82 81
Utility and Line Handling.................. 70 86 83 82
Supply and Towing Supply................... 70 75 81 80
Anchor Handling Towing Supply.............. 37 37 34 36
Standby Safety............................. 22 22 23 20
Geophysical, Freight and Other............. 10 3 4 4
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Total Fleet................................ 286 306 307 303(1)
============= ============= ===============================
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(1) Excludes 11 oil spill response vessels but includes 227
offshore marine service vessels owned by the Company and 76
offshore marine service vessels that are not owned by the
Company. Of the 76 offshore marine service vessels that are
not Company owned, 34 are owned by joint venture corporations
in which the Company has an equity interest, 9 are operated
under pooling arrangements with Company owned vessels, 29 are
chartered-in or managed by the Company, and 4 are chartered-in
by the TMM Joint Venture, as hereinafter defined, for use in
their operations.
Since 1994, vessel acquisition transactions and investments in joint
ventures that have significantly increased the size of the Company's
fleet include: (i) 127 utility, crew, and supply vessels acquired in a
1995 transaction (the "Graham Transaction") with John E. Graham & Sons
and certain of its affiliated companies (collectively "Graham"), (ii) 11
towing and anchor handling towing supply vessels acquired pursuant to
transactions in 1995 and 1996 (the "1995 and 1996 CNN Transactions") with
Compagnie Nationale de Navigation ("CNN"), a French corporation, (iii) 41
crew and utility vessels acquired in a 1996 transaction (the "McCall
Transaction") with McCall Enterprises, Inc. and its affiliated companies
4
(the "McCall Companies"), (iv) 28 anchor handling towing supply, supply,
and towing supply vessels acquired and equity investments in joint
ventures that owned 21 anchor handling towing supply and towing supply
vessels pursuant to the SMIT Transaction, (v) 24 utility, crew, and
supply vessels acquired in a 1997 transaction (the "Galaxie Transaction")
with Galaxie Marine Service, Inc. and affiliated companies ("Galaxie"),
and (vi) 15 anchor handling towing supply, crew, and supply vessels
constructed for the Company during 1997 and 1998. The vessels acquired in
the Graham Transaction, the McCall Transaction, and the Galaxie
Transaction and those constructed for the Company primarily support the
oil and gas exploration and production industry in the U.S. Gulf of
Mexico; whereas, vessels acquired in the 1995 and 1996 CNN Transactions
and the SMIT Transaction are employed in foreign offshore support
markets.
The Company actively monitors opportunities to buy and sell vessels that
will maximize the overall utility and flexibility of its fleet. Since
1994, the Company has sold 99 vessels that include: (i) 6 utility, 4
supply, 1 crew, and 1 anchor handling towing supply in 1995, (ii) 16
utility in 1996, (iii) 15 supply (7 of which have been bareboat
chartered-in by the Company), 7 utility, 6 towing supply, 5 anchor
handling towing supply (1 of which has been bareboat chartered-in by the
Company), 2 crew, 1 freight, and 1 seismic in 1997, and (iv) 8 anchor
handling towing supply (3 of which have been bareboat chartered-in by the
Company), 8 towing supply (3 of which have been bareboat chartered-in by
the Company), 7 utility, 6 supply (5 of which have been bareboat
chartered-in by the Company), and 5 crew in 1998.
The Company is also committed to the construction of 15 vessels over the
next two years that include 8 crew, 4 anchor handling towing supply, 2
utility, and 1 supply.
JOINT VENTURES AND POOLING ARRANGEMENTS
The Company has formed or acquired interests in 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 and lessen the risks and capital outlays associated with
independent fleet expansion. The joint venture and pooling arrangements
in which the Company participates are described below:
VEESEA JOINT VENTURE. Standby safety vessels operated by the Company in
the North Sea are owned by a subsidiary of the Company, VEESEA Holdings,
Inc. ("VEESEA Holdings") and its subsidiaries (collectively, "VEESEA").
All standby safety vessels operated by the Company in the North Sea are
managed under an arrangement with Vector Offshore Limited, a U.K. company
("Vector"), which owns a 9% interest in VEESEA Holdings (the "Veesea
Joint Venture"). The Veesea Joint Venture enabled the Company, beginning
in 1991, to enter a niche market using local management and an existing
infrastructure. At December 31, 1998, 11 vessels owned by the Company
were operating in standby safety service pursuant to the Veesea Joint
Venture.
SEAVEC POOL. In January 1995, the Company entered into a pooling
arrangement with Toisa Ltd., a U.K. offshore marine transportation and
services company ("Toisa"). Under this pooling arrangement (the "SEAVEC
Pool"), the Company and Toisa jointly market their standby safety vessels
in the North Sea market, with operating revenues pooled and allocated to
the respective companies pursuant to a formula based on the class of
vessels each company contributes to the pool. At December 31, 1998, the
SEAVEC Pool was comprised of 16 vessels of which 5 were owned by Toisa.
SAINT FLEET POOL. In November 1996, Vector entered into bareboat charters
for seven standby safety vessels which provide for VEESEA Holdings,
Toisa, and the owners of the vessels to share in net operating profits
after certain adjustments for maintenance and management expenses (the
"Saint Fleet Pool"). Vector assumed management control of these vessels
in December 1996 and markets the vessels in coordination with the SEAVEC
Pool.
TMM JOINT VENTURE. During 1994, the Company and Transportacion Maritima
Mexicana S.A. de C.V., a Mexican corporation ("TMM"), organized a joint
venture to serve the Mexican offshore market (the "TMM Joint Venture").
The TMM Joint Venture is comprised of two corporations, Maritima
Mexicana, S.A. and SEAMEX International, Ltd., in each of which the
Company owns a 40% equity interest. The TMM Joint Venture enabled the
Company to expand into a market contiguous to the U.S. Gulf of Mexico and
provides greater marketing flexibility for the Company's fleet in the
region. At December 31, 1998, the TMM Joint Venture operated 12 vessels
owned by the joint venture and 11 chartered-in vessels, 6 of which were
provided by the Company.
SMIT JOINT VENTURES. Pursuant to the SMIT Transaction, the Company
acquired certain joint venture interests owned by SMIT (the "SMIT Joint
Ventures") which increased the Company's presence in international
markets. At December 31, 1998, 18 vessels in the Far East, Latin America,
the Middle East, and the Mediterranean were owned and operated by the
SMIT Joint Ventures.
5
VISION JOINT VENTURE. During 1997, the Company completed the structuring
of a limited liability company, SEACOR VISION LLC (the "Vision Joint
Venture"), with a wholly owned subsidiary of TMM that owns and operates
an anchor handling towing supply vessel that was constructed in 1997. A
subsidiary of TMM owns 25% of the Vision Joint Venture, and the Company
owns all of the remaining membership interest. At December 31, 1998, the
vessel was operating in Latin America.
OTHER JOINT VENTURES. As of December 31, 1998, the Company participated
in eight additional joint ventures. Five were involved in the operation
of offshore marine service vessels internationally. One holds an
investment in a Handymax Dry-Bulk vessel built in 1990. One offers
logistics services to the offshore industry, including the coordination
and provision of marine, air, and land transportation and materials
handling and storage in the U.S. Gulf of Mexico. Another assists with the
management of the Company's vessels operating offshore Nigeria.
CUSTOMERS
The Company offers offshore marine services to over 150 customers who are
primarily major integrated oil companies and large independent oil and
gas exploration and production companies. The Company has enjoyed
long-standing relationships with several of its customers, and the
Company has established alliances with some of them. The percentage of
revenues attributable to any individual customer varies from time to
time, depending on the level of oil and gas exploration undertaken by a
particular customer, the suitability of the Company's vessels for the
customer's projects, and other factors, many of which are beyond the
Company's control. For the fiscal year ended December 31, 1998, 11% of
the Company's marine operating revenue was received from Mobil Oil
Corporation.
CHARTER TERMS
Customers for offshore marine vessels generally award charters based on
suitability and availability of equipment, price and reputation for
quality service and duration of employment.
Charter terms may vary from several days to several years.
COMPETITION
The offshore marine service industry is highly competitive. In addition
to price, service, and reputation, the principal competitive factors for
offshore supply fleets include the existence of national flag preference,
operating conditions and intended use (all of which determine the
suitability of vessel types), complexity of maintaining logistical
support, and the cost of transferring equipment from one market to
another.
Although there are many suppliers of offshore marine services, management
believes there is only one company, Tidewater, Inc., which operates in
all geographic markets and has a substantial percentage of the domestic
and foreign offshore marine market in relation to that of the Company and
its other competitors.
GOVERNMENT REGULATION
DOMESTIC REGULATION. The Company's operations are subject to significant
federal, state and local regulations, as well as international
conventions. The Company's domestically registered vessels are subject to
the jurisdiction of the United States Coast Guard (the "Coast Guard"),
the National Transportation Safety Board, the U.S. Customs Service and
the U.S. Maritime Administration, as well as subject to rules of private
industry organizations such as the American Bureau of Shipping. These
agencies and organizations establish safety standards and are authorized
to investigate vessels and accidents and to recommend improved maritime
safety standards. Moreover, to ensure compliance with applicable safety
regulations, the Coast Guard is authorized to inspect vessels at will.
The Company is also subject to the Shipping Act, 1916, as amended (the
"Shipping Act"), and the Merchant Marine Act of 1920, as amended (the
"1920 Act," and together with the Shipping Act, the "Acts"), which
govern, among other things, the ownership and operation of vessels used
to carry cargo between U.S. ports. The Acts require that vessels engaged
in the U.S. coastwise trade be owned by U.S. citizens and built in the
United States. For a corporation engaged in the U.S. coastwise trade to
be deemed a citizen of the U.S., (a) the corporation must be organized
under the laws of the U.S. or of a state, territory or possession
thereof, (b) each of the president or other chief executive officer and
the chairman of the board of directors of such corporation must be U.S.
citizens, (c) no more than a minority of the number of directors of such
corporation necessary to constitute a quorum for the transaction of
business can be non-U.S. citizens, and (d) at least 75% of the interest
in such corporation must be owned by U.S. "Citizens" (as defined in the
Acts). Should the Company fail to comply with the U.S. citizenship
requirements of the Acts, it would be prohibited from operating its
vessels in the U.S. coastwise trade during the period of such
non-compliance.
To facilitate compliance with the Acts, the Company's Restated
Certificate of Incorporation: (i) contains provisions limiting the
aggregate percentage ownership by Foreigners of any class of the
Company's capital stock (including the Common Stock) to 22.5% of the
outstanding shares of each such class to ensure that such foreign
ownership will not exceed the maximum percentage permitted by applicable
maritime law (presently 25.0%), and authorizes the Board of Directors,
6
under certain circumstances, to increase the foregoing percentage to
24.0%, (ii) requires institution of a dual stock certification system to
help determine such ownership, and (iii) permits the Board of Directors
to make such determinations as reasonably may be necessary to ascertain
such ownership and implement such limitations. In addition, the Company's
Amended and Restated By-Laws provide that the number of foreign directors
shall not exceed a minority of the number necessary to constitute a
quorum for the transaction of business and restrict any officer who is
not a U.S. citizen from acting in the absence or disability of the
Chairman of the Board of Directors and Chief Executive Officer and the
President, all of whom must be U.S. citizens.
FOREIGN REGULATION. The Company, through its subsidiaries, joint ventures
and pooling arrangements, operates vessels registered in the following
foreign jurisdictions: St. Vincent and the Grenadines, Vanuatu, the
Cayman Islands, France, Chile, Egypt, the Netherlands, Bahamas, Greece,
Panama, Liberia, the Philippines, and Mexico. The Company's vessels
registered in these jurisdictions are subject to the laws of the
applicable jurisdiction as to ownership, registration, manning and safety
of vessels. In addition, the vessels are subject to the requirements of a
number of international conventions to which the jurisdiction of
registration of the vessels is a party. Among the more significant of
these conventions are: (i) the 1978 Protocol Relating to the
International Convention for the Prevention of Pollution from Ships, (ii)
the International Convention on the Safety of Life at Sea, 1974 and 1978
Protocols, and (iii) the International Convention on Standards of
Training, Certification and Watchkeeping for Seafarers, 1978. The Company
believes that its vessels registered in these foreign jurisdictions are
in compliance with all applicable material regulations and have all
licenses necessary to conduct their business. In addition, vessels
operated as standby safety vessels in the North Sea are subject to the
requirements of the Department of Transport of the U.K. pursuant to the
U.K. Safety Act.
ENVIRONMENTAL REGULATION. The Company's vessels routinely transport
diesel fuel to offshore rigs and platforms and carry diesel fuel for
their own use, transport certain bulk chemical materials used in drilling
activities, transport rig-generated wastes to shore for delivery to waste
disposal contractors, and transport liquid mud which contains oil and oil
by-products. These operations are subject to a variety of federal and
analogous state statutes concerning matters of environmental protection.
Statutes and regulations that govern the discharge of oil and other
pollutants onto navigable waters include OPA 90 and the Clean Water Act
of 1972, as amended (the "Clean Water Act"). The Clean Water Act imposes
substantial potential liability for the costs of remediating releases of
petroleum and other substances in reportable quantities. State laws
analogous to the Clean Water Act also specifically address the accidental
release of petroleum in reportable quantities.
OPA 90, which amended the Clean Water Act, increased the limits on
liability for oil discharges at sea, although such limits do not apply in
certain listed circumstances. In addition, some states have enacted
legislation providing for unlimited liability under state law for oil
spills occurring within their boundaries. Other environmental statutes
and regulations governing Company operations include, among other things,
the Resource Conservation and Recovery Act, as amended, which regulates
the generation, transportation, storage and disposal of on-shore
hazardous and non-hazardous wastes; the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, which imposes
strict, joint and several liability for the costs of remediating
historical environmental contamination; and the Outer Continental Shelf
Lands Act, as amended ("OCSLA"), which regulates oil and gas exploration
and production activities on the Outer Continental Shelf.
OCSLA provides the federal government with broad discretion in regulating
the leasing of offshore resources for the production of oil and gas.
Because the Company's operations rely on offshore oil and gas exploration
and production, the government's exercise of OCSLA authority to restrict
the availability of offshore oil and gas leases could have a material
adverse effect on the Company's financial condition and results of
operations.
In addition to these federal and state laws, state and local laws and
regulations and certain international treaties to which the U.S. is a
signatory, such as MARPOL 73/78, subject the Company to various
requirements governing waste disposal and water and air pollution.
ENVIRONMENTAL SERVICES
MARKET
The Company's environmental service business is operated primarily
through NRC, IRC, and ERST and provides contractual oil spill response
and other related training and consulting services. The market for these
services has grown substantially since 1990 when the United States
Congress passed OPA 90 after the Exxon Valdez spill in Alaska. OPA 90
requires that all tank vessels operating within the Exclusive Economic
Zone of the United States and all facilities and pipelines handling oil
that could have a spill impacting the navigable waters of the United
States, develop a plan to respond to a "worst case" oil spill and ensure
by contract or other approved means the ability to respond to such a
spill.
7
EQUIPMENT AND SERVICES
OIL SPILL RESPONSE SERVICES. The Company owns and maintains specialized
equipment which is positioned in designated areas to comply with
regulations promulgated by the Coast Guard and also has personnel trained
to respond to oil spills as required by customers and regulations. The
Company provides these services on the East, Gulf, and West Coasts of the
United States as well as parts of the Caribbean. West Coast coverage is
provided through Clean Pacific Alliance ("CPA"), a joint venture between
NRC and Crowley Marine Services.
When an oil spill occurs, the Company mobilizes specialized oil spill
response equipment, using either its own personnel or personnel under
contract, to provide emergency response services for both land and marine
oil spills. The Company has established a network of approximately 50
independent oil spill response contractors that may assist it with the
provisioning of equipment and personnel. NRC has acted as the principal
contractor on several of the largest oil spills that have occurred in the
United States after the enactment of OPA 90.
TRAINING, DRILL, AND OTHER PROFESSIONAL SERVICES. The Company has
developed customized training programs for industrial companies which
educate personnel on the risks associated with the prevention of and
response to oil spills, handling of hazardous materials, fire fighting,
and other crisis related events. The Company also plans for and
participates in customer oil spill response drill programs, vessel
response plans, and response exercises. The Company's drill services and
training programs are offered both on a stand-alone basis and as part of
its base retainer services.
INTERNATIONAL. The Company operates its environmental service business
internationally through IRC. Client services of IRC include training,
exercise support, and special projects in assessing risk of spills,
response preparedness, strategies, and resource requirements.
International response services are currently provided in the Southeast
Asia, Indian Ocean, Caribbean, and Latin America regions. A joint venture
has been formed with local partners in Thailand to provide spill response
and other services to multinational oil companies, governments, and
industry.
CUSTOMERS AND CONTRACT ARRANGEMENTS
The Company offers its retainer services and oil spill response services
primarily to the domestic and international shipping community and to
owners of facilities such as refineries, pipelines, exploration and
production platforms, and tank terminals. In addition to its retainer
customers, the Company also provides oil spill response services to
others, including, under certain circumstances, the Coast Guard. The
Company presently has approximately 700 customers. The Company's retainer
arrangements with these customers include both short-term contracts (one
year or less) and long-term agreements, in some cases as long as seven
years from inception. For the fiscal year ended December 31, 1998,
approximately 24% and 11% of the Company's environmental retainer revenue
was received from Coastal Refining and Marketing, Inc. and Citgo
Petroleum Corporation, respectively.
The Company also generates revenue from the supervision of activities in
response to oil spill emergencies. The level of spill activity can
dramatically impact the Company's environmental service revenue. A single
large spill can contribute significantly to overall revenues and to
operating income. However, the Company is unable to predict revenues from
oil spills.
COMPETITION
The principal competitive factors in the environmental service business
are price, service, reputation, experience, and operating capabilities.
Management believes that the lack of uniform regulatory development and
enforcement on a federal and state level has created a lower barrier to
entry in several market segments, which has increased the number of
competitors. The Company's oil spill response business faces competition
primarily from the Marine Spill Response Corporation, a non-profit
corporation funded by the major integrated oil companies, other industry
cooperatives and also from smaller contractors who target specific market
niches. The Company's environmental consulting business faces competition
from a number of relatively small privately held spill management
companies.
GOVERNMENT REGULATION
NRC is "classified" by the Coast Guard as an Oil Spill Removal
Organization ("OSRO"). The OSRO classification process is strictly
voluntary and plan holders who utilize classified OSROs are exempt from
the requirement to list their response resources in their plans. The
classification process represents standard guidelines by which the Coast
Guard and plan holders can evaluate an OSRO's potential to respond to and
recover oil spills of various types and sizes in different operating
environments and geographic locations. NRC and CPA, in combination, hold
OSRO classification under the current Coast Guard guidelines for every
port in the continental United States and Hawaii and Puerto Rico.
8
In addition to the Coast Guard, the Environmental Protection Agency, the
Office of Pipeline Safety, the Minerals Management Service division of
the Department of Interior, and individual states regulate vessels,
facilities, and pipelines in accordance with the requirements of OPA 90
or under analogous state law. There is currently little uniformity among
the regulations issued by these agencies.
When responding to third-party oil spills, the Company's environmental
service business enjoys immunity from imposition of liability under
federal law and some state laws for any spills arising from its response
efforts, except if the Company's environmental service business is found
to be grossly negligent or to have engaged in willful misconduct. The
Company's environmental service business maintains insurance coverage
against such claims arising from its response operations. It considers
the limits of liability adequate, although there can be no assurance that
such coverage will be sufficient to cover future claims that may arise
DRILLING SERVICES
The Company owns a 55.4% membership interest in Chiles Offshore, a
Delaware limited liability company formed for purposes of constructing,
owning, and operating state-of-the-art premium jackup offshore drilling
rigs. Jackup rigs are the largest category of mobile offshore drilling
units, representing approximately 60% of such units. A mobile offshore
drilling unit consists of a drilling package mounted on a hull, which is
maintained at a specific location during drilling operations.
Chiles currently has two rigs under construction consisting of a
LeTourneau Enhanced 116-C jackup rig and a LeTourneau Super 116 jackup
rig, both of which are improved versions of the most versatile and
popular design in the worldwide jackup rig fleet (the LeTourneau 116-C).
The hulls, machinery, and outfitting are identical on the two Rigs and
are based on the larger LeTourneau Super 116 design. The only difference
is that the LeTourneau Super 116 design has a leg that has been designed
to a higher specification while the LeTourneau Enhanced 116-C design is
based on a LeTourneau 116-C design that has subsequently been
strengthened to carry the larger LeTourneau Super 116 hull and longer
legs. The Rigs will have capabilities that substantially exceed those of
typical existing premium jackup rigs, including increased engine
horsepower, increased hydraulic horsepower, and an enlarged mud handling
and solids control system. The Rigs will also incorporate such features
as digital drilling controls, dual pipe handling, pipe handling robotics,
and a drillpipe identification and tracking system. The Rigs will further
differentiate themselves by their increased productivity, due mainly to
their superior engine and hydraulic horsepower. The design of the Rigs
allows an increase of leg length from the present configuration of 477
feet to a maximum of 543 feet. The Rigs, as presently configured, are
rated to work in water depths of up to 360 feet.
The Rigs are under construction at the AMFELS shipyard, which was
originally built and operated by Marathon LeTourneau, Inc. and has a
long-term commitment to the offshore drilling industry. Many of the key
personnel who designed and built LeTourneau jackup rigs in the past are
currently working there. AMFELS is 100% owned by Keppel FELS, Ltd., an
established international shipyard and engineering group based in
Singapore.
The scheduled delivery dates (each, a "Scheduled Delivery Date") of the
Rigs are staggered. The Scheduled Delivery Date of the Chiles Columbus is
April 30, 1999 and the Scheduled Delivery Date of the Chiles Magellan is
September 10, 1999. Delays in delivery can be caused by a number of
factors. Chiles has procured "delay-in-delivery" insurance that provides
for coverage of $30,000 per day per Rig up to a maximum of 360 days for
delays in excess of 30 days, up to a total combined limit of $21.6
million for both Rigs. Generally, such insurance provides coverage in the
event of delays resulting from certain events, including physical loss or
damage to the Rigs or the AMFELS shipyard during construction as a result
of named perils, including labor disturbances; delays in delivery of
materials required for construction as a result of such events; and
delays resulting from restricted access to the shipyard as a result of
such events. However, the coverage provided under such insurance is
subject to significant exceptions and would not provide protection
against certain delays in delivery.
The construction costs for the Chiles Columbus are expected to be
approximately $83.5 million and the construction costs for the Chiles
Magellan are expected to be approximately $87.8 million, in each case net
of capitalized interest.
The offshore contract drilling business and demand for drilling services
remain dependent on a variety of political and economic factors beyond
the Company's control, including without limitation, worldwide demand for
oil and natural gas.
Historically, the offshore contract drilling industry has been highly
competitive and cyclical, with periods of high demand, short rig supply
and high day rates followed by periods of low demand, excess rig supply
and low day rates. During 1998, the decline in product prices in the oil
and gas industry, particularly oil prices, resulted in reduced day rates
and decreased utilization. The Company cannot predict whether, or to what
extent, market conditions will improve or deteriorate further. The
Company expects that its drilling service business will be particularly
9
dependent upon the condition of the oil and natural gas industry and the
exploration and production expenditures of oil and gas companies in the
U.S. Gulf of Mexico.
The Company's drilling service business will not receive any material
revenues unless and until the Rigs under construction achieve commercial
operation. As of the date of this Report, drilling contracts have not
been executed for either of the Rigs. In addition, there may be periods
in the future when one or both of the Rigs are not under contract and
thus, not producing revenues. Moreover, during any such period, expenses
will be incurred to maintain the affected Rig pending execution of a
contract. Finally, if a Rig is not working because of adverse demand
conditions in the local market, unreimbursed expenses may be incurred to
mobilize the Rig from that market to another where demand conditions are
more favorable.
EMPLOYEES
As of December 31, 1998, the Company directly employed 1,787 persons that
included 1,477 shipboard personnel and 310 administrative and managerial
personnel. Of the 310 administrative and managerial personnel employed by
the Company, Chiles employed 32. West Africa Offshore, Ltd., a Nigerian
corporation of which the Company owns 40%, assists with the management of
the Company's vessels operating offshore Nigeria, and as of December 31,
1998, employed 200 shipboard and 65 administrative and managerial
personnel in support of the Company's operations. As of December 31,
1998, shipboard personnel provided to the Company for various foreign
operations pursuant to an agreement with SMIT approximated 540. As of
December 31, 1998, Celtic Pacific Ship Management Overseas, Ltd., a
vessel manning agency, provided 350 shipboard personnel for the Company's
North Sea standby safety operations. As of December 31, 1998, other
crewing agencies provided the Company 64 shipboard personnel for foreign
operations.
10
GLOSSARY OF SELECTED OFFSHORE MARINE INDUSTRY TERMS
ANCHOR HANDLING TOWING SUPPLY VESSELS. Anchor handling towing supply
vessels are equipped with winches capable of towing drilling rigs and
lifting and positioning their anchors and other marine equipment. They
range in size and capacity and are usually characterized in terms of
horsepower and towing capacity. For U.S. Gulf of Mexico service, anchor
handling towing supply vessels typically require 6,000 horsepower or more
to position and service semi-submersible rigs drilling in deep water
areas.
BAREBOAT CHARTER. This is a lease arrangement 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 vessel
owner.
CREW BOATS. Crew boats transport personnel and cargo to and from
production platforms and rigs. Older crew boats, early 1980's built, are
generally 100 to 110 ft. in length and are generally designed for speed
to transport personnel. Newer crew boat designs are generally larger, 130
to 180 ft. in length, and have greater cargo carrying capacities. They
are used primarily to transport cargo on a time sensitive basis.
FREIGHT VESSELS. Freight vessels have a substantial amount of clear deck
space for cargo and adequate stability to handle tiers of containers or
overdimensional cargo. Speed and fuel consumption are also important
factors in this vessel category.
LINE HANDLING VESSELS. Line handling vessels are outfitted with special
equipment to assist tankers while they are loading at single buoy
moorings. They have a high degree of maneuverability, are well fendered
and include pollution dispersal capability.
OIL SPILL RESPONSE VESSELS. Oil spill response vessels are specially
equipped to respond to oil spill emergencies and are certified as such by
the U.S. Coast Guard.
OVERALL UTILIZATION. For any vessel with respect to any period, the ratio
of aggregate number of days worked by such vessel to total calendar days
available during such period.
PROJECT AND GEOPHYSICAL VESSELS. These vessels generally have special
features to meet the requirements of specific jobs. The special features
include large deck spaces, high electrical generating capacities, slow
controlled speed and unique thrusters, extra berthing facilities and long
range capabilities. These vessels are primarily used for well stimulation
and for the deployment of seismic data gathering equipment.
RATE PER DAY WORKED. For any vessel with respect to any period, the ratio
of total charter revenue of such vessel to the aggregate number of days
worked of such vessel for such period.
STANDBY SAFETY VESSELS. Standby safety vessels operate in the U.K. sector
of the North Sea. They typically remain on station to provide a safety
backup to offshore rigs and production facilities, carry special
equipment to rescue personnel, are equipped to provide first aid and
shelter and, in some cases, also function as supply vessels.
SUPPLY VESSELS. Supply vessels serve drilling and production facilities
and support offshore construction and maintenance work. They are
differentiated from other vessels by cargo flexibility and capacity. The
size of a vessel typically determines deck capacity, although vessels
constructed after 1979 with exhaust stacks forward have better
configurations for cargo stowage and handling. In addition to deck cargo,
such as pipe or drummed materials on pallets, supply vessels transport
liquid mud, potable and drill water, diesel fuel and dry bulk cement.
Generally, customers prefer vessels with large liquid mud and bulk cement
capacity and large areas of clear deck space. For certain jobs, other
characteristics such as maneuverability, fuel efficiency or firefighting
capability may also be important.
TOWING SUPPLY VESSELS. These vessels perform the same functions as supply
vessels but are equipped with more powerful engines (3,000 to 5,000
horsepower) and a deck mounted winch, giving them the added capability to
perform general towing duties, buoy setting and limited anchor handling
work. Towing supply vessels are primarily used in international
operations, which require the additional versatility that these vessels
offer relative to supply vessels.
UTILITY VESSELS. These vessels provide service to offshore production
facilities and also support offshore maintenance and construction work.
Their capabilities include the transportation of fuel, water, deck cargo
and personnel. They range in length from 96 feet to 135 feet and can,
depending on the vessel design, have enhanced features such as
firefighting and pollution response capabilities.
11
ITEM 2. PROPERTIES
The Company's primary facilities are located in Texas, Louisiana, and New
York. Executive offices, approximating 6,500 square feet, are rented in
Houston, Texas, pursuant to a five-year lease expiring in 2000. Morgan
City, Louisiana is the largest base for the Company's offshore marine
service business that includes administrative offices and warehouse
facilities, approximating 15,000 square feet, and a waterfront site for
vessel dockage. This facility is rented pursuant to a ten-year lease that
contains renewal options. Calverton, New York is the largest facility for
the Company's environmental service business that includes executive and
administrative offices that approximate 9,000 square feet. This facility
is rented pursuant to a five-year lease that contains renewal options.
The drilling service business also leases executive and administrative
office space located in Houston, Texas that approximates 5,300 square
feet. The facility is rented pursuant to a five-year lease that contains
a renewal option.
The Company also maintains other facilities in support of its offshore
marine and environmental service operations. Domestically, offshore
marine service operation sites are located primarily in Louisiana cities
that both serve as ports-of-call for many customers and represent
strategically disbursed operating bases along the U.S. Gulf of Mexico.
The Company's offshore marine service operation also maintains offices in
Rotterdam, the Netherlands, Paris, France, Great Yarmouth and Aberdeen,
United Kingdom, Dubai, United Arab Emirates, and Singapore in support of
its widely disbursed international fleet. The environmental service
business maintains small marketing offices in Florida, Texas, Tennessee,
California, Louisiana, New Jersey, and Puerto Rico.
The Company believes that its facilities, including waterfront locations
that provide for vessel dockage to allow the undertaking of certain
vessel repair work, provide an adequate base of operations for the
foreseeable future. Information regarding the Company's fleet is included
in Item 1 of this Form 10-K.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal and other proceedings which are
incidental to the conduct of its business. The Company believes that none
of these proceedings, if adversely determined, would have a material
adverse effect on its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1998.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age, and offices held by each of the executive officers of the
Company at December 31, 1998 were as follows:
NAME AGE POSITION
- - ---------------------------- --------------- --------------------------------------------------------
Charles Fabrikant 54 Chairman of the Board of Directors,
President and Chief Executive Officer
Randall Blank 48 Executive Vice President, Chief Financial
Officer and Secretary
Alice Gran 49 Vice President and General Counsel
Lenny Dantin 46 Vice President and Treasurer
Milton Rose 54 Vice President
Mark Miller 37 Vice President
Andrew Strachan 51 Vice President
Charles Fabrikant has been Chairman of the Board and Chief Executive
Officer of SEACOR since December 1989, and has served as a director of
certain of SEACOR's subsidiaries since December 1989. He has been
President of SEACOR since October 1992. For more than the past five
years, Mr. Fabrikant has been the Chairman of the Board and Chief
Executive Officer of SCF Corporation ("SCF") and President of Fabrikant
International Corporation ("FIC"), each a privately owned corporation
engaged in marine operations and investments. Since January 1992, Mr.
Fabrikant has been Chairman of the Board of NRC. Each of SCF and FIC may
be deemed to be an affiliate of the Company. Mr. Fabrikant is a licensed
attorney admitted to practice in the State of New York and in the
District of Columbia.
12
Randall Blank has been Executive Vice President and Chief Financial
Officer of SEACOR since December 1989 and has been the Secretary since
October 1992. Since June 1994, Mr. Blank has been Chief Financial Officer
and Vice President of NRC. From December 1989 to October 1992, Mr. Blank
was Treasurer of SEACOR. In addition, Mr. Blank has been a director of
certain of SEACOR's subsidiaries since January 1990. Since 1986, Mr.
Blank has served as President and Chief Operating Officer of SCF.
Alice Gran has been Vice President and General Counsel of SEACOR since
July 1998. From 1978 until joining SEACOR, Ms. Gran was a partner in the
Washington, D.C. law firm of Fort & Schlefer, L.L.P. Ms. Gran is a
licensed attorney admitted to practice in the District of Columbia.
Lenny Dantin has been Vice President of SEACOR since March 1991,
Treasurer since October 1992, and has been Vice President and the
Secretary, Treasurer and a director of certain of SEACOR's subsidiaries
since January 1990. Also, since 1994, Mr. Dantin has been a director of
one of the companies comprising the TMM Joint Venture.
Milton Rose has been Vice President of SEACOR and President and Chief
Operating Officer of SEACOR Marine, Inc. since January 1993. In addition,
since January 1993, Mr. Rose has been a director of certain of SEACOR's
subsidiaries. Since 1994, he has been a director of one of the companies
comprising the TMM Joint Venture. From 1985 to January 1993, Mr. Rose was
Vice President-Marine Division for Bay Houston Towing Company.
Mark Miller has been Vice President of SEACOR since November 1995, and
President and Chief Operating Officer of NRC since November 1992. Since
1992, Mr. Miller has been a director of certain of NRC's subsidiaries,
and since 1996, he has been a director of CPA.
Andrew Strachan has been a Vice President of SEACOR since April 1997 and
a director of certain SEACOR subsidiaries since December 1996. Prior to
joining SEACOR, Mr. Strachan held various positions at SMIT from 1967
through 1996, and most recently, Mr. Strachan served as Group Director
for SMIT's offshore shipping business.
13
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
On October 23, 1996, SEACOR's Common Stock, commenced trading on the New
York Stock Exchange, Inc. (the "NYSE") under the trading symbol "CKH."
Prior to October 23, 1996, SEACOR's Common Stock was traded on the Nasdaq
Stock Market's National Market under the trading symbol "CKOR." Set forth
in the tables below for the periods presented are the high and low sale
prices for SEACOR's Common Stock:
HIGH LOW
------------------- ------------------
Fiscal Year Ending December 31, 1997:
First Quarter................................... 67 1/4 44 3/4
Second Quarter.................................. 66 3/4 51 7/8
Third Quarter................................... 58 1/2 39 5/8
Fourth Quarter.................................. 73 5/8 53 7/8
Fiscal Year Ending December 31, 1998:
First Quarter................................... 61 1/8 50 1/4
Second Quarter.................................. 61 15/16 53 1/2
Third Quarter................................... 61 7/16 33
Fourth Quarter.................................. 54 3/8 31 1/4
Fiscal Year Ending December 31, 1999:
First Quarter (through March 23, 1999).......... 50 1/16 38 1/2
The closing sale price of SEACOR's Common Stock, as reported on the NYSE
Composite Tape on March 23, 1999, was $48 1/4 per share. As of March 23,
1999, there were approximately 117 holders of record of the Common Stock.
SEACOR has not paid any cash dividends in respect of its Common Stock
since its inception in December 1989 and has no present intention to pay
any such dividends in the foreseeable future. Instead, SEACOR intends to
retain earnings for working capital and to finance the expansion of its
business. Pursuant to the terms of the Company's Credit Facility with
DnB, SEACOR may declare and pay dividends if it is in full compliance
with the covenants contained in the Credit Facility and no Events of
Default, as defined in the Credit Facility, have occurred and are
continuing or will occur after giving effect to any declaration or
distribution to shareholders. In addition to any contractual
restrictions, as a holding company, SEACOR's ability to pay any cash
dividends is dependent on the earnings and cash flows of its operating
subsidiaries and their ability to make funds available to SEACOR. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."
The payment of future cash dividends, if any, would be made only from
assets legally available therefor, and would also depend on the Company's
financial condition, results of operations, current and anticipated
capital requirements, plans for expansion, restrictions under then
existing indebtedness, and other factors deemed relevant by the Company's
Board of Directors in its sole discretion.
14
ITEM 6. SELECTED FINANCIAL DATA
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth, for the periods and at the dates
indicated, selected historical and consolidated financial data for the
Company, in thousands of dollars, except per share data. Such financial
data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements of the Company included in Parts II and
IV, respectively, of this Annual Report on Form 10-K.
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1994 1995 1996 1997 1998
---------- ---------- ----------- ----------- ----------
INCOME STATEMENT DATA:
Operating revenue:
Marine...................................$ 93,985 $ 104,894 $ 193,557 $ 325,009 $ 359,611
Oil spill and emergency response.......... - 8,927 12,466 4,763 5,154
Environmental retainer and other
services............................... - 12,838 18,421 17,176 21,026
---------- ---------- ----------- ----------- ----------
93,985 126,659 224,444 346,948 385,791
Costs and Expenses:
Costs of oil spill and emergency response... - 7,643 10,398 3,916 4,223
Operating expenses -
Marine.................................... 55,860 66,205 108,043 158,175 177,236
Environmental............................. - 4,580 6,227 5,402 6,263
Administrative and general.................. 7,278 13,953 22,304 28,299 36,102
Depreciation and amortization............... 14,108 18,842 24,967 36,538 36,449
---------- ---------- ----------- ----------- ----------
Operating Income............................... 16,739 15,436 52,505 114,618 125,518
Net interest income (expense).................. (3,548) (4,098) (2,155) (1,412) 2,548
Gain (loss) from equipment sales or
retirements................................. (388) 4,076 2,264 61,928 38,338
Other income (expense) (1)..................... (267) 228 (646) 569 6,492
---------- ---------- ----------- ----------- ----------
Income before income taxes, minority
interest, equity in net earnings of 50% or less
owned companies, and extraordinary item..... 12,536 15,642 51,968 175,703 172,896
Income tax expense............................. 4,368 5,510 18,535 61,384 60,293
---------- ---------- ----------- ----------- ----------
Income before minority interest, equity in
net earnings of 50% or less owned
companies, and extraordinary item........... 8,168 10,132 33,433 114,319 112,603
Minority interest in (income) loss of
subsidiaries................................ 184 321 244 (301) (1,612)
Equity in net earnings of 50% or less owned
companies................................... 975 872 1,283 5,575 13,627
---------- ---------- ----------- ----------- ----------
Income before extraordinary item............... 9,327 11,325 34,960 119,593 124,618
Extraordinary item - gain (loss) on
extinguishment of debt, net (less applicable
income taxes)............................... - - (807) (439) 1,309
========== ========== =========== =========== ==========
Net income....................................$ 9,327 $ 11,325 $ 34,153 $ 119,154 $ 125,927
========== ========== =========== =========== ==========
Net income per common share:
Basic earnings per common share..........$ 1.31 $ 1.50 $ 2.97 $ 8.61 $ 9.59
Diluted earnings per common share......... 1.22 1.37 2.74 7.47 8.25
STATEMENT OF CASH FLOWS DATA:
Cash provided by operating activities......$ 21,150 $ 9,939 $ 58,737 $ 105,548 $ 122,141
Cash used in investing activities........... (4,855) (78,695) (100,120) (215,087) (149,202)
Cash provided by (used in) financing
activities............................... (7,714) 53,291 161,482 135,468 27,308
OTHER FINANCIAL DATA:
EBITDA (2).................................$ 32,923 $ 35,964 $ 79,730 $ 157,341 $ 174,293
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents(3)...............$ 44,637 $ 28,786 $ 149,053 $ 175,381 $ 175,267
Total assets................................ 238,145 350,883 636,455 1,019,801 1,257,975
Total long-term debt, including current
portion.................................. 79,517 111,095 220,452 360,639 474,921
Stockholders' equity........................ 111,482 183,464 351,071 474,014 542,782
(1) In 1998, other income includes primarily net gains from commodity
swap transactions, net gains from the sale of marketable
securities, and a gain from the sale of an investment in a 50% or
less owned company.
(2) As used herein, "EBITDA" is operating income plus depreciation
and amortization, amortization of deferred mobilization costs,
which is included in marine operating expenses, minority interest
in (income) loss of subsidiaries and equity in net earnings of
50% or less owned companies, before applicable income taxes.
EBITDA should not be considered by an investor as an alternative
to net income as an indicator of the Company's operating
performance or as an alternative to cash flows as a better
measure of liquidity.
(3) Cash and cash equivalents exclude restricted cash in 1997 and
1998 of $46,983 and $69,234, respectively, and marketable
securities in 1996, 1997, and 1998 of $311, $160,440, and
$194,703, respectively.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OFFSHORE MARINE SERVICES
The Company provides marine transportation and related services largely
dedicated to supporting offshore oil and gas exploration and production
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 also are
used for special projects, such as well stimulation, seismic data
gathering, freight hauling, line handling, salvage, and oil spill
emergencies.
Operating revenues are affected primarily by the number of vessels owned,
average rates per day worked and utilization of the Company's fleet, and
the number of vessels bareboat and time chartered-in.
Since 1994, acquisition transactions and investments in joint ventures
that have significantly increased the size of the Company's fleet
include: (i) 127 utility, crew, and supply vessels acquired in the 1995
Graham Transaction, (ii) 11 towing and anchor handling towing supply
vessels acquired in the 1995 and 1996 CNN Transactions, (iii) 41 crew and
utility vessels acquired in the 1996 McCall Transaction, (iv) 28 anchor
handling towing supply, supply, and towing supply vessels acquired and
equity investments in joint ventures that owned 21 anchor handling towing
supply and towing supply vessels pursuant to the 1996 SMIT Transaction,
(v) 24 utility, crew, and supply vessels acquired in the 1997 Galaxie
Transaction, and (vi) 15 anchor handling towing supply, crew, and supply
vessels constructed during 1997 and 1998. The vessels acquired in the
Graham Transaction, the McCall Transaction, and the Galaxie Transaction
and the vessels constructed primarily support the oil and gas exploration
and production industry in the U.S. Gulf of Mexico; whereas, vessels
acquired in the 1995 and 1996 CNN Transactions and the SMIT Transaction
are employed in foreign offshore support markets. The Company also
actively monitors opportunities to buy and sell vessels that will
maximize the overall utility and flexibility of its fleet. Since 1994,
the Company has sold 99 vessels: (i) 36 utility, (ii) 25 supply, (iii) 14
towing supply, (iv) 14 anchor handling towing supply, (v) 8 crew, (vi) 1
freight, and (vii) 1 seismic. Nineteen of the vessels sold have
subsequently been bareboat chartered-in by the Company.
The Company is also committed to the construction of 15 vessels over the
next two years that include 8 crew, 4 anchor handling towing supply, 2
utility, and 1 supply.
Rates per day worked and utilization of the Company's fleet are a
function of demand for and availability of marine vessels that is 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.
Year Ended December 31,
---------------------------------------------------
1996 1997 1998
--------------- --------------- ---------------
Rates per Day Worked ($):(1)(2)
Supply/Towing supply....................... 4,479 6,283 6,572
Anchor handling towing supply.............. 6,482 10,176 12,283
Crew....................................... 1,726 2,291 2,701
Standby safety............................. 4,884 6,033 6,620
Utility/Line handling...................... 1,152 1,381 1,904
Geophysical, Freight and Other............. 4,289 4,586 6,120
Overall fleet........................... 2,565 3,598 4,254
Overall Utilization (%):(1)
Supply/Towing supply....................... 94.5 92.3 89.4
Anchor handling towing supply.............. 93.1 84.4 85.8
Crew....................................... 97.8 97.5 93.2
Standby safety............................. 85.8 94.0 99.5
Utility/Line handling...................... 81.4 97.9 91.6
Geophysical, Freight and Other............. 99.1 97.7 99.2
Overall fleet........................... 90.8 95.2 91.5
------------
(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 its
standby safety vessels, are earned in foreign currencies,
primarily British pounds sterling, and have been converted
to U.S. dollars at the weighted average exchange rate for
the periods indicated.
16
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.
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 which are
chartered-out are owned. At December 31, 1998, the Company had nine
vessels bareboat chartered-out.
The table below sets forth the Company's fleet structure at the dates
indicated.
At December 31,
--------------------------------------------------
Fleet Structure 1996 1997 1998
- - --------------------------------------------- --------------- ---------------- ---------------
Owned...................................... 242 248 225
Bareboat and time chartered-in............. 2 11 27
Managed.................................... - 1 4
Joint venture vessels(1)................... 30 34 39
Pool vessels(2)............................ 12 12 12
=============== ================ ===============
Overall Fleet.......................... 286 306 307
=============== ================ ===============
------------
(1) 1996, 1997, and 1998 include 9, 13 and 17 vessels,
respectively, operated by the TMM Joint Venture.
Additionally, 1996 and 1997 include 21 vessels operated by
the SMIT Joint Venture, and 1998 includes 18 and 4 vessels
operated by the SMIT Joint Ventures and 3 other joint
venture businesses, respectively. At December 31, 1998, 6
Company owned vessels were additionally chartered-out to and
operated by the TMM Joint Venture. See "Business - Joint
Ventures and Pooling Arrangements."
(2) 1996, 1997, and 1998 include 5 SEAVEC Pool vessels and 7
Saint Fleet Pool vessels. See "Business - Joint Ventures and
Pooling Arrangements."
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 also incurs fixed charges related to the
depreciation of property and equipment. Depreciation is a significant
operating cost, and the amount related to vessels is the most significant
component.
A portion of the Company's revenues and expenses are 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. The foregoing applies primarily to the
Company's North Sea operations. Overall, the percentage of the Company's
offshore marine revenues derived from foreign operations, whether in U.S.
dollars or foreign currencies, approximated 42% for the fiscal year ended
December 31, 1998.
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, currency restrictions and exchange rate
fluctuations, 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 fiscal
year, or put through survey a disproportionate number of older vessels,
which typically have higher drydocking costs, comparative results may be
affected. For the years ended December 31, 1998, 1997, and 1996,
drydocking costs totaled $10.8 million, $11.6 million, and $8.5 million,
respectively. During those same periods the Company completed the
drydocking of 95, 109, and 108 marine vessels, respectively.
As of December 31, 1998, the average age of the Company's owned offshore
marine service fleet was approximately 13.6 years. The Company believes
that after offshore marine service vessels have been in service for
approximately 25 years (20 years for crewboats), the amount of
expenditures (which typically increase with vessel age) necessary to
satisfy required marine certification standards may not be economically
17
justifiable. There can be no assurance that the Company will be able to
maintain its fleet by extending the economic life of existing vessels or
acquiring new or used vessels, or that the Company's financial resources
will be sufficient to enable it to make capital expenditures for such
purposes.
Operating results are also affected by the Company's participation in the
following joint ventures: (i) the Veesea Joint Venture which operated 11
standby safety vessels in the North Sea at December 31, 1998; (ii) the
SEAVEC and Saint Fleet Pools which coordinate the marketing of 23 standby
safety vessels in the North Sea, of which 11 are owned by the Veesea
Joint Venture at December 31, 1998; (iii) the TMM Joint Venture which
operated 23 vessels in Mexico at December 31, 1998; (iv) the SMIT Joint
Ventures which operated 18 vessels in the Far East, Latin America, the
Middle East, and the Mediterranean at December 31, 1998; (v) the Vision
Joint Venture which operated one vessel in Latin America at December 31,
1998; and (vi) other joint venture operations. See "Business - Joint
Ventures and Pooling Arrangements."
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. 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 OPA 90 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 seven years.
Spill response revenue is dependent on the magnitude of any one spill
response and the number of spill responses within a given fiscal period.
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 sub-contractors 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. Operating results are also affected by NRC's
participation in CPA on the West Coast of the United States.
DRILLING SERVICES
The Company's drilling service business, conducted through Chiles
Offshore, has operated as a development stage company since inception in
1997 by devoting substantially all of its efforts to designing,
engineering, and contracting with shipyards and vendors for the Rigs,
raising capital, and securing contracts for the Rigs. Drilling operations
have not generated operating revenues, nor is there any assurance that it
will generate significant operating revenues in the future. In addition,
there can be no assurance that the Company's drilling service business
will successfully complete the transition from a development stage
company to successful operations. Additional risk factors associated with
the Company's drilling service business includes, but are not limited to,
oil and gas prices, capital expenditure plans of oil and gas operators,
access to capital, completion of construction of the Rigs, and
competition. As a result of the aforementioned factors and the related
uncertainties, there can be no assurance of the Company's drilling
service business' future success.
18
RESULTS OF OPERATIONS
The following table sets forth operating revenue and operating profit by
the Company's various business segments, in thousands of dollars. The
Company evaluates the performance of each operating segment based upon
the operating profit of the segment including gains from the sale of
equipment and interest in 50% or less owned companies and equity in the
net income of 50% or less owned companies but excluding minority
interest, interest income and expense, gains from the sale of marketable
securities and commodity swap transactions, corporate expenses, and
income taxes. Operating profit is defined as Operating Income as reported
in the Consolidated Statements of Income included in Part IV of this
Annual Report on Form 10-K net of corporate expenses and certain other
income and expense items. The disaggregation of financial results has
been prepared using a management approach. Segment assets exclude those
considered by the Company to be of a corporate nature. Corporate assets
include SEACOR and its wholly owned subsidiaries' unrestricted cash,
marketable securities, certain other assets, and property and equipment
related to corporate operations. Information disclosed in the tables
presented below may differ from separate financial statements reported by
subsidiaries of the Company due to certain elimination entries required
in consolidation.
1998 Marine Environmental Drilling Other Total
----------- ------------ ----------- ----------- -----------
Revenue............................ 359,611 $ 26,180 - $ - $ 385,791
=========== =========== =========== =========== ===========
Operating Profit................... 127,403 $ 4,479 (823) $ - $ 131,059
Gains from Equipment Sales or
Retirements, net............... 38,227 111 - - 38,338
Gains from Sale of Interest in a
50% or 1,197 - - - 1,197
Less Owned Company.............
Equity Earnings.................. 13,657 554 - - 14,211
Minority Interest................ - - - (1,612) (1,612)
Interest Income.................. - - - 25,346 25,346
Interest Expense................. - - - (22,798) (22,798)
Gains from Commodity Swap - - - 3,273 3,273
Transactions.....................
Gains from Sale of Marketable - - - 1,827 1,827
Securities.......................
Corporate Expenses............... - - - (5,344) (5,344)
Income Taxes..................... - - - (60,879) (60,879)
=========== ============ =========== =========== ===========
Income before Extraordinary
Item........................... 180,484 $ 5,144 (823) $ (60,187) $ 124,618
=========== ============ =========== =========== ===========
Investment in Equity Method
Investees.......................... 54,954 $ 524 - $ - $ 55,478
Other Segment Assets............... 770,614 29,103 177,832 - 977,549
----------- ------------ ----------- ----------- -----------
Subtotal Segment Assets.......... 825,568 29,627 177,832 - 1,033,027
Corporate.......................... - - - 224,948 224,948
=========== ============ =========== =========== ===========
Total Assets................... 825,568 $ 29,627 177,832 $ 224,948 $ 1,257,975
=========== ============ =========== =========== ===========
Depreciation and Amortization...... 32,534 $ 3,846 56 $ 13 $ 36,449
====================================================================================================
1997
Revenue............................ 325,009 $ 21,939 - $ - $ 346,948
=========== ============ =========== =========== ===========
Operating Profit................... 115,818 $ 3,029 (382) $ - $ 118,465
Gains (Losses) from Equipment
Sales or Retirements, net........ 62,027 (99) - - 61,928
Equity Earnings.................. 5,656 771 - - 6,427
Minority Interest................ - - - (301) (301)
Interest Income.................. - - - 12,756 12,756
Interest Expense................. - - - (14,168) (14,168)
Corporate Expenses............... - - - (3,278) (3,278)
Income Taxes..................... - - - (62,236) (62,236)
=========== ============ =========== =========== ===========
Income before Extraordinary
Item........................... 183,501 $ 3,701 (382) $ (67,227) $ 119,593
=========== ============ =========== =========== ===========
Investment in Equity Method
Investees.......................... 37,151 $ 1,219 - $ - $ 38,370
Other Segment Assets............... 702,449 32,861 67,398 - 802,708
----------- ------------ ----------- ----------- -----------
Subtotal Segment Assets.......... 739,600 34,080 67,398 - 841,078
Corporate.......................... - - - 178,723 178,723
=========== ============ =========== =========== ===========
Total Assets................... 739,600 $ 34,080 67,398 $ 178,723 $ 1,019,801
=========== ============ =========== =========== ===========
Depreciation and Amortization...... 32,914 $ 3,563 6 $ 55 $ 36,538
====================================================================================================
1996
Revenue............................ 193,557 $ 30,887 - $ - $ 224,444
=========== ============ =========== =========== ===========
Operating Profit................... 50,849 $ 4,918 - $ - $ 55,767
Gains from Equipment Sales or
Retirements, net............... 2,193 71 - - 2,264
Equity Earnings.................. 1,563 410 - - 1,973
McCall Acquisition Cost.......... (542) - - - (542)
Minority Interest................ - - - 244 244
Interest Income.................. - - - 3,558 3,558
Interest Expense................. - - - (5,713) (5,713)
Corporate Expenses............... - - - (3,366) (3,366)
Income Taxes..................... - - - (19,225) (19,225)
=========== ============ =========== =========== ===========
Income before Extraordinary
Item........................... - $ 5,399 - $ 24,502 $ 34,960
=========== ============ =========== =========== ===========
Investment in Equity Method
Investees.......................... 20,900 $ 416 - $ - $ 21,316
Other Segment Assets............... 432,508 29,025 - - 461,533
----------- ------------ ----------- ----------- -----------
Subtotal Segment Assets.......... 453,408 29,441 - - 482,849
Corporate.......................... - - - 153,606 153,606
=========== ============ =========== =========== ===========
Total Assets................... 453,408 $ 29,441 - $ 153,606 $ 636,455
=========== ============ =========== =========== ===========
Depreciation and Amortization...... 21,442 $ 3,379 - $ 146 $ 24,967
====================================================================================================
19
Revenues attributed to geographic areas were based upon the country of
domicile for offshore marine service segment customers and the country in
which the Company provided oil spill protection or other related training
and consulting services for environmental service segment customers. The
Company considers long-lived assets to be property and equipment that has
been distributed to geographical areas based upon the assets' physical
location during the applicable period. Certain of the Company's offshore
marine service segment's long-lived vessel assets relocate between its
geographical areas of operation. The costs of long-lived vessel assets
that are relocated have been allocated between geographical areas of
operation based upon length of service in the applicable region. The
following table is presented in thousands of dollars.
United Other
United Nigeria Kingdom Foreign Total
States
------------ ----------- ----------- ----------- -----------
1998:
Revenue.................... $ 234,651 $ 30,655 $ 28,524 $ 91,961 $ 385,791
Long-Lived Assets.......... 406,945 47,257 31,416 139,243 624,861
1997:
Revenue.................... 216,513 25,318 39,099 66,018 346,948
Long-Lived Assets.......... 262,309 42,888 42,213 135,524 482,934
1996:
Revenue.................... 164,934 19,777 14,173 25,560 224,444
Long-Lived Assets.......... 188,016 38,202 20,188 151,370 397,776
COMPARISON OF YEAR END 1998 TO YEAR END 1997
Operating revenue of the Company's offshore marine service business
increased $34.6 million in the twelve month period ended December 31,
1998 compared to the twelve month period ended December 31, 1997. The
increase was due primarily to higher day rates earned by many of the
Company's vessels operating domestically and in foreign regions. Domestic
revenue rose due to improvements in rates per day worked and vessel
acquisitions partially offset by vessel dispositions, a decline in the
utilization of supply/towing supply, crewboats, and utility vessels, and
the relocation of vessels to work offshore West Africa and in other
foreign regions. Revenues earned from the Company's operations offshore
West Africa rose due primarily to the relocation of vessels into the
region, improved rates per day worked, additional chartered-in vessels,
and vessel acquisitions partially offset by vessel dispositions. Revenues
earned from the Company's operations in the Far East and Latin America
rose due primarily to higher rates per day worked, additional
chartered-in vessels, and vessel acquisitions offset by vessel
dispositions and the relocation of equipment to offshore West Africa.
Revenues earned from the Company's operations in the North Sea declined
due to vessel dispositions and the relocation of vessels to other foreign
regions offset by the effect of higher rates per day worked.
Operating revenue of the Company's environmental service business
increased $4.2 million in the twelve month period ended December 31, 1998
compared to the twelve month period ended December 31, 1997 due primarily
to oil spill, retainer, and other service revenue earned during 1998 as a
result of the Company's acquisition of ERST in October 1997.
Operating profit of the Company's offshore marine service business
increased $11.7 million in the twelve month period ended December 31,
1998 compared to the twelve month period ended December 31, 1997. The
increase was due to factors affecting operating revenue as outlined above
offset by higher costs associated with (i) crew wages, (ii)
administration (as discussed below), (iii) repairs and maintenance, (iv)
bareboat and time charters-in, (v) a vessel construction contract
cancellation, and (vi) crew travel. Domestic and foreign crew wages rose
in response to competition for qualified personnel in an active offshore
market. Main engine and hull repair costs rose primarily in response to
greater running time of the Company's crewboats. Electronic and
communication costs rose due to the installation and use of additional
communication equipment aboard vessels working domestically and in
foreign regions. Bareboat charter expense rose domestically in connection
with the Company's sale and leaseback of 19 vessels. Charter expense also
rose in foreign operations due to the addition of vessels to the
Company's fleet. Certain fees and expenses were incurred domestically
pursuant to the cancellation of a contract for the construction of a
supply vessel. Crew travel expenses rose due primarily to the relocation
of vessels from domestic to foreign markets and an increase in the
frequency of crew rotation aboard other vessels working offshore West
Africa. These cost increases were offset by a decline in domestic
drydocking expenses due primarily to the disposition and drydock deferral
of certain vessels.
Operating profit of the Company's environmental service business
increased $1.4 million in the twelve month period ended December 31, 1998
compared to the twelve month period ended December 31, 1997. In addition
to including the results of ERST, which was acquired in October 1997,
operating profits rose due to reduced operating costs.
Since inception, the Company's drilling service business has engaged in
no operations other than managing construction of the Rigs and related
matters. The Company has not generated any operating revenues to date.
The drilling service business' operating loss was $0.9 million in the
twelve month period ending December 31, 1998 as a result of general and
administrative and depreciation expenses.
20
Overall administrative and general expenses, relating primarily to
operating activities, increased $7.8 million in the twelve month period
ended December 31, 1998 compared to the twelve month period ended
December 31, 1997. The increase was due primarily to (i) higher offshore
marine service segment costs, (ii) the acquisition of ERST in October
1997, and (iii) the acquisition of a majority equity interest in Chiles
in December 1997. In 1998, the offshore marine service business added
staff in support of the Company's operations in West Africa and other
foreign regions and experienced increases in wage costs due to heightened
competition for administrative personnel in the domestic labor market.
Corporate administrative expenses also increased between the comparable
twelve month periods due to higher wage and legal costs. An increase in
the environmental service segment's administrative costs due to the
acquisition of ERST during 1997 was partially offset by a decline in
administrative expenses incurred by NRC. Administrative and general
expenses primarily include costs associated with personnel, professional
services, travel, communications, facility rental and maintenance,
general insurance, and franchise taxes.
Net gains from equipment sales and retirements decreased $23.6 million in
the twelve month period ended December 31, 1998 compared to the twelve
month period ended December 31, 1997. During 1998, net gains from
equipment sales and retirements aggregated $38.3 million, resulting
primarily from the sale of 34 offshore marine vessels: 8 towing supply (3
of which were bareboat chartered-in), 8 anchor handling towing supply (3
of which were bareboat chartered-in), 7 utility, 6 supply (5 of which
were bareboat chartered-in) and 5 crew. During 1997, net gains from
equipment sales and retirements aggregated $61.9 million, resulting
primarily from the sale of 37 offshore marine vessels: 15 supply (7 of
which were bareboat chartered-in), 6 towing supply, 5 anchor handling
towing supply (1 of which was bareboat chartered-in), 7 utility, 2 crew,
1 freight, and 1 seismic. The decrease in gains between comparable
periods was due primarily to a decline in the number of offshore marine
vessels sold and the increase in the deferral of gains associated with
sale and leaseback transactions. In accordance with generally accepted
accounting principles, gains from sale and leaseback transactions are
deferred to the extent of the present value of minimum lease payments and
are credited to income as a reduction in rental expense over the
applicable lease terms.
Equity earnings from 50% or less owned companies increased $7.8 million
in the twelve month period ended December 31, 1998 compared to the twelve
month period ended December 31, 1997. The increase primarily related to a
$2.1 and $1.4 million gain from the sale of an offshore marine vessel by
the TMM Joint Venture and the SMIT Joint Ventures, respectively. The TMM
Joint Venture's earnings also rose due to fleet expansion and higher
revenues earned by offshore marine vessels operating between comparable
years.
Gain from the sale of the Company's investment in a 50% or less owned
company increased $1.2 million in the twelve month period ending December
31, 1998 compared to the twelve month period ending December 31, 1997.
During 1998, the Company sold its equity interest in a joint venture
entity which provided marine and underwater services to offshore terminal
and oilfield operations internationally. There was no comparable
disposition of an equity interest in a 50% or less owned company during
1997.
Minority interest in income of subsidiaries of the Company increased $1.3
million in the twelve month period ended December 31, 1998 compared to
the twelve month period ended December 31, 1997 due primarily to the
commencement of operations in June 1997 of the Vision Joint Venture.
Interest income increased $12.6 million in the twelve month period ended
December 31, 1998 compared to the twelve month period ended December 31,
1997 due primarily to greater invested cash balances that resulted from
(i) the sale in September 1997 of the Company's 7.2% Notes, (ii) the sale
of offshore marine vessels, (iii) the sale in April 1998 of the Chiles
10.0% Notes, and (iv) the continuing strong results of operations.
Interest expense increased $8.6 million in the twelve month period ended
December 31, 1998 compared to the twelve month period ended December 31,
1997 due primarily to the (i) sale in September 1997 of the 7.2% Notes,
(ii) sale in April 1998 of the Chiles 10.0% Notes, and (iii) amortization
of debt discount recognized on indebtedness issued pursuant to the SMIT
Additional Consideration Transaction. The increase in interest expense
was partially offset by the capitalization of interest costs in
connection with the construction of offshore marine vessels and the Rigs.
Gains from commodity swap transactions increased $3.3 million in the
twelve month period ended December 31, 1998 compared to the twelve month
period ended December 31, 1997. During 1998, the Company entered into
natural gas commodity swap transactions that resulted in the recognition
of a net gain. There were no comparable commodity swap transactions
during the prior year. See "Liquidity and Capital Resources" for
additional discussion of the Company's commodity swap activities.
Gains from the sale of marketable securities increased $1.8 million in
the twelve month period ended December 31, 1998 compared to twelve month
period ended December 31, 1997. During 1998, the Company sold certain
available-for-sale securities that resulted in net gains from those
21
transactions. No available-for-sale securities were sold during the prior
year.
The Company's overall depreciation and amortization expense, relating
primarily to operating activities, did not change significantly between
the comparable twelve month periods ending December 31, 1998 and 1997. A
decline in depreciation expense due to offshore marine vessel sales was
offset primarily by higher expense associated with depreciating newly
constructed and acquired offshore marine vessels, additional offshore
marine vessel purchase consideration paid in the SMIT Additional
Consideration Transaction, and amortizing goodwill associated with the
acquisition of ERST.
COMPARISON OF YEAR END 1997 TO YEAR END 1996
Operating revenue of the Company's offshore marine service business
increased $131.5 million in the twelve month period ended December 31,
1997 compared to the twelve month period ended December 31, 1996 due
primarily to a net increase in the number of owned vessels and a
significant improvement in rates per day worked for the Company's
offshore vessels operating in the U.S. Gulf of Mexico. Significant
offshore vessel acquisitions included 24 vessels purchased from SMIT
during December 1996 that operate in the North Sea, offshore West Africa,
and in Other Foreign regions and 24 vessels purchased from Galaxie during
January 1997 that operate in the U.S. Gulf of Mexico. Anchor handling
towing supply, towing supply, and supply vessels were acquired from SMIT,
and utility, crew, and supply vessels were acquired from Galaxie. Strong
demand in the U.S. Gulf of Mexico resulted in rates per day worked
increasing between comparable periods for all offshore vessels owned by
the Company. Additionally, rates per day worked for the Company's vessels
operating in the North Sea, offshore West Africa, and in Other Foreign
regions also increased between comparable periods.
Operating revenue of the Company's environmental service business
decreased $8.9 million in the twelve month period ended December 31, 1997
compared to the twelve month period ended December 31, 1996 due primarily
to a decline in the severity of oil spills managed by the Company.
Retainer fees and other service revenues also declined between comparable
periods due primarily to a decline in voyage and other service
activities.
Operating profit of the Company's offshore marine service business
increased $65.0 million in the twelve month period ended December 31,
1997 compared to the twelve month period ended December 31, 1996. The
increase was due primarily to factors affecting operating revenue as
outlined above. These increases in operating profit were partially offset
by higher wage, repair, insurance, charter, food provision, and
administrative costs (see discussion below). Wage costs increased for
seaman working in the U.S. Gulf of Mexico region in response to strong
demand for personnel resulting from very active market conditions. Repair
costs increased for the Company's fleet operating in the U.S. Gulf of
Mexico due primarily to an increase in (i) the number of scheduled engine
overhauls, (ii) other engine maintenance resulting from greater running
time by the Company`s smaller vessels, and (iii) drydock expenses that
resulted from rising shipyard costs and more stringent regulatory
inspections. Health insurance costs in the United States increased due to
higher per average employee claim costs. Charter cost increased due to
the sale and leaseback of eight vessels during 1997. The food provision
per diem for vessels operating domestically was increased in 1997.
Operating profit of the Company's environmental service business declined
$1.9 million in the twelve month period ended December 31, 1997 compared
to the twelve month period ended December 31, 1996 due primarily to the
factors affecting operating revenue as outlined above. These declines in
operating profit were partially offset by decreases in both operating and
general and administrative expenses.
The Company's overall administrative and general expenses, relating
primarily to operating activities, increased $6.0 million in the twelve
month period ended December 31, 1997 compared to the twelve month period
ended December 31, 1996 and related primarily to an increase in
managerial staff and other administrative costs necessary to support
fleet growth in the offshore marine service segment that includes the
recent vessel acquisitions from SMIT and Galaxie. Also during 1997, the
Company's marine service business increased its reserve for doubtful
foreign trade accounts receivable. Administrative and general expenses of
the environmental service business decreased in response to reduced
voyage and other service activities. Administrative and general expenses
primarily include costs associated with personnel, professional services,
travel, communications, facility rental and maintenance, general
insurance, and franchise taxes.
Net gains from equipment sales and retirements increased $59.7 million in
the twelve month period ended December 31, 1997 compared to the twelve
month period ended December 31, 1996. During 1997, net gains from
equipment sales and retirements aggregated $61.9 million, primarily from
the sale of 37 offshore marine vessels: 15 supply (7 of which were
bareboat chartered-in by the Company), 6 towing supply, 5 anchor handling
towing supply (1of which was bareboat chartered-in by the Company), 7
utility, 2 crew, 1 freight, and 1 seismic. During 1996, net gains from
equipment sales and retirements aggregated $2.3 million, primarily from
the sale of 16 utility vessels. The increase in gains between comparable
22
periods was due primarily to the number and types of offshore marine
vessels sold.
Interest income increased $9.2 million in the twelve month period ended
December 31, 1997 compared to the twelve month period ended December 31,
1996 due primarily to greater invested cash balances that resulted from
improved operating results and the sale of the Company's 5 3/8% Notes and
7.2% Notes.
Interest expense increased $8.5 million in the twelve month period ended
December 31, 1997 compared to the twelve month period ended December 31,
1996 due primarily to an increase in the Company's outstanding
indebtedness offset by the capitalization in 1997 of certain interest
costs associated with the construction of offshore marine vessels.
Equity Earnings from 50% or less owned companies increased $4.5 million
in the twelve month period ended December 31, 1997 compared to the twelve
month period ended December 31, 1996. The increase in equity earnings
between the periods was due primarily to operating profits earned by the
SMIT Joint Ventures that were acquired in December 1996 pursuant to the
SMIT Transaction and improved operating results of CPA.
The Company's overall depreciation and amortization expense, which
related primarily to operating activities, increased $11.6 million in the
twelve month period ended December 31, 1997 compared to the twelve month
period ended December 31, 1996. This increase was due primarily to a net
increase in the number of owned offshore marine vessels that were
acquired from SMIT and Galaxie.
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 Company may, from time to time, issue
shares of Common Stock, its 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
vessels, and retainer, spill response, and consulting activities of the
Company's environmental service business. Factors relating to the marine
service business are affected directly by the volatility of oil and gas
prices, the level of offshore production and exploration activity, and
other factors beyond the Company's control.
OFFSHORE MARKET DEVELOPMENTS. The decline in oil and gas prices that
began in 1998 has resulted in reduced drilling and production support
activities both domestically and internationally. As a result, revenue
earned by the Company's offshore marine service fleet has declined, and
during March 1999, the Company had 43 offshore marine vessels out of
service in the U.S. Gulf of Mexico. Lower oil and gas prices have also
resulted in reduced day rates and decreased utilization of jackup rigs,
particularly in the U.S. Gulf of Mexico shallow water market, and excess
supply in the current jackup market.
Sustained weak commodity prices, economic problems in countries outside
the United States, or a number of other factors beyond the Company's
control could further curtail spending by oil and gas companies.
Therefore, the Company cannot predict whether, or to what extent, market
conditions will improve or deteriorate further. The current trends in
market conditions will have an adverse effect on the Company's financial
position, results of operations, and cash flows.
The Company believes that Chiles has sufficient financing in place to
complete the construction and outfitting of the Rigs and fund the initial
cost of operations. Current day rate levels for jackup rigs are, however,
not sufficient for Chiles to operate the Rigs at cash flow levels
necessary to provide for adequate debt service coverage. Accordingly, if
jackup rig day rates remain depressed, it will be necessary for Chiles to
obtain additional financing in the form of subordinated debt or equity.
The Company believes that Chiles will be able to obtain such financing,
if required; however, there can be no assurance that it will be available
on acceptable terms.
CASH AND MARKETABLE SECURITIES. At December 31, 1998, the Company's cash
and investments in marketable securities totaled $439.2 million,
including $161.0 million of unrestricted cash and cash equivalents,
$194.7 million of investments in marketable securities, and $83.5 million
of restricted cash. The Company's cash and investments in marketable
securities rose between years by $56.4 million for the twelve month
period ending December 31, 1998 compared to the twelve month period
ending December 31, 1997, see discussion below regarding Cash Generation
and Deployment.
23
Restricted cash at December 31, 1998 includes $21.3 million and $62.2
million that is intended for use in defraying the costs of constructing
offshore marine vessels for the Company and the Rigs and other related
matters for Chiles, respectively. At December 31, 1998, the Company has
funded approximately $8.8 million in offshore marine vessel construction
costs from unrestricted cash balances, and subject to the Maritime
Administration's approval, the Company expects such amounts to be
reimbursed from construction reserve fund restricted cash accounts as
discussed below.
Proceeds from the sale of certain offshore marine vessels in 1997 and
1998 have been deposited into escrow and construction reserve fund bank
accounts 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 the vessels. Escrow accounts were established
pursuant to certain exchange and escrow agreements and restrict the use
of funds deposited therein for a period of six months. Should replacement
offshore marine vessels not be delivered prior to expiration of the
applicable six-month escrow period, funds then remaining in the escrow
accounts will be released to the Company for general use. In 1998, the
Company also established, pursuant to Section 511 of the Merchant Marine
Act, 1936, as amended, joint depository construction reserve fund
accounts with the Maritime Administration. From the date of deposit,
withdrawals from these accounts are subject to prior written approval of
the Maritime Administration, and funds must be committed for expenditure
within three years or they will be released for the Company's general
use.
Net proceeds from the sale of the Chiles 10.0% Notes were deposited into
escrow accounts in accordance with certain escrow agreements between
Chiles and U.S. Bank Trust National Association, as Escrow Agent. These
funds may be used to (i) partially fund the construction of the Rigs,
(ii) pay interest on the Chiles 10.0% Notes through the first two
semi-annual interest payment dates, and (iii) provide working capital.
Upon receipt by the Escrow Agent of an Officer's Certificate of Chiles
that Chiles has made the final installment of the Rigs' purchase price in
accordance with the related construction contracts, any funds remaining
in escrow will be released by the Escrow Agent to Chiles.
Investments in marketable securities at December 31, 1998, totaling
$194.7 million, were primarily comprised of U.S. Government and related
Government Agencies' securities and also included a relatively small
amount of corporate debt, debt securities of the government of the United
Kingdom, and equity securities. All of these securities are publicly
traded and highly liquid instruments, and the Company does not believe
that this portfolio contains material market risks.
CAPITAL STRUCTURE. At December 31, 1998, the Company's capital structure
was comprised of $474.9 million in long-term debt (including current
portion) and $542.8 million in stockholders' equity. Long term debt rose
during the year from the issuance of the Chiles 10.0% Notes and
completion of the SMIT Additional Consideration Transaction.
Stockholders' equity rose due to an increase in retained earnings of
$125.9 million from net income and common stock and paid in capital of
$3.3 million primarily from the exercise of stock options, the issuance
of Common Stock in connection with the acquisition of ERST that occurred
in 1997, and amortization of restricted stock. $60.3 million of Common
Stock repurchases and a $0.1 million decline in accumulated other
comprehensive income offset these increases.
CASH GENERATION AND DEPLOYMENT. At December 31, 1998, cash and cash
equivalents were relatively unchanged from the prior year end. Cash flow
provided from operating activities increased $16.6 million due primarily
to improved rates per day earned by vessels in the offshore marine
service business. In 1998, cash generated from investing and financing
activities primarily included $176.3 million from the sale or maturity of
marketable securities, $144.0 million from the sale of offshore marine
vessels and other equipment, and $105.8 million of net proceeds generated
from the sale of the Chiles 10.0% Notes. These increases in cash flow
were primarily offset by uses in investing and financing activities to
acquire $226.8 million of property and equipment, $220.5 million of
marketable securities and other investments, and $60.3 million of Common
Stock, and to increase restricted cash balances by $22.3 million and
repay $14.7 million of indebtedness.
CAPITAL EXPENDITURES. Capital expenditures for property and equipment
totaled $226.8 million, $136.1 million and $104.1 million in 1998, 1997,
and 1996, respectively. During each of those years, expenditures for
property and equipment primarily related to the Company's acquisition,
construction, and improvement of offshore marine vessels, and capital
expenditures in 1998 additionally included costs incurred in connection
with the construction of two Rigs. The Company has substantially expanded
the size of its offshore marine vessel fleet over the past several years,
and its construction program that began in 1996 reflects a continuing
commitment to serving the offshore oil and gas industry with equipment
well suited for deep-water drilling and production activities.
24
As of December 31, 1998, the Company has commitments to build 15 offshore
marine service vessels at an approximate aggregate cost of $137.0 million
of which $55.0 million has been expended, and its majority owned
subsidiary, Chiles, has commitments to build two Rigs for $171.3 million
of which $99.9 million has been expended. Completion of these
construction projects is expected during the next two years.
The Company may make selective acquisitions of offshore marine vessels or
fleets of offshore marine vessels and oil spill response equipment or
expand the scope and nature of its environmental services. The Company
also may upgrade or enhance its offshore marine vessels or construct
offshore marine vessels to remain competitive in the marketplace.
Management anticipates that such expenditures would be funded through a
combination of existing cash balances, cash flow provided by operations,
sale of existing equipment and, potentially, through the issuance of
additional indebtedness, shares of Common Stock, or the Company's
preferred stock.
OTHER INVESTMENTS. At December 31, 1998, the Company had an equity
investment in and loans to, aggregating $14.5 million, Globe Wireless,
Inc. ("Globe Wireless"), a telecommunication service provider dedicated
to the maritime industry. The investment, carried at cost and totaling
$10.0 million, was in the form of Series C Convertible Preferred Stock,
$.001 par value ("Series C Preferred Stock"). Loans, totaling $4.5
million, bear interest at the applicable LIBOR rate plus 2.0% payable
quarterly, are repayable in 2003, and are secured by substantially all of
the tangible and intangible assets of Globe Wireless. Subject to and upon
the terms and conditions contained in an Amended and Restated Loan
Agreement dated as of April 15, 1998 between the Company and Globe
Wireless, the Company has agreed to loan to Globe Wireless up to an
additional $5.5 million. Subject to certain conditions, the Company may
exercise certain warrants to purchase up to an amount of the Series C
Preferred Stock, equal to the principal amount of the loans outstanding,
as repayment of the loans. At December 31, 1998, the Company's investment
in convertible preferred stock and loans to Globe Wireless were
convertible into an approximate 45% common stock interest in Globe
Wireless.
STOCK AND DEBT REPURCHASE PROGRAM. During February 1999, SEACOR's Board
of Directors increased its previously announced securities repurchase
authority by $25.0 million. During 1998, the Company purchased 1,305,100
shares of Common Stock and $17.1 million principal amount of the Chiles
10.0% Notes at an aggregate cost of $74.6 million. Of the Common Stock
repurchased by the Company in 1998, 593,100 shares, at an aggregate cost
of $23.3 million, were acquired in the open market, and 712,000 shares,
at an aggregate cost of $37.0 million, were acquired pursuant to the SMIT
Stock Repurchase Transaction. During 1999, the Company acquired in the
open market an additional 593,500 shares of Common Stock, $2.5 million
principal amount of its 7.2% Notes, and $1.5 million principal amount of
the Chiles 10.0% Notes at an aggregate cost of $27.1 million. Since
initiating the security repurchase program in 1997, the Company has
acquired 2,064,568 shares of Common Stock and $22.1 million principal
amount of the Chiles 10.0% Notes, 7.2% Notes, and 5 3/8% Notes, at an
aggregate cost of $108.2 million. The Company has $31.8 million available
for the purchase of additional SEACOR Securities that may be conducted
from time to time through open market purchases, privately negotiated
transactions, or otherwise depending on market conditions.
LIQUIDITY. At December 31, 1998, the Company had $100.0 million available
for future borrowings under its Credit Facility with DnB. Until
termination of the Credit Facility, a commitment fee is payable on a
quarterly basis, at rates ranging from 17.5 to 40 basis points per annum
on the average unfunded portion of the Credit Facility. The commitment
fee rate 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.
Under the terms of the Credit Facility, 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 EBITDA, as defined, and/or
the credit rating maintained by Moody's and Standard & Poor's, if any.
The Credit Facility requires the Company, on a consolidated basis, to
maintain a minimum ratio of indebtedness to vessel value, 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 Credit Facility limits the amount of secured indebtedness which 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.
25
On April 29, 1998, Chiles completed the sale of the Chiles 10.0% Notes.
The offering was made to qualified institutional buyers and to certain
persons in offshore transactions exempt from registration under U.S.
federal securities laws. Pursuant to an exchange offer that was
consummated on September 28, 1998, all holders of the Chiles 10% Notes
exchanged such notes for new notes identical in form and terms, that were
registered under the Securities Act of 1933, as amended. Interest on the
Chiles 10.0% Notes is payable semi-annually on May 1 and November 1 of
each year commencing November 1, 1998. The Chiles 10.0% Notes are not
redeemable at the option of Chiles prior to May 1, 2003, except that
until May 1, 2001, Chiles may redeem, at its option, in the aggregate up
to 35% of the original principal amount of the Chiles 10.0% Notes, on a
pro rata basis, with the net proceeds of one or more Public Equity
Offerings (as defined), at a redemption price of 110% plus accrued
interest to the redemption date; provided, however, that at least $71.5
million aggregate principal amount of the Chiles 10.0% Notes remains
outstanding after each such redemption. On and after May 1, 2003, the
Chiles 10.0% Notes may be redeemed at the option of Chiles, in whole or
in part, initially at 105.0% of the principal amount thereof and
declining by 1.67% each year thereafter to 100.0% of the principal amount
on and after May 1, 2006, plus accrued interest to the date of
redemption. The proceeds from the issuance of the Chiles 10.0% Notes were
placed in escrow to be used to (a) partially fund the construction of
Rigs, (b) pay interest on the Chiles 10.0% Notes through the first two
semi-annual interest payment dates, and (c) provide working capital.
Chiles incurred $4.2 million in costs associated with the sale of the
Chiles 10.0% Notes.
Also on April 29, 1998, Chiles established the Chiles Bank Facility which
was arranged by Nederlandse Scheepshypotheek Bank N.V. and MeesPierson
Capital Corporation. Borrowings under the Chiles Bank Facility may be
repaid and reborrowed during the term thereof and bear interest at a per
annum rate equal to LIBOR plus a margin of 1.25%. Subject to satisfaction
of customary conditions precedent, including that there shall have
occurred no material adverse change with respect to Chiles or its
business, assets, properties, conditions (financial or otherwise), or
prospects since the date of execution of the Chiles Bank Facility,
availability under the Chiles Bank Facility will commence upon delivery
of a rig being constructed under contract with Chiles. Presently,
management has no reason to believe that credit under the facility would
not be available. Until the commencement of availability, Chiles will be
required to pay quarterly in arrears a commitment fee equal to 0.25% per
annum on the undrawn amount of the Chiles Bank Facility, thereafter
increased to 0.50% per annum.
The Chiles Bank Facility is guaranteed by the Rig Owners and such
guarantees are secured by first priority mortgages on the Rigs,
assignment of earnings of the Rigs (which may continue to be collected by
Chiles unless there occurs an event of default), and assignments of
insurance proceeds.
The Chiles Bank Facility contains customary affirmative covenants,
representations, and warranties and is cross-defaulted to the related
promissory notes; provided, however, should there occur an event of
default under the Chiles Bank Facility (other than arising from
enforcement actions undertaken by a holder of other indebtedness of
Chiles, enforcement actions arising from in rem claims against either of
the Rigs or bankruptcy events with respect to Chiles or a Rig Owner), the
lenders under the Chiles Bank Facility have agreed on a one-time basis
not to enforce remedies for a period of 60 days during which the holders
of the Notes ("Noteholders") or Chiles may cure such event of default or
prepay all of the indebtedness outstanding under the Chiles Bank
Facility. The Chiles Bank Facility also contains certain negative
covenants applicable to Chiles and the Guarantors, including prohibitions
against the following: certain liens on the collateral under the Chiles
Bank Facility; material changes in the nature of their business; sale or
pledge of any Guarantor's membership interests; sale or disposition of
any Rig or other substantial assets; certain changes in office locations;
consolidations or mergers; certain Restricted Payments (as defined in the
Chiles Bank Facility), including distributions on membership interests in
Chiles Offshore (the "Membership Interests"); the exercise of a right to
call the Notes; or any material amendment or modification of the
Indenture. The Chiles Bank Facility further requires Chiles to prevent
the Guarantors from making certain loans and advances, except in their
normal course of business or to certain affiliates; assuming,
guaranteeing or (except in their ordinary course of business) otherwise
becoming liable in connection with any obligations other than guaranties
for the benefit of the lenders under the Chiles Bank Facility, guaranties
in favor of the Noteholders or pre-existing guaranties; paying out any
funds, except in their ordinary course of business for the business of
Chiles or service of certain indebtedness permitted under the Chiles Bank
Facility; and issuing or disposing of any of their own membership
interests (except to Chiles). In addition, the Chiles Bank Facility
requires that the fair market value of the Rigs, as determined by
appraisers appointed by the lenders thereunder, at all times equals or
exceeds an amount equal to 130% of outstanding indebtedness under the
Chiles Bank Facility.
At December 31, 1998, the Company had outstanding $186.75 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
were issued under an Indenture dated as of November 1, 1996, (the "1996
Indenture"), between the Company and First Trust National Association, as
trustee. 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 redeemed
into shares of Common Stock at a conversion price of $66.00 per share
(equivalent to a conversion rate of 15.1515 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
26
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
(as defined in the 1996 Indenture) 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 2001.
DISCLOSURE ABOUT MARKET RISKS. The Company's operating revenues are
primarily earned from its operation of offshore marine service vessels
and net income can vary significantly with fluctuations in the average
rate per day worked or utilization of that equipment. Assuming operating
activities comparable to fiscal year 1998, each $100 change in the
average rate per day worked would have an approximate $8.3 million effect
on operating revenues and an approximate $5.4 million effect on net
income. Also assuming operating activities comparable to fiscal year
1998, each 1% change in utilization would have an approximate $3.8
million effect on operating revenues and an approximate $2.5 million
effect on net income. Should changes in rates per day worked and
utilization have an adverse effect on the Company's results of operation
and cash flows, certain actions may be taken by management to mitigate
the impact through cost reduction measures that include but are not
limited to the deferral of vessel drydockings and repairs or the removal
of vessels from service.
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. The financial statements of the Company's United Kingdom
operations are measured using the pound sterling and changes in the
strength of that currency relative to the U.S. dollar and the
corresponding adjustment to the net assets of those operations caused by
exchange rate fluctuations result in the recognition of currency
translation adjustments that are reported in Accumulated Other
Comprehensive Income in Stockholders' Equity. 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 December 31, 1998, the notional and fair
value of those forward exchange contracts, which expire at various dates
through January 2000, were approximately $3.4 million and $0.04 million,
respectively. The weighted average exchange rate of the Company's forward
exchange contracts at December 31, 1998 was approximately .61 pounds
sterling per U.S. dollar. The Company also collects certain revenues and
pays certain expenses in other foreign currencies. With respect to these
foreign currency risks, the Company has not entered into hedging
contracts and its operating results are positively or negatively affected
as these foreign currencies strengthen or weaken against the U.S. dollar.
The market risks associated with these other foreign currencies have not
been material.
The rates that the Company is able to charge customers for its fleet of
offshore marine vessels and those that it expects to charge for the Rigs
under construction and, consequently, the earnings and cash flows from
such operations are in large part dependent upon natural gas prices. In
an effort to achieve greater predictability with respect to such cash
flows and earnings and to mitigate the effects that the volatility of the
price of natural gas will have on its operations, the Company has in the
past and may in the future hedge against the risks associated with
movements in natural gas prices through the use of commodity futures,
options, swap agreements, and other hedge devices. The use of these
hedging arrangements is intended to limit the risk of a decline in market
rates for offshore vessels and the Rigs, which typically follow a decline
in natural gas prices. These arrangements, however, may also mitigate the
favorable effect on earnings and cash flows of increased rates, which
typically follow an increase in natural gas prices.
Beginning in 1998, the Company entered into commodity price swap
agreements pursuant to which, on each applicable settlement date, the
Company receives the amount, if any, by which the contract price for the
notional quantity of natural gas under contract exceeds the settlement
price quoted on the New York Mercantile Exchange ("NYMEX") or pays the
amount, if any, by which the settlement price quoted on the NYMEX exceeds
the contract price. As of December 31, 1998, the Company had entered into
various commodity price swap agreements based on 12,660 million British
thermal units ("MMbtu") of natural gas per day at an average price of
$2.22 per MMbtu under commodity swap transactions that expire at various
dates through December 2000. For accounting purposes, the change in the
market value of the Company's natural gas commodity price swap agreements
is recognized as a gain or loss in the period of change.
27
MINORITY INTEREST. Minority interest includes the interest of the
Company's partners in the net worth of primarily three joint ventures:
Chiles, the Veesea Joint Venture, and the Vision Joint Venture.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." 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. SFAS 133 is
effective for fiscal years beginning after June 15, 1999. A company may
also implement SFAS 133 as of the beginning of any fiscal quarter after
issuance (that is, fiscal quarters beginning June 16, 1998 and
thereafter). SFAS 133 must be applied to derivative instruments and
certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantially modified after December 31, 1997. The
Company has not yet quantified the impact of adopting SFAS 133 on its
financial statements and has not determined the timing or method of its
adoption of SFAS 133.
YEAR 2000
The Year 2000 ("Y2K") issue is the result of computerized systems being
written to store and process the year portion of dates using two digits
rather than four and that date sensitive systems may fail or produce
erroneous results on or before January 1, 2000 because the year 2000 will
be interpreted incorrectly. The Company has been pursuing a strategy to
ensure that all of its significant computer systems will be able to
process dates from and after January 1, 2000 without critical failure.
Computerized systems are integral to the Company's operations,
particularly for accounting and office product software applications used
throughout its many offices and, to a lesser extent, for communication,
navigational and other systems aboard certain of the Company's vessels.
Most of the Company's computerized accounting and office product software
applications are licensed through commercial third party software
developers with whom the Company has maintenance contracts. Where
necessary, these software developers have already modified and released
newer versions of their product that are Y2K compliant. The Company has
implemented or is in the process of testing and evaluating these newer
Y2K compliant versions. In connection with the acquisition of accounting
applications in prior years unconnected with its Y2K planning, the
Company has already upgraded materially all of its computer hardware to
systems that are Y2K compliant. The Company expects to complete the
implementation of both Y2K compliant accounting and office product
software and related hardware during the second half of 1999.
Substantially all Y2K compliant software upgrades have been provided
under the terms of the Company's maintenance contracts without additional
cost. The Company has also substantially completed inventorying and
preparing a risk analysis of other date-aware systems in its operations
that include vessels. Presently, the Company estimates the cost of
modifying its information technology infrastructure to be Y2K compliant
will be approximately $0.5 million.
The Company's computer systems are not widely integrated with the systems
of its suppliers and customers. A potential Y2K risk attributable to
third parties would be from a temporary disruption in certain materials
and services provided by third parties. Major suppliers have been
contacted regarding Y2K compliance, and the Company has added Y2K
compliance requirements to all of its purchasing contracts.
At present, the Company has not developed a contingency plan to address
all areas of risk associated with Y2K compliance but expects to develop a
plan, if needed, beginning in the third quarter of 1999. The Company is
committed to ensuring that it is fully Y2K ready and believes that, when
completed, its plans will adequately address the above-mentioned risks.
Based upon the Y2K risk assessment work performed thus far, the Company
believes the most likely Y2K-related failures would be related to a
disruption of materials and services provided by third parties. Although
the Company does not expect that such disruptions would have a material
adverse effect on the Company's financial condition or results of
operations, there can be no assurance that the Company's belief is
correct or that its risk assessments are, in fact, accurate. The Company
believes that the upgrades to its hardware and software systems, in
conjunction with any contingency plans developed prior to January 1,
2000, will permit a transition through that date without significant
interruption in its business or operations; however, such assessment is
predicated on the timely completion of the above referenced software
modifications. Should these modifications and upgrades be delayed or the
Company's contingency plans fail, the Y2K issue could have a material
impact on the Company's financial condition or results of operations. In
addition, there can be no assurance that the Company's vendors, suppliers
28
and other parties with whom the Company does business will successfully
resolve their Y2K problems. In the event of any such failures or other
Y2K failures, there can be no assurance that, despite the Company's
contingency plans, there will not be a material adverse effect on the
Company's financial condition or results of operations.
EUROPEAN ECONOMIC AND MONETARY UNION
The Company conducts business in the Netherlands and France and may
conduct business from time to time in other countries which have agreed
to join the European Economic and Monetary Union (the "EMU"). The member
nations of the EMU have agreed to adopt a single currency called the
Euro. Effective January 1, 1999, a three-year transition period for the
Euro has begun and the conversion rates between the Euro and member
nations national currencies have been fixed. Business enterprises have
the option of switching to the single currency at any time prior to
January 1, 2002. The software upgrades of the Company's principal
financial accounting system necessary to allow for the conduct of
business in Euros and national currencies during the transition period
and entirely in Euros thereafter have been provided under the terms of a
maintenance contract with its software provider without additional costs.
There may also be other costs relating to the conversion to the Euro that
the Company is unable to accurately estimate or segregate, but the
Company does not anticipate that such costs will be material. The Company
does not anticipate that the conversion to the Euro will have a material
impact on its future financial condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes are included in
Part IV of this Form 10-K on pages 33 through 56.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
29
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As permitted by General Instruction G. to this Form 10-K, other than
information with respect to the Company's executive officers which is set
forth in Item 4A of Part I of this Form 10-K, the information required to
be disclosed pursuant to this Item 10 is incorporated in its entirety
herein by reference to the Company's definitive proxy statement to be
filed with the Commission pursuant to Regulation 14A within 120 days
after the end of the Company's last fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
As permitted by General Instruction G. to this Form 10-K, the information
required to be disclosed pursuant to this Item 11 is incorporated in its
entirety herein by reference to the Company's definitive proxy statement
to be filed with the Commission pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As permitted by General Instruction G. to this Form 10-K, the information
required to be disclosed pursuant to this Item 12 is incorporated in its
entirety herein by reference to the Company's definitive proxy statement
to be filed with the Commission pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As permitted by General Instruction G. to this Form 10-K, the information
required to be disclosed pursuant to this Item 13 is incorporated in its
entirety herein by reference to the Company's definitive proxy statement
to be filed with the Commission pursuant to Regulation 14A within 120
days after the end of the Company's last fiscal year.
30
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report:
1. and 2. Financial Statements and Financial Statement
Schedules.
See Index to Consolidated Financial Statements and Financial
Statement Schedules on page 33 of this Form 10-K.
3. Exhibits:
See Index to Exhibits on pages 59 - 65 of this Form 10-K.
(b) Reports on Form 8-K:
None.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Charles Fabrikant
------------------------------
Charles Fabrikant,
Chairman of the Board,
President and Chief
Executive Officer
Date: March 31, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Charles Fabrikant Chairman of the Board, March 31, 1999
-------------------------- President and Chief Executive
Charles Fabrikant Officer (Principal Executive Officer)
/s/ Randall Blank Executive Vice President, Chief March 31, 1999
-------------------------- Financial Officer and Secretary
Randall Blank (Principal Financial Officer)
/s/ Lenny P. Dantin Vice President and March 31, 1999
-------------------------- Treasurer (Principal Accounting
Lenny P. Dantin Officer and Controller)
/s/ Granville E. Conway Director March 31, 1999
--------------------------
Granville E. Conway
/s/ Michael E. Gellert Director March 31, 1999
--------------------------
Michael E. Gellert
/s/ Antoon Kienhuis Director March 31, 1999
--------------------------
Antoon Kienhuis
/s/ Stephen Stamas Director March 31, 1999
--------------------------
Stephen Stamas
/s/ Richard M. Fairbanks III Director March 31, 1999
----------------------------
Richard M. Fairbanks III
Director March __, 1999
--------------------------
Pierre de Demandolx
/s/ Andrew R. Morse Director March 31, 1999
--------------------------
Andrew R. Morse
32
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Financial Statements:
Page
Report of Independent Public Accountants.................................................. 34
Consolidated Balance Sheets - December 31, 1998 and 1997.................................. 35
Consolidated Statements of Income for each of the three years
ended December 31, 1998................................................................ 36
Consolidated Statements of Changes in Equity for each of the
three years ended December 31, 1998.................................................... 37
Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1998................................................................ 38
Notes to Consolidated Financial Statements................................................ 39
Financial Schedules:
Reports of Independent Public Accountants on Financial
Statement Schedule..................................................................... 57
Valuation and Qualifying Accounts for each of the three
years ended December 31, 1998.......................................................... 58
All Financial Schedules, except those set forth above, have been omitted
since the information required is included in the financial statements or
notes or have been omitted as not applicable or required.
33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To SEACOR SMIT Inc.:
We have audited the accompanying consolidated balance sheets of SEACOR
SMIT Inc. (a Delaware corporation) and subsidiaries as of December 31,
1998 and 1997 and the related consolidated statements of income, changes
in equity and cash flows for each of the three years in the period ended
December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
and the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of SEACOR SMIT
Inc. and subsidiaries as of December 31, 1998 and 1997 and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
New Orleans, Louisiana
February 5, 1999
34
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 1998 1997
--------------- ---------------
Current Assets:
Cash and cash equivalents, including restricted cash of $14,239 at December 31,
1998........................................................................... $ 175,267 $ 175,381
Marketable securities............................................................ 40,325 33,020
Trade and other receivables, net of allowance for
doubtful accounts of $1,956 and $1,626, respectively........................... 86,621 84,087
Inventories...................................................................... 1,561 2,149
Prepaid expenses and other....................................................... 7,959 1,422
--------------- ---------------
Total current assets......................................................... 311,733 296,059
--------------- ---------------
Investments, at Equity and Receivables from 50% or Less Owned Companies............. 55,478 38,370
Available-for-Sale Securities....................................................... 154,378 127,420
Property and Equipment:
Vessels and equipment............................................................ 506,279 447,620
Vessels and rigs under construction.............................................. 185,116 108,592
Other............................................................................ 45,188 36,671
--------------- ---------------
736,583 592,883
Less-accumulated depreciation.................................................... 111,722 109,949
--------------- ---------------
624,861 482,934
--------------- ---------------
Restricted Cash..................................................................... 69,234 6,983
Other Assets........................................................................ 42,291 28,035
=============== ===============
$ 1,257,975 $ 1,019,801
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................................................ $ 2,122 $ 1,925
Accounts payable and accrued expenses............................................ 45,842 34,304
Accrued wages.................................................................... 4,740 3,658
Accrued interest................................................................. 4,511 4,616
Accrued income taxes............................................................. - 8,739
Other current liabilities........................................................ 14,503 6,279
--------------- ---------------
Total current liabilities.................................................... 71,718 59,521
--------------- ---------------
Long-Term Debt ..................................................................... 472,799 358,714
Deferred Income Taxes............................................................... 86,124 59,681
Deferred Gains and Other Liabilities................................................ 51,623 34,168
Minority Interest in Subsidiaries................................................... 32,929 33,703
Stockholders' Equity:
Common stock, $.01 par value, 40,000,000 shares authorized; 14,146,457 and
14,064,221 shares issued in 1998 and 1997, respectively........................ 141 140
Additional paid-in capital....................................................... 272,012 268,728
Retained earnings................................................................ 337,086 211,159
Less 1,472,134 and 166,968 shares held in treasury in 1998 and 1997, respectively,
at cost......................................................................... (65,656) (5,365)
Unamortized restricted stock..................................................... (972) (986)
Accumulated other comprehensive income........................................... 171 338
--------------- ---------------
Total stockholders' equity................................................... 542,782 474,014
=============== ===============
$ 1,257,975 $ 1,019,801
=============== ===============
The accompanying notes are an integral part of these financial statements and
should be read in conjunction herewith.
35
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
1998 1997 1996
--------------- ---------------- ---------------
Operating Revenue:
Marine........................................................ $ 359,611 $ 325,009 $ 193,557
Environmental -
Oil spill and emergency response............................ 5,154 4,763 12,466
Retainer and other services................................. 21,026 17,176 18,421
--------------- ---------------- ---------------
385,791 346,948 224,444
--------------- ---------------- ---------------
Costs and Expenses:
Cost of spill and emergency response.......................... 4,223 3,916 10,398
Operating expenses -
Marine...................................................... 177,236 158,175 108,043
Environmental............................................... 6,263 5,402 6,227
Administrative and general.................................... 36,102 28,299 22,304
Depreciation and amortization................................. 36,449 36,538 24,967
--------------- ---------------- ---------------
260,273 232,330 171,939
--------------- ---------------- ---------------
Operating Income................................................. 125,518 114,618 52,505
--------------- ---------------- ---------------
Other Income (Expense):
Interest income............................................... 25,346 12,756 3,558
Other......................................................... 6,492 569 (646)
Gain from equipment sales or retirements, net................. 38,338 61,928 2,264
Interest expense.............................................. (22,798) (14,168) (5,713)
--------------- ---------------- ---------------
47,378 61,085 (537)
--------------- ---------------- ---------------
Income Before Income Taxes, Minority Interest, Equity in Earnings
of 50% or Less Owned Companies, and Extraordinary Item........ 172,896 175,703 51,968
--------------- ---------------- ---------------
Income Tax Expense:
Current....................................................... 33,635 36,317 15,215
Deferred...................................................... 26,658 25,067 3,320
--------------- ---------------- ---------------
60,293 61,384 18,535
--------------- ---------------- ---------------
Income Before Minority Interest, Equity in Earnings of 50% or
Less Owned Companies and Extraordinary Item................... 112,603 114,319 33,433
Minority Interest in (Income) Loss of Subsidiaries............... (1,612) (301) 244
Equity in Net Earnings of 50% or Less Owned Companies............ 13,627 5,575 1,283
--------------- ---------------- ---------------
Income Before Extraordinary Item................................. 124,618 119,593 34,960
Extraordinary Item - Gain/(Loss) on Extinguishment of Debt, net of
tax.............................................................. 1,309 (439) (807)
--------------- ---------------- ---------------
Net Income....................................................... $ 125,927 $ 119,154 $ 34,153
=============== ================ ===============
Basic Earnings Per Common Share:
Income before extraordinary item.............................. $ 9.49 $ 8.64 $ 3.04
Extraordinary item............................................ 0.10 (0.03) (0.07)
=============== ================ ===============
Net income.................................................... $ 9.59 $ 8.61 $ 2.97
=============== ================ ===============
Diluted Earnings Per Common Share:
Income before extraordinary item.............................. $ 8.17 $ 7.50 $ 2.80
Extraordinary item............................................ 0.08 (0.03) (0.06)
=============== ================ ===============
Net income.................................................... $ 8.25 $ 7.47 $ 2.74
=============== ================ ===============
Weighted Average Common Shares:
Basic......................................................... 13,135,111 13,840,205 11,480,929
Diluted....................................................... 16,090,556 16,845,001 13,256,291
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
36
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
Accumulated
Unamortized Other
Common Additional Retained Treasury Restricted Comprehensive Comprehensive
Stock Paid-in Earnings Stock Stock Income Income
Capital
------------------------------------------- -------- ----------- ----------- --------- ----------- ------------- -------------
1998
-------------------------------------------
Balance, December 31, 1997................$ 140 $ 268,728 $ 211,159 $ (5,365) $ (986) $ 338 $ -
Add/(Deduct) -
-Net income for fiscal year 1998..... - - 125,927 - - - 125,927
-Issuance of common stock:
ERST/O'Brien's Inc. acquisition.. - 442 - - - - -
Exercise of stock options........ 1 1,473 - - - - -
Issuance of restricted stock..... - 1,369 - - (1,319) - -
-Amortization of restricted stock.... - - - - 1,333 - -
-Net currency translation adjustments - - - - - (121) (121)
-Change in unrealized gains (losses)
on available-for-sale securities.. - - - - - (46) (46)
-Purchase of treasury shares......... - - - (60,291) - - -
-------- ----------- ----------- --------- ----------- ------------- -------------
Balance, December 31, 1998................$ 141 $ 272,012$ 337,086 $ (65,656) $ (972) $ 171 $ 125,760
==============================================================================================================================
1997
-------------------------------------------
Balance, December 31, 1996................$ 139 $ 258,904 $ 92,005 $ (622) $ (279) $ 924 $ -
Add/(Deduct) -
-Net income for fiscal year 1997..... - - 119,154 - - - 119,154
-Issuance of common stock:
Galaxie transaction.............. 1 2,787 - - - - -
SMIT transaction................. - 1,554 - - - - -
ERST/O'Brien's Inc. acquisition.. - 3,614 - - - - -
Exercise of stock options........ - 656 - - - - -
Issuance of restricted stock..... - 1,213 - - (1,146) - -
-Amortization of restricted stock.... - - - - 439 - -
-Net currency translation adjustments - - - - - (570) (570)
-Change in unrealized gains (losses)
on available-for-sale securities. - - - - - (16) (16)
-Purchase of treasury shares......... - - - (4,743) - - -
-------- ----------- ----------- --------- ----------- ------------- -------------
Balance, December 31, 1997................$ 140 $ 268,728 $ 211,159 $ (5,365) $ (986) $ 338 $ 118,568
==============================================================================================================================
1996
-------------------------------------------
Balance, December 31, 1995................$ 99 $ 127,317$ 57,852 $ (576) $ (159) $ (1,069)$ -
Add/(Deduct) -
-Net income for fiscal year 1996...... - - 34,153 - - - 34,153
-Issuance of common stock:
Public offering................... 9 37,670 - - - - -
2.5% note conversion.............. 2 3,939 - - - - -
6.0% note conversion.............. 21 53,764 - - - - -
SMIT transaction.................. 7 33,635 - - - - -
Exercise of stock options......... 1 2,452 - - - - -
Issuance of restricted stock...... - 575 - - (575) - -
-Cancellation of restricted stock..... - - - (46) 46 - -
-Amortization of restricted stock..... - - - - 409 - -
-Net currency translation adjustments. - - - - - 1,993 1,993
-Public offering costs................ - (448) - - - - -
======== =========== =========== ========= =========== ============= =============
Balance, December 31, 1996................$ 139 $ 258,904 $ 92,005 $ (622) $ (279) $ 924 $ 36,146
==============================================================================================================================
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
37
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
1998 1997 1996
------------- ------------- ------------
Cash Flows from Operating Activities:
Net Income....................................................................$ 125,927 $ 119,154 $ 34,153
Depreciation and amortization................................................. 36,449 36,538 24,967
Restricted stock amortization.............................................. 1,333 439 409
Debt discount amortization................................................. 1,275 7 137
Bad debt expense........................................................... 455 1,155 238
Deferred income taxes...................................................... 26,658 25,067 3,320
Equity in net earnings of 50% or less owned companies...................... (13,627) (5,575) (1,283)
Extraordinary (gain)/loss, extinguishment of debt.......................... (1,309) 439 807
Gain from sale of investment in 50% or less owned company.................. (1,197) - -
Gain on commodity swaps transactions, net.................................. (3,273) - -
Net gain from sale of available-for-sale securities........................ (1,827) - -
Gain from equipment sales or retirements, net.............................. (38,338) (61,928) (2,264)
Amortization of deferred gains on sale and leaseback transactions.......... (19,797) - -
Minority interest in income (loss) of subsidiaries......................... 1,612 301 (244)
Other, net................................................................. 2,770 1,451 279
Changes in operating assets and liabilities -
(Increase) decrease in receivables....................................... 231 (35,976) (14,819)
(Increase) decrease in inventories....................................... 590 (602) 69
(Increase) decrease in prepaid expenses and other assets................. (5,820) (998) 609
Increase in accounts payable, accrued and other liabilities.............. 10,029 26,076 12,359
------------- ------------- ------------
Net cash provided by operations........................................ 122,141 105,548 58,737
------------- ------------- ------------
Cash Flows from Investing Activities:
Purchases of property and equipment........................................... (226,779) (136,097) (50,794)
Proceeds from the sale of marine vessels and equipment........................ 143,965 139,828 3,441
Investments in and advances to 50% or less owned companies.................... (6,973) (7,075) (65)
Principal payments on notes due from 50% or less owned companies.............. 2,611 723 942
Proceeds from sale of investment in 50% or less owned company................. 2,310 - -
Net increase in restricted cash account....................................... (22,251) (46,983) -
Proceeds from sale of available-for-sale securities........................... 143,241 - -
Proceeds from maturity of held-to-maturity securities......................... 33,020 311 642
Purchase of available-for-sale securities..................................... (209,018) (127,454) -
Purchase of held-to-maturity securities....................................... - (33,032) (330)
Purchase of convertible preferred stock and loans to Globe Wireless, Inc...... (11,500) (3,000) -
Acquisition of vessels and joint venture interests from SMIT
Internationale N.V......................................................... - - (54,427)
Dividends received from 50% or less owned companies........................... 2,334 - -
Other, net.................................................................... (162) (2,308) 471
------------- ------------- ------------
Net cash (used in) investing activities................................... (149,202) (215,087) (100,120)
------------- ------------- ------------
Cash Flows from Financing Activities:
Payments of long-term debt and stockholder loans.............................. (14,741) (10,383) (52,743)
Proceeds from issuance of long-term debt ..................................... - 1,125 7,711
Net proceeds from sale of common stock........................................ - - 37,231
Payments on capital lease obligations......................................... (1,454) (1,844) (172)
Net proceeds from the sale of Chiles Offshore LLC 10.0% Senior Notes.......... 105,762 - -
Net proceeds from sale of 5 3/8% Convertible Subordinated Notes............... - - 168,189
Net proceeds from sale of 7.2% Subordinated Notes............................. - 148,049 -
Proceeds from sale of minority interest....................................... - 4,096 -
Distribution of membership interest to a minority shareholder................. (2,725) - -
Common stock acquired for treasury............................................ (60,291) (4,743) -
Other, net.................................................................... 757 (832) 1,266
------------- ------------- ------------
Net cash provided by financing activities................................. 27,308 135,468 161,482
------------- ------------- ------------
Effects of Exchange Rate Changes on Cash and Cash Equivalents.................... (361) 399 168
------------- ------------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents............................. (114) 26,328 120,267
Cash and Cash Equivalents, beginning of period................................... 175,381 149,053 28,786
============= ============= ============
Cash and Cash Equivalents, end of period......................................$ 175,267 $ 175,381 $ 149,053
============= ============= ============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
38
SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES:
NATURE OF OPERATIONS. SEACOR SMIT Inc. ("SEACOR") and its subsidiaries
(the "Company") furnish vessel support to the offshore oil and gas
exploration and production industry and provide contractual oil spill
response and related training and consulting services to companies who
store, transport, produce, or handle petroleum and certain non-petroleum
oils as required by the Oil Pollution Act of 1990 ("OPA 90"). The Company
operates principally in the United States, offshore West Africa, the
North Sea, the Far East, and Latin America. During 1997, the Company
acquired a 55.4% membership interest in Chiles Offshore LLC ("Chiles"), a
joint venture and strategic alliance created to construct, own, and
operate state-of-the-art premium jackup offshore drilling rigs. During
1997, Chiles commenced construction of two state-of-the-art premium
jackup offshore drilling rigs (the "Rigs") that are scheduled for
delivery in April and September 1999.
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of SEACOR and all majority owned subsidiaries. Intercompany
balances and transactions have been eliminated. The equity method of
accounting is used by the Company when it has a 20% to 50% ownership
interest in other entities and the ability to exercise significant
influence over their operating and financial policies.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS. Cash equivalents refer to securities with
original maturities of three months or less. At December 31, 1998, cash,
totaling $14,239,000, was restricted for payment of the Rigs construction
costs and interest on outstanding indebtedness of Chiles.
ACCOUNTS RECEIVABLE. Customers of offshore marine support services are
primarily major and large independent oil and gas exploration and
production companies; whereas, customers of oil spill and emergency
response services include tank vessel owner/operators, refiners,
terminals, exploration and production facilities and pipeline operators.
The Company's customers are granted credit on a short-term basis and
related credit risks are considered minimal.
INVENTORIES. Inventories consist of offshore marine vessel spare parts,
fuel, and supplies that are recorded at cost and charged to vessel
expenses as consumed.
PROPERTY AND EQUIPMENT. Property and equipment are recorded at historical
cost and depreciated over the estimated useful lives of the related
assets. Depreciation is computed on the straight-line method for
financial reporting purposes. Maintenance and repair costs, including
routine drydock inspections on vessels in accordance with maritime
regulations, are charged to operating expense as incurred. Expenditures
that extend the useful life or improve the marketing and commercial
characteristics of vessels and major renewals or improvements to other
properties are capitalized.
Vessels and related equipment are depreciated over 20-25 years; all other
property and equipment are depreciated and amortized over two to ten
years.
Interest cost incurred during the construction of offshore marine vessels
and Rigs is capitalized as part of the carrying value of the assets and
amortized to expense over their estimated useful lives. Interest
capitalized in 1998 and 1997 totaled $8,455,000 and $1,516,000,
respectively. No interest was capitalized in 1996.
OTHER ASSETS. Intangibles and other assets consist of the following, in
thousands:
1998 1997
----------- ----------
Goodwill......................................$ 17,682 $ 17,239
Convertible preferred stock of Globe
Wireless, Inc................................. 10,000 -
Deferred financing cost....................... 10,788 6,841
Net sale-type leases, see Note 10............. 3,454 2,543
Covenants-not-to-compete...................... 1,509 1,509
Notes Receivable due from Globe Wireless, Inc. 4,500 3,000
Other......................................... 764 886
---------- ---------
48,697 32,018
Less accumulated amortization................. (6,406) (3,983)
---------- ---------
Total other assets............................$ 42,291 $ 28,035
========== =========
39
Intangible assets are carried at cost less accumulated depreciation and
amortized to expense primarily on a straight-line basis over their
estimated period of benefit, ranging from three to twenty years. Other
assets also include the Company's equity investment in and loans to,
aggregating $14.5 million, Globe Wireless, Inc. ("Globe Wireless"), a
telecommunication service provider dedicated to the maritime industry.
The investment, carried at cost and totaling $10.0 million, was in the
form of Series C Convertible Preferred Stock, $.001 par value ("Series C
Preferred Stock"). Loans, totaling $4.5 million, bear interest at the
applicable LIBOR rate plus 2.0% payable quarterly, are repayable in 2003,
and are secured by substantially all of the tangible and intangible
assets of Globe Wireless. Subject to and upon the terms and conditions
contained in an Amended and Restated Loan Agreement dated as of April 15,
1998 between the Company and Globe Wireless, the Company has agreed to
loan to Globe Wireless up to an additional $5.5 million. Subject to
certain conditions, the Company may exercise certain warrants to purchase
up to an amount of the Series C Preferred Stock, equal to the principal
amount of the loans outstanding, as repayment of the loans. At December
31, 1998, the Company's investment in convertible preferred stock and
loans to Globe Wireless were convertible into an approximate 45% common
stock interest in Globe Wireless.
INCOME TAXES. Deferred income tax assets and liabilities have been
provided in recognition of the income tax effect attributable to the
difference between assets and liabilities reported in the tax return and
financial statements. Deferred tax assets or liabilities are provided
using the enacted tax rates expected to apply to taxable income in the
periods in which the deferred tax assets and liabilities are expected to
be settled or realized.
DEFERRED GAIN. The Company has entered into vessel sale and leaseback
transactions and other vessel sale transactions with joint venture
corporations in which the Company has a 50% or less ownership interest.
Certain gains realized from these transactions were not immediately
recognized as income but were deferred in the Consolidated Balance
Sheets. For the sale and leaseback transactions, gains were deferred to
the extent of the present value of minimum lease payments and are being
amortized to income as reductions in rental expense over the applicable
lease terms. For vessel sale transactions with joint venture
corporations, gains were deferred to the extent of the Company's
ownership interest and are being amortized to income over the applicable
vessels' depreciable lives.
FOREIGN CURRENCY TRANSLATION. The assets, liabilities, and results of
operations of certain SEACOR subsidiaries are measured using the currency
of the primary foreign economic environment within which they operate,
their functional currency. For purpose of consolidating these
subsidiaries with SEACOR, the assets and liabilities of these foreign
operations are translated to U.S. dollars at currency exchange rates as
of the balance sheet date and for revenue and expenses at the weighted
average currency exchange rates during the applicable reporting periods.
Translation adjustments resulting from the process of translating these
subsidiaries' financial statements are charged to Accumulated Other
Comprehensive Income in Stockholders' Equity.
Certain SEACOR subsidiaries also enter into transactions denominated in
currencies other than their functional currency. Changes in currency
exchange rates between the functional currency and the currency in which
a transaction is denominated is included in the determination of net
income in the period in which the currency exchange rates change. Foreign
currency exchange gains or losses included in determining net income have
not been material. Gains and losses on foreign currency transactions that
are designated as, and effective as, economic hedges of a net investment
in a foreign entity (such as debt denominated in a foreign currency or
forward exchange contracts) are charged to Accumulated Other
Comprehensive Income in Stockholders' Equity. Gains or losses on foreign
currency transactions that do not hedge an exposure are included in
determining net income in accordance with the requirements for other
foreign currency transactions as described above.
REVENUE RECOGNITION. The Company's offshore marine service business earns
revenue primarily from time or bareboat charter of vessels to customers
based upon daily rates of hire. Rates of hire earned under time and
bareboat charters vary substantially in direct proportion to the
operating expenses incurred in conjunction with each type of charter.
Typically, under time charter arrangements, the vessels' operating
expenses are the responsibility of the Company; whereas, under bareboat
charters, the vessels' operating expenses are the responsibility of the
charterer. Vessel charters may range from several days to several years.
Environmental customers are charged retainer fees for ensuring by
contract the availability (at predetermined rates) of the Company's
response services and equipment. 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
other emergency and spill response as contemplated by response plans
filed by the Company's customers. Certain vessel owners pay in advance a
minimum 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 other vessel owners pay a fixed fee for the
Company's retainer service and such fee is recognized ratably throughout
the year. Facility owners generally pay a quarterly fee based on a
formula that defines and measures petroleum products transported to or
40
processed at the facility. Some facility owners pay an annual fixed fee
and such fee is recognized ratably throughout the year. Retainer
agreements with vessel owners generally range from one to three years
while retainer arrangements with facility owners are as long as seven
years. Spill response revenue is dependent on the magnitude of any one
spill response and the number of spill responses within a given fiscal
year. Consequently, spill response revenue can vary greatly between
comparable periods. Consulting fees are also earned by the Company's
environmental service business from preparation of customized training
programs, planning of and participation in customer oil spill response
drill programs and response exercises, and other special projects.
EARNINGS PER SHARE. In the fourth quarter of 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per
Share," effective December 15, 1997, and all prior period earnings per
share data have been restated to conform with the provisions of that
Statement. Basic earnings per common share were computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the relevant periods. Diluted earnings per
common share further gives effect for all potentially dilutive common
shares that would have been outstanding in the relevant periods assuming
the removal of certain stock restrictions and the issuance of common
shares for stock options and convertible subordinated notes through the
application of the treasury stock and if-converted methods. Certain
options and share awards, 52,711 and 16,960 in 1998 and 1997,
respectively, were excluded from the computation of diluted earnings per
share as the effect would have been antidultive.
Per
Income Shares Share
---------------------------- -------
FOR THE YEAR ENDED 1998-
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item................ $ 124,618,000 13,135,111 $ 9.49
=======
EFFECT OF DILUTIVE SECURITIES:
Options and Restricted Stock.................... - 125,901
Convertible Securities.......................... 6,761,000 2,829,544
----------------------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions..................... $ 131,379,000 16,090,556 $ 8.17
============================ =======
FOR THE YEAR ENDED 1997-
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item................ $ 119,593,000 13,840,205 $ 8.64
=======
EFFECT OF DILUTIVE SECURITIES:
Options and Restricted Stock.................... - 163,930
Convertible Securities.......................... 6,787,000 2,840,866
----------------------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions...................... $ 126,380,000 16,845,001 $ 7.50
============================ =======
FOR THE YEAR ENDED 1996-
BASIC EARNINGS PER SHARE:
Income Before Extraordinary Item................ $ 34,960,000 11,480,929 $ 3.04
=======
EFFECT OF DILUTIVE SECURITIES:
Options and Restricted Stock.................... - 177,529
Convertible Securities.......................... 2,122,000 1,597,833
----------------------------
DILUTED EARNINGS PER SHARE:
Income Available to Common Stockholders
Plus Assumed Conversions...................... $ 37,082,000 13,256,291 $ 2.80
============================ =======
RELIANCE ON FOREIGN OPERATIONS. For the years ended December 31, 1998,
1997, and 1996, approximately 39%, 38%, and 27%, respectively, of the
Company's operating revenues were derived from its foreign operations
that increased significantly during 1997 due primarily to the SMIT
Transaction (see Note 4). The Company's foreign operations, primarily
contained in its offshore marine service business, 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, currency restrictions and exchange rate
fluctuations, import-export quotas and other forms of public and
governmental regulations, 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. Oil spill response and related training and
consulting service revenues derived from foreign markets have not been
material.
COMPREHENSIVE INCOME. During 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS 130"), "Reporting Comprehensive
Income," which establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as the total of net
income and all other changes in equity of an enterprise that result from
transactions and other economic events of a reporting period other than
41
transactions with owners. The Company has chosen to disclose
Comprehensive Income in the Consolidated Statements of Changes in Equity.
For purposes of SFAS 130, the Company's other comprehensive income or
loss was comprised of net currency translation adjustments and unrealized
holding gains on available for sale securities. Income taxes allocated to
each component of other comprehensive income during the years indicated
are as follows, in thousands of dollars:
Before-Tax Tax (Expense) Net-of-Tax
Amount Or Benefit Amount
--------------- --------------- ---------------
1998
Foreign currency translation adjustments.......................$ (186) $ 65 $ (121)
Unrealized gains on available-for-sale securities:
Unrealized holdings gains (losses) arising during period.... 1,757 (615) 1,142
Less - reclassification adjustment for gains included in
net income..................................................... (1,827) 639 (1,188)
=============== =============== ===============
Other comprehensive income.....................................$ (256) $ 89 $ (167)
=============== =============== ===============
1997
Foreign currency translation adjustments.......................$ (876) $ 306 $ (570)
Unrealized gains on available-for-sale securities:
Unrealized holdings gains (losses) arising during period.... (25) 9 (16)
Less - reclassification adjustment for gains included in
net income..................................................... - - -
=============== =============== ===============
Other comprehensive income.....................................$ (901) $ 315 $ (586)
=============== =============== ===============
1996
Foreign currency translation adjustments.......................$ 3,066 $ (1,073) $ 1,993
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period.............. - - -
Less - reclassification adjustment for gains included in
net income..................................................... - - -
=============== =============== ===============
Other comprehensive income.....................................$ 3,066 $ (1,073) $ 1,993
=============== =============== ===============
Accumulated other comprehensive income balances during the years
indicated are as follows, in thousands of dollars:
Foreign Unrealized Accumulated
Currency Gains (Losses) on Other Comprehensive
Items Securities Income
--------------------- --------------------- ---------------------
1998
Beginning balance...........$ 354 $ (16) $ 338
Current period change....... (121) (46) (167)
--------------------- --------------------- ---------------------
Ending Balance..............$ 233 $ (62) $ 171
===================== ===================== =====================
1997
Beginning balance...........$ 924 $ - $ 924
Current period change....... (570) (16) (586)
--------------------- --------------------- ---------------------
Ending Balance..............$ 354 $ (16) $ 338
===================== ===================== =====================
1996
Beginning balance...........$ (1,069) $ - $ (1,069)
Current period change....... 1,993 - 1,993
--------------------- --------------------- ---------------------
Ending Balance..............$ 924 $ - $ 924
===================== ===================== =====================
INVESTMENT IN CHILES. Due to Chiles' initial focus on the U.S. Gulf of
Mexico, its business and operations will be particularly dependent upon
the condition of the oil and gas industry in the U.S. Gulf of Mexico and
the exploration and production expenditures of oil and gas companies
there. The offshore drilling industry historically has been and is
expected to continue to be highly competitive and cyclical. During 1998,
the decline in product prices in the oil and gas industry, particularly
oil prices, resulted in reduced day rates and decreased utilization,
particularly in the U.S. Gulf of Mexico shallow water market, and excess
supply in the current jackup rig market. Sustained weak commodity prices,
economic problems in countries outside the United States, or a number of
other factors beyond Chiles' control could curtail spending by oil and
gas companies. Therefore, Chiles cannot predict whether, or to what
extent, market conditions will improve or deteriorate further. The
current trends in market conditions may have an adverse effect on the
Company's future results of operations, although the extent of such
effect cannot be accurately predicted.
The Company believes that Chiles has sufficient financing in place to
complete the construction and outfitting of the Rigs and fund the initial
cost of operations. Current day rate levels for jackup rigs are, however,
not sufficient for Chiles to operate the Rigs at cash flow levels
necessary to provide for adequate debt service coverage. Accordingly, if
jackup rig day rates remain depressed, it will be necessary for Chiles to
obtain additional financing in the form of subordinated debt or equity.
The Company believes that Chiles will be able to obtain such financing,
if required; however, there can be no assurance that it will be available
on acceptable terms.
RECENT ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No.
133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging
Activities." 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
42
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. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. A company may also implement SFAS 133 as
of the beginning of any fiscal quarter after issuance (that is, fiscal
quarters beginning June 16, 1998 and thereafter). SFAS 133 must be
applied to derivative instruments and certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or substantially
modified after December 31, 1997. The Company has not yet quantified the
impact of adopting SFAS 133 on its financial statements and has not
determined the timing or method of its adoption of SFAS 133.
During April 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position 98-5 ("SOP"), "Reporting on the Costs
of Start-Up Activities." The SOP requires costs of start-up activities
and organization costs to be expensed as incurred. The SOP is effective
for financial statements for fiscal years beginning after December 15,
1998. During 1998, the Company adopted the SOP, and the effect did not
have a material effect on the Company's statement of financial position
or results of operations.
RECLASSIFICATIONS. Certain reclassifications of prior year information
have been made to conform with the current year presentation.
2. FINANCIAL INSTRUMENTS:
The estimated fair value amounts of the Company's financial instruments
have been determined using available market information and appropriate
valuation methodologies. Considerable judgment was required in developing
the estimates of fair value, and accordingly, the estimates presented
herein, in thousands of dollars, are not necessarily indicative of the
amounts realizable in a current market exchange.
1998 1997
------------------------- ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------------ ------------ ----------- -----------
ASSETS:
Cash and temporary cash investments.....................$ 175,267 $ 175,267 $ 175,381 $ 175,381
Marketable securities................................... 194,748 194,703 160,465 158,921
Notes receivable........................................ 12,114 12,072 9,312 9,312
Restricted cash......................................... 69,234 69,234 46,983 46,983
Other assets, convertible preferred stock............... 10,000 10,000 - -
Natural gas commodity swaps............................. 3,708 3,708 - -
LIABILITIES:
Long-term debt, including current portion............... 474,921 461,040 360,639 388,157
Indebtedness to a minority shareholder of a subsidiary.. 607 570 1,175 1,169
Foreign currency forward contracts...................... 37 37 161 161
The carrying value of cash and temporary cash investments and restricted
cash approximated fair values due to the short-term maturities of these
instruments. The fair value of marketable securities was estimated using
quoted market prices. Notes receivable approximated fair value since they
bear interest at current market rates. Convertible preferred stock is
carried at cost, which is lower then net realizable value. The fair
market value of long-term debt, indebtedness to a minority stockholder,
forward contracts, and natural gas commodity swaps was determined based
upon quoted market prices or by discounting the future cash flows using
market information as to borrowing rates for debt of similar terms and
maturity.
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. The financial statements of the Company's United Kingdom
operations are measured using the pound sterling and changes in the
strength of that currency relative to the U.S. dollar and the
corresponding adjustment to the net assets of those operations caused by
exchange rate fluctuations result in the recognition of currency
translation adjustments that are reported in Accumulated Other
Comprehensive Income in Stockholders' Equity. 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 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. At December 31, 1998, the total notional value of
those forward exchange contracts was $3,448,000, all of which expire at
various dates through January 2000. The rates that the Company is able to
charge customers for its fleet of offshore marine vessels and those that
it expects to charge for the Rigs under construction and, consequently,
the earnings and cash flows from such operations are in large part
43
dependent upon natural gas prices. In an effort to achieve greater
predictability with respect to such cash flows and earnings and to
mitigate the effects that the volatility of the price of natural gas will
have on its operations, the Company has in the past and may in the future
hedge against the risks associated with movements in natural gas prices
through the use of commodity futures, options, swap agreements, and other
hedge devices. The use of these hedging arrangements is intended to limit
the downside risk of a decline in rates for offshore vessels and the
Rigs, which typically follow a decline in natural gas prices. These
arrangements, however, may also mitigate the favorable effect on earnings
and cash flows of increased rates, which typically follow an increase in
natural gas prices.
Beginning in 1998, the Company entered into commodity price swap
agreements pursuant to which, on each applicable settlement date, the
Company receives the amount, if any, by which the contract price for the
notional quantity of natural gas under contract exceeds the settlement
price quoted on the New York Mercantile Exchange ("NYMEX") or pays the
amount, if any, by which the settlement price quoted on the NYMEX exceeds
the contract price. As of December 31, 1998, the Company had entered into
various commodity swap agreements based on 12,660 million British thermal
units ("MMbtu") of natural gas per day at an average price of $2.22 per
MMbtu under commodity swap transactions that expire at various dates
through December 2000. For accounting purposes, the change in the market
value of the Company's natural gas commodity price swap agreements is
recognized as a gain or loss in the period of change. For the fiscal year
1998, the Company has recognized net gains, totaling $3,273,000, from
natural gas commodity swap transactions that were reported as Other
Income in the Consolidated Statements of Income. During 1998, cash
settlements from natural gas commodity swap transactions were not
material.
3. MARKETABLE SECURITIES:
The Company's marketable securities are categorized as held-to-maturity
or available-for-sale, as defined by the Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." Held-to-maturity securities are measured at
amortized cost, and available-for-sale securities are measured at fair
values with unrealized holding gains and losses charged to Accumulated
Other Comprehensive Income in Stockholders' Equity.
The amortized cost and fair value of marketable securities at December
31, 1998 and 1997 were as follows, in thousands of dollars:
Gross Unrealized Holding
------------------------
Type of Securities Amortized Gains Losses Fair Value
Cost
- - -------------------------------------- -------------- ---------- ----------- ---------------
1998
AVAILABLE-FOR-SALE:
U.S. Government and Agencies.... $ 184,649 $ 1,502 $ (1,212) $ 184,939
Corporate Debt Securities....... 5,143 - (337) 4,806
U.K. Government Securities...... 4,529 49 - 4,578
Equity Securities............... 427 - (47) 380
-------------- ---------- ----------- ---------------
$ 194,748 $ 1,551 $ (1,596) $ 194,703
============== ========== =========== ===============
1997
HELD-TO-MATURITY:
Corporate Debt Securities....... $ 33,020 $ - $ (1,519) $ 31,501
AVAILABLE-FOR-SALE:
U.S. Government and Agencies ... 122,444 48 (72) 122,420
Corporate Debt Securities....... 5,001 - (1) 5,000
-------------- ---------- ----------- ---------------
$ 160,465 $ 48 $ (1,592) $ 158,921
============== ========== =========== ===============
The contractual maturities of marketable securities at December 31, 1998
were as follows, in thousands of dollars:
Amortized Fair
Type and Maturity Cost Value
- - ---------------------------------------------------- ----------- ------------
AVAILABLE-FOR-SALE:
Mature in One Year or Less.......................$ 40,050 $ 40,325
Mature After One Year Through Five Years.......... 93,929 94,896
Mature After Five Years Through Ten Years......... 5,357 5,464
Mature After Ten Years............................ 55,412 54,018
----------- ------------
$ 194,748 $ 194,703
=========== ============
During 1998, the gross realized gains and gross realized losses from the
sale of available-for-sale securities were $2,084,000 and $257,000,
respectively. The specific identification method was used to determine
the cost of available-for-sale securities in computing realized gains and
losses. There were no available-for-sale securities sold during 1997. The
Company did not have investments in available-for-sale securities during
1996.
44
4. VESSEL ACQUISITIONS AND DISPOSITIONS:
MCCALL ACQUISITION. During May 1996, the Company acquired McCall
Enterprises, Inc. ("McCall") and affiliated companies (collectively, the
"McCall Companies") which operated 36 crew boats and 5 utility boats
dedicated to serving the oil and gas industry primarily in the U.S. Gulf
of Mexico. In consideration for such acquisition (the "McCall
Acquisition"), which was accomplished pursuant to a series of merger and
share exchange agreements involving the Company, certain subsidiaries of
the Company, the McCall Companies, and the former stockholders of the
McCall Companies, the former stockholders of the McCall Companies
received an aggregate of 1,306,550 shares of SEACOR's common stock. The
McCall Acquisition was accounted for as a pooling of interests, and all
costs related to effecting this business combination were expensed.
1996 CNN TRANSACTION. Pursuant to an agreement entered into by the
Company and CNN in June 1996 (the "1996 CNN Agreement"), the Company
consummated a transaction providing for the acquisition from CNN of six
vessels for $22,650,000 in cash (the "1996 CNN Transaction"). At closing,
the Company prepaid $9,600,000 aggregate principal amount of the
indebtedness outstanding under promissory notes previously issued to CNN
by the Company. In addition, CNN converted $4,750,000 principal amount of
the Company's 2.5% Notes into 156,650 shares of SEACOR's common stock (in
accordance with the terms of the 2.5% Notes), and subsequently sold all
616,598 shares of SEACOR's common stock then owned by it (including the
shares of SEACOR's common stock received by CNN upon such conversion) in
the Company's July 3, 1996 underwritten public offering.
SEACOR's common stock issued in July 1996 upon conversion of the 2.5%
Notes was recorded at $3,941,000, the net carrying value of the 2.5%
Notes that includes $4,750,000 of the then outstanding principal amount
and $809,000 of related debt discount. The difference between the
$9,600,000 paid to extinguish certain promissory notes due CNN and their
$8,358,000 net carrying value was recorded as an $807,000 extraordinary
loss (net of income taxes).
SMIT TRANSACTION. On December 19, 1996, the Company acquired
substantially all of the offshore vessel assets, vessel spare parts, and
certain related joint venture interests owned by SMIT Internationale N.V.
("SMIT") and its subsidiaries (the "SMIT Transaction"). The aggregate
consideration, including amounts payable under certain lease purchase
agreements for two vessels, consisted of: (i) approximately $71,449,000
in cash (including approximately $357,000 for certain vessel spare
parts), (ii) 712,000 shares of SEACOR's common stock of which 31,517
shares were issued subsequent to December 31, 1996, and (iii) up to
$22,000,000 principal amount of the Company's Series A 5 3/8% Convertible
Subordinated Notes Due November 15, 2006 (the "SMIT Convertible Notes")
of which $15,250,000 principal amount were issued at close. In addition,
the definitive agreements for the SMIT Transaction provide for the
payment by the Company, in combination of cash and non-convertible notes,
of up to $47,200,000 of additional consideration based upon the earnings
performance during 1997 and 1998 by certain of the assets acquired from
SMIT. The acquired assets included a 100% interest in 24 vessels, a 50%
interest in nine vessels sold by SMIT directly, and SMIT's interest in
joint ventures that own and operate 12 vessels.
Pursuant to a letter of intent dated December 19, 1996, between the
Company and SMIT that provided for the Company to acquire an additional
four vessels (the "Malaysian Purchase") that were owned by a Malaysian
joint venture in which SMIT had an interest, the Company completed the
Malaysian Purchase for aggregate consideration of $12,909,000 in 1997.
On March 3, 1998, the Company satisfied its obligation to pay SMIT
additional consideration as discussed in the preceding paragraph through
the payment of $20,880,000 in cash and, through the issuance in January
1999, of $23,200,000 principal amount of five-year unsecured promissory
notes that will bear interest at 90 basis points above the comparable
rate for five year U.S. Treasury Notes (5.467%). As part of this
transaction, the Company and SMIT also have agreed to extend the three
year term of the salvage and maritime contracting and non-compete
agreements first established in December 1996 through December 2001.
GALAXIE TRANSACTION. On January 3, 1997, the Company acquired
substantially all of the offshore marine assets, including vessels, owned
by Galaxie Marine Service, Inc., Moonmaid Marine, Inc., Waveland Marine
Service, Inc. and Triangle Marine, Inc. (collectively, "Galaxie"), for
aggregate consideration of $23,354,000, consisting of $20,567,000 in cash
and 50,000 shares of SEACOR's common stock. The primary assets acquired
were 24 vessels. At the date of acquisition, the Galaxie vessels were
dedicated to serving the oil and gas industry in the U.S. Gulf of Mexico.
VESSEL CONSTRUCTION. During 1997 and 1998, the Company completed the
construction of seven crew, four anchor handling towing supply and four
supply vessels for aggregate cost of $144,296,000.
45
VESSEL DISPOSITIONS. The table below sets forth, during the periods
indicated, the number of offshore marine vessels sold by type of service.
During the Twelve Months Ended
December 31,
---------------------------------------
Type of Vessel 1998 (1) 1997(1) 1996
------------------------------------ ------------ ----------- ------------
Utility............................. 7 7 16
Supply.............................. 6 15 -
Anchor Handling Towing Supply....... 8 5 -
Crew................................ 5 2 -
Towing Supply....................... 8 6 -
Freight............................. - 1 -
Seismic............................. - 1 -
------------ ----------- ------------
34 37 16
============ =========== ============
(1) Of the vessels sold during 1998, five supply,
three towing supply, and three anchor handling towing
supply vessels were bareboat chartered-in by the
Company. Of the vessels sold during 1997, seven
supply and one anchor handling towing supply vessel
were bareboat chartered-in by the Company.
5. INVESTMENTS IN AND RECEIVABLES FROM 50% OR LESS OWNED COMPANIES:
Investments, carried at equity, and advances to 50% or less owned
companies at December 31, 1998 and 1997 were as follows, in thousands of
dollars:
Ownership
50% or Less Owned Companies Percentage 1998 1997
------------------------------------ ------------- ------------ -----------
SEACOR-Smit (Aquitaine) Ltd......... 50.0% $ 14,529 $ 10,385
SEAMEX International, Ltd........... 40.0% 14,195 9,499
Ocean Marine Services (Egypt) Ltd... 33.3% 6,897 6,197
Maritima Mexicana, S.A.............. 40.0% 4,506 1,739
Patagonia Offshore Services S.A..... 50.0% 4,228 4,874
Ultragas Smit Lloyd Ltda............ 49.0% 2,638 2,014
Other............................... 25.7%-50.0% 8,485 2,443
------------ -----------
$ 55,478 $ 38,370
============ ===========
Pursuant to the SMIT Transaction, the Company structured a joint venture,
SEACOR-Smit (Aquitaine) Ltd., a Bahamian corporation ("Aquitaine"), and
acquired the joint venture interests of SMIT in Smit Swire Shilbaya Egypt
Ltd., an Egyptian corporation ("SSS"), and Ultragas Smit Lloyd Ltda., a
Chilean corporation ("Ultragas-Smit"). During 1998, the assets of SSS
were transferred to Ocean Marine Services (Egypt) Ltd. ("OMS"), also an
Egyptian corporation of which the Company owns 33.3%. At December 31,
1998, OMS owned six vessels that were operating offshore Egypt,
Ultragas-Smit owned three vessels that were operating offshore Chile, and
Aquitaine owned six vessels that were operating in the Far East and Latin
America.
During 1997, the Company and a subsidiary of Sociedad Naviera Ultragas
Ltda., the Company's joint venture partner in Ultragas-Smit, formed
Patagonia Offshore Services S.A., a Panamanian corporation ("Patagonia"),
to operate vessels in support of the Argentine and adjacent offshore
markets. Patagonia owns one vessel that was acquired from the Company in
1997. The Company realized a gain from the vessel sale that has been
deferred to the extent of its ownership interest in Patagonia and is
being amortized to income over the vessel's depreciable life. At December
31, 1998, the Company's advances to Patagonia totaled $2,773,000.
During 1994, the Company and Transportacion Maritima Mexicana S.A. de
C.V., a Mexican corporation ("TMM"), structured a joint venture to serve
the Mexican offshore market (the "TMM Joint Venture") that is comprised
of two corporations, Maritima Mexicana, S.A. and SEAMEX International,
Ltd., a Liberian corporation ("SEAMEX"). Since 1994, the Company has sold
six vessels to the TMM Joint Venture. The Company realized gains from the
vessel sales that have been deferred to the extent of the Company's
ownership interest in the TMM Joint Venture and are being amortized to
income over the vessels' depreciable lives. At December 31, 1998, the TMM
Joint Venture owed the Company $3,968,000 related primarily to advances
for the purchase of vessels.
The amount of consolidated retained earnings that represents
undistributed earnings of 50% or less owned companies accounted for by
the equity method was $21,479,000 at December 31, 1998 of which
$15,156,000 represented earnings for which deferred taxes have not been
provided.
6. RESTRICTED CASH:
At December 31, 1998, restricted cash totaled $83,473,000, and of such
balance, $21,259,000 and $62,214,000 are intended for use in defraying
the costs of constructing offshore marine vessels for the Company and the
Rigs and other related matters for Chiles, respectively. At December 31,
1998, the Company has funded approximately $8,806,000 in offshore marine
vessel construction costs from unrestricted cash balances, and subject to
the Maritime Administration's approval, the Company expects such amounts
to be reimbursed from construction reserve fund restricted cash accounts,
as discussed below.
46
Proceeds from the sale of certain offshore marine vessels in 1997 and
1998 have been deposited into escrow and construction reserve fund bank
accounts 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 the vessels. Escrow accounts were established
pursuant to certain exchange and escrow agreements and restrict the use
of funds deposited therein for a period of six months. Should replacement
offshore marine vessels not be delivered prior to expiration of the
applicable six-month escrow period, funds then remaining in the escrow
accounts will be released to the Company for general use. In 1998, the
Company also established, pursuant to Section 511 of the Merchant Marine
Act, 1936, as amended, joint depository construction reserve fund
accounts with the Maritime Administration. From date of deposit,
withdrawals from these accounts are subject to prior written approval of
the Maritime Administration, and funds must be committed for expenditure
within three years or they will be released for the Company's general
use.
Net proceeds from the sale by Chiles in April 1998 of $110,000,000
aggregate principal amount of its 10.0% Senior Notes Due 2008 (the
"Chiles 10.0% Notes") were deposited into escrow accounts in accordance
with certain escrow agreements between Chiles and U.S. Bank Trust
National Association, as Escrow Agent. These funds may be used to (i)
partially fund the construction of the Rigs, (ii) pay interest on the
Chiles 10.0% Notes through the first two semi-annual interest payment
dates, and (iii) provide working capital. Upon receipt by the Escrow
Agent of an Officer's Certificate of Chiles that Chiles has made the
final installment of the Rigs' purchase price in accordance with the
related construction contracts, any funds remaining in escrow will be
released by the Escrow Agent to Chiles.
7. INCOME TAXES:
Income (loss) before income taxes, minority interest, equity in net
earnings of 50% or less owned companies, and extraordinary item derived
from the United States and foreign operations for the years ended
December 31, are as follows, in thousands of dollars:
1998 1997 1996
------------- ------------- -------------
United States.................................$ 118,721 $ 141,979 $ 53,952
Foreign........................................ 54,175 33,724 (1,984)
------------- ------------- -------------
$ 172,896 $ 175,703 $ 51,968
============= ============= =============
The Company files a consolidated U.S. federal tax return. Income tax
expense (benefit) consisted of the following components for the years
ended December 31, in thousands of dollars:
1998 1997 1996
------------- ------------- -------------
Current:
State........................................ $ 1,367 $ 295 $ 316
Federal................................... 26,607 33,303 12,648
Foreign...................................... 5,661 2,719 2,251
Deferred:
Federal...................................... 26,658 25,067 3,574
Foreign................................... - - (254)
------------- ------------- -------------
$ 60,293 $ 61,384 $ 18,535
============= ============= =============
The following table reconciles the difference between the statutory
federal income tax rate for the Company to the effective income tax rate:
1998 1997 1996
------------- ------------- -------------
Statutory Rate............................... 35.0 % 35.0 % 35.0%
Foreign and State Taxes...................... 1.3 % 0.2 % 0.7%
Other........................................ (1.4)% (0.3)% -
------------- ------------- -------------
34.9 % 34.9 % 35.7%
============= ============= =============
The components of the net deferred income tax liability were as follows,
for the years ended December 31, in thousands of dollars:
1998 1997
------------ -------------
Deferred tax assets:
Alternative Minimum Tax Credit $ - $ 71
Carryforwards................................
Foreign Tax Credit Carryforwards....... 881 -
Subpart F Loss......................... 2,462 2,064
Nondeductible Accruals................. 1,030 614
Other.................................. 128 94
------------ -------------
Total deferred tax assets......... 4,501 2,843
------------ -------------
Deferred tax liabilities:
Property and equipment................. 88,184 60,214
Investment in Subsidiaries............. 2,192 1,787
Other.................................. 93 278
------------ -------------
Total deferred tax liabilities.... 90,469 62,279
------------ -------------
Net deferred tax liabilities. $ 85,968 $ 59,436
============ =============
47
The Company has not recognized a deferred tax liability of $8,216,000 for
undistributed earnings of certain non-U.S. subsidiaries and joint venture
corporations because it considers those earnings to be indefinitely
reinvested abroad. As of December 31, 1998, the undistributed earnings of
these subsidiaries and joint venture corporations were $23,474,000.
8. MINORITY INTEREST:
In December 1991, the managing agent of the Company's vessels operating
in the North Sea invested approximately $1,278,000 of cash in VEESEA
Holdings, Inc. and its subsidiaries (collectively "VEESEA"). In return
for this investment and for services rendered to VEESEA, the agent
received 9% of the equity of VEESEA, and SEACOR, through another
subsidiary, assigned to the agent a $679,000 participation in debt due to
the SEACOR subsidiary from VEESEA. During 1998, $72,000 of the
indebtedness due the minority stockholder was repaid. A fee is paid the
minority stockholder for managing the Company's vessels in the North Sea.
The U.S. dollar equivalent of fees paid in pounds sterling under this
arrangement approximated $1,087,000, $1,015,000, and $960,000 in the
years ended December 31, 1998, 1997, and 1996, respectively.
In August 1997, SEACOR Offshore Rigs Inc. ("SEACOR Rigs"), a wholly owned
subsidiary of SEACOR, invested $8,850,000 in exchange for a 50%
membership interest in Chiles. SEACOR Rigs subsequently made several
interest bearing (at 10% per annum) bridge loans to Chiles and, on
December 16, 1997, in connection with the sale by Chiles of $20,000,000
of membership interests to third parties, contributed the aggregate
amount outstanding under such bridge loans of $13,990,000 and $12,160,000
in cash to Chiles as capital. Through the foregoing transactions, SEACOR
Rigs invested an aggregate of $35,000,000 in Chiles and, as a result,
owns an approximate 55.4% membership interest in Chiles. Prior to
December 16, 1997, the Company did not own a controlling interest in
Chiles and, therefore, accounted for the investment under the equity
method. Beginning December 16, 1997, the financial position and results
of operations of Chiles are included in the consolidated financial
statements of the Company. The equity raised by Chiles will fund a
portion of two Rigs' construction costs and serve as working capital.
Also during 1997, the Company completed the structuring of a limited
liability company (the "LLC"), pursuant to a Memorandum of Agreement
dated September 25, 1996, with a wholly owned subsidiary of TMM. The TMM
subsidiary contributed approximately $4,000,000 to the LLC which owns and
operates a recently constructed anchor handling towing supply vessel for
a 25% membership interest, and Vision Offshore Inc., a wholly owned
subsidiary of SEACOR, owns all of the remaining membership interest in
the LLC. On December 31, 1998, a SEACOR subsidiary loaned the LLC
$11,270,000 that was distributed to the members based upon their
respective ownership interest.
9. LONG-TERM DEBT:
Long-term debt balances, maturities, and interest rates are as follows
for the years ended December 31, in thousands of dollars:
1998 1997
-------------- --------------
5 3/8% Convertible Subordinated Notes due 2006, interest payable
semi-annually commencing 1997.........................................$ 186,750 $ 186,750
7.2% Senior Notes Due 2009, interest payable semi-annually............... 150,000 150,000
Capital Lease Obligations................................................ 20,842 22,296
10.0% Senior Notes of Chiles due 2008, interest payable semi-annually
commencing 1998....................................................... 92,870 -
Promissory Note due a vessel charterer, payable in equal monthly
installments from from February 1998 through June 2002, bearing
interest at 10.0%, secured by mortgage on a vessel with book value
of $1,674,000 at December 31, 1998.................................... 985 1,125
5.467% Subordinated Promissory Notes due SMIT in 2004 , interest payable
quarterly commencing March 1999....................................... 23,200 -
Promissory Note due a stockholder, payable in equal annual installments
from January 1998 through January 2001, bearing interest at 7.5%...... 776 1,000
------------- -------------
475,423 361,171
============= =============
Less - Portion due within one year...................................... (2,122) (1,925)
- Debt discount, 7.2% Senior Notes Due 2009........................ (502) (532)
------------- -------------
$ 472,799 $ 358,714
============= =============
Annual maturities of long-term debt for the five years following December
31, 1998 are as follows, in thousands of dollars.
Year 1999 2000 2001 2002 2003
- - ------------------------------------- ----------- ---------- ----------- ----------- -----------
Amount............................... $ 2,122 $ 2,191 $ 18,137 (1) $ 154 $ -
=========== ========== =========== =========== ===========
(1) Six million seven hundred and fifty thousand dollars of the debt
maturing in 2001 is payable in convertible subordinated notes in
accordance with the terms of a lease between the Company and
SMIT.
48
On November 5, 1996, the Company completed the private placement of
$172,500,000 aggregate principal amount of its 5 3/8% Convertible
Subordinated Notes due November 15, 2006 (the "Convertible Notes"). The
Convertible Notes and the SMIT Convertible Notes (collectively the "5
3/8% Notes") were issued under an Indenture dated as of November 1, 1996,
(the "1996 Indenture"), between the Company and First Trust National
Association, as trustee. 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 redeemed into shares of SEACOR's common stock at a conversion
price of $66.00 per share (equivalent to a conversion rate of 15.1515
shares of SEACOR's 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 date of repurchase. The Company
incurred $4,311,000 in costs associated with the sale of the Convertible
Notes including $3,881,000 of underwriter's discount. The debt issue
costs are reported in other assets and are being amortized to expense
over ten years. The 5 3/8% Notes are general unsecured obligations of the
Company, subordinated in right of payment to all "Senior Indebtedness"
(as defined in the 1996 Indenture) 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. The 5 3/8% Notes will mature on November 15, 2006 and bear
interest at a rate of 5 3/8% per annum from November 5, 1996, in the case
of the Convertible Notes, and December 19, 1996, in the case of the SMIT
Convertible Notes, or in each case, from the most recent interest payment
date on which interest has been paid or provided for, payable on May 15
and November 15 of each year, commencing on May 15, 1997 to the holders
thereof on May 1 and November 1, respectively, preceding such interest
payment date.
On December 19, 1996, pursuant to the SMIT Transaction, the Company
issued $15,250,000 principal amount of its SMIT Convertible Notes. The
SMIT Convertible Notes were issued under the 1996 Indenture discussed
above. Also, pursuant to the SMIT Transaction, the Company entered into
lease purchase agreements for two vessels.
During October 1997, the Company purchased $1,000,000 of the then
outstanding $187,500,000 principal amount of its Convertible Notes in the
open market. The write-off of certain deferred financing costs associated
with the Convertible Notes acquired and the difference between the amount
paid to acquire the Convertible Notes and their carrying value resulted
in the Company recognizing an extraordinary loss of $114,000 or $.01 per
share.
On November 17, 1998 the Company entered into an agreement for a
$100,000,000 unsecured reducing revolving credit facility (the "Credit
Facility") with Den norske Bank ASA ("DnB"), as agent for itself and
other lenders named therein that replaced the prior revolving credit
facility with DnB. Until termination of the Credit Facility, a commitment
fee is payable on a quarterly basis, at rates ranging from 17.5 to 40
basis points per annum on the average unfunded portion of the Credit
Facility. The commitment fee rate 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.
Under the terms of the Credit Facility, the Company may borrow up to
$100,000,000 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 EBITDA, as defined, and/or the credit
rating maintained by Moody's and Standard & Poor's, if any.
The Credit Facility requires the Company, on a consolidated basis, to
maintain a minimum ratio of indebtedness to vessel value, 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 Credit Facility limits the amount of secured indebtedness which 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.
An extraordinary loss of $325,000 or $0.02 per share was recognized in
1997 in connection with the termination of a prior revolving credit
facility with DnB that resulted from the write-off of unamortized debt
issue costs.
On September 15, 1997, the Company completed the sale of $150,000,000
aggregate principal amount of its 7.2% Senior Notes Due 2009 (the "7.2%
Notes") which will mature on September 15, 2009. The offering was made to
qualified institutional buyers and a limited number of institutional
accredited investors and in offshore transactions exempt from
registration under U.S. federal securities laws. 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
49
Premium, if any, relating to the then prevailing Treasury Yield and the
remaining life of the 7.2% Notes. On December 8, 1997, the Company
completed an exchange offer through which it exchanged all of the 7.2%
Notes for a series of 7.2% Senior Notes (the "7.2% Exchange Notes") which
are identical in all material respects to the 7.2% Notes, except that the
7.2% Exchange Notes are registered under the Securities Act of 1933, as
amended. The 7.2% Notes and the 7.2% Exchange Notes were issued under an
indenture (the "1997 Indenture") between the Company and First Trust
National Association, as trustee. The 1997 Indenture contains covenants
including, among others, limitations on liens and sale and leasebacks of
certain Principal Properties, as defined in the 1997 Indenture, and
certain restrictions on the Company consolidating with or merging into
any other Person, as defined in the 1997 Indenture. The Company incurred
$1,412,500 in costs associated with the sale of the 7.2% Notes including
$1,012,500 of underwriters discount. Debt issue costs are reported in
Other Assets of the Consolidated Balance Sheet and are being amortized to
expense over the life of the related indebtedness.
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 prepayment
included cash of $20,880,000 and the issuance, effective January 1, 1999,
of five-year subordinated promissory notes in the aggregate principal
amount of $23,200,000, which notes will bear interest at 5.467% per annum
payable quarterly in arrears. The amounts prepaid to SMIT have increased
the carrying values of vessels and certain joint venture interests that
were acquired in the SMIT Transaction.
On April 29, 1998, the Company's majority owned subsidiary, Chiles,
completed the sale of the Chiles 10.0% Notes. The offering was made to
qualified institutional buyers and to certain persons in offshore
transactions exempt from registration under U.S. federal securities laws.
Pursuant to an exchange offer that was consummated on September 28, 1998,
all holders of the Chiles 10% Notes exchanged such notes for new notes
identical in form and terms, that were registered under the Securities
Act of 1933, as amended. Interest on the Chiles 10.0% Notes is payable
semi-annually on May 1 and November 1 of each year commencing November 1,
1998. The Chiles 10.0% Notes are not redeemable at the option of Chiles
prior to May 1, 2003, except that until May 1, 2001, Chiles may redeem,
at its option, in the aggregate up to 35% of the original principal
amount of the Chiles 10.0% Notes, on a pro-rata basis, with the net
proceeds of one or more Public Equity Offerings (as defined), at a
redemption price of 110% plus accrued interest to the redemption date;
provided, however, that at least $71,500,000 aggregate principal amount
of the Chiles 10.0% Notes remains outstanding after each such redemption.
On and after May 1, 2003, the Chiles 10.0% Notes may be redeemed at the
option of Chiles, in whole or in part, initially at 105.0% of the
principal amount thereof and declining by 1.67% each year thereafter to
100.0% of the principal amount on and after May 1, 2006, plus accrued
interest to the date of redemption. The proceeds from the issuance of the
Chiles 10.0% Notes were placed in escrow to be used to (a) partially fund
the construction of Rigs, (b) pay interest on the Chiles 10.0% Notes
through the first two semi-annual interest payment dates, and (c) provide
working capital. All obligations with respect to the Chiles 10.0% Notes
are limited exclusively to Chiles and are nonrecourse to SEACOR. Chiles
incurred $4,238,000 in costs associated with the sale of the Chiles 10.0%
Notes that have been reported as Other Assets in the Condensed Balance
Sheets and are being amortized to expense over the life of the related
indebtedness.
During 1998, SEACOR and a wholly owned subsidiary of SEACOR purchased
$17,130,000 principal amount of the Chiles 10.0% Notes in the open
market. The write-off of certain deferred financing costs associated with
the Chiles 10.0% Notes acquired and the difference between the amount
paid to acquire the Chiles 10.0% Notes and their carrying value resulted
in the Company recognizing an extraordinary gain of $1,309,000 or $0.10
per share.
Also on April 29, 1998, Chiles entered into a bank credit agreement that
provides for a $25,000,000 revolving credit facility (the "Chiles Bank
Facility") maturing December 31, 2004. Borrowings under the Chiles Bank
Facility may be repaid and reborrowed during the term thereof and bear
interest at a per annum rate equal to LIBOR plus a margin of 1.25%.
Subject to satisfaction of customary conditions precedent, including that
there shall have occurred no material adverse change with respect to
Chiles or its business, assets, properties, conditions (financial or
otherwise), or prospects since the date of execution of the Chiles Bank
Facility, availability under the Chiles Bank Facility will commence upon
delivery of a rig being constructed under contract with Chiles.
Presently, management has no reason to believe that credit under the
facility would not be available. Until the commencement of availability,
Chiles will be required to pay quarterly in arrears a commitment fee
equal to 0.25% per annum on the undrawn amount of the Chiles Bank
Facility, thereafter increased to 0.50% per annum.
The Chiles Bank Facility is guaranteed by wholly owned subsidiaries of
Chiles that own the Rigs (the "Rig Owners") and such guarantees will be
secured by first priority mortgages on the Rigs, assignment of earnings
of the Rigs (which may continue to be collected by Chiles unless there
occurs an event of default) and assignments of insurance proceeds. All
obligations with respect to the Chiles Bank Facility are limited
exclusively to Chiles and are nonrecourse to SEACOR.
50
The Chiles Bank Facility contains customary affirmative covenants,
representations, and warranties and is cross-defaulted to the related
promissory notes; provided, however, should there occur an event of
default under the Chiles Bank Facility (other than arising from
enforcement actions undertaken by a holder of other indebtedness of
Chiles, enforcement actions arising from in rem claims against either of
the Rigs or bankruptcy events with respect to Chiles or a Rig Owner), the
lenders under the Chiles Bank Facility have agreed on a one-time basis
not to enforce remedies for a period of 60 days during which the
Noteholders or the Company may cure such event of default or prepay all
of the indebtedness outstanding under the Chiles Bank Facility. In
addition, the Chiles Bank Facility requires that the fair market value of
the Rigs, as determined by appraisers appointed by the lenders
thereunder, at all times equals or exceeds an amount equal to 130% of
outstanding indebtedness under the Chiles Bank Facility.
10. LEASES:
During 1998 and 1995, the Company entered into sale-type leases for two
crew and one anchor handling towing supply vessels, respectively. The
anchor handling towing supply vessel was sold in 1998 to a third party
and bareboat chartered to SEAMEX. The remaining leases expire in 2001 and
contain options that permit the lessee to purchase the vessels at various
dates during the term of the leases. The amortization of unearned income
in the years ended December 31, 1998, 1997, and 1996, totaled $403,000,
$448,000, and $485,000, respectively. The net investment in sale-type
leases at December 31, 1998 was comprised of minimum lease payment
receivables, totaling $2,415,000, estimated residual values of
$1,933,000, and unearned income of $1,454,000. As of December 31, 1998,
$262,000 and $2,632,000 of the net investment in the sale-type leases
were reported in the Consolidated Balance Sheets as current and
noncurrent Other Assets, respectively.
In December 1996, pursuant to the SMIT Transaction, the Company leased
two vessels under capital leases with gross costs of $21,239,000 that are
being depreciated over an estimated useful life of 23 years. At December
31, 1998 and 1997, accumulated depreciation totaled $1,781,000 and
$867,000, respectively. At December 31, 1998, $1,587,000 and $19,255,000
in obligations under these capital leases are reported as current and
long-term debt, respectively. Minimum lease payments of $2,669,000 are
due in 1999 and 2000, and $18,482,000 in 2001. The amount to be paid in
2001 will include cash and the issuance of $6,750,000 in SMIT Convertible
Notes. Future minimum lease payments include interest of $2,977,000.
During 1998 and 1997, the Company completed transactions for the sale and
leaseback of 11 and 8 vessels, respectively, and the leases have been
classified as operating leases in accordance with SFAS No. 13 "Accounting
for Leases." The leases contain purchase and lease renewal options at
fair market value or rights of first refusal with respect to the sale or
lease of the vessels and range in duration from two to four years. Net
book value of the sold vessels totaled $28,538,000 and $15,261,000 in
1998 and 1997, respectively. Gains realized from those sales, totaling
$38,442,000 and $26,986,000 in 1998 and 1997, respectively, have been
deferred and are being credited to income as reductions in rental expense
over the lease terms. Rental expense in 1998 and 1997 totaled $2,142,000
and $504,000, respectively. Future minimum lease payments are $25,285,000
in 1999, $22,393,000 in 2000, $4,897,000 in 2001, and $1,129,000 in 2002.
11. COMMON STOCK:
On February 24, 1997, SEACOR's Board of Directors authorized the
repurchase, from time to time, of up to $50,000,000 of SEACOR's common
stock or 5 3/8% Notes. During 1997, SEACOR repurchased 110,200 shares of
its common stock at an aggregate cost of $4,743,000. Also during 1997,
SEACOR issued 136,578 shares of its common stock for aggregate value of
$7,956,000 pursuant to the Galaxie Transaction, the SMIT Transaction, and
the acquisition of ERST/O'Brien's Inc.
During 1998, SEACOR's Board of Directors increased its previously
announced securities repurchase authority by $65,000,000 and expanded its
previously announced securities repurchase authority to include, in
addition to its common stock and 5 3/8% Notes, its 7.2% Notes and the
Chiles 10% Notes (collectively, the "SEACOR Securities"). Shares totaling
1,305,100 at an aggregate cost of $60,291,000 were repurchased for
treasury during the year. 712,000 of these shares, previously issued as
part of the Company's purchase consideration in the SMIT Transaction,
were repurchased from a subsidiary of SMIT. All other repurchases of
SEACOR's common stock during 1998 were made in the open market. As of
December 31, 1998, the Company had approximately $33,891,000 available
for the repurchase of SEACOR Securities. The repurchase of any SEACOR
Securities will be effected from time to time through open market
purchases, privately negotiated transactions, or otherwise, depending on
market conditions.
12. BENEFIT PLANS:
SEACOR SAVINGS PLAN. SEACOR, through a wholly owned subsidiary,
introduced a defined contribution plan (the "SEACOR Plan"), effective
July 1, 1994. Furthermore, in connection with a merger and acquisition,
the Company assumed the obligations of certain other defined contribution
plans. Effective January 1, 1998, the Company merged the defined
51
contribution plans previously assumed into the SEACOR Plan. Requirements
for eligibility in the SEACOR Plan include (i) one year of full time
employment, (ii) attainment of 21 years of age, and (iii) residency in
the United States. Participants may contribute up to 15% of their pre-tax
annual compensation, and contributions are funded monthly. Participants
are fully vested in the Company's contribution upon (i) attaining the age
of 65, (ii) death, (iii) becoming disabled, or (iv) completing five years
of employment service. Contribution forfeitures for non-vested terminated
employees are used to reduce future contributions of the Company or pay
administrative expenses. The Company's contribution is limited to 50% of
the employee's first 6% of wages invested in the SEACOR Plan and is
subject to annual review by the Board of Directors. The Company's
contributions to the plans were $845,000, $614,000, and $599,000 for the
years ended December 31, 1998, 1997, and 1996, respectively.
STOCK PLANS. On November 22, 1992, and April 18, 1996, SEACOR's
stockholders adopted the 1992 Non-Qualified Stock Option Plan (the "Stock
Option Plan") and the 1996 Share Incentive Plan (the "Share Incentive
Plan"), respectively, (collectively, the "Plans"). The Plans provide for
the grant of options to purchase shares of SEACOR's common stock, and the
Share Incentive Plan additionally provides for the grant of stock
appreciation rights, restricted stock awards, performance awards, and
stock units to key officers and employees of the Company. The exercise
price per share of options granted cannot be less than 75% and 90% of the
fair market value of SEACOR's common stock at the date of grant under the
Stock Option Plan and Share Incentive Plan, respectively. Options granted
under the Plans expire no later than the tenth anniversary of the date of
grant. The Plans are administered by the Stock Option and Executive
Compensation Committee of the Board of Directors (the "Compensation
Committee"). Five hundred thousand shares of SEACOR's common stock have
been reserved for issuance under each of the Stock Option Plan and the
Share Incentive Plan.
STOCK OPTIONS. In October 1995, Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting for Stock Based
Compensation," was issued effective in 1996 for the Company. Under SFAS
123, companies could either adopt a "fair valued based method" of
accounting for an employee stock option, as defined, or continue to use
accounting methods as prescribed by APB Opinion No. 25. The Company has
elected to continue accounting for its plan under APB Opinion No 25. Had
compensation costs for the plan been determined consistent with SFAS 123,
the Company's net income and earnings per share would have been reduced
to the following pro forma amounts for the years ended December 31, 1998,
1997, and 1996, in thousands of dollars, except per share data.
1998 1997 1996
-------------------------- --------------------------- ---------------------------
As Reported Pro forma As Reported Pro forma As Reported Pro forma
------------ ------------ ------------- ------------- ------------- -------------
Net Income...................$ 125,927 $ 125,746 $ 119,154 $ 119,051 $ 34,153 $ 33,844
Earnings per common share:
Basic.....................$ 9.59 $ 9.57 $ 8.61 $ 8.60 $ 2.97 $ 2.95
Diluted................... 8.25 8.24 7.47 7.47 2.74 2.71
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future events, and additional awards in the future are
anticipated.
SHARE AWARD TRANSACTIONS. The following transactions have occurred in the
Plans during the periods ended December 31:
1998 1997 1996
------------------------- ------------------------- ------------------------
Number of Wt'ed Avg. Number of Wt'ed Avg. Number of Wt'ed Avg.
Shares Exer. Price Shares Exer. Price Shares Exer. Price
----------- ------------ ----------- ------------ ---------- ------------
Stock Option Activities -
Outstanding, at beginning of 325,112 $ 17.04 346,112 $ 16.92 425,197 $ 16.28
year.............................
Granted.................... 20,652 51.74 - - 7,300 30.75
Exercised.................. (48,750) 15.54 (21,000) 15.05 (85,039) 14.90
Canceled................... (1,200) 34.46 - - (1,346) 18.75
----------- ----------- ----------
Outstanding, at end of year... 295,814 19.64 325,112 17.04 346,112 16.92
=========== ----------- ==========
Options exercisable at year
end.............................. 275,362 17.26 317,812 16.72 222,411 16.14
=========== =========== ==========
Weighted average fair value
of options granted.............. $ 33.58 $ - $ 18.86
=========== =========== ==========
Restricted stock awards granted.. 25,290 52.16 18,510 61.92 14,250 40.42
=========== =========== ==========
Shares available for future grant 480,913 525,589 544,099
=========== =========== ==========
The fair value of each option granted during the periods presented is
estimated on the date of grant using the Black-Scholes option-pricing
model with the following assumptions: (a) no dividend yield, (b) weighted
average expected volatility of 44.06% and 25.38% in the years 1998 and
1996, respectively, (c) discount rates of 5.21% and 6.21% in the years
1998 and 1996, respectively, and (d) expected lives of five years.
52
On date of issue, the market value of restricted shares issued to certain
officers and key employees of the Company is recorded in Stockholders'
Equity as Unamortized Restricted Stock and then amortized to expense over
one and three year vesting periods. During 1998, 1997, and 1996,
compensation cost recognized in connection with restricted stock awards
totaled $1,333,000, $439,000, and $409,000, respectively. At December 31,
1998, there were 40,981 shares of unvested restricted stock outstanding
at a weighted average price of $53.78. 25,814, 10,583, and 4,584 shares
will vest in 1999, 2000, and 2001, respectively. On January 29, 1999, the
Compensation Committee granted 36,700 restricted shares to certain
officers and key employees of the Company with aggregate market value of
$1,638,000 on that date.
The following table summarizes certain information about the options
outstanding at December 31, 1998 grouped into three exercise price
ranges:
Exercise Price Range
---------------------------------------------------
$9.64 - $14.75 $18.75 - $21.25 $30.75 - $53.00
---------------- ----------------- ----------------
Options outstanding at December 31, 1998.............. 124,166 146,996 24,652
Weighted-average exercise price.......................$ 14.11 $ 19.53 $ 48.15
Weighted-average remaining contractual life........... 4.6 years 5.2 years 8.7 years
Options exercisable at December 31, 1998.............. 124,166 146,996 4,200
Weighted average exercise price of exercisable
options..............................................$ 14.11 $ 19.53 $ 30.75
13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Selected financial information for interim periods are presented below in
thousands of dollars, except share data. Earnings per share are computed
independently for each of the quarters presented; therefore, the sum of
the quarterly earnings per share do not necessarily equal the total for
the year. During the fourth quarter ended December 31, 1997, the Company
adopted SFAS No. 128, "Earnings per Share," and all prior period earnings
per share data have been restated to conform with the provisions of that
Statement.
Quarter Ended
----------------------------------------------------------------
Dec. 31, Sept. 30, June 30, March 31,
------------- ------------ ------------ ------------
1998:
Revenue...................................... $ 92,791 $ 100,043 $ 95,744 $ 97,213
Gross profit(1).............................. 35,194 42,416 42,189 41,821
Income before extraordinary item............. 27,937 26,361 36,050 34,270
Basic earnings per common share -
Income before extraordinary item.......... 2.21 2.02 2.74 2.51
Extraordinary item........................ 0.10 - - -
------------- ------------ ------------ ------------
Net Income................................ $ 2.31 $ 2.02 $ 2.74 $ 2.51
============= ============ ============ ============
Diluted earnings common per share -
Income before extraordinary item.......... $ 1.90 $ 1.75 $ 2.34 $ 2.16
Extraordinary item........................ 0.08 - - -
------------- ------------ ------------ ------------
Net Income................................ $ 1.98 $ 1.75 $ 2.34 $ 2.16
============= ============ ============ ============
1997:
Revenue...................................... $ 94,262 $ 88,259 $ 85,248 $ 79,179
Gross profit(1).............................. 40,371 34,719 33,359 34,468
Income before extraordinary items............ 24,954 27,453 38,424 28,762
Basic earnings per common share -
Income before extraordinary item.......... 1.80 1.99 2.78 2.07
Extraordinary item........................ (0.01) - (0.02) -
------------- ------------ ------------ ------------
Net Income................................ $ 1.79 $ 1.99 $ 2.76 $ 2.07
============= ============ ============ ============
Diluted earnings per common share -
Income before extraordinary item.......... $ 1.58 $ 1.74 $ 2.38 $ 1.80
Extraordinary item........................ - - (0.02) -
------------- ------------ ------------ ------------
Net Income................................ $ 1.58 $ 1.74 $ 2.36 $ 1.80
============= ============ ============ ============
(1) Gross profit is defined as Operating Income as reported in the
Consolidated Statements of Income plus general and administrative
expenses.
14. RELATED PARTY TRANSACTIONS:
Miller Environmental Group ("MEG"), an environmental contractor based in
Calverton, New York, maintains and stores spill response equipment owned
by NRC and provides labor, equipment and materials to assist in spill
response activities, and provides other services to NRC. In fiscal 1998,
1997, and 1996, NRC paid approximately $171,000, $446,000, and
$2,379,000, respectively, to MEG for these services. The father of a
SEACOR corporate officer is Vice President, Secretary and Treasurer of
MEG.
NRC also contracts with James Miller Marine Services ("JMMS"), an
environmental contractor based in Staten Island, New York, for services
similar to those provided by MEG. In fiscal 1998, 1997, and 1996, NRC
paid approximately $398,000, $612,000, and $591,000, respectively, to
JMMS for these services. The brother of a SEACOR corporate officer is
Vice President of JMMS.
53
Globe Wireless provides the Company's offshore marine service segment a
"ship-to-shore" communication network and has provisioned and installed
certain computer hardware, software, and electronic equipment aboard its
offshore marine vessels. In fiscal 1998 and 1997, approximately $743,000
and $40,000 was paid to Globe Wireless for services and merchandise
provided the Company.
15. MAJOR CUSTOMERS AND SEGMENT DATA:
The Company adopted Statement of Financial Accounting Standards No. 131
("SFAS 131"), "Disclosures about Segments of an Enterprise and Related
Information," during the fourth quarter of 1998. SFAS 131 establishes
standards for the way that public business enterprises report information
about operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also established
standards for related disclosures about products and services, geographic
areas, and major customers. SFAS 131 defined operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance.
The Company has aggregated its business activities into three operating
segments: marine, environmental, and drilling. These operating segments
represent strategic business units that offer different services.
The marine service segment charters support vessels to owners and
operators of offshore drilling rigs and production platforms both
domestically and internationally. Two of the largest groups of offshore
support vessels operated by the Company are crew boats, which transport
personnel and small loads of cargo when expedited deliveries are
required, and utility boats, which support offshore production activities
by delivering general cargo and facilitating infield transportation of
personnel and materials. Two other significant classes of vessels
operated by the Company are towing supply and anchor handling towing
supply vessels. These vessels have powerful engines, a deck mounted
winch, and capability to tow and position offshore drilling rigs as well
as provide supply vessel services. The Company also operates supply
vessels, which transport drill pipe, drilling fluids, and construction
materials, and special service vessels, which include standby safety,
well stimulation, seismic data gathering, line handling, freight, oil
spill response, and salvage vessels.
The environmental service segment 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. 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 OPA 90 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. When oil spills occur, the Company mobilizes specialized
oil spill response equipment, using either its own personnel or personnel
under contract, to provide emergency response services for both land and
marine oil spills.
The drilling service segment was formed during 1997 when the Company
acquired a 55.4% membership interest in Chiles whose business purpose is
to construct, own, and operate jackup rigs. Also during 1997, Chiles
commenced construction of two Rigs that are scheduled for delivery in
April and September 1999. Jackup rigs are mobile self-elevating drilling
platforms equipped with legs that are lowered to the ocean floor until a
foundation is established to support drilling operations. Oil and gas
exploration companies use jackup rigs extensively for offshore drilling
in water depths from 20 feet to 350 feet. The Rigs, as presently
configured, are rated to work in water depths of up to 360 feet.
The Company evaluates the performance of each operating segment based
upon the operating profit of the segment and including gains from the
sale of equipment and interest in 50% or less owned companies and equity
in the net income of 50% or less owned companies but excluding minority
interest, interest income and expense, gains from the sale of marketable
securities and commodity swap transactions, corporate expenses, and
income taxes. Operating profit is defined as Operating Income as reported
in the Consolidated Statements of Income net of corporate expenses and
certain other income and expense items. The accounting policies of the
operating segments are the same as those described in the summary of
significant accounting policies except that the disaggregation of
financial results has been prepared using a management approach. Segment
assets exclude those considered by the Company to be of a corporate
nature. Corporate assets include SEACOR and its wholly owned
subsidiaries' unrestricted cash, marketable securities, certain other
assets, and property and equipment related to corporate operations.
Information disclosed in the tables presented below may differ from
separate financial statements presented by subsidiaries of the Company
due to certain elimination entries required in consolidation.
54
Revenues attributed to geographic areas were based upon the country of
domicile for marine service segment customers and the country in which
the Company provided oil spill protection or other related training and
consulting services for environmental service segment customers. Revenues
from marine and environmental services rendered to divisions or
subsidiaries of one customer totaled $40,717,000 in 1998 and $41,852,000
in 1997 (11% of revenues in 1998 and 12% of revenues in 1997). Divisions
or subsidiaries of one customer serviced by the marine segment accounted
for $26,004,000 or 12% of revenues in 1996. The Company considers
long-lived assets to be property and equipment that has been distributed
to geographical areas based upon the assets' physical location during the
applicable period. Certain of the Company's offshore marine service
segment's long-lived vessel assets relocate between its geographical
areas of operation. The costs of long-lived vessel assets that are
relocated have been allocated between geographical areas of operation
based upon length of service in the applicable region.
Information about profit and loss and assets by business segment is as
follows for the years ended December 31, in thousands of dollars:
1998 Marine Environmental Drilling Other Total
----------- ----------- ----------- ----------- -----------
Revenue............................ 359,611 $ 26,180 - $ - $ 385,791
=========== =========== =========== =========== ===========
Operating Profit................... 127,403 $ 4,479 (823) $ - $ 131,059
Gains from Equipment Sales or
Retirements, net............... 38,227 111 - - 38,338
Gains from Sale of Interest in a
50% or 1,197 - - - 1,197
Less Owned Company.............
Equity Earnings.................. 13,657 554 - - 14,211
Minority Interest................ - - - (1,612) (1,612)
Interest Income.................. - - - 25,346 25,346
Interest Expense................. - - - (22,798) (22,798)
Gains from Commodity Swap - - - 3,273 3,273
Transactions ....................
Gains from Sale of Marketable - - - 1,827 1,827
Securities.......................
Corporate Expenses............... - - - (5,344) (5,344)
Income Taxes..................... - - - (60,879) (60,879)
----------- ----------- ----------- ----------- -----------
Income before Extraordinary
Item........................... 180,484 $ 5,144 (823) $ (60,187) $ 124,618
=========== ============ =========== =========== ===========
Investment in Equity Method 54,954 $ 524 - $ - $ 55,478
Investees..........................
Other Segment Assets............... 770,614 29,103 177,832 - 977,549
----------- ----------- ----------- ----------- -----------
Subtotal Segment Assets.......... 825,568 29,627 177,832 - 1,033,027
Corporate.......................... - - - 224,948 224,948
----------- ----------- ----------- ----------- -----------
Total Assets................... 825,568 $ 29,627 177,832 $ 224,948 $ 1,257,975
=========== ============ =========== =========== ===========
Depreciation and Amortization...... 32,534 $ 3,846 56 $ 13 $ 36,449
====================================================================================================
1997
Revenue............................ 325,009 $ 21,939 - $ - $ 346,948
=========== ============ =========== =========== ===========
Operating Profit................... 115,818 $ 3,029 (382) $ - $ 118,465
Gains from Equipment Sales or
Retirements, net............... 62,027 (99) - - 61,928
Equity Earnings.................. 5,656 771 - - 6,427
Minority Interest................ - - - (301) (301)
Interest Income.................. - - - 12,756 12,756
Interest Expense................. - - - (14,168) (14,168)
Corporate Expenses............... - - - (3,278) (3,278)
Income Taxes..................... - - - (62,236) (62,236)
----------- ----------- ----------- ----------- -----------
Income before Extraordinary
Item........................... 183,501 $ 3,701 (382) $ (67,227) $ 119,593
=========== ============ =========== =========== ===========
Investment in Equity Method
Investees.......................... 37,151 $ 1,219 - $ - $ 38,370
Other Segment Assets............... 702,449 32,861 35,012 - 770,322
----------- ----------- ----------- ----------- -----------
Subtotal Segment Assets.......... 739,600 34,080 35,012 - 808,692
Corporate.......................... - - - 211,109 211,109
----------- ----------- ----------- ----------- -----------
Total Assets................... 739,600 $ 34,080 35,012 $ 211,109 $ 1,019,801
=========== ============ =========== =========== ===========
Depreciation and Amortization...... 32,914 $ 3,563 6 $ 55 $ 36,538
====================================================================================================
1996
Revenue............................ 193,557 $ 30,887 - $ - $ 224,444
=========== ============ =========== =========== ===========
Operating Profit................... 50,849 $ 4,918 - $ - $ 55,767
Gains from Equipment Sales or
Retirements, net............... 2,193 71 - - 2,264
Equity Earnings.................. 1,563 410 - - 1,973
McCall Acquisition Cost.......... (542) - - - (542)
Minority Interest................ - - - 244 244
Interest Income.................. - - - 3,558 3,558
Interest Expense................. - - - (5,713) (5,713)
Corporate Expenses............... - - - (3,366) (3,366)
Income Taxes..................... - - - (19,225) (19,225)
----------- ----------- ----------- ----------- -----------
Income before Extraordinary
Item........................... - $ 5,399 - $ 24,502 $ 34,960
=========== ============ =========== =========== ===========
Investment in Equity Method
Investees.......................... 20,900 $ 416 - $ - $ 21,316
Other Segment Assets............... 432,508 29,025 - - 461,533
----------- ----------- ----------- ----------- -----------
Subtotal Segment Assets.......... 453,408 29,441 - - 482,849
Corporate.......................... - - - 153,606 153,606
----------- ----------- ----------- ----------- -----------
Total Assets................... 453,408 $ 29,441 - $ 153,606 $ 636,455
=========== ============ =========== =========== ===========
Depreciation and Amortization...... 21,442 $ 3,379 - $ 146 $ 24,967
====================================================================================================
55
Information concerning principal geographic areas was as follows for the
years ending December 31, in thousands of dollars:
United United Other
States Nigeria Kingdom Foreign Total
----------- ----------- ----------- ----------- -----------
1998:
Revenue...................... $ 234,651 $ 30,655 $ 28,524 $ 91,961 $ 385,791
Long-Lived Assets............ 406,945 47,257 31,416 139,243 624,861
1997:
Revenue...................... 216,513 25,318 39,099 66,018 346,948
Long-Lived Assets............ 262,309 42,888 42,213 135,524 482,934
1996:
Revenue...................... 164,934 19,777 14,173 25,560 224,444
Long-Lived Assets............ 188,016 38,202 20,188 151,370 397,776
16. COMMITMENTS AND CONTINGENCIES:
As of December 31, 1998, the Company has commitments to build 15 marine
offshore marine service vessels at an approximate aggregate cost of
$137,000,000 of which $55,000,000 has been expended, and its majority
owned subsidiary, Chiles, has commitments to build 2 Rigs for
$171,300,000 of which $99,900,000 has been expended. Completion of these
construction projects is expected during the next two years.
During 1998, the Company and TMM terminated an agreement to form two
joint venture corporations that would have acquired two offshore marine
vessels recently constructed and delivered to the Company. TMM, through a
subsidiary, would have acquired a minority equity interest in those joint
venture corporations.
In the normal course of its business, the Company becomes involved in
various litigation matters including, among other things, claims by third
parties for alleged property damages, personal injuries, and other
matters. While the Company believes it has meritorious defenses against
these claims, management has used estimates in determining the Company's
potential exposure and has recorded reserves in its financial statements
related thereto where appropriate. It is possible that a change in the
Company's estimates of that exposure could occur, but the Company does
not expect such changes in estimated costs will have a material effect on
the Company's financial position or results of operations.
17. SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS:
1998 1997 1996
---------- ---------- ----------
(in thousands of dollars)
Cash income taxes paid...................................................$ 47,345 $ 29,160 $ 12,043
Cash interest paid....................................................... 22,514 12,022 4,037
Schedule of Non-Cash Investing and Financing Activities:
Property exchanged for investment in and notes
receivable from 50% or less owned company.......................... - 2,240 -
Conversion of 6% Notes to SEACOR's common stock.......................... - - 53,785
Conversion of 2.5% Notes, net of discount, to SEACOR's common stock...... - - 3,941
Investment in 50% or less owned companies with long-term debt, including 738 - -
debt discount...........................................................
Acquisition of ERST/O'Brien's Inc. with SEACOR's common stock............ 442 3,614 -
Purchase of vessels with - SEACOR's common stock.............. - 4,342 33,642
- 5 3/8% Notes....................... - - 15,250
- capital lease obligations.......... - - 23,771
- notes, including debt discount..... 22,462 - -
18. SUBSEQUENT EVENTS:
In February 1999, SEACOR reported that its Board of Directors had
increased its previously announced securities repurchase program by
$25,000,000. With this increase, the Company has approximately
$32,000,000 available for such purposes. The securities covered by the
repurchase program continue to include the Company's common stock, its 5
3/8% Notes, its 7.2% Notes, and the Chiles 10.0% Notes. Subsequent to
December 31, 1998, the Company has purchased approximately $27,000,000 of
its securities, primarily its common stock, and now has approximately
12,118,000 common shares outstanding. The repurchase of securities will
be conducted from time to time through open market purchases, privately
negotiated transactions, or otherwise depending on market conditions.
56
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To SEACOR SMIT Inc.:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements of SEACOR SMIT Inc. and
its subsidiaries and have issued our report thereon dated February 5,
1999. Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule on page 58 is
the responsibility of the Company's management and is presented for the
purpose of complying with the Securities and Exchange Commission's rules
and is not part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly states in all material
respects the financial data required to be set forth therein in relation
to the basic financial statements taken as a whole.
Arthur Andersen LLP
New Orleans, Louisiana
February 5, 1999
57
SEACOR SMIT INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(IN THOUSANDS)
Balance Charges to Balance
Beginning Cost and (a) End
Description Of Year Expenses Deductions Of Year
- - ----------------------------------------- ----------- ------------ ----------- -----------
Year Ended December 31, 1998
Allowance for doubtful accounts
(deducted from accounts receivable) $ 1,626 $ 455 $ 125 $ 1,956
=========== ============ =========== ===========
Year Ended December 31, 1997
Allowance for doubtful accounts
(deducted from accounts receivable) $ 475 $ 1,155 $ 4 $ 1,626
=========== ============ =========== ===========
Year Ended December 31, 1996
Allowance for doubtful accounts
(deducted from accounts receivable) $ 380 $ 238 $ 143 $ 475
=========== ============ =========== ===========
(a) Recovery of accounts receivable which had been previously reserved
as uncollectible or accounts receivable amounts deemed
uncollectible and removed from accounts receivable and allowance
for doubtful accounts.
58
INDEX TO EXHIBITS
Exhibit
Number Description
- - ------ -----------
2.1* Asset Purchase Agreement, dated as of December 19, 1996, by
and among SEACOR Holdings, Inc. and certain of its
subsidiaries, and Smit Internationale N.V. and certain of its
subsidiaries (incorporated herein by reference to Exhibit 2.0
to the Company's Current Report on Form 8-K dated December 19,
1996 and filed with the Commission on December 24, 1996).
2.2* Purchase Agreement, dated as of December 3, 1996, among SEACOR
Holdings, Inc., Acadian Offshore Services, Inc., Galaxie
Marine Service, Inc., Moonmaid Marine, Inc., Triangle Marine,
Inc., F.C. Felterman, Ernest Felterman, D. Lee Felterman and
Daniel C. Felterman (incorporated herein by reference to
Exhibit 2.1 to the Company's Registration Statement on Form
S-3 (No. 333-20921) filed with the Commission on January 31,
1997).
2.3* Purchase Agreement, dated as of December 3, 1996, among SEACOR
Holdings, Inc., Waveland Marine Service, Inc., F.C. Felterman,
Ernest Felterman, D. Lee Felterman and Daniel C. Felterman
(incorporated herein, by reference to Exhibit 2.2 to the
Company's Registration Statement on Form S-3 (No. 333-20921)
filed with the Commission on January 31, 1997).
2.4* Definitive Purchase Agreement, dated September 5, 1995, by and
among Graham Marine Inc., Edgar L. Graham, J. Clark Graham,
and Glenn A. Graham (incorporated herein by reference to
Exhibit 2.0 to the Company's Current Report on Form 8-K dated
September 15, 1995).
2.5* Global Agreement, dated as of November 14, 1995, by and among
Compagnie Nationale de Navigation and Feronia International
Shipping, SA and SEACOR Holdings, Inc. and the subsidiaries
listed in said agreement (incorporated herein by reference to
Exhibit 2.2 of the Company's Registration Statement on Form
S-3 (No. 33-97868) filed with the Commission on November 17,
1995).
2.6* Agreement and Plan of Merger, dated as of May 31, 1996, by and
among SEACOR Holdings, Inc., SEACOR Enterprises, Inc. and
McCall Enterprises, Inc. (incorporated herein by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K dated
May 31, 1996 and filed with Commission on June 7, 1996).
2.7* Agreement and Plan of Merger, dated as of May 31, 1996, by and
among SEACOR Holdings, Inc., SEACOR Support Services, Inc. and
McCall Support Vessels, Inc. (incorporated herein by reference
to Exhibit 2.2 to the Company's Current Report on Form 8-K
dated May 31, 1996 and filed with Commission on June 7, 1996).
2.8* Agreement and Plan of Merger, dated as of May 31, 1996, by and
among SEACOR Holdings, Inc., SEACOR N.F., Inc. and N.F. McCall
Crews, Inc. (incorporated herein by reference to Exhibit 2.3
to the Company's Current Report on Form 8-K dated May 31, 1996
and filed with Commission on June 7, 1996).
2.9* Exchange Agreement relating to McCall Crewboats, L.L.C., dated
as of May 31, 1996, by and among SEACOR Holdings, Inc. and the
persons listed on the signature pages thereto (incorporated
herein by reference to Exhibit 2.4 to the Company's Current
Report on Form 8-K dated May 31, 1996 and filed with
Commission on June 7, 1996).
2.10* Share Exchange Agreement and Plan of Reorganization relating
to Cameron Boat Rentals, Inc., dated as of May 31, 1996, by
and among SEACOR Holdings, Inc., McCall Enterprises, Inc. and
the persons listed on the signature pages thereto
(incorporated herein by reference to Exhibit 2.5 to the
Company's Current Report on Form 8-K dated May 31, 1996 and
filed with Commission on June 7, 1996).
2.11* Share Exchange Agreement and Plan of Reorganization relating
to Philip A. McCall, Inc., dated as of May 31, 1996, by and
among SEACOR Holdings, Inc., McCall Enterprises, Inc. and the
persons listed on the signature pages thereto (incorporated
herein by reference to Exhibit 2.6 to the Company's Current
Report on Form 8-K dated May 31, 1996 and filed with
Commission on June 7, 1996).
59
2.12* Share Exchange Agreement and Plan of Reorganization relating
to Cameron Crews, Inc., dated as of May 31, 1996, by and among
SEACOR Holdings, Inc., McCall Enterprises, Inc. and the
persons listed on the signature pages thereto (incorporated
herein by reference to Exhibit 2.7 to the Company's Current
Report on Form 8-K dated May 31, 1996 and filed with
Commission on June 7, 1996).
3.1* Restated Certificate of Incorporation of SEACOR SMIT Inc.
(incorporated herein by reference to Exhibit 3.1(a) to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997 and filed with the Commission on August
14, 1997).
3.2* Certificate of Amendment to the Restated Certificate of
Incorporation of SEACOR SMIT Inc. (incorporated herein by
reference to Exhibit 3.1(b) to the Company's Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 1997 and
filed with the Commission on August 14, 1997).
3.3* Amended and Restated By-laws of SEACOR Holdings, Inc.
(incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (No.
333-12637) of SEACOR Holdings, Inc. filed with the
Commission on September 25, 1996).
4.1* Indenture, dated as of November 1, 1996, between First Trust
National Association, as trustee, and SEACOR Holdings, Inc.
(including therein forms of 5-3/8% Convertible Subordinated
Notes due November 15, 2006 of SEACOR Holdings, Inc.)
(incorporated herein by reference to Exhibit 4.0 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996 and filed with the Commission on
November 14, 1996).
4.2* Indenture, dated as of September 22, 1997, between SEACOR SMIT
Inc. and First Trust National Association, as trustee
(including therein form of Exchange Note 7.20% Senior Notes
Due 2009)(incorporated herein by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-4 (No.
333-38841) filed with the Commission on October 27, 1997).
4.3* Investment and Registration Rights Agreement, dated as of
March 14, 1995, by and among SEACOR Holdings, Inc., Miller
Family Holdings, Inc., Charles Fabrikant, Mark Miller, Donald
Toenshoff, Alvin Wood, Granville Conway and Michael Gellert
(incorporated herein by reference to Exhibit 4.0 of the
Company's Current Report on Form 8-K dated March 14, 1995, as
amended).
4.4* Investment and Registration Rights Agreement, dated as of May
31, 1996, among SEACOR Holdings, Inc. and the persons listed
on the signature pages thereto (incorporated herein by
reference to Exhibit 10.8 to the Company's Current Report on
Form 8-K dated May 31, 1996 and filed with the Commission on
June 7, 1996).
4.5* Registration Rights Agreement, dated November 5, 1996, between
SEACOR Holdings, Inc. and Credit Suisse First Boston
Corporation, Salomon Brothers Inc. and Wasserstein Perella
Securities, Inc. (incorporated herein by reference to Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 and filed with the
Commission on November 14, 1996).
4.6* Investment and Registration Rights Agreement, dated as of
December 19, 1996, by and between SEACOR Holdings, Inc. and
Smit International Overseas B.V. (incorporated herein by
reference to Exhibit 4.0 to the Company's Current Report on
Form 8-K dated December 19, 1996 and filed with the Commission
on December 24, 1996).
4.7* Investment and Registration Rights Agreement, dated as of
January 3, 1997, among SEACOR Holdings, Inc., Acadian Offshore
Services, Inc., Galaxie Marine Service, Inc., Moonmaid Marine,
Inc. and Triangle Marine, Inc. (incorporated herein by
reference to Exhibit 4.6 to the Company's Registration
Statement on Form S-3 (No. 333-20921) filed with the
Commission on January 31, 1997).
4.8* Investment and Registration Rights Agreement, dated October
27, 1995, by and between SEACOR Holdings, Inc. and Coastal
Refining and Marketing, Inc. (incorporated herein by reference
to Exhibit 4.2 of the Company's Registration Statement on Form
S-3 (No. 33-97868) filed with the Commission on November 17,
1995).
60
4.9* Investment and Registration Rights Agreement, dated November
14, 1995, by and between SEACOR Holdings, Inc. and Compagnie
Nationale de Navigation (incorporated herein by reference to
Exhibit 4.3 of the Company's Registration Statement on Form
S-3 (No. 33-97868) filed with the Commission on November 17,
1995).
4.10* Registration Agreement, dated as of September 22, 1997,
between the Company and the Initial Purchasers (as defined
therein)(incorporated herein by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-4 (No.
333-38841) filed with the Commission on October 27, 1997).
4.11* Restated Stockholders' Agreement dated December 16, 1992
(incorporated herein by reference to Exhibit 10.12 to the
Annual Report on Form 10-K of SEACOR Holdings, Inc. for the
fiscal year ended December 31, 1992).
10.1* Indemnification Agreement, dated as of May 31, 1996, among all
of the stockholders of McCall Enterprises, Inc., Norman
McCall, as representative of such stockholders, and SEACOR
Holdings, Inc. (incorporated herein by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K dated May 31,
1996 and filed with Commission on June 7, 1996).
10.2* Indemnification Agreement, dated as of May 31, 1996, among all
of the stockholders of McCall Support Vessels, Inc., Norman
McCall, as representative of such stockholders, and SEACOR
Holdings, Inc. (incorporated herein by reference to Exhibit
10.2 to the Company's Current Report on Form 8-K dated May 31,
1996 and filed with Commission on June 7, 1996).
10.3* Indemnification Agreement, dated as of May 31, 1996, among all
of the stockholders of N.F. McCall Crews, Inc., Norman McCall,
as representative of such stockholders, and SEACOR Holdings,
Inc. (incorporated herein by reference to Exhibit 10.3 to the
Company's Current Report on Form 8-K dated May 31, 1996 and
filed with Commission on June 7, 1996).
10.4* Indemnification Agreement, dated as of May 31, 1996, among all
of the members of McCall Crewboats, L.L.C., Norman McCall, as
representative of such members, and SEACOR Holdings, Inc.
(incorporated herein by reference to Exhibit 10.4 to the
Company's Current Report on Form 8-K dated May 31, 1996 and
filed with Commission on June 7, 1996).
10.5* Indemnification Agreement, dated as of May 31, 1996, among all
of the stockholders of Cameron Boat Rentals, Inc., Norman
McCall, as representative of such stockholders, and SEACOR
Holdings, Inc. (incorporated herein by reference to Exhibit
10.5 to the Company's Current Report on Form 8-K dated May 31,
1996 and filed with Commission on June 7, 1996).
10.6* Indemnification Agreement, dated as of May 31, 1996, among all
of the stockholders of Philip A. McCall, Inc. and SEACOR
Holdings, Inc. (incorporated herein by reference to Exhibit
10.6 to the Company's Current Report on Form 8-K dated May 31,
1996 and filed with Commission on June 7, 1996).
10.7* Indemnification Agreement, dated as of May 31, 1996, among all
of the stockholders of Cameron Crews, Inc., Norman McCall, as
representative of such stockholders, and SEACOR Holdings, Inc.
(incorporated herein by reference to Exhibit 10.7 to the
Company's Current Report on Form 8-K dated May 31, 1996 and
filed with Commission on June 7, 1996).
10.8* The Master Agreement, dated as of June 6, 1996, by and among
Compagnie Nationale de Navigation, SEACOR Holdings, Inc. and
SEACOR Worldwide Inc. (incorporated herein by reference to
Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q
for the period ended June 30, 1996).
10.9* Management and Administrative Services Agreement, dated
January 1, 1990, between SCF Corporation and SEACOR Holdings,
Inc. (incorporated herein by reference to Exhibit 10.32 to the
Company's Registration Statement on Form S-1 (No. 33-53244)
filed with the Commission on November 10, 1992).
10.10* Amendment No. 1 to the Management and Services Agreement,
dated as of January 1, 1993, between SCF Corporation and
SEACOR Holdings, Inc. (incorporated herein by reference to
Exhibit 10.34 to the Annual Report on Form 10-K of SEACOR
Holdings, Inc. for the fiscal year ended December 31, 1992).
61
10.11* Lease Agreement, dated September 1, 1989, between The Morgan
City Fund and NICOR Marine Inc. (SEACOR Marine Inc., as
successor lessee) (incorporated herein by reference to Exhibit
10.33 to the Company's Registration Statement on Form S-1 (No.
33-53244) filed with the Commission on November 10, 1992).
10.12*,** SEACOR Holdings, Inc. 1992 Non-Qualified Stock Option Plan
(incorporated herein by reference to Exhibit 10.45 to the
Company's Registration Statement on Form S-1 (No. 33-53244)
filed with the Commission on November 10, 1992).
10.13*,** SEACOR Holdings, Inc. 1996 Share Incentive Plan (incorporated
herein by reference to SEACOR Holdings, Inc.'s Proxy Statement
dated March 18, 1996 relating to the Annual Meeting of
Stockholders held on April 18, 1996).
10.14*,** Stock Option Grant Agreement, dated as of January 5, 1993,
between SEACOR Holdings, Inc. and Charles Fabrikant
(incorporated herein by reference to Exhibit 10.48 to the
Annual Report on Form 10-K of SEACOR Holdings, Inc. for the
fiscal year ended December 31, 1992).
10.15*,** Stock Option Grant Agreement, dated as of January 5, 1993,
between SEACOR Holdings, Inc. and Randall Blank (incorporated
herein by reference to Exhibit 10.49 to the Annual Report on
Form 10-K of SEACOR Holdings, Inc. for the fiscal year ended
December 31, 1992).
10.16*,** Stock Option Grant Agreement, dated as of January 5, 1993,
between SEACOR Holdings, Inc. and Milton Rose (incorporated
herein by reference to Exhibit 10.50 to the Annual Report on
Form 10-K of SEACOR Holdings, Inc. for the fiscal year ended
December 31, 1992).
10.17*,** Benefit Agreement, dated May 1, 1989, between NICOR Marine
Inc. and Lenny P. Dantin (assumed by SEACOR Holdings, Inc.)
(incorporated herein by reference to Exhibit 10.51 to the
Company's Registration Statement on Form S-1 (No. 33-53244)
filed with the Commission on November 10, 1992).
10.18*,** Employment Agreement, dated December 24, 1992, between SEACOR
Holdings, Inc. and Milton Rose (incorporated herein by
reference to Exhibit 10.61 to the Annual Report on Form 10-K
of SEACOR Holdings, Inc. for the fiscal year ended December
31, 1992).
10.19* Management and Services Agreement, dated January 1, 1985,
between NICOR Marine (Nigeria) Inc. and West Africa Offshore
Limited (assumed by SEACOR Holdings, Inc.) (incorporated
herein by reference to Exhibit 10.55 to the Company's
Registration Statement on Form S-1 (No.
33-53244) filed with the Commission on November 10, 1992).
10.20* Bareboat Charter Agreement, dated December 19, 1996, between
SEACOR-SMIT Offshore (International) B.V. and Smit-Lloyd B.V.
(incorporated herein by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K dated December 19, 1996
and filed with the Commission on December 24, 1996).
10.21* Bareboat Charter Agreement, dated December 19, 1996, between
SEACOR-SMIT Offshore (International) B.V. and Smit-Lloyd B.V.
(incorporated herein by reference to Exhibit 10.2 to the
Company's Current Report on Form 8-K dated December 19, 1996
and filed with the Commission on December 24, 1996).
10.22* Joint Venture Agreement, dated December 19, 1996, between
SEACOR Holdings, Inc. and Smit-Lloyd (Antillen) N.V.
(incorporated herein by reference to Exhibit 10.0 to the
Company's Current Report on Form 8-K dated December 19, 1996
and filed with the Commission on December 24, 1996).
10.23* Form of Management Agreement (incorporated herein by reference
to Exhibit 10.4 to the Company's Current Report on Form 8-K
dated December 19, 1996 and filed with the Commission on
December 24, 1996).
10.24* Malaysian Side Letter, dated December 19, 1996, between SEACOR
Holdings, Inc. and Smit Internationale N.V. (incorporated
herein by reference to Exhibit 10.3 to the Company's Current
Report on Form 8-K dated December 19, 1996 and filed with the
Commission on December 24, 1996).
62
10.25* Salvage and Maritime Contracting Agreement, dated December 19,
1996, between SEACOR Holdings, Inc. and Smit Internationale
N.V. (incorporated herein by reference to Exhibit 10.5 to the
Company's Current Report on Form 8-K dated December 19, 1996
and filed with the Commission on December 24, 1996).
10.26* License Agreement, dated December 19, 1996, between SEACOR
Holdings, Inc., certain subsidiaries of SEACOR Holdings, Inc.
and Smit Internationale N.V. (incorporated herein by reference
to Exhibit 10.6 to the Company's Current Report on Form 8-K
dated December 19, 1996 and filed with the Commission on
December 24, 1996).
10.27* Amended and Restated Operating Agreement of Chiles Offshore
LLC, dated as of December 16, 1997, between SEACOR Offshore
Rigs Inc., COI, LLC and the other Members identified therein.
(incorporated herein by reference to Exhibit 10.27 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997).
10.28* Letter Agreement, dated February 26, 1998, between SEACOR SMIT
Inc. and certain of its subsidiaries and SMIT Internationale
N.V. and certain of its subsidiaries (incorporated herein by
reference to Exhibit 99.1 of the Company's Current Report on
Form 8-K filed with the Commission of March 11, 1998).
10.29* Purchase Agreement, dated as of September 15, 1997, between
the Company and Salomon Brothers Inc., individually and as
representative of the Initial Purchasers (as defined
therein)(incorporated herein by reference to Exhibit 4.2 to
the Company's Registration Statement on Form S-4 (No.
333-38841) filed with the Commission on October 27, 1997).
10.28*,** Restricted Stock Grant Agreement, dated as of March 14, 1995,
between SEACOR Holdings, Inc. and Charles Fabrikant
(incorporated herein by reference to Exhibit 10.0 of the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1995)
10.29*,** Restricted Stock Grant Agreement, dated as of May 7, 1996,
between SEACOR Holdings, Inc. and Charles Fabrikant
(incorporated herein by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996).
10.30*,** Restricted Stock Grant Agreement, dated as of May 7, 1996,
between SEACOR Holdings, Inc. and Randall Blank (incorporated
herein by reference to Exhibit 10.2 of the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1996).
10.31*,** Restricted Stock Grant Agreement, dated as of May 7, 1996,
between SEACOR Holdings, Inc. and Milton Rose (incorporated
herein by reference to Exhibit 10.3 of the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1996).
10.32*,** Restricted Stock Grant Agreement, dated as of May 7, 1996,
between SEACOR Holdings, Inc. and Mark Miller (incorporated
herein by reference to Exhibit 10.4 of the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31,
1996).
10.33*,** Restricted Stock Grant Agreement, dated as of May 7, 1996,
between SEACOR Holdings, Inc. and Timothy McKeand
(incorporated herein by reference to Exhibit 10.5 of the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996).
10.34*,** Restricted Stock Grant Agreement, dated as of January 27,
1997, between SEACOR Holdings, Inc. and Charles Fabrikant
(incorporated herein by reference to Exhibit 10.36 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
10.35*,** Restricted Stock Grant Agreement, dated as of January 27,
1997, between SEACOR Holdings, Inc. and Randall Blank
(incorporated herein by reference to Exhibit 10.37 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
10.36*,** Restricted Stock Grant Agreement, dated as of January 27,
1997, between SEACOR Holdings, Inc. and Milton Rose
(incorporated herein by reference to Exhibit 10.38 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
63
10.37*,** Restricted Stock Grant Agreement, dated as of January 27,
1997, between SEACOR Holdings, Inc. and Mark Miller
(incorporated herein by reference to Exhibit 10.39 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
10.38*,** Restricted Stock Grant Agreement, dated as of January 27,
1997, between SEACOR Holdings, Inc. and Timothy McKeand
(incorporated herein by reference to Exhibit 10.40 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996).
10.39*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Charles Fabrikant (incorporated
herein by reference to Exhibit 10.39 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1997).
10.40*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Charles Fabrikant (incorporated
herein by reference to Exhibit 10.40 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1997).
10.41*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Randall Blank (incorporated
herein by reference to Exhibit 10.41 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1997).
10.42*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Randall Blank (incorporated
herein by reference to Exhibit 10.42 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1997).
10.43*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Milton Rose (incorporated herein
by reference to Exhibit 10.43 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997).
10.44*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Milton Rose (incorporated herein
by reference to Exhibit 10.44 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997).
10.45*,** Restricted Stock Grant Agreement, dated February 5, 1998,
between SEACOR SMIT Inc. and Andrew Strachan (incorporated
herein by reference to Exhibit 10.45 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31,
1997).
10.46* Revolving Credit Facility Agreement dated as of June 30, 1997
among SEACOR SMIT Inc., Den norske Bank ASA, as agent, and the
other banks and financial institutions named therein
(incorporated herein by reference to Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1997 and filed with the Commission on August
14, 1997).
10.47* Agreement, dated October 27, 1995, by and among SEACOR
Holdings, Inc., NRC Holdings, Inc., Coastal Refining and
Marketing, Inc., and Phibro Energy USA, Inc. (incorporated
herein by reference to Exhibit 10.1 of the Company's
Registration Statement on Form S-3 (No. 33-97868) filed with
the Commission on November 15, 1995).
10.48*,** Employment Agreement, dated March 14, 1995, by and between
National Response Corporation and Mark Miller (incorporated
herein by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-3 (No. 33-97868) filed with
the Commission on November 15, 1995).
10.49*,** Employment Agreement, dated March 14, 1995, by and between
National Response Corporation and James Miller (incorporated
herein by reference to Exhibit 10.4 of the Company's
Registration Statement on Form S-3 (No. 33-97868) filed with
the Commission on November 15, 1995).
10.50*,** Stock Option Grant Agreement dated as of February 8, 1994
between SEACOR Holdings, Inc. and Charles Fabrikant
(incorporated herein by reference to Exhibit 10.100 to the
Annual Report on Form 10-K of SEACOR Holdings, Inc. for the
fiscal year ended December 31, 1995).
64
10.51*,** Stock Option Grant Agreement dated as of February 8, 1994
between SEACOR Holdings, Inc. and Randall Blank (incorporated
herein by reference to Exhibit 10.101 to the Annual Report on
Form 10-K of SEACOR Holdings, Inc. for the fiscal year ended
December 31, 1995).
10.52*,** Stock Option Grant Agreement dated as of March 14, 1995
between SEACOR Holdings, Inc. and Charles Fabrikant
(incorporated herein by reference to Exhibit 10.102 of the
Annual Report on Form 10-K of SEACOR Holdings, Inc. for the
fiscal year ended December 31, 1995).
10.53*,** Stock Option Grant Agreement dated as of March 14, 1995
between SEACOR Holdings, Inc. and Randall Blank (incorporated
herein by reference to Exhibit 10.103 of the Annual Report on
Form 10-K of SEACOR Holdings, Inc. for the fiscal year ended
December 31, 1995).
10.54*,** Letter agreement, dated February 26, 1997, between SEACOR SMIT
Inc. and certain of its' subsidiaries and SMIT Internationale,
N.V. and certain of its subsidiaries (incorporated herein by
reference to Exhibit 99.1 of the Current Report on Form 8-K
filed with the Commission on March 11, 1998).
10.55** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Charles L. Fabrikant.
10.56** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Charles L. Fabrikant.
10.57** Option Agreement, dated January 29, 1999, between SEACOR SMIT
Inc. and Charles L. Fabrikant.
10.58** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Randall Blank.
10.59** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Randall Blank.
10.60** Option Agreement, dated January 29, 1999, between SEACOR SMIT
Inc. and Randall Blank.
10.61** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Milton R. Rose.
10.62** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Milton R. Rose.
10.63** Option Agreement, dated January 29, 1999, between SEACOR SMIT
Inc. and Milton R. Rose.
10.64** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Andrew G. Strachan.
10.65** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Alice Gran.
10.66** Restricted Stock Grant Agreement, dated January 29, 1999,
between SEACOR SMIT Inc. and Alice Gran.
10.67** Option Agreement, dated January 29, 1999, between SEACOR SMIT
Inc. and Alice Gran.
21.1 List of Registrant's Subsidiaries.
23.1 Consent of Arthur Andersen LLP.
27.1 Financial Data Schedule.
- - ------------------
* Incorporated herein by reference as indicated.
** Management contracts or compensatory plans or arrangements required
to be filed as an exhibit pursuant to Item 14 ( c ) of the rules
governing the preparation of this report.
65