SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
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, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-12289
SEACOR SMIT INC.
----------------
(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 Richmond Avenue, Suite 400, Houston, Texas 77082
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (281) 899-4800
---------------
Securities registered pursuant to Section 12 (b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, par value $.01 per share New York Stock Exchange
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Securities registered pursuant to
Section 12 (g) of the Act:
None
(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. X Yes
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). X Yes No
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of March 21, 2003 was approximately $692,950,000. The total
number of shares of Common Stock issued and outstanding as of March 21, 2003 was
19,658,146.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A within 120
days after the end of the Registrant's last fiscal year is incorporated by
reference into Part III of this Annual Report on Form 10-K.
EXPLANATORY NOTE
This amendment to the Annual Report on Form 10-K of SEACOR SMIT Inc. for the
fiscal year ended December 31, 2002, that was originally filed on March 31,
2003, is being filed solely to correct typographical errors to Item 1 of Part I,
Items 7 and 8 of Part II and Item 15 of Part IV, including Note 9 to Notes to
Consolidated Financial Statements. This amendment does not reflect events
occurring after the filing of the original 10-K.
TABLE OF CONTENTS
PAGE
PART I ........................................................................................................................1
ITEM 1. BUSINESS................................................................................................................1
General ...........................................................................................................1
Segment and Geographic Information...................................................................................1
Offshore Marine Services.............................................................................................2
"Other" Business Segment.............................................................................................8
Environmental Compliance............................................................................................11
Employees 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 ....................................................................................................................13
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS..................................................13
ITEM 6. SELECTED FINANCIAL DATA................................................................................................14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................................15
Overview 15
Offshore Marine Services............................................................................................15
"Other" Business Segment............................................................................................17
Critical Accounting Policies........................................................................................19
Results of Operations...............................................................................................21
Comparison of Fiscal Year 2002 to Fiscal Year 2001..................................................................23
Comparison of Fiscal Year 2001 to Fiscal Year 2000..................................................................25
Liquidity and Capital Resources.....................................................................................27
Item 7A. Quantitative and Qualitative Disclosures about Market Risk............................................................35
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................................................37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.................................37
PART III ....................................................................................................................37
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT....................................................................37
ITEM 11. EXECUTIVE COMPENSATION................................................................................................37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS........................37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................................37
ITEM 14. CONTROLS AND PROCEDURES...............................................................................................37
PART IV ....................................................................................................................38
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES and REPORTS ON FORM 8-K.......................................................38
FORWARD-LOOKING STATEMENTS
Certain statements discussed in Item 1 (Business), Item 3 (Legal Proceedings),
Item 7 (Management's Discussion and Analysis of Financial Condition and Results
of Operations), Item 7A (Quantitative and Qualitative Disclosures About Market
Risk) and elsewhere in this Form 10-K constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements concerning Management's expectations, strategic
objectives, business prospects, anticipated economic performance and financial
condition and other similar matters involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of results to differ materially from any future
results, performance or achievements discussed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: general economic and business conditions, the
cyclical nature of our business, adequacy of insurance coverage, currency
exchange fluctuations, changes in foreign political, military and economic
conditions, the ongoing need to replace aging vessels, dependence of spill
response revenue on the number and size of spills and upon continuing government
regulation in this area and our ability to comply with such regulation and other
governmental regulation, industry fleet capacity, changes in foreign and
domestic oil and gas exploration and production activity, competition,
regulatory initiatives, customer preferences, marine-related risks, effects of
adverse weather conditions and seasonality on the Company's offshore aviation
business, helicopter related risks, effects of adverse weather and river
conditions and seasonality on inland river operations, the level of grain export
volume, variability in freight rates for inland river barges and various other
matters, many of which are beyond the Company's control and other factors. The
words "estimate," "project," "intend," "believe," "plan" and similar expressions
are intended to identify forward-looking statements. Forward-looking statements
speak only as of the date of the document in which they are made. We disclaim
any obligation or undertaking to provide any updates or revisions to any
forward-looking statement to reflect any change in our expectations or any
change in events, conditions or circumstances on which the forward-looking
statement is based.
PART I
ITEM 1. BUSINESS
GENERAL
Unless the context indicates otherwise, any reference to the "Company" refers to
SEACOR SMIT Inc., incorporated in 1989 in Delaware, 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.
The Company is a major provider of offshore marine services to the oil and gas
exploration and production industry and is one of the leading providers of oil
spill response services to owners of tank vessels and oil storage, processing
and handling facilities. The Company operates an inland river hopper barge
business, and until the merger of Chiles Offshore Inc. ("Chiles") with ENSCO
International Incorporated ("ENSCO") on August 7, 2002 (the "Chiles Merger"),
the Company held a 23.8% equity interest in Chiles, a former owner and operator
of ultra-premium jackup drilling rigs. On December 31, 2002, the Company
acquired the remaining 80% of issued and outstanding stock of Tex-Air
Helicopters, Inc. ("Tex-Air") that it did not already own (the "Tex-Air
Acquisition"). Tex-Air operates a fleet of 36 helicopters that serve the
offshore oil and gas industry in the U.S. Gulf of Mexico.
SEACOR's principal executive offices are located at 11200 Richmond Avenue, Suite
400, Houston, Texas 77082, where its telephone number is (281) 899-4800.
The Company's Internet address is www.seacorsmit.com. All of the Company's
periodic report filings with the Securities and Exchange Commission ("SEC")
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended, are made available, free of charge, through the Company's website,
including the Company's annual report on Form 10-K, quarterly reports on Form
10-Q, and current reports on Form 8-K, and any amendments to those reports.
These reports and amendments are available through the Company's website as soon
as reasonably practicable after the Company electronically files such report or
amendment with the SEC.
SEGMENT AND GEOGRAPHIC INFORMATION
Financial data for segment and geographic areas is reported in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Results of Operations" and "Item 8. Consolidated Financial
Statements - Note 13. Major Customers and Segment Data" included in Parts II and
IV, respectively, of this Annual Report on Form 10-K. The Company's principal
business segment is offshore marine services. Its "Other" business segment
includes environmental services, inland river services, offshore aviation
services and other investments.
1
OFFSHORE MARINE SERVICES
GENERAL
The Company's offshore marine service business is primarily dedicated to
operating a diversified fleet of offshore support vessels that service oil and
gas exploration and production facilities mainly in the U.S. Gulf of Mexico, the
North Sea, Latin America, West Africa and Asia. The Company's vessels deliver
cargo and personnel to offshore installations, handle anchors for drilling rigs
and other marine equipment, support offshore construction and maintenance work
and provide standby safety support and oil spill response services. From time to
time, vessels service special projects, such as well stimulation, seismic data
gathering and freight hauling. In addition to vessel services, the Company's
offshore marine service business offers logistics services, which include
shorebase, marine transport and other supply chain management services also in
support of offshore oil and gas exploration and production operations.
FLEET
GENERAL. As of December 31, 2002, the average age of SEACOR's fleet was
approximately 15.0 years. Excluding standby safety vessels, the average age of
the fleet was approximately 13.8 years. The Company believes that after vessels
have been in service for approximately 25 years (20 years for crewboats and 30
years for certain standby safety vessels), the level of expenditures (which
typically increase with vessel age) necessary to satisfy required marine
certification standards may not be economically 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. In each of the three years ended December 31,
2000, 2001 and 2002, the offshore marine service business segment accounted for
82%, 92% and 91%, respectively, of the Company's consolidated operating
revenues.
The Company's fleet is primarily comprised of the following vessel types:
ANCHOR HANDLING TOWING SUPPLY. Anchor handling towing supply vessels range in
size and capacity and are equipped with winches capable of towing drilling rigs
and lifting and positioning their anchors. At present, the horsepower and pounds
of winch line pull capacity for these vessels range from approximately 6,000
horsepower to 15,000 horsepower and 600,000 lbs. to 1,000,000 lbs.,
respectively. These vessels also have varying capacity to transport deck cargo
and liquid mud, potable and drill water, diesel fuel and dry bulk cement in
compartments below deck. A number of anchor handling towing supply vessels are
equipped with dynamic positioning ("DP") systems that enable them to maintain a
fixed position in close proximity to a rig without the use of tie-up lines.
CREW BOATS. Crew boats transport personnel as well as cargo to and from
production platforms and rigs. Crew vessels built prior to 1990 are generally
100 feet to 110 feet in length. Newer crew vessel designs, also known as Fast
Support Intervention Vessels, are 130 feet to 200 feet in length, have enhanced
cargo carrying capacities, and certain of them are equipped with DP
capabilities. All of the Company's crew vessels travel at high-speeds and are
used primarily to transport cargo on a time sensitive basis.
GEOPHYSICAL, FREIGHT AND OTHER. Certain vessels of the Company are employed in
special project activities such as well stimulation, seismic data gathering and
freight hauling. To meet the requirements of these type of services, the
Company's vessels must generally have special features, such as large deck
space, high electrical generating capacity, high maneuverability and unique
thrusters, extra berthing facilities and long-range cruising capabilities.
MINI-SUPPLY. Mini-supply vessels range in size from 125 feet through 155 feet in
length and serve drilling and production facilities and support offshore
construction and maintenance work. They typically carry deck cargo, liquid mud,
methanol and diesel fuel and water but are not equipped with below deck bulk
tanks for the carriage of dry mud or cement. Mini-supply vessels have bow
thrusters for added maneuverability and are well suited for deepwater production
support.
STANDBY SAFETY. Standby safety vessels operate in the UK 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, function as supply
vessels.
SUPPLY. Supply vessels serve drilling and production facilities and support
offshore construction and maintenance work. They are differentiated from other
vessels by cargo-carrying flexibility and capacity, which is typically
determined by the size of a vessel. In addition to deck cargo, supply vessels
transport liquid mud, potable and drill water, diesel fuel and dry bulk cement
below deck. Generally, customers prefer vessels with large liquid mud and bulk
cement capacity and large areas of clear deck space. For certain projects,
characteristics such as maneuverability, fuel efficiency or firefighting
capability may also be important. The Company's supply vessels range in length
from 166 feet to 250 feet and certain of those vessels have DP capabilities.
2
TOWING SUPPLY. Towing supply vessels perform the same functions as supply
vessels but are equipped with more powerful engines (3,000 to 6,000 horsepower)
and deck mounted winches, 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. Utility vessels service offshore production facilities and also support
offshore maintenance and construction work. They are capable of transporting
fuel, water, deck cargo and personnel and certain of the fleet have enhanced
firefighting and pollution response features. Utility vessels range in length
from 96 feet to 125 feet.
The following table sets forth a count of the Company's vessel types as of
December 31 for each year indicated and the percent of offshore marine service
segment operating revenues earned by vessel type that were owned, chartered-in
or managed by the Company in each twelve-month period ending December 31 for
each year indicated.
2000 2001 2002
-------------------------------------- -------------------
Vessel Type Count Percent Count Percent Count Percent
-------------------------------------------- ----- ------- ----- ------- ----- -------
Anchor Handling Towing Supply................ 27 21.4% 31 21.9% 28 22.9%
Crew......................................... 90 25.7% 91 21.3% 96 19.9%
Geophysical, Freight and Other............... 3 0.9% 3 0.5% 2
-
Mini-Supply.................................. 8 1.6% 26 5.5% 33 6.3%
Standby Safety............................... 37 12.5% 30 10.2% 26 11.3%
Supply and Towing Supply..................... 74 25.7% 79 31.2% 71 31.3%
Utility...................................... 66 8.2% 65 6.6% 45(2) 4.9%
Other(1)..................................... - 4.0% - 2.8% - 3.4%
------- ------- ------ ------ ------ ------
305 100.0% 325 100.0% 301(3) 100.0%
======== ======= ====== ====== ====== ======
---------------------
(1) Consists primarily of the percent of operating revenues
earned by the logistics activities of the Company's
offshore marine service segment.
(2) Fifteen utility vessels were retired from service in
2002 and are excluded from fleet count.
(3) The fleet includes 200 vessels owned by wholly-owned
subsidiaries of the Company. The Company also
chartered-in 40 vessels and managed 6 vessels as of
year end. As of year end, joint ventures in which the
Company owned a 50% or less interest owned 45 vessels
and chartered-in 5 vessels from third parties and joint
ventures in which the Company owned a majority interest
owned 5 vessels. See "Joint Ventures" for discussion of
joint venture vessel activity.
ACQUISITIONS AND DISPOSITIONS. The Company actively monitors opportunities to
buy and sell vessels to maximize the overall utility and flexibility of its
fleet. Fleet additions have resulted principally from the purchase of vessels
from competitors, newly constructed vessels and equity holdings in joint
ventures that own vessels. See "Joint Ventures" for discussion of joint venture
vessel activity. The following table sets forth acquisitions by the Company in
the last five years by vessel type.
Vessel Type 1998 1999 2000 2001 2002 Total
-------------------------------- ----- ------- ----- ------- ----- -------
Anchor Handling Towing Supply... 3 3 1 3 2 12
Crew............................ 4 4 2 4 5 19
Mini-Supply..................... - 2 - 19 4 25
Standby Safety.................. - - 16 - - 16
Supply and Towing Supply........ 3 1 6 14 1 25
Utility......................... - - - 11 - 11
------- ------- ------ ------ ------ ------
10 10 25 51 12 108
======== ======= ====== ====== ====== ======
The following table sets forth sale transactions in the last five years by
vessel type. These sale transactions include 5 utility vessels and 1 mini-supply
vessel transferred to the Company's environmental service business segment and 4
towing supply, 4 crew, 2 utility, 1 anchor handling towing supply and 1
mini-supply vessel sold to joint venture companies in which the Company owns a
50% or less interest. See "Joint Ventures" for discussion of joint venture
vessel activity. Thirty-six of the vessels sold in the last five years remain
bareboat chartered-in by the Company pursuant to sale-leaseback transactions.
Leaseback vessels include 20 crew, 12 supply and towing supply, 2 anchor
handling towing supply and 2 mini-supply.
Vessel Type 1998 1999 2000 2001 2002 Total
-------------------------------- ----- ------- ----- ------- ----- -------
Anchor Handling Towing Supply... 8 1 1 1 4 15
Crew............................ 5 11 1 13 10 40
Geophysical, Freight and Other.. - - - - 1 1
Mini-Supply..................... - - - 4 - 4
Standby Safety.................. - - 2 6 3 11
Supply and Towing Supply........ 14 - 9 5 8 36
Utility......................... 7 2 8 10 7 34
------- ------- ------ ------ ------ ------
34 14 21 39 33 141
======== ======= ====== ====== ====== ======
3
MARKETS
The Company operates vessels in five principal geographic regions. The table
below sets forth by region, at the dates indicated, the vessel types that are
owned, chartered-in, managed, joint ventured and pooled.
At December 31,
-----------------------------------------
Vessel Type by Geographic Market 2000 2001 2002
--------------------------------------------------------- -------- ------- ------
Domestic, principally in the U.S. Gulf of Mexico:
Anchor Handling Towing Supply......................... 7 4 5
Crew.................................................. 66 60 63
Geophysical, Freight and Other........................ 2 2 1
Mini-Supply........................................... 6 23 29
Supply and Towing Supply.............................. 24 20 18
Utility............................................... 61 62 42
-------- ------- -------
Total Domestic Fleet...................................... 166 171 158
-------- ------- -------
Latin America:
Anchor Handling Towing Supply......................... 6 9 9
Crew.................................................. 6 10 10
Mini-Supply........................................... 2 3 4
Supply and Towing Supply.............................. 18 20 19
Utility............................................... 3 3 3
-------- ------- -------
35 45 45
-------- ------- -------
North Sea:
Anchor Handling Towing Supply......................... - 2 3
Standby Safety........................................ 37 30 26
Supply and Towing Supply.............................. 4 15 9
-------- ------- -------
41 47 38
-------- ------- -------
West Africa:
Anchor Handling Towing Supply......................... 6 9 7
Crew.................................................. 8 11 13
Supply and Towing Supply.............................. 13 11 12
Utility............................................... 2 - -
-------- ------- -------
29 31 32
-------- ------- -------
Asia:
Anchor Handling Towing Supply......................... 6 6 3
Crew.................................................. 9 9 10
Supply and Towing Supply.............................. 5 6 6
-------- ------- -------
20 21 19
-------- ------- -------
Other Foreign:
Anchor Handling Towing Supply......................... 2 1 1
Crew.................................................. 1 1 -
Geophysical, Freight and Other........................ 1 1 1
Supply and Towing Supply.............................. 10 7 7
-------- ------- -------
14 10 9
-------- ------- -------
Total Foreign Fleet....................................... 139 154 143
-------- ------- -------
Total Fleet............................................... 305 325 301
======== ======= =======
DOMESTIC. The Company is a major provider of vessel services primarily to the
oil and gas exploration and production industry operating in the U.S. Gulf of
Mexico. At December 31, 2002, the Company's U.S. fleet was comprised of 158
vessels, including 3 that participate in a joint venture. See "Joint Ventures"
for discussion of joint venture vessel activity. Anchor handling towing supply,
supply and towing supply, and certain of the Company's crew and mini-supply
vessels support exploration activities while utility and certain of the
Company's other crew and mini-supply vessels support production activities. A
significant number of the Company's drilling support vessels generally service
rigs operating in deep water. The Company's domestic vessels may also be
employed in geophysical, freight and other special purpose operations. At
December 31, 2002, 39 companies were operating approximately 357 supply and
towing supply, 225 crew, 165 utility and mini-supply and 27 anchor handling
towing supply vessels in the U.S. Gulf of Mexico.
LATIN AMERICA. The Company provides vessel services in Latin America for both
exploration and production activities. At December 31, 2002, the Company owned,
either directly or through joint ventures, and/or operated 45 vessels in this
region, including 26 in Mexico, 8 in Trinidad and 11 in Brazil, Chile, Argentina
and Venezuela. The Company's joint ventures owned 25 of its Latin American
vessels and chartered-in an additional 12 vessels, 7 from the Company and 5 from
other vessel owners. See "Joint Ventures" for discussion of joint venture vessel
activities. A Brazilian customer also charters four vessels from the Company.
Operating conditions in Mexico are similar to those in the U.S. Gulf of Mexico;
however, demand for vessels in Mexico has been affected historically, to a
significant degree, by Mexican government policies, particularly those relating
to Petroleos Mexicanos ("PEMEX"), the Mexican national oil company. At December
31, 2002, 9 companies were operating approximately 200 vessels from ports in
Mexico.
4
Trinidad has continued to grow as an exporter of liquefied natural gas ("LNG"),
which has resulted in increased offshore drilling activities necessary to supply
LNG production facilities with natural gas feedstock. A major oil discovery in
2002 off the east coast of Trinidad is also expected to generate demand for
vessels in the coming year. Demand for vessel services in Brazil, Argentina and
Chile were steady throughout 2002 although lower in Venezuela. The Company
presently operates one vessel in Venezuela through a joint venture. See "Joint
Ventures" for discussion of joint venture vessel activity.
NORTH SEA. The Company's North Sea fleet, comprised of 38 vessels at December
31, 2002, provides principally standby safety, supply and anchor handling towing
supply vessel services to platform and rig operators in the region, which
encompasses offshore Norway, Denmark, the Netherlands, Great Britain and
Ireland. The Company's fleet includes 5 standby safety vessels managed for third
party owners and 3 additional standby safety vessels that participate in joint
ventures. See "Joint Ventures" for discussion of joint venture vessel activities
and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Offshore Marine Services" for discussion of managed
vessel activity. At December 31, 2002, 8 companies were operating approximately
126 certified standby safety vessels in the North Sea and an additional 145
supply and 93 anchor handling towing supply vessels were working in this region.
Demand in the North Sea market for standby safety vessel services developed in
1991 after the United Kingdom promulgated legislation requiring offshore
operations to maintain higher specification standby safety vessels. The
legislation 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.
WEST AFRICA. At December 31, 2002, the Company owned and/or operated and managed
31 vessels in this region, and one of its joint ventures bareboat chartered-out
a vessel. See "Joint Ventures" for discussion of joint venture vessel
activities. Approximately 50% of the Company's West African fleet operates from
ports in Nigeria and the remainder of its vessels work from ports in Equatorial
Guinea, Gabon, Cameroon, Congo, Angola, Guinea, and South Africa. Competition is
very concentrated in West Africa with only 6 principal vessel operators managing
approximately 240 vessels. The need for vessels in this market is primarily
dependent upon multi-year offshore oil and gas exploration and development
projects and production support.
ASIA. At December 31, 2002, the Company's Asian fleet was comprised of 19
vessels, including 10 vessels that participate in joint ventures. See "Joint
Ventures" for discussion of joint venture vessel activities. At December 31,
2002, 17 companies were operating more than 250 vessels in this region in
support of exploration, production, construction and special project activities.
OTHER FOREIGN. At December 31, 2002, nine of the Company's other foreign vessels
operated from ports located in Egypt, Greece and France. Joint ventures own
eight of these vessels and one vessel owned by the Company was bareboat
chartered-out. See "Joint Ventures" for discussion of joint venture vessel
activities.
JOINT VENTURES
The Company has formed or acquired interests in offshore marine joint ventures
to enter new markets, enhance its marketing capabilities and facilitate
operations in certain foreign markets. These arrangements have allowed the
Company to expand its fleet or marine-related operations while diversifying the
risks and reducing the capital outlays associated with independent expansion.
The table below sets forth, at the dates indicated, the various types of joint
venture vessels that are owned and chartered-in from companies other than
SEACOR.
At December 31,
----------------------------------------------
Vessel Type 2000 2001 2002
---------------------------------------------------------- ------------- -------------- --------------
Anchor Handling Towing Supply......................... 6 7 5
Crew.................................................. 9 12 15
Geophysical, Freight and Other........................ 1 1 1
Mini-Supply........................................... - 2 3
Standby Safety........................................ 9 3 3
Supply and Towing Supply.............................. 29 27 26
Utility............................................... 3 2 2
------------- -------------- --------------
57 54 55(1)
============= ============== ==============
--------------------
(1) The fleet count at December 31, 2002 included 45 vessels in which the
Company owned a 50% or less interest, 2 supply, 2 standby safety and 1 crew
vessel in which the Company owned a majority interest and 5 additional
vessels were chartered-into a minority owned joint venture.
TMM JOINT VENTURE. In 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") that is comprised of two
corporations, Maritima Mexicana, S.A., a Mexican corporation, and SEAMEX
International Ltd., a Liberian corporation, in each of which the Company owns a
40% equity interest. The TMM Joint Venture has enabled the Company to expand
into a market contiguous to the U.S. Gulf of Mexico and provides greater
5
marketing flexibility for the Company's fleet in the region. At December 31,
2002, the TMM Joint Venture was comprised of 26 vessels, 15 owned and 11
chartered-in, including 6 vessels provided by the Company and 5 vessels provided
by other vessels owners.
LOGISTICS JOINT VENTURE. The Company holds a 67% equity interest in Energy
Logistics, Inc., a joint venture corporation that provides shorebase, marine
transport and other supply chain management services in support of offshore
exploration and production operations primarily in the U.S. Gulf of Mexico that
was incorporated in 1996. Energy Logistics, Inc. owns Liberty Services, Inc.
("Liberty"), which has provided base services, equipment rental and personnel in
support of the offshore energy industry for over 15 years. Energy Logistics,
Inc. and Liberty (collectively referred to as "ELI") operate shorebase support
facilities in Louisiana and employ vessels owned by the Company in its
operations.
PELICAN JOINT VENTURE. In December 2000, the Company entered into a joint
venture owned 50% by each of the Company and Penguin Boat International Limited,
a Singapore corporation ("Penguin"). The joint venture, Pelican Offshore
Services Pte Ltd, also a Singapore corporation ("Pelican"), owns nine Fast
Support Intervention Vessels. The Pelican fleet is currently employed in Asia.
Penguin built eight of the nine Pelican vessels. Pelican currently has offices
in Jakarta, Indonesia and Singapore.
OTHER JOINT VENTURES. At December 31, 2002, the Company participated in 9
additional joint ventures that provided vessel services to the oil and gas
industry. The Company formed certain of these joint ventures and acquired its
interest in other of these joint ventures with the acquisition of businesses and
fleets of vessels. At December 31, 2002, these joint ventures owned 26 vessels,
including 1 remaining to be sold under a joint venture's plan of liquidation,
and chartered-in 1 vessel from the Company. The Company owns a majority interest
in 2 of these joint ventures, which together own 5 vessels. Other joint venture
vessels operate from ports in Trinidad, the U.S., Egypt, Chile, Argentina,
Brazil, Greece, England, Gabon, Venezuela and Russia. An additional joint
venture assists with management of the Company's vessels operating in Nigeria.
CUSTOMERS AND CONTRACT ARRANGEMENTS
The Company offers offshore marine services to over 200 customers, including
major integrated oil companies and large independent oil and gas exploration and
production companies, and has enjoyed long standing relationships with many of
them. The percentage of operating 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, 2002,
there was no one customer from whom the Company's offshore marine service
segment earned 10% or more of its aggregate operating revenues.
The majority of the vessels in the Company's fleet are time chartered to
customers pursuant to which the customer rents a vessel and the Company provides
all necessary support for its safe and efficient operation. Vessel operating
expenses are typically the responsibility of the Company except that generally
the customer provides fuel and lubricants. In return for providing time charter
services, the Company is paid a daily rate of hire. The Company also
charters-out vessels from its fleet to customers under bareboat charter
agreements. Pursuant to these agreements, the Company provides only the vessel
to the customer, and the customer assumes responsibility to provide for all of
the vessel's operating expenses and generally assumes all risk of operation. The
daily rate of hire that the Company charges under a bareboat charter agreement
is lower than that under a time charter agreement.
Customers for 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.
INDUSTRY HAZARDS AND INSURANCE
Vessel operations involve inherent risks associated with hazards, such as
adverse weather conditions, collisions, fire, and mechanical failures, which may
result in injury to personnel, damage to equipment, loss of operating revenues
and increased costs. The Company maintains hull, liability, marine war risk,
general liability, workers compensation and other insurance customary in the
industry.
Recent terrorist attacks, the continuing threat of terrorist activity and
economic and political uncertainties have led to significant increases in
premiums paid by the Company for much of its insurance protection. There is no
assurance that in the future the Company will be able to maintain its existing
coverage or that it will not experience further substantial increases in
premium. There can also be no assurance that the Company's liability coverage
will be adequate to cover all potential claims that may arise.
6
RISKS OF FOREIGN OPERATIONS
For the years ended December 31, 2000, 2001 and 2002 approximately 30%, 42% and
51%, respectively, of the Company's offshore marine service operating revenues
were derived from its foreign operations. The Company's foreign offshore marine
service 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, terrorist attacks,
fluctuating currency values, hard currency shortages, controls of currency
exchange, the repatriation of income or capital, import-export quotas and other
forms of public and governmental regulation, all of which are beyond the control
of the Company. It is not possible to predict whether any of these 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.
INDUSTRY CONDITIONS
Exploration and drilling activities, which affect the demand for vessels, are
influenced by a number of factors, including the current and anticipated prices
of oil and natural gas, the expenditures by oil and gas companies for
exploration and development and the availability of drilling rigs. In addition,
demand for drilling services remains dependent on a variety of political and
economic factors beyond the Company's control, including worldwide demand for
oil and natural gas, the ability of the Organization of Petroleum Exporting
Countries ("OPEC") to set and maintain production levels and pricing, the level
of production of non-OPEC countries and the policies of various governments
regarding exploration and development of their oil and natural gas reserves. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" for discussion of current market conditions.
COMPETITION
The offshore marine service industry is highly competitive in each of the
markets in which the Company operates. In addition to price, service and
reputation, the principal competitive factors for 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 that, other than the Company, only Tidewater Inc. 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. See "Markets" for the number of competitors in the five principal
geographical regions in which the Company operates.
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 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.: (i) the corporation
must be organized under the laws of the United States or of a state, territory
or possession thereof, (ii) each of the president or other chief executive
officer and the chairman of the board of directors of such corporation must be a
U.S. citizen, (iii) 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 (iv) 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) limits the aggregate percentage ownership by non-U.S.
citizens 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, 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
7
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, Argentina, Trinidad, Mexico, the United Kingdom, and the Marshall
Islands. The 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 UK pursuant to the UK 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, certain
bulk chemical materials used in drilling activities, rig-generated wastes for
delivery to waste disposal contractors onshore, and 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 the Oil Pollution Act of 1990, as amended ("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 the Company's
offshore marine operations include, among other things, the Resource
Conservation and Recovery Act, as amended ("RCRA"), which regulates the
generation, transportation, storage and disposal of on-shore hazardous and
non-hazardous wastes; the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), which imposes strict and 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 offshore marine 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, 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.
"OTHER" BUSINESS SEGMENT
ENVIRONMENTAL SERVICES
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 OPA 90 and
various state regulations. The Company's environmental services are provided
primarily through its wholly-owned subsidiaries, National Response Corporation
("NRC"), International Response Corporation ("IRC") and The O'Brien's Group,
Inc. These services include training, consulting and supervision for emergency
preparedness, response and crisis management associated with oil or hazardous
material spills, fires and natural disasters and maintaining specialized
equipment for immediate deployment in response to spills and other events.
The market for contractual oil spill response and other related training and
consulting services grew substantially since 1990, when the United States
Congress passed OPA 90 after the Exxon Valdez oil 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
8
a spill affecting 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. Over a decade since OPA 90's
enactment, the market for these services has stabilized and has become very
competitive for the numerous companies that now provide related services.
NRC owns and maintains specialized equipment that is positioned in designated
areas to comply with regulations promulgated by the Coast Guard and has
personnel trained to respond to oil spills as required by customers and
regulations. NRC also owns 16 vessels and charters-in 2 vessels, which are
outfitted with specialized equipment to respond to marine oil spills. When an
oil spill occurs, the Company mobilizes the appropriate 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 a network of independent oil spill response contractors that may
assist it with the provisioning of equipment and personnel.
The Company has developed customized training programs for industrial companies
that 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 drills and other response exercises and drafts
vessel response plans. The Company's drill services and training programs are
offered both on a stand-alone basis and as part of its base retainer services.
The Company offers its retainer services and oil spill response services
primarily to the domestic and international maritime 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 on one-time basis, including, under certain
circumstances, the Coast Guard. 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 operates its environmental service business internationally,
primarily through IRC. Client services of IRC include oil spill response,
training, exercise support and special projects in assessing risk of spills,
response preparedness, strategies and resource requirements. International
response services are currently provided in Southeast Asia, the Caribbean, the
Middle East, West Africa and Latin America. Joint ventures have been formed with
local partners in Thailand and Brazil to provide spill response and other
services to multinational oil companies, governments and industries. Oil spill
response and related consulting service revenues derived from foreign operations
have not been material.
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 holds OSRO
classification under the current Coast Guard guidelines for every port in the
continental United States, Hawaii and the Caribbean.
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 damages arising from its response efforts, except for deaths,
personal injuries or 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.
INLAND RIVER SERVICES
The Company's inland river business was established in the third quarter of 2000
upon its acquisition of newly constructed inland river hopper barges ("barges")
and was further expanded in December 2000 upon acquiring SCF Corporation
("SCF"), a company that owned and operated barges. SCF has been engaged in the
business of operating and managing barges since 1983.
The Company's barges service the agriculture and industrial sectors within the
United States that are strategically aligned along the Mississippi River and its
tributaries. The principal cargoes carried by the Company's barges are grain and
other bulk commodities. The Company's barges are each capable of transporting
approximately 1,500 tons of cargo. The Company has decided to outsource barge
movements to owners and/or operators of towboats, the source of power to move
barges from one location to another along the river system. The combination of a
towboat and barges is commonly referred to as a "tow." The number of barges
9
comprising a tow depends on a variety of factors, including but
not limited to the horsepower of the towboat, river conditions, the direction of
travel and the load and empty mix of the tow.
The barge business has been consolidating for many years. Management believes
that there are five major domestic companies that operate over 1,000 barges
each. There are also three mid-sized barge companies that operate more than 500
but less than 1,000 barges. Approximately 77% of the barge capacity in the
United States is held by the eight largest operators.
Since the inception of its inland river business, the Company has constructed
259 barges, and at December 31, 2002, the Company has contracts to acquire an
additional 61 newly constructed barges in 2003. The following table sets forth
the number of barges owned and operated by the Company as of December 31 for
each of the years indicated.
Barges 2000 2001 2002
---------------------- ------- ------- -------
Owned................. 66 101 295
Joint Ventured........ 11 11 11
Managed............... 185 226 229
------- ------- -------
262 338 535
======= ======= =======
OFFSHORE AVIATION SERVICES
The Company has commenced offshore aviation operations through the acquisition
of Houston-based Tex-Air. Through two separate cash transactions in January and
July of 2002, the Company acquired 20 percent of the outstanding stock of
Tex-Air for aggregate consideration of $0.2 million. The remaining 80 percent of
Tex-Air's common stock was acquired on December 31, 2002 in a stock-for-stock
transaction whereby the Company issued 68,292 shares of Common Stock, which then
had an average market price of $43.84. As security for the selling stockholder's
obligations under the purchase agreement, 6,097 shares issued pursuant to the
transaction were deposited into escrow for a period of eighteen months. The
selling stockholder of Tex-Air has the opportunity to receive additional
consideration of up to $0.9 million based upon certain performance standards
over a twenty-four month period following the date of acquisition.
Tex-Air was founded in March 1988 and provides helicopter transportation
services primarily to oil and gas companies operating in the U.S. Gulf of
Mexico. In addition, its aircraft are utilized in servicing the healthcare
industry and are also used for seismic work, aerial photography and VIP
transportation. Tex-Air also operates a Federal Aviation Administration ("FAA")
approved maintenance repair station and an American Eurocopter Corporation
factory-approved service center in Houston, Texas through which Tex-Air provides
helicopter repair and refurbishment services to customers.
The following table sets forth the type and number of aircraft operated by the
Company as of December 31, 2002:
Passenger
Manufacturer Model Number Engine Capacity
----------------------------------------------------------------------------
Eurocopter AS355 N 1 Twin 5
Eurocopter AS355 F2 2 Twin 5-6
Eurocopter AS355 F1 1 Twin 5
Eurocopter AS350 B2 7 Single 5-6
Eurocopter AS350 B1 1 Single 5
Eurocopter AS350 BA 4 Single 5
Eurocopter AS350 B 2 Single 5
Eurocopter EC 120 B 10 Single 4
Bell 206 B Series 8 Single 4
-----------
36
===========
Tex-Air charters its helicopters to customers primarily through master service
agreements, term contracts and day-to-day charter arrangements. Master service
agreements require incremental payments based on usage, have fixed terms ranging
from one month to five years and generally are cancelable upon notice by either
party in 30 days. Term contracts and day-to-day charter arrangements are
generally non-cancelable without just cause and call for a combination of a
monthly or daily fixed rental fee plus a charge based on usage. At December 31,
2002, Tex-Air had 22 helicopters operating under master service agreements or
term contracts. The majority of Tex-Air's fleet operates in the U.S. Gulf of
Mexico servicing offshore production facilities, which tend to provide a more
stable revenue stream than servicing the exploration or construction phases of
the oil and gas industry. The principal customers for Tex-Air's helicopter
activities are major oil companies and offshore communication and production
management companies.
The helicopter transportation business is highly competitive in the U.S. Gulf of
Mexico. There are three major and several smaller competitors operating in this
market. In addition, there are several oil and gas operators in the U.S. Gulf of
Mexico that operate their own helicopter fleets. Tex-Air is the fourth largest
independent helicopter company operating in the U.S. Gulf of Mexico. Contracts
for helicopter services are usually obtained through competitive bids, the
10
results of which are typically impacted by an operator's safety record,
demonstrated reliability, price, type and availability of equipment and quality
of service.
Tex-Air is subject to regulations pursuant to the Federal Aviation Act of 1958,
as amended, and other statutes as it carries persons and properties in its
helicopters pursuant to a FAR Part 135 Air Taxi Certificate granted by the FAA.
The FAA regulates flight operations, and in this respect, has jurisdiction over
Tex-Air personnel, aircraft, ground facilities and certain technical aspects of
its operations. In addition to the FAA, the National Transportations Safety
Board is authorized to investigate aircraft accidents and to recommend improved
safety standards and, because of the use of radio facilities in its operations,
Tex-Air is also subject to the Communications Act of 1934.
In general, helicopter operations are potentially hazardous and may result in
incidents or accidents, the risks of which are inherent in the offshore
transportation industry. These hazards may result in injury to personnel, loss
of equipment and operating revenues. Tex-Air conducts training and safety
programs to minimize these hazards. Tex-Air maintains insurance coverage for
legal liabilities to other parties, as well as for damage to its aircraft. There
can be no assurance that Tex-Air's liability coverage will be adequate to cover
all potential claims that may arise. There is also no assurance that Tex-Air
will be able to maintain its existing coverage or that operating revenues will
not be negatively impacted by these hazards in the future.
Tex-Air is subject to federal, state and local laws and regulations relating to
the protection of the environment. The nature of the business of operating and
maintaining helicopters requires that Tex-Air use, store and dispose of
materials that are subject to these laws and regulations. The environmental
protection requirements have become more stringent in recent years; however,
management believes these laws and regulations will not have a material adverse
effect on the Company's business or financial condition.
INVESTMENT IN CHILES
Chiles was formed in 1997 for the purpose of constructing, owning and operating
ultra-premium jackup drilling rigs. The Company consolidated the reporting of
financial information of Chiles from its inception in 1997 until its initial
public offering of common stock in September 2000 (the "Chiles IPO"). As a
consequence of the Chiles IPO, the Company's ownership interest in Chiles was
reduced from 55.4% to 27.3%. Because its ownership interest declined below 50%,
the Company ceased its consolidation of Chiles with that of its own and began
accounting for its ownership interest in Chiles using the equity method.
The Chiles Merger, on August 7, 2002, resulted in the Company receiving $5.25
and 0.6575 shares of ENSCO common stock for each share of Chiles' common stock
it owned at the time of the merger. The Company received $25.4 million and
3,176,646 shares of ENSCO's common stock, valued at $73.4 million on date of
merger, and recognized an after-tax gain of $12.9 million, or $0.61 per diluted
share. Following the Chiles Merger, the Company began accounting for the shares
it owns of ENSCO as available-for-sale securities and now records changes in
their market value each period as adjustments to other comprehensive income.
OTHER ACTIVITIES
In 1998, the Company acquired an interest in the predecessor of Globe Wireless,
L.L.C. ("Globe Wireless") and now owns, through its ownership of senior
convertible preferred units, approximately 38% of the voting units issued by
Globe Wireless. Globe Wireless operates a worldwide network of high frequency
radio stations. The network of stations is a wireless data network initially
targeted at the maritime industry that supports Internet messaging, telex and
facsimile communications. Globe Wireless also provides Satellite messaging
services to the maritime industry.
Also in 1998, the Company entered into a joint venture with an established
private ship-owning and ship-management company in which it owns a 50% interest.
The joint venture currently owns and operates a 52,000 dwt handy-max bulk
carrier that was built in 2001.
In addition, the Company, from time to time, makes investments in other related
businesses.
ENVIRONMENTAL COMPLIANCE
The Company's operations are subject to federal, state, and local laws and
regulations controlling the discharge of materials into the environment or
otherwise relating to the protection of the environment. The Company makes
necessary expenditures and seeks, in all material respects, to comply with these
laws to avoid environmental damage. Compliance with existing environmental laws
has not had a material adverse effect on the Company's operations. However,
future changes in environmental regulations with respect to the oil and gas
industry could adversely affect the Company.
EMPLOYEES
As of December 31, 2002, the Company directly or indirectly employed
approximately 3,400 individuals. Of those directly employed, approximately 1,490
work aboard offshore marine service segment vessels, 95 support offshore
11
aviation flight operations, and 515 serve in administrative, shore support and
managerial capacities, including 367 in the offshore marine business segment,
110 in the environmental business segment, 8 in the inland river business
segment, 10 in the offshore aviation business segment and 20 corporate
employees.
All indirect employees support vessel operations. In Nigeria, a joint venture
company assists with vessel management and, at December 31, 2002, employed
approximately 260 shipboard and 60 administrative, shore support and managerial
personnel. Also at December 31, 2002, the Company's North Sea operations were
provided 980 seamen through various manning agencies.
ITEM 2. PROPERTIES
SEACOR's executive offices are located in Houston, Texas and New York, New York.
Headquarters for the Company's offshore marine and offshore aviation business
segments are located in Houston, Texas and headquarters for the Company's inland
river and environmental business segments are located in St. Louis, Missouri and
New York, New York, respectively.
The Company maintains additional facilities in support of all of its lines of
business. Domestically, the offshore marine service segment's largest base of
operation is located in Morgan City, Louisiana and adjacent communities that
include administrative offices, warehouse facilities and a waterfront site for
vessel dockage. Other domestic offshore marine service segment facilities are
located primarily in Louisiana cities that serve as ports-of-call for many
customers and represent strategically dispersed operating bases along the U.S.
Gulf of Mexico. In its foreign operations, the offshore marine service segment
maintains offices in the United Kingdom, Singapore, France and the Netherlands
in support of its widely dispersed foreign fleet. The environmental service
segment maintains offices in 14 cities, primarily located in the U.S. The inland
river and offshore aviation business segments have facilities along the U.S.
Gulf of Mexico coast. The Company believes that its facilities, including
waterfront locations used for vessel dockage and the undertaking of certain
vessel repair work, provide an adequate base of operations for the foreseeable
future.
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 2002.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Officers of the Company serve at the pleasure of the Board of Directors. The
name, age and offices held by each of the executive officers of the Company at
December 31, 2002 were as follows:
Name Age Position
-------------------------------- ------------------ -----------------------------------------------------------------
Charles Fabrikant 58 Chairman of the Board of Directors,
President and Chief Executive Officer
Randall Blank 52 Executive Vice President, Chief Financial
Officer and Secretary
Milton Rose 58 Vice President
Rodney Lenthall 57 Vice President
Lenny Dantin 50 Vice President and Chief Accounting Officer
Dick Fagerstal 42 Senior Vice President, Corporate Development and Treasurer
Alice Gran 53 Vice President and General Counsel
Andrew Strachan 55 Vice President
Charles Fabrikant has been Chairman of the Board and Chief Executive Officer of
SEACOR 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
five years preceding its acquisition by SEACOR in December 2000, Mr. Fabrikant
served as Chairman of the Board and Chief Executive Officer of SCF. For more
than the past five years, Mr. Fabrikant has been the President of Fabrikant
International Corporation ("FIC"), a privately owned corporation engaged in
marine operations and investments that may be deemed an affiliate of the
Company. Mr. Fabrikant is a director of Globe Wireless, and prior to the Chiles
Merger, Mr. Fabrikant served as Chairman of the Board of Chiles. 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. 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 and, since October 1997, has been the Chief Executive Officer of the
Company's environmental service segment. Mr. Blank is a director of Globe
Wireless, and prior to the Chiles Merger, Mr. Blank served as a director of
Chiles.
Milton Rose has been a Vice President of SEACOR and President and Chief
Operating Officer of its Americas Division since January 1993. Mr. Rose also
serves as a director of various SEACOR joint ventures. From 1985 to January
1993, Mr. Rose was Vice President-Marine Division for Bay Houston Towing
Company, a provider of ship docking and contract towing services.
Rodney Lenthall has been a Vice President of SEACOR and President of its
International Division since November 2000. In addition, Mr. Lenthall has been a
director of certain SEACOR subsidiaries since May 1998 and of Globe Wireless
since 1999. Mr. Lenthall was CEO of OIL Ltd. from 1990 to 1998, and a director
of the parent company, Ocean Group PLC, a major UK transport company, from 1993
until April 1998. Mr. Lenthall served as a consultant to the Company from May
1998 until November 2000. He is also a supervisory board director of Viktor
Lenac Shipyard, Croatia and Chairman of The Shipowners P&I Club (Luxembourg).
Lenny Dantin has been Vice President and Chief Accounting Officer of SEACOR
since March 1991. From October 1992 to May 2000, Mr. Dantin was Treasurer of
SEACOR. In addition, Mr. Dantin has been an officer and director of certain of
SEACOR's subsidiaries since January 1990. Since 1994, Mr. Dantin has been a
director of the two companies comprising the TMM Joint Venture.
Dick Fagerstal has served as Senior Vice President, Corporate Development since
February 2003 and has served as Treasurer since May 2000. From August 1997 to
February 2003, Mr. Fagerstal served as Vice President of Finance. Mr. Fagerstal
has also served as a director of certain of SEACOR's subsidiaries since August
1997. Prior to the Chiles Merger, Mr. Fagerstal served as a director, Senior
Vice President and Chief Financial Officer of Chiles. From February 1986 to
August 1997, Mr. Fagerstal served as a bank officer for the New York office of
Den norske Bank ASA.
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.
Andrew Strachan has been a Vice President of SEACOR since April 1997 and a
director and officer of certain SEACOR subsidiaries since December 1996. From
prior to 1996 and until joining SEACOR, Mr. Strachan held various positions with
SMIT that included Group Director for SMIT's offshore shipping business.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR THE COMPANY'S COMMON STOCK
SEACOR's Common Stock trades on the New York Stock Exchange (the "NYSE") under
the trading symbol "CKH." Set forth in the table below for the periods presented
are the high and low sale prices for SEACOR's Common Stock.
HIGH LOW
------------ -----------
Fiscal Year Ending December 31, 2001:
First Quarter..................................... 54.5000 44.5000
Second Quarter.................................... 49.2800 43.0000
Third Quarter..................................... 48.1500 34.5100
Fourth Quarter.................................... 47.5000 34.2500
Fiscal Year Ending December 31, 2002:
First Quarter..................................... 50.1900 40.1000
Second Quarter.................................... 51.7000 44.3000
Third Quarter..................................... 47.9800 37.0500
Fourth Quarter.................................... 44.5000 37.7500
Fiscal Year Ending December 31, 2003:
First Quarter (through March 21, 2003)............ 44.8400 34.2700
As of March 21, 2003, there were 353 holders of record of Common Stock.
13
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 dividends in
the foreseeable future. Instead, SEACOR intends to retain earnings for working
capital and to finance the expansion of its business. Any payment of future
dividends will be at the discretion of SEACOR's Board of Directors and will
depend upon, among other factors, the Company's earnings, financial condition,
capital requirements, level of indebtedness and contractual restrictions,
including the provisions of the Company's revolving credit facility.
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.
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 "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Item 8. Consolidated Financial
Statements" included in Parts II and IV, respectively, of this Annual Report on
Form 10-K.
Year Ended December 31,
-------------------------------------------------------------------------
1998 1999 2000 2001 2002
------------- ------------- ------------- ------------- -------------
INCOME STATEMENT DATA:
Operating Revenues...............................$ 385,791 $ 289,425 $ 339,941 $ 434,790 $ 403,158
Costs and Expenses:
Operating expenses............................ 187,722 166,786 201,452 234,551 249,892
Administrative and general.................... 36,102 34,744 39,548 49,980 53,265
Depreciation and amortization................. 36,449 41,282 51,189 58,324 56,244
------------- ------------- ------------- ------------- -------------
Operating Income................................. 125,518 46,613 47,752 91,935 43,757
Net interest income (expense).................... 2,548 (1,835) (10,027) (8,452) (8,231)
Income from equipment sales or retirements, net.. 38,338 1,677 7,628 9,030 8,635
Other income (expense)(1)........................ 6,492 (2,939) 16,305 11,208 24,319
------------- ------------- ------------- ------------- -------------
Income before income taxes, minority interest,
equity in net earnings of 50% or less owned
companies and extraordinary item.............. 172,896 43,516 61,658 103,721 68,480
Income tax expense............................... 60,293 15,249 20,580 36,058 23,852
------------- ------------- ------------- ------------- -------------
Income before minority interest, equity in
net earnings of 50% or less owned
companies and extraordinary item.............. 112,603 28,267 41,078 67,663 44,628
Minority interest in (income) loss of
subsidiaries.................................. (1,612) 1,148 (3,393) (372) (226)
Equity in net earnings (losses) of 50% or
less owned companies......................... 13,627 330 (3,565) 4,306 3,705
------------- ------------- ------------- ------------- -------------
Income before extraordinary item................. 124,618 29,745 34,120 71,597 48,107
Extraordinary item - gain (loss) on extinguishment
of debt, net of tax.............................. 1,309 1,191 - (896) (1,520)
------------- ------------- ------------- ------------- -------------
Net income.......................................$ 125,927 $ 30,936 $ 34,120 $ 70,701 $ 46,587
============= ============= ============= ============= =============
Income before Extraordinary Item(2) :
Basic earnings per common share............$ 6.32 $ 1.66 $ 2.02 $ 3.68 $ 2.41
Diluted earnings per common share.......... 5.45 1.64 1.92 3.47 2.35
STATEMENT OF CASH FLOWS DATA:
Cash provided by operating activities.........$ 122,141 $ 47,872 $ 65,251 $ 111,420 $ 66,795
Cash provided by (used in) investing
activities................................. (149,202) 39,779 (31,012) (76,638) 6,167
Cash provided by (used in) financing
activities................................. 27,308 (82,686) 14,222 (77,455) 87,205
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents, marketable securities
and construction reserve funds.............$ 439,204 $ 273,499 $ 347,159 $ 258,055 $ 525,931
Total assets.................................. 1,257,975 1,196,991 1,132,730 1,298,138 1,487,107
Long-term debt................................ 472,799 465,661 377,955 256,675 402,118
Stockholders' equity.......................... 542,782 508,130 552,552 743,698 804,951
-----------------------
(1) In 2000, 2001 and 2002, other income included gains and losses from the
sale of marketable securities, derivative transactions, the sale of
investments in 50% or less owned companies and net foreign currency gains
(losses). In 2000, other income additionally included a gain upon the sale
of shares of Chiles. In 2002, other income additionally included gains
resulting from the Chiles Merger.
(2) Computations of basic and diluted income before extraordinary item per
common share give effect for SEACOR's June 15, 2000 three-for-two stock
split.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Through its subsidiaries and joint venture arrangements, the Company's principal
business segment is primarily dedicated to operating a diversified fleet of
offshore support vessels that service oil and gas exploration and production
facilities mainly in the U.S. Gulf of Mexico, the North Sea, Latin America, West
Africa and Asia. The Company's vessels deliver cargo and personnel to offshore
installations, handle anchors for drilling rigs and other marine equipment,
support offshore construction and maintenance work and provide standby safety
support and oil spill response services. From time to time, vessels service
special projects, such as well stimulation, seismic data gathering and freight
hauling. In addition to vessel services, the Company's offshore marine service
business offers logistics services, which include shorebase, marine transport
and other supply chain management services also in support of offshore oil and
gas exploration and production operations.
The Company is also a leading provider of oil spill response services to owners
of tank vessels and oil storage, processing and handling facilities. The Company
operates an inland river barge business, and until the Chiles Merger on August
7, 2002, the Company held a 23.8% equity interest in Chiles, a former owner and
operator of ultra-premium jackup drilling rigs. On December 31, 2002, the
Company completed the acquisition of Tex-Air, a company providing helicopter
transportation services primarily to oil and gas companies operating in the U.S.
Gulf of Mexico.
OFFSHORE MARINE SERVICES
The Company's offshore marine service segment provides marine transportation,
logistics and related services primarily dedicated to supporting oil and gas
exploration and production.
Since its inception, the Company has actively monitored opportunities to buy and
sell vessels to maximize the overall utility and flexibility of its fleet. Fleet
growth has occurred principally through the purchase of vessels from competitors
and equity holdings in joint ventures that own vessels and through construction
of new equipment. Since 1997 and in support of fleet expansion, the Company has
regularly deposited proceeds from the sale of many of its vessels into
construction reserve fund accounts for the express 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 those vessels. See
"Liquidity and Capital Resources - Cash and Marketable Securities" for
additional discussion of construction reserve funds.
The offshore marine service segment's operating revenues are primarily affected
by the number of vessels owned and bareboat and time chartered-in, as well as
rates per day worked and utilization of the Company's fleet. Overall utilization
for any vessel with respect to any period is the ratio of aggregate number of
days worked by such vessel to total calendar days available during such period.
The rate per day worked for any vessel with respect to any period is the ratio
of total time charter revenue of such vessel to the aggregate number of days
worked by such vessel for such period.
Rates per day worked and utilization of the Company's fleet are a function of
demand for and availability of marine vessels, which are closely aligned with
the level of exploration and development of offshore areas. The level of
exploration and development of offshore areas is affected by both short-term and
long-term trends in oil and gas prices, which in turn are related to the demand
for petroleum products and the current availability of oil and gas resources.
Over the three year period from 2000 through 2002, demand for offshore rigs
peaked in March 2001 at 470 rigs and declined to approximately 420 rigs at year
end 2001, where it has remained through year end 2002. The decline in offshore
rig demand has been greatest in the U.S. Gulf of Mexico. Drilling activity has
traditionally been linked to the cash flow of oil and gas companies, which is
directly related to oil and natural gas commodity prices. High oil and natural
gas prices have historically resulted in greater drilling activity, which
increases the demand for the Company's services. The decline in rig demand since
2001 has tracked oil and natural gas commodity prices until recently. Although
oil and natural gas prices have increased during the second half of 2002 and
risen further in 2003, this has yet to produce an increase in drilling activity.
While the Company remains hopeful that drilling demand will pick-up in 2003, the
year began with less offshore activity than during the same period in 2002 in
most of the major markets in which the Company operates.
15
The table below sets forth rates per day worked and utilization data for the
Company's fleet during the periods indicated.
Year Ended December 31,
----------------------------------------------
Fleet 2000 2001 2002
---------------------------------------------------------- ------------- -------------- --------------
Rates per Day Worked ($):(1)(2)
Anchor Handling Towing Supply......................... 11,410 13,548 13,067
Crew.................................................. 2,645 3,313 3,216
Geophysical, Freight and Other........................ 5,341 5,406 -
Mini-Supply........................................... 2,041 3,071 2,854
Standby Safety........................................ 5,328 5,448 5,935
Supply and Towing Supply.............................. 5,251 7,771 7,985
Utility............................................... 1,609 1,895 1,755
Overall Utilization (%):(1)
Anchor Handling Towing Supply......................... 70.7 84.6 78.2
Crew.................................................. 94.3 93.4 80.3
Geophysical, Freight and Other........................ 60.4 51.8 -
Mini-Supply........................................... 92.9 91.7 86.9
Standby Safety........................................ 79.0 87.3 87.4
Supply and Towing Supply.............................. 74.1 88.8 88.1
Utility............................................... 55.0 56.1 60.6
Overall Fleet..................................... 75.7 81.1 78.5
--------------
(1) 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, minority-owned joint
venture vessels and managed vessels and include vessels bareboat and time
chartered-in by the Company.
(2) Revenues for certain of the Company's vessels included in the calculation
of rates per day worked, primarily its North Sea fleet, are earned in
foreign currencies, primarily Pounds Sterling, and have been converted to
U.S. dollars at the weighted average exchange rate for the periods
indicated.
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 earned at similar rates. However,
operating expenses associated with vessels that are bareboat and time
chartered-in include charter hire expenses that, in turn, are included in vessel
expenses, but exclude depreciation expense.
The Company earns operating revenues primarily from the time or bareboat
charter-out of vessels, which are owned or bareboat or time chartered-in.
Operating revenues earned from the bareboat charter-out of vessels are generally
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. At various times, the Company provides
management services to other vessel owners. Charter revenues and vessel expenses
of managed vessels are not included in operating results, but the Company does
recognize a management fee in operating revenues.
The table below sets forth the Company's fleet structure at the dates indicated.
At December 31,
--------------------------------------------
Fleet Structure 2000 2001 2002
----------------------------------------------------------- -------------- ------------- -------------
Domestic:
Owned.................................................. 146 146 119
Bareboat Chartered-in (1).............................. 18 23 36
Managed................................................ - - -
Joint Ventures and 2 2 3(3)
Pools(2)................................:
-------------- ------------- -------------
166 171 158
-------------- ------------- -------------
Foreign:
Owned.................................................. 71 88 81
Bareboat Chartered-in(1)............................... 3 2 4
Managed................................................ 5 12 6
Joint Ventures and 60 52 52(3)
Pools(2)................................:
-------------- ------------- -------------
139 154 143
-------------- ------------- -------------
305 325 301
============== ============= =============
-------------------------
(1) The number of vessels chartered-in by the Company has increased since 1999
due primarily to sale-leaseback transactions.
(2) See "Item 1. Business - Joint Ventures."
(3) There were no domestic and foreign pooled vessels at December 31, 2002. Of
those vessels which are joint ventured, 45 participated in joint ventures
in which the Company owned less than a majority interest, 5 participated in
joint ventures in which the Company owned the majority interest and 5 were
chartered-in.
Vessel operating expenses are primarily a function of fleet size and utilization
levels. The most significant vessel operating expense items are wages paid to
marine personnel, maintenance and repairs and marine insurance. In addition to
variable vessel operating expenses, the offshore marine business segment incurs
fixed charges related to the depreciation of property and equipment and
charter-in hire. Depreciation is a significant operating expense and the amount
related to vessels is the most significant component.
16
Drydocking repairs, which are a substantial component of a vessel's maintenance
costs, are expensed when incurred. Under applicable maritime regulations,
vessels must be drydocked twice in a five-year period for inspection by
regulatory authorities. The Company follows an asset management strategy
pursuant to which it defers required drydocking of selected vessels and
voluntarily removes these 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 year or put through survey a
disproportionate number of older and/or larger vessels, which typically have
higher drydocking costs, comparative results may be affected. For the years
ended December 31, 2000, 2001 and 2002, drydocking costs totaled $7.3 million,
$10.1 million and $12.9 million, respectively. During those same periods, the
Company completed the drydocking of 80, 99 and 84 marine vessels, respectively.
The number of main propulsion engine overhauls performed in any year
particularly affects engine repair expenses, which are also a significant
component of the Company's vessel maintenance costs. In recent years, the
Company has generally removed older-lower horsepower main propulsion engine
vessels from its fleet and has replaced them with newer-higher horsepower main
propulsion engine vessels. This change in fleet mix has particularly occurred
with the Company's introduction of the new aluminum constructed Fast Support
Intervention Vessels, in which main propulsion engines may total 9,000
horsepower and exceed the horsepower of older crew vessels sold from the fleet
by as much as 7,000 horsepower. Should the Company undertake a greater number of
scheduled main propulsion engine overhauls and/or have an increase in emergency
engine repairs in a fiscal year, comparative results may be affected. For the
years ended December 31, 2000, 2001 and 2002, main propulsion engine repair
expenses totaled
$13.2 million, $15.2 million and $16.8 million, respectively.
The Company believes that recent terrorist attacks, the continuing threat of
terrorist activity and economic and political uncertainties have resulted in
significant increases in the Company's cost to insure liabilities to other
parties and damage to its vessels and other property. The combined effect of
rising insurance premiums and the assumption by the Company of higher deductible
limits is presently expected to increase operating expenses in 2003 by an amount
between $3.3 million and $5.5 million. There is no assurance that in the future
the Company will be able to maintain its existing coverage or that it will not
experience further substantial increases in premiums.
At December 31, 2002, the Company had 36 vessels bareboat chartered-in pursuant
to sale-leaseback transactions that have been accounted for as operating leases
for financial reporting purposes. Income realized from the sale component of
these transactions has been deferred to the extent of the present value of
minimum lease payments and is being amortized to income as reductions in rental
expense over the applicable lease terms. Charter-in expense, net of deferred
income amortization, resulting from sale-leaseback transactions totaled $3.3
million in 2000, $11.0 million in 2001 and $14.5 million in 2002. Proceeds from
vessels sold pursuant to sale-leaseback transactions have been deposited into
joint depository construction reserve fund accounts with the Maritime
Administration for purposes of acquiring newly constructed vessels and
qualifying for temporary deferral of taxable gains realized from the sale of
those vessels. See "Liquidity and Capital Resources - Cash and Marketable
Securities" for additional discussion of construction reserve funds.
In early 2002, the Company removed 15 utility vessels from service, considering
them held for sale assets pursuant to standards that govern accounting for
long-lived asset disposal. These vessels range in length from 96 feet to 120
feet, approximate 20-22 years of age, and had an aggregate carrying value of
$1.4 million. As of early 2003, 13 of these vessels remain unsold, and due to
the passage of time, no longer meet accounting standards that permit their
classification as held for sale assets. Although the Company will continue to
market these vessels for sale, depreciation will resume on their carrying
amount, adjusted for any depreciation expense that would have been recognized
had the vessels been continuously classified as held and used over the past
year. These retired vessels have been excluded from utilization statistics and
fleet counts.
A portion of the Company's revenues and expenses, primarily related to its North
Sea operations, are received or paid in foreign currencies. For financial
statement reporting purposes, these amounts are translated into U.S. dollars at
the weighted average exchange rates during the relevant period.
"OTHER" BUSINESS SEGMENT
ENVIRONMENTAL SERVICES
The Company's 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.
17
Pursuant to retainer agreements entered into with the Company, certain vessel
owners pay in advance to the Company an annual retainer fee based upon the
number and size of vessels in each such owner's fleet and in some circumstances
pay the Company additional fees based upon the level of each vessel owner's
voyage activity in the U.S. The Company recognizes the greater of revenue earned
by voyage activity or the portion of the retainer earned in each accounting
period. Certain vessel and facility owners pay a fixed fee or a fee based on
volume of petroleum product transported for the Company's retainer services and
such fee is recognized ratably throughout the year. The Company's retainer
agreements with vessel owners generally range from one to three years while
retainer arrangements with facility owners are as long as ten years.
Spill response revenues and related operating profits are dependent on the
magnitude of any one spill response and the number of spill responses within a
given fiscal period. Consequently, spill response revenues and operating profits
can vary greatly between comparable periods and the revenues 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 payments to sub-contractors
for labor, equipment and materials and direct charges to the Company for
equipment and materials.
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.
INLAND RIVER SERVICES
The Company's inland river business earns operating revenues primarily from
voyage affreightments under which customers are charged for a committed space to
transport cargo for a specific time from a point of origin to a destination at
an established rate per ton. The Company also earns operating revenues while
cargo is stored aboard barges and when barges are chartered-out to third
parties. Barge operating expenses are typically differentiated between those
directly related to voyages and all other barge operating costs. Voyage expenses
primarily include towing, switching, fleeting and cleaning costs; whereas,
non-voyage related operating expenses include such costs as repairs, insurance
and depreciation.
A majority of the barges owned by the Company and certain of those managed for
third parties participate in two pooling arrangements. Pursuant to these pooling
arrangements, operating revenues and voyage expenses are pooled and the net
results are allocated to respective participating barge owners based upon the
number of days any one participating owner's barges bear to the total number of
days of all barges participating in the pool.
OFFSHORE AVIATION SERVICES
Tex-Air derives the majority of its operating revenues from service contracts
with major integrated and independent oil and gas companies, primarily in the
production phase of the oil and gas cycle. The number and type of helicopters in
Tex-Air's fleet, the utilization of that fleet and the rates of hire Tex-Air is
able to obtain in the market primarily influence operating revenues. Rates and
utilization are a function of demand for and availability of helicopters, which
are closely aligned with the level of exploration, development and production in
the U.S. Gulf of Mexico. The level of exploration, development and production is
affected by both short-term and long-term trends in oil and gas prices that, in
turn, are related to the demand for petroleum products and the current
availability of oil and gas resources. At December 31, 2002, Tex-Air's fleet
consisted of 36 helicopters, of which 22 helicopters were committed for hire
under customer contracts.
Operating expenses are primarily a function of fleet size and utilization
levels. The majority of Tex-Air's operating expenses consist of wages and
related benefits, insurance, repairs and maintenance and equipment leases.
INVESTMENT IN CHILES
The Company consolidated the reporting of financial information of drill rig
operator Chiles, as a consequence of its majority ownership of Chiles, from
Chiles' inception in 1997 until the Chiles IPO. On September 22, 2000, Chiles
completed the Chiles IPO. Upon the Chiles IPO, the Company's ownership interest
in Chiles was reduced from 55.4% to 27.3%, at which point the Company ceased
consolidating Chiles's financial condition, results of operations and cash flows
and began accounting for its interest in Chiles using the equity method.
Following the Chiles Merger in August 2002, the Company began accounting for the
shares of ENSCO it acquired in the Chiles Merger as available-for-sale
securities and now records changes in their market value each period as
adjustments to other comprehensive income.
Chiles derived its operating revenues primarily from drilling wells for oil and
gas operators. Its rig operating expense consisted primarily of crew costs,
insurance, inspections, repair and maintenance and other related costs. General
and administrative expenses consisted primarily of corporate and safety
management, administration, marketing,financial and legal expenses.
18
OTHER ACTIVITIES
Other activities primarily relate to the Company's ownership interest in Globe
Wireless, a handy-max bulk carrier joint venture, and Strategic Software
Limited, whose principal activity is to develop and sell software to the ship
brokerage and shipping industry. The Company, from time to time, may make
investments in other related businesses.
CRITICAL ACCOUNTING POLICIES
GENERAL. Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses the consolidated financial statements of the Company,
which have been prepared in accordance with accounting principles generally
accepted in the U.S. In many cases, the accounting treatment of a particular
transaction is specifically dictated by generally accepted accounting
principles; whereas, in other circumstances, the Company is required to make
estimates, judgements and assumptions that we believe are reasonable based upon
information available. The Company bases its estimates and judgements on
historical experience and various other factors that it believes to be
reasonable under the circumstances, the results of which form the basis for
making judgements about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions and conditions. The Company believes that
of its significant accounting policies, as discussed in its footnotes to the
consolidated financial statements, the following may involve a higher degree of
judgement and complexity.
REVENUE RECOGNITION. Operating revenues are earned primarily from the offshore
marine service segment's time and bareboat charter-out of vessels. Operating
revenues are recognized when persuasive evidence of an arrangement exists, the
service has been delivered, fees are fixed and determinable, collectibility is
probable and when other significant obligations have been fulfilled.
RESERVES FOR DOUBTFUL ACCOUNTS RECEIVABLE. The Company extends short-term credit
to its customers who are primarily major and large independent oil and gas
exploration companies. Although credit risks are considered minimal, the Company
regularly reviews amounts owing to the Company from customers and adjusts its
reserve for probable doubtful accounts receivable.
PURCHASE ACCOUNTING AND GOODWILL. Purchase accounting requires extensive use of
estimates and judgement to allocate the cost of an acquired enterprise to the
assets acquired and liabilities assumed. The cost of each acquired operation is
allocated to the assets acquired and liabilities assumed based on their
estimated fair values. These estimates are revised during an allocation period
as necessary when, and if, information becomes available to further define and
quantify the value of the assets acquired and liabilities assumed. The
allocation period does not exceed one year from the date of the acquisition. To
the extent additional information to refine the original allocation becomes
available during the allocation period, the allocation of the purchase price is
adjusted. Should information become available after the allocation period, those
items are included in operating results. The cost of an enterprise acquired in a
business combination includes the direct cost of the acquisition. The operating
results of entities acquired are included in the Company's consolidated
statements of income from the completion date of the applicable transaction.
In recording various business combinations, the Company has assigned the excess
of the cost of its acquired enterprises over the sum of the amounts assigned to
the identifiable assets acquired less liabilities assumed to goodwill, the
balance of which totaled $28.3 million at December 31, 2002. In 2001 and prior
years, the Company amortized goodwill to expense over the expected benefit
period, ranging from 10 to 22 years. Effective January 1, 2002, the Company
adopted Financial Accounting Standards No. 142 ("SFAS 142"), "Goodwill and Other
Intangible Assets." Among other changes to prior practices, the new standard
requires that goodwill be tested for impairment annually or when events or
circumstances occur between annual tests indicating that goodwill for a
reporting unit might be impaired based on a fair value concept. The Company
ceased amortization of its remaining goodwill balance effective January 1, 2002.
The Company's goodwill has primarily resulted from the acquisition of
environmental and offshore marine businesses. The Company has performed its
annual impairment test of goodwill based upon carrying values as of December 31,
2002 and has determined there was no goodwill impairment. The implied fair
values of the applicable reporting units were determined by employing comparable
company and present value techniques to estimate the fair value of related
groups' net assets. Estimates used in discounted cash flow projections were
consistent with the most recent budgets and plans used by management and
incorporated consideration of industry trends. There were many assumptions and
estimates employed in determining the implied fair value of each reporting unit,
including among other, the projection of vessels' rates per day worked, vessels'
utilization, plans for vessel acquisitions and dispositions and operating
expenses. The Company believes its estimates and assumptions are reasonable;
however, variations from those estimates could produce materially different
results. After-tax goodwill amortization for each of the twelve month periods
ending December 31, 2000 and 2001 was $0.9 million, or $0.04 per diluted share,
and $2.1 million, or $0.10 per diluted share, respectively.
19
FAIR VALUE OF DERIVATIVE INSTRUMENTS. Derivative instruments are recorded at
fair value and except for those transactions that are effective hedges for
accounting purposes in accordance with SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," gains and losses are included in the
determination of net income. The derivative contracts recorded in the Company's
consolidated balance sheets are stated at their fair values, the determination
of which the Company acquired from third parties that regularly conduct business
in the derivative contracts, which we have negotiated. Future adverse changes in
the market price for the underlying notional amounts of the Company's derivative
contracts may result in losses in the Company's statement of income or other
comprehensive income, if hedge accounting criteria are met.
INVESTMENTS. The Company holds less than majority investments in, and has
receivables from, strategically aligned companies that totaled $61.4 million at
December 31, 2002. The Company employs the equity method of accounting for
investments in common stock when such investments in voting stock gives it the
ability to exercise significant influence over operating and financial policies
of a company even though it holds 50% or less of the voting stock. Significant
influence is generally deemed to exist if the Company owns between 20% and 50%
of an entity's voting stock, although the ability to exercise influence may be
indicated in several ways even when such investments are below 20%. The Company
also holds a $1.2 million investment, carried at cost, in a private company over
which it does not have the ability to exercise significant influence nor does it
own greater than 20% of the entity's voting stock. The Company may record
investment impairment charges when it believes an investment has experienced a
decline in value that is other than temporary. Future adverse changes in market
conditions or poor operating results of underlying investments could result in
losses or an inability to recover the carrying value of the investments that may
not be reflected in an investment's current carrying value, thereby possibly
requiring an impairment charge in the future.
IMPAIRMENT OF LONG-LIVED ASSETS. The Company depreciates its vessels over 20 to
25 years from date of original construction, except for standby safety vessels
where it has chosen a useful life of 30 years. In assigning depreciable lives to
its vessels, the Company has considered the effects of both physical
deterioration largely caused by wear and tear due to operating use and other
economic factors that could impact commercial viability. Furthermore, salvage
value, an amount typically expected to be recovered through sale upon vessel
retirement, approximates 10% of cost. To date, the Company's experience confirms
that these policies are reasonable, although, there may be events or changes in
circumstances in the future that indicate the recoverability of the carrying
amount of a vessel might not be possible. Examples of events or changes in
circumstances that could indicate that the recoverability of a vessel's carrying
amount should be assessed might include (i) a significant decrease in the market
value of a vessel, (ii) a significant adverse change in the business climate
that could affect the value of a vessel and (iii) current period operating or
cash flow losses combined with a history of operating or cash flow losses or a
projection or forecast that demonstrates continuing losses associated with a
vessel. If events or changes in circumstances as set forth above indicate that a
vessel's carrying amount may not be recoverable, the Company would then be
required to estimate the undiscounted future cash flows expected to result from
the use of the vessel and its eventual disposition. If the sum of the expected
future cash flows is less than the carrying amount of the vessel, the Company
would be required to recognize an impairment loss.
INCOME TAXES. At December 31, 2002, the Company had not provided for U.S. income
taxes with respect to $31.6 million of undistributed earnings of certain
non-U.S. subsidiaries and 50% or less owned companies as it is the Company's
intention to indefinitely invest these earnings abroad. Should a remittance of
these earnings be expected in the foreseeable future, the Company would then be
required to provision for the related U.S. income tax consequences.
FOREIGN CURRENCY TRANSACTIONS. The Company accounts for its foreign operations
in accordance with SFAS 52, "Foreign Currency Translation." The Company is
particularly exposed to the impact of currency exchange rate fluctuations in the
United Kingdom, where certain of its wholly-owned subsidiaries operate offshore
vessels and whose functional currency, the primary currency in which the
wholly-owned subsidiaries conduct their business, is Pounds Sterling. Through
these operations, the Company is subject to foreign currency translation
adjustments, an inherent result of the process of translating foreign entities'
financial statements from their functional currency to the U.S. dollar, which
are included in Accumulated Other Comprehensive Income.
SEACOR has made advances to certain of its wholly-owned subsidiaries, whose
functional currency is Pounds Sterling. SEACOR considers these advances to be
intercompany loans with payment expected in the foreseeable future. Until
repaid, accounting standards require that changes in the value of the
intercompany loans due to fluctuations in the exchange rate from the transaction
date until the settlement date with respect to these intercompany loans be
included in the determination of net income.
The Company is also exposed to transaction gains and losses that result from the
effect of exchange rate changes on transactions denominated in currencies other
than in the functional currency of any SEACOR subsidiary.
20
If it should be determined that the functional currency of a foreign subsidiary
should be changed to U.S. dollars, the accumulated currency translation
adjustments that apply to the subsidiary would be retained in Accumulated
Comprehensive Income until the subsidiary is sold or substantially liquidated.
Further, nonmonetary assets owned by the subsidiary at the end of the period
immediately prior to the change would be translated in subsequent periods at the
exchange rate that was current at the end of that period. If the subsidiary were
sold or substantially liquidated, the cumulative translation adjustment
attributable to that subsidiary would then be removed from Accumulated Other
Comprehensive Income and be included in determining the gain or loss recognized
on the sale or liquidation of that investment.
RESULTS OF OPERATIONS
The following table sets forth the operating revenues and profits of the
Company's offshore marine service business and combines similar results for its
environmental and inland river businesses and for Chiles from 2000 until the
Chiles IPO in an "Other" reporting category, as they do not meet accounting
standards for separate disclosure. In prior years, the environmental service
business was reported as a separate segment but no longer meets criteria for
reporting segregation pursuant to accounting standards. Operating results of the
Company's offshore aviation business does not appear in the following table as
this business segment was acquired on December 31, 2002.
The Company evaluates business performance based upon operating profit plus any
income and losses from equipment sales and retirements, the sale of interests in
50% or less owned companies and foreign currency translation and equity in
earnings and losses of 50% or less owned companies, but excluding, interest
income and expense, gain from Chiles Merger, gain upon sale of shares of Chiles,
gains or losses from derivative transactions and the sale of marketable
securities, corporate expenses, income taxes and minority interest in income or
losses of subsidiaries. Operating profit is defined as Operating Income as
reported in "Item 8. Financial Statements and Supplementary Data - Consolidated
Statements of Income" included in Part IV of this Annual Report on Form 10-K
excluding corporate expenses and net of certain other income and expense items.
The disaggregation of financial results has been prepared using a management
approach. Segment assets exclude those which the Company considers to be of a
corporate nature, including unrestricted cash, marketable securities, certain
other assets and property and equipment related to corporate activities.
Twelve Month Period Ending December 31,
------------- -------------- -------------
2000 Marine Other Total
------------------------------------------------------------- ------------- -------------- -------------
OPERATING REVENUES :
External Customers.........................................$ 276,473 $ 63,468 $ 339,941
Intersegment................................................ 458 - 458
Elimination................................................. - (458) (458)
------------- -------------- -------------
$ 276,931 $ 63,010 $ 339,941
============= ============== =============
REPORTABLE SEGMENT PROFIT:
Operating Profit...........................................$ 35,403 $ 18,470 $ 53,873
Income from Equipment Sales and Retirements, net............ 7,616 13 7,629
Equity in Net Losses of 50% or Less Owned Companies......... (396) (4,590) (4,986)
Other, primarily Foreign Currency Exchange Losses, net...... (1,573) - (1,573)
------------- -------------- -------------
$ 41,050 $ 13,893 54,943
============= ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES, MINORITY
INTEREST,
EQUITY EARNINGS AND EXTRAORDINARY ITEM:
Net Interest Expense....................................... (10,027)
Derivative Income, net..................................... 6,292
Gains from Sale of Marketable Securities, net.............. 7,562
Gain upon Sale of Shares of Chiles......................... 4,023
Corporate Expenses......................................... (6,121)
Equity in Net Losses of 50% or Less Owned Companies........ 4,986
-------------
$ 61,658
=============
ASSETS:
Investments in and Receivables from 50% or Less Owned $ 43,078 $ 94,616 $ 137,694
Companies.....................................................
Other Segment Assets........................................ 635,208 49,783 684,991
------------- -------------- -------------
$ 678,286 $ 144,399 822,685
============= ==============
Corporate................................................... 310,045
-------------
$ 1,132,730
=============
CAPITAL EXPENDITURES:
Segment....................................................$ 46,824 $ 26,814 $ 73,638
============= ==============
Corporate................................................... 112
-------------
$ 73,750
=============
DEPRECIATION AND AMORTIZATION:
Segment....................................................$ 41,910 $ 9,253 $ 51,163
============= ==============
Corporate................................................... 26
-------------
$ 51,189
-----------------------------------------------------------------------------------------------------------
21
Twelve Month Period Ending December 31,
------------- -------------- -------------
2001 Marine Other Total
------------------------------------------------------------- ------------- -------------- -------------
OPERATING REVENUES:
External Customers.........................................$ 398,345 $ 36,445 $ 434,790
Intersegment................................................ 778 - 778
Elimination................................................. - (778) (778)
------------- -------------- -------------
$ 399,123 $ 35,667 $ 434,790
============= ============== =============
REPORTABLE SEGMENT PROFIT:
Operating Profit...........................................$ 96,821 $ 4,245 $ 101,066
Income (Loss) from Equipment Sales or Retirements, net...... 9,180 (150) 9,030
Gain from Sale of Interest in 50% or Less Owned Companies... 201 - 201
Equity in Net Earnings of 50% or Less Owned Companies....... 5,181 1,111 6,292
Other, primarily Foreign Currency Exchange Gains, net....... 1,183 8 1,191
------------- -------------- -------------
$ 112,566 $ 5,214 117,780
============= ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES, MINORITY
INTEREST,
EQUITY EARNINGS AND EXTRAORDINARY ITEM:
Net Interest Expense....................................... (8,452)
Derivative Income, net..................................... 4,127
Gains from Sale of Marketable Securities, net.............. 5,689
Corporate Expenses......................................... (9,131)
Equity in Net Earnings of 50% or Less Owned Companies...... (6,292)
-------------
$ 103,721
=============
ASSETS:
Investments in and Receivables from 50% or Less Owned $ 49,618 $ 104,209 $ 153,827
Companies.....................................................
Other Segment Assets........................................ 875,148 60,722 935,870
------------- -------------- -------------
$ 924,766 $ 164,931 1,089,697
============= ==============
Corporate................................................... 208,441
-------------
$ 1,298,138
=============
CAPITAL EXPENDITURES:
Segment....................................................$ 92,495 $ 14,903 $ 107,398
============= ==============
Corporate................................................... 47
-------------
$ 107,445
=============
DEPRECIATION AND AMORTIZATION:
Segment....................................................$ 52,871 $ 5,398 $ 58,269
============= ==============
Corporate................................................... 55
-------------
$ 58,324
-----------------------------------------------------------------------------------------------------------
2002
-------------------------------------------------------------
OPERATING REVENUES:
External Customers.........................................$ 367,702 $ 35,456 403,158
Intersegment................................................ 267 - 267
Elimination................................................. - (267) (267)
------------- -------------- -------------
$ 367,969 $ 35,189 $ 403,158
============= ============== =============
REPORTABLE SEGMENT PROFIT:
Operating Profit...........................................$ 49,598 $ 5,324 54,922
Income from Equipment Sales or Retirements, net............. 8,625 10 8,635
Equity in Net Earnings (Losses) of 50% or Less Owned 5,995 (2,796) 3,199
Companies.....................................................
Other, primarily Foreign Currency Exchange Gains, net....... 6,307 118 6,425
------------- -------------- -------------
$ 70,525 $ 2,656 73,181
============= ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES, MINORITY
INTEREST,
EQUITY EARNINGS AND EXTRAORDINARY ITEM:
Net Interest Expense....................................... (8,231)
Derivative Loss, net....................................... (5,043)
Gains from Sale of Marketable Securities, net.............. 3,218
Gain from Chiles Merger.................................... 19,719
Corporate Expenses......................................... (11,165)
Equity in Net Earnings of 50% or Less Owned Companies...... (3,199)
-------------
$ 68,480
=============
ASSETS:
Investments in and Receivables from 50% or Less Owned $ 39,155 $ 22,204 $ 61,359
Companies.....................................................
Other Segment Assets........................................ 891,172 99,362 990,534
------------- -------------- -------------
$ 930,327 $ 121,566 1,051,893
============= ==============
Corporate................................................... 435,214
-------------
$ 1,487,107
=============
CAPITAL EXPENDITURES:
Segment....................................................$ 94,037 $ 45,273 $ 139,310
============= ==============
Corporate................................................... 396
-------------
$ 139,706
=============
DEPRECIATION AND AMORTIZATION:
Segment....................................................$ 50,846 $ 5,165 $ 56,011
============= ==============
Corporate................................................... 233
-------------
$ 56,244
-----------------------------------------------------------------------------------------------------------
22
Revenues attributed to geographic areas were based upon the country of domicile
for offshore marine and drilling 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 from time to time 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 for the years ending December 31.
2000 2001 2002
------------ ------------- ------------
Revenues:
United States of America................... $ 236,841 $ 267,195 $ 212,291
------------ ------------- ------------
Foreign:
United Kingdom........................... 39,565 74,477 83,033
Nigeria.................................. 15,544 29,425 36,130
Other.................................... 47,991 63,693 71,704
------------ ------------- ------------
103,100 167,595 190,867
------------ ------------- ------------
$ 339,941 $ 434,790 $ 403,158
============ ============= ============
Long-Lived Assets:
United States of America................... $ 302,417 $ 335,648 $ 365,474
------------ ------------- ------------
Foreign:
United Kingdom........................... 47,898 186,686 182,741
Nigeria.................................. 40,119 39,973 42,121
Other.................................... 136,644 172,450 147,632
------------ ------------- ------------
224,661 399,109 372,494
------------ ------------- ------------
$ 527,078 $ 734,757 $ 737,968
============ ============= ============
COMPARISON OF FISCAL YEAR 2002 TO FISCAL YEAR 2001
OFFSHORE MARINE SERVICES
OPERATING REVENUES. The offshore marine service segment's operating revenues
decreased $31.2 million, or 8%, in the twelve month period ended December 31,
2002 compared to the twelve month period ended December 31, 2001. Declines in
operating revenues resulting primarily from lower utilization, rates per day
worked and the bareboat charter-out of additional vessels were partially offset
by an improvement in operating revenues resulting from changes in fleet
composition and the strengthening in 2002 of the Pound Sterling currency against
the U.S. dollar.
A decline in fleet utilization lowered operating revenues by approximately $30.8
million. Utilization declined for all vessel types in the Company's U.S. fleet
and for anchor handling towing supply and supply and towing supply vessels
operating internationally. These declines were partially offset by an increase
in operating revenues resulting from improved utilization of the Company's
foreign crew vessels.
A decline in rates per day worked lowered operating revenues by approximately
$10.9 million. Rates per day worked decreased for all of the Company's U.S.
vessel types, excluding anchor handling towing supply whose rates increased
slightly between years. In foreign markets, declining rates per day worked
earned by anchor handling towing supply vessels were offset by an improvement in
rates per day worked earned by crew and supply and towing supply vessels.
Functional currency (Pounds Sterling) rates per day worked earned by the
Company's North Sea standby safety vessels remained steady between years;
however, a strengthening between years in the Pound Sterling currency relative
to the U.S. dollar increased reported operating revenues by approximately $2.7
million.
Operating revenues also declined by approximately $3.3 million due to a net
increase in the number of vessels entering bareboat charter-out service.
An improvement in operating revenues resulting from fleet additions exceeded
declines resulting from fleet dispositions by approximately $10.7 million.
Operating revenues earned in the current and prior year by recently acquired
North Sea anchor handling towing supply and supply vessels and newly constructed
crew and mini-supply vessels operating principally in the U.S. Gulf of Mexico
exceeded declines resulting from the sale and charter-in termination of less
marketable U.S. utility and crew vessels, North Sea standby safety vessels and
other foreign supply and towing supply vessels.
OPERATING PROFIT. The offshore marine business segment's operating profit
decreased $47.2 million, or 49%, in the twelve month period ended December 31,
2002 compared to the twelve month period ended December 31, 2001 due primarily
to those factors affecting operating revenues outlined above and higher
operating expenses.
Crew wages for seamen increased in both the current and prior year in response
to competition for qualified personnel. Regulatory docking expense rose between
23
years as cost to repair additional supply and towing supply and anchor handling
towing supply vessels in 2002 exceeded declines resulting from the repair of
fewer, less expensive, crew and utility vessels. A greater number of main engine
overhauls, higher expenses resulting from major hull repairs to a anchor
handling towing supply vessel and the replacement of certain diesel generator
engines resulted in higher vessel repair and maintenance expenses between years.
Foreign shore support expenses increased due to the Company's Nigerian office
relocation and higher shore support wage costs in that region and expanded
Trinidadian vessel operations. Fleet repositioning along the West African coast
and rising fees resulted in higher port and pilotage expenses. The
sale-leaseback of vessels in the current and prior year caused an increase in
charter-in expense that was partially offset by lower depreciation. Depreciation
and amortization expense additionally declined between years as certain of the
Company's North Sea standby safety vessels reached the end of their depreciable
lives and the Company ceased amortizing goodwill cost effective January 1, 2002
in accordance with recently enacted accounting standards.
INCOME (LOSS) FROM EQUIPMENT SALES OR RETIREMENTS, NET. Income from equipment
sales or retirements decreased $0.6 million in the twelve month period ended
December 31, 2002 compared to the twelve month period ended December 31, 2001.
The offshore marine service segment sold 33 vessels in 2002. Income recognized
from these sales was generally constant with sale income of the prior year.
Results of 2002 included a $2.5 million charge against income from the
write-down of the carrying value of equipment associated with a cancelled
offshore vessel construction contract. This decline was offset by income
recognition of $1.1 million in 2002 from a vessel sale completed in a prior year
to a joint venture that was previously deferred based on the Company having
financed the transaction. That sale was refinanced with a lending institution
and the Company's loan was repaid. Prior year results included a $0.7 million
charge against income with respect to the write-down in the carrying value of 3
vessels.
Thirteen vessels were sold in 2002 pursuant to sale-leaseback transactions that
resulted in the deferral of income recognition of $13.8 million. Sale income was
deferred to the extent of the present value of minimum lease payments and is
being amortized to income as reductions in rental expense over the applicable
lease terms.
EQUITY IN NET EARNINGS (LOSSES) OF 50% OR LESS OWNED COMPANIES. Equity earnings
increased $0.8 million in the twelve month period ended December 31, 2002
compared to the twelve month period ended December 31, 2001. Profits rose due to
improved performance by the Pelican Joint Venture and other joint ventures
operating in Trinidad, Egypt and Greece.
FOREIGN CURRENCY EXCHANGE GAINS (LOSSES). Net foreign currency exchange gains
increased $5.1 million in the twelve month period ended December 31, 2002
compared to the twelve month period ended December 31, 2001, due primarily to
the revaluation of intercompany loans between SEACOR and certain of its
wholly-owned offshore marine subsidiaries, whose functional currency is Pounds
Sterling, as that currency strengthened against the U.S. dollar.
"OTHER" BUSINESS SEGMENT
OPERATING REVENUES. The "Other" business segments' operating revenues declined
$1.0 million, or 3%, in the twelve month period ended December 31, 2002 compared
to the twelve month period ended December 31, 2001. Operating revenues earned by
the environmental service segment decreased $4.8 million, or 18%, due to the
loss of certain customers' retainer business, retainer service contract
renegotiations with certain other customers and a decrease in the number and
severity of managed oil spills. Operating revenues earned by the inland river
business segment increased $3.0 million, or 31%, due to an increase in the size
of the Company's barge fleet. Operating revenues in 2002 included a $0.8 million
arrangement fee earned for provisioning services in obtaining rig construction
financing for Chiles.
OPERATING PROFIT. The "Other" business segments' operating profit increased $1.1
million, or 25%, in the twelve month period ended December 31, 2002 compared to
the twelve month period ended December 31, 2001. The operating profits of the
inland river business increased $1.3 million, or 57%, and other operating profit
in 2002 totaled $0.8 million, resulting from the arrangement fee collected from
Chiles. These increases in operating profits were offset primarily by a $0.8
million, or 42%, decline in the operating profits earned by the Company's
environmental service segment. Reduced operating revenues of the environmental
service segment were partially offset by lower direct cost of spill response and
vessel and field operating expenses. Results of the environmental service
segment also benefited from lower expense due to the cessation of goodwill
amortization effective January 1, 2002 in accordance with recently enacted
accounting standards.
24
EQUITY IN NET EARNINGS (LOSSES) OF 50% OR LESS OWNED COMPANIES. The "Other"
business segments incurred equity losses of $2.8 million in the twelve month
period ended December 31, 2002 compared to recognizing equity earnings of $1.1
million in the twelve month period ended December 31, 2001. Earnings were
reduced as a result of the Chiles Merger and a charge against income for
investment impairment in Strategic Software Limited. Results in 2001 included a
gain realized from the sale of a Handymax Dry-Bulk ship by a bulk carrier joint
venture. These declines were offset by lower operating losses of Globe Wireless.
OTHER
NET INTEREST EXPENSE. Net interest expense decreased $0.2 million in the twelve
month period ended December 31, 2002 compared to the twelve month period ended
December 31, 2001. Interest expense declined $4.9 million between years
resulting from the repayment of loans that financed vessel acquisitions, the
redemption of $146.3 million of the Company's 5 3/8% Convertible Subordinated
Notes Due 2006 (the "5 3/8% Notes") and the entry into interest swap agreements
with respect to the Company's 7.2% Senior Notes Due September 15, 2009 (the
"7.2% Notes"). See "Item 7A Quantitative and Qualitative Disclosures about
Market Risk" for additional discussion of interest rate swap agreements.
Offsetting interest expense declines was a $4.7 million decrease in interest
income resulting from lower invested cash balances and interest rates.
DERIVATIVE INCOME (LOSS) NET. The Company recognized $5.0 million in net losses
from derivative transactions in the twelve month period ended December 31, 2002
compared to $4.1 million in net gains from derivative transactions in the twelve
month period ended December 31, 2001. In 2002, net losses resulted primarily
from the settlement of U.S. Treasury rate-lock agreements, notes and bond
options, future contracts, and a transaction that hedged the Company's share
ownership position in ENSCO resulting from the Chiles Merger. These losses were
partially offset by unrealized gains resulting from interest rate swap
agreements. In 2001, the Company realized net gains from commodity price hedging
arrangements on various natural gas and crude oil positions, U.S. treasury note
and U.S. treasury bond option and futures contracts and foreign currency forward
exchange contracts.
GAINS ON SALE OF MARKETABLE SECURITIES, NET. Gains on sale of marketable
securities decreased $2.5 million in the twelve month period ended December 31,
2002 compared to the twelve month period ended December 31, 2001. In both years,
the Company realized net gains primarily from the sale of equity securities.
GAIN FROM CHILES MERGER. The Company recognized a gain of $19.7 million in 2002
as a result of the Chiles Merger.
CORPORATE EXPENSES. Corporate expenses increased $2.0 million in the twelve
month period ended December 31, 2002 compared to the twelve month period ended
December 31, 2001. Compensation increased as a consequence of the successful
completion of the Chiles Merger. In 2002, the Company also expanded its
information technology support infrastructure and incurred higher corporate
development and travel expenses.
COMPARISON OF FISCAL YEAR 2001 TO FISCAL YEAR 2000
OFFSHORE MARINE SERVICES
OPERATING REVENUES. The Company's offshore marine service segment's operating
revenues increased $122.2 million, or 44%, in the twelve month period ended
December 31, 2001 compared to the twelve month period ended December 31, 2000.
This increase was due primarily to additional vessels and higher rates per day
worked and utilization.
Operating revenues generated by newly acquired, constructed and chartered-in
vessels exceeded the loss of revenues associated with vessel dispositions
through sales and charter-in terminations. Fleet growth over the past two years
contributed approximately $80.0 million toward higher operating revenues in 2001
versus 2000. Vessel dispositions and charter-in terminations over the past two
years resulted in a decline in operating revenues between years of approximately
$19.0 million.
Rising rates per day worked and utilization resulted in higher operating
revenues between years of $45.0 million and $15.0 million, respectively. Rates
per day worked rose for all vessel classes in all operating regions, excluding
domestic geophysical, freight and other vessels. Rates per day worked
particularly improved for the Company's worldwide fleet of supply and towing
supply vessels, U.S. crew and utility vessels and foreign anchor handling towing
supply vessels. Higher utilization of domestic and foreign anchor handling
towing supply and supply and towing supply vessels was partially offset by a
decline in the use of North Sea standby safety and U.S. utility and crew
vessels.
25
OPERATING PROFIT. The Company's offshore marine business segment's operating
profit increased $61.4 million, or 173%, in the twelve month period ended
December 31, 2001 compared to the twelve month period ended December 31, 2000
due primarily to those factors affecting operating revenues outlined above.
Operating expenses additionally increased due primarily to higher (i) charter-in
costs following the sale and leaseback of several vessels, (ii) crew wages paid
to seamen working domestically in response to competition for qualified
personnel, (iii) the number of vessels undergoing drydocking, (iv) vessel
related insurance claims costs and (v) costs to repair crew vessel engines,
which have grown in number and horsepower with the construction of larger
vessels over the past several years. General and administrative expenses also
rose between years due primarily to higher compensation costs with the addition
of staff and an increase in reserves for doubtful accounts receivable associated
with the Company's foreign operations.
INCOME (LOSS) FROM EQUIPMENT SALES OR RETIREMENTS, NET. Income from equipment
sales increased $1.6 million in the twelve month period ended December 31, 2001
compared to the twelve month period ended December 31, 2000. The offshore marine
service segment sold 39 vessels in 2002. An increase in income resulting from
the sale of additional vessels was partially offset by a $0.7 million charge
against income with respect to the write-down in the carrying value of 3
vessels.
Ten vessels were sold in 2002 pursuant to sale-leaseback transactions that
resulted in the deferral of income recognition of $11.7 million. Sale income was
deferred to the extent of the present value of minimum lease payments and is
being amortized to income as reductions in rental expense over the applicable
lease terms. Six vessels sold in 2002 to joint ventures resulted in the deferral
of income recognition of an additional $3.2 million. In joint venture sale
transactions, gains were deferred to the extent of the Company's ownership
interest, with amortization to income over the applicable vessels' depreciable
lives, and upon receipt of debt securities and an inadequate down payment, with
amortization to income on the installment method.
EQUITY IN NET EARNINGS (LOSSES) OF 50% OR LESS OWNED COMPANIES. Equity earnings
increased $5.6 million in the twelve month period ended December 31, 2001
compared to the twelve month period ended December 31, 2000. Profits rose due to
improved performance by the TMM Joint Venture, the sale of a vessel by a joint
venture that was structured between the Company and SMIT and the commencement of
the Pelican Joint Venture.
FOREIGN CURRENCY EXCHANGE GAINS (LOSSES). The Company recognized a net foreign
currency exchange gain of $1.2 million in the twelve month period ended December
31, 2001 compared to net foreign currency exchange loss of $1.6 million in the
twelve month period ended December 31, 2000. Net foreign currency exchange gains
in 2001 resulted primarily from the revaluation of intercompany loans between
SEACOR and certain of its wholly-owned offshore marine subsidiaries, whose
functional currency is Pounds Sterling, as that currency strengthened against
the U.S. dollar. Net foreign currency exchange losses in 2000 resulted primarily
from transaction losses recognized upon revaluing foreign cash and investment
balances.
"OTHER" BUSINESS SEGMENT
OPERATING REVENUES. The "Other" business segments' operating revenues decreased
$27.0 million, or 43%, in the twelve month period ended December 31, 2001
compared to the twelve month period ended December 31, 2000. Operating revenues
declined $37.4 million as a consequence of the Chiles IPO. This decline was
offset by an $8.5 million, or 779%, increase in the operating revenues resulting
from the start-up in late 2000 of the Company's inland river business and a $1.9
million, or 7%, increase in the operating revenues of the environmental service
segment. A retainer client of a dissolved U.S. West Coast joint venture was
added in late 2000 and international equipment sales increased between years.
OPERATING PROFIT. The "Other" business segments' operating profit decreased
$14.2 million, or 77%, in the twelve month period ended December 31, 2001
compared to the twelve month period ended December 31, 2000 due primarily to
those factors affecting operating revenues outlined above and higher
environmental service segment operating expenses. The establishment of
operations on the U.S. West Coast upon the dissolution of a joint venture in
that region, higher legal and international marketing expenses and increased
wages associated with the provisioning of spill management services increased
the environmental service segment's cost of operations.
EQUITY IN NET EARNINGS (LOSSES) OF 50% OR LESS OWNED COMPANIES. The "Other"
business segments had equity earnings of $1.1 million in the twelve month period
ended December 31, 2001 compared to equity losses of $4.6 million in the twelve
month period ended December 31, 2000. As a consequence of the Chiles IPO, the
Company began accounting for its investment in Chiles using the equity method
and equity earnings rose by $5.4 million. Equity earnings also increased due to
a decline in the operating losses of Globe Wireless, a gain realized from the
sale of a Handymax Dry-Bulk ship by a bulk carrier joint venture and higher
income earned by two foreign joint ventures. These improvements were offset by
the Company's recognition of a charge against income for investment impairment
and its proportionate share of the net losses of Strategic Software Limited and
a decline in profits resulting from the dissolution of a U.S. West Coast joint
venture.
26
OTHER
NET INTEREST EXPENSE. Net interest expense decreased $1.6 million in the twelve
month period ended December 31, 2001 compared to the twelve month period ended
December 31, 2000. Interest expense declined due primarily to the
deconsolidation of Chiles and SEACOR's redemption in 2001 of $135.3 million
principal amount of its 5 3/8% Notes. Interest income also declined primarily
with the use of previously invested cash balances to acquire vessels and barges
and to liquidate debt.
DERIVATIVE INCOME (LOSSES), NET. Net gains from derivative transactions
decreased $2.2 million in the twelve month period ended December 31, 2001
compared to the twelve month period ended December 31, 2000. Gains realized in
2000 upon termination of the Company's swap agreements in respect of certain
Chiles debt that was substantially purchased and redeemed with proceeds from the
Chiles IPO did not recur. Net gains from commodity price hedging arrangements on
various natural gas and crude oil positions, U.S. treasury note and U.S.
treasury bond option and futures contracts and foreign currency forward exchange
contracts in 2001 partially offset the decline.
GAINS FROM SALE OF MARKETABLE SECURITIES, NET. Net gains from the sale of
marketable securities decreased $1.9 million in the twelve month period ended
December 31, 2001 compared to the twelve month period ended December 31, 2000.
In both years, the Company realized net gains primarily from the sale of equity
securities.
GAIN UPON SALE OF SHARES OF CHILES. In 2000, the Company recognized a gain upon
the sale of common stock of Chiles representing the difference between the
Company's underlying interest in the net book value of Chiles immediately
following the Chiles IPO and its pre-IPO carrying value.
CORPORATE EXPENSES. In the twelve month period ended December 31, 2001 compared
to the twelve month period December 31, 2000, corporate expenses increased $3.0
million. 2001 included underwriting fees and legal and professional expenses
relating to unused availability under a standby purchase agreement in connection
with the redemption of certain of the Company's 5 3/8% Notes and higher costs
resulting from an increase in the number of filings with the Commission.
Corporate expenses also increased between comparable periods due to an increase
in wage and related benefit costs.
LIQUIDITY AND CAPITAL RESOURCES
CASH AND MARKETABLE SECURITIES
At December 31, 2002, the Company's cash and investments in marketable
securities totaled $525.9 million, including $342.0 million of unrestricted cash
and cash equivalents, $88.6 million of investments in marketable securities and
$95.3 million of construction reserve funds. The Company's cash and investments
in marketable securities increased $267.8 million in the twelve month period
ended December 31, 2002 compared to the twelve month period ended December 31,
2001. See "Cash Generation and Deployment" below.
Construction reserve funds at December 31, 2002 were comprised of joint
depository accounts with the Maritime Administration that were established
pursuant to Section 511 of the Merchant Marine Act, 1936, as amended. In
accordance with this statute, the Company has been permitted to deposit proceeds
from the sale of certain vessels into the joint depository construction reserve
fund accounts for purposes of acquiring newly constructed U.S.-flag vessels and
qualifying for temporary deferral of taxable gains realized from the sale of the
vessels. From date of deposit, withdrawals from the joint depository
construction reserve fund accounts are subject to prior written approval of the
Maritime Administration, and the funds on deposit must be committed for
expenditure within three years or be released for the Company's general use. Any
such gains from vessel sales previously deferred would become immediately
taxable upon release to the Company of sale proceeds that were deposited into
joint depository construction reserve fund accounts.
Investments in marketable securities at December 31, 2002 were comprised of
$48.8 million in equity securities and $39.8 million of debt securities issued
by U.S. states and their political subdivisions, the government of the United
Kingdom, the U.S. government and its agencies and corporations. Of the
investments in debt securities, 59%, or $23.3 million, have contractual
maturities between 1 and 10 years and 41%, or $16.5 million, have contractual
maturities of greater than 10 years.
CASH GENERATION AND DEPLOYMENT
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. The Company's principal sources of liquidity are cash
flows from operations and borrowings under its revolving credit facility
although, from time to time, it may issue shares of Common Stock, preferred
stock, debt or a combination thereof, or sell vessels to finance the acquisition
27
of equipment and businesses or make improvements to existing equipment. The
Company's cash flow levels are determined 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 the operations of its environmental service, inland
river and offshore aviation business segments.
The volatility of oil and gas prices, the level of offshore production and
exploration activity and other factors beyond the Company's control will
directly affect the Company's offshore marine and aviation service businesses. A
curtailment of drilling activity in U.S. Gulf of Mexico following March 2001 has
adversely affected demand and rates per day worked for most vessel types in the
Company's domestic offshore marine fleet. As a result, operating results have
declined, and at December 31, 2002, the Company has 47 U.S. vessels out of
service that include, amongst others, 30 utility and 13 crew vessels. Although
oil and natural gas prices have improved, this has yet to produce an increase in
U.S. Gulf of Mexico drilling activity. The Company cannot predict whether, or to
what extent, market conditions will improve, remain stable or even deteriorate.
As a result, should present demand and rates per day worked for the Company's
U.S. vessels remain unchanged or further decline, results of operations and cash
flows will be adversely affected.
CASH FLOWS PROVIDED FROM OPERATING ACTIVITIES. Cash flows provided from
operating activities were $65.3 million, $111.4 million and $66.8 million in
2000, 2001 and 2002, respectively. The increase in operating cash flows from
2000 to 2001 was due primarily to fleet growth in the offshore marine service
segment and an improvement in rates per day worked earned by vessels and their
utilization. The decrease in operating cash flows from 2001 to 2002 resulted
primarily from a decline in utilization and rates per day worked for the
Company's offshore marine vessels.
CASH FLOW PROVIDED BY INVESTING AND FINANCING ACTIVITIES. Cash flow provided by
investing and financing activities totaled $195.6 million, $309.7 million and
$440.8 million in 2000, 2001 and 2002, respectively.
In the twelve month period ended December 31, 2000:
o available-for-sale securities were sold for $90.3 million;
o cash proceeds from the sale of equipment, primarily vessels, totaled $56.8
million;
o proceeds, including cash collateral of $19.5 million, were received upon
the termination of certain swap agreements in connection with Chiles'
purchase and redemption of certain of its outstanding debt;
o the Company realized $17.7 million upon completion of a membership
interests offering by Chiles; o dividends received from offshore marine
joint ventures totaled $9.0 million; and o additional cash was provided
primarily from the repayment of certain offshore marine joint venture
loans.
In the twelve month period ended December 31, 2001:
o available-for-sale securities were sold for $145.9 million;
o the Company borrowed $65.0 million under its revolving credit facility in
connection with the acquisition of Stirling Shipping Holdings Limited
("Stirling") and repayment of Stirling's then outstanding bank debt and
borrowed $10.6 million from a bank primarily for vessel construction;
o cash proceeds from the sale of equipment, primarily vessels, totaled $60.7
million;
o SEACOR sold 216,170 shares of Common Stock for $10.0 million in connection
with the redemption of certain of its 5 3/8% Notes; and o additional cash
was provided by dividends and loan payments from offshore marine joint
ventures, the sale of ownership interest in two offshore marine joint
ventures and the settlement of certain derivative transactions.
In the twelve month period ended December 31, 2002:
o SEACOR sold $200.0 million aggregate principal amount of its 5 7/8% Notes
(hereinafter defined);
o cash proceeds from the sale of equipment, primarily vessels, totaled $128.7
million; o available-for-sale securities were sold for $63.5 million;
o the Company received $25.4 million upon completion of the Chiles Merger;
o marine joint ventures repaid $20.7 million of outstanding loans that
financed vessel acquisitions; and
o additional cash was provided primarily by joint venture dividends and the
exercise of stock options.
CASH FLOW USED IN INVESTING AND FINANCING ACTIVITIES. Cash flow used in
investing and financing activities totaled $212.4 million, $463.8 million and
$347.4 million in 2000, 2001 and 2002, respectively.
In the twelve month period ended December 31, 2000:
o $73.8 million was expended primarily to construct rigs and barges and to
acquire and construct vessels;
o marketable securities were acquired for $60.7 million;
o cash held in construction reserve fund joint depository accounts rose by
$18.8 million;
28
o Chiles repaid $15.0 million of outstanding indebtedness borrowed under its
then outstanding credit facility;
o the Company paid $15.0 million primarily to acquire Putford Enterprises
Ltd. and associated companies (net of cash acquired) and the majority of a
minority stockholder's interest in a North Sea joint venture;
o the deconsolidation of Chiles resulted in an $11.7 million reduction in
cash balances;
o investments and loans to joint ventures totaled $7.1 million, primarily to
start-up the Pelican Joint Venture; o SEACOR Securities (hereinafter
defined) were repurchased for $4.8 million; and
o additional cash was used primarily to repay debt and settle certain
derivative transactions.
In the twelve month period ended December 31, 2001:
o the Company repaid $162.9 million of outstanding indebtedness, primarily
including $71.0 million of Stirling debt, $38.0 million principal amount of
5 3/8% Notes, $35.0 million borrowed under its revolving credit facility
and $17.6 million with respect to two vessels purchased under capital lease
arrangements;
o $107.4 million was expended primarily to acquire and construct vessels and
barges;
o cash held in construction reserve fund joint depository accounts rose by
$14.5 million;
o the Company paid $98.2 million, net of cash acquired, to purchase companies
that owned vessels;
o marketable securities were acquired for $74.8 million;
o investments in and advances to joint ventures, primarily to acquire
vessels, totaled $5.8 million; and
o additional cash was used primarily to purchase SEACOR Securities.
In the twelve month period ended December 31, 2002:
o $139.7 million was expended primarily to acquire and construct vessels and
barges;
o the Company repaid $93.8 million of outstanding indebtedness, primarily
including $30.0 million borrowed under its revolving credit facility, $21.4
million owing to former shareholders of Stirling, $11.0 million principal
amount of the 5 3/8% Notes, $13.0 million principal amount of the 7.2%
Notes, $12.1 million principal amount of notes assumed in connection with
the acquisition of two vessels in 2001, and $5.9 million principal amount
of debt obligations assumed in the Tex-Air Acquisition;
o marketable securities were acquired for $49.6 million;
o cash held in construction reserve fund joint depository accounts rose by
$40.0 million;
o SEACOR Securities were repurchased for $18.5 million; and
o additional cash was used primarily to settle derivative transactions.
Following year end and through March 21, 2003, the Company sold five vessels for
aggregated cash consideration of $56.3 million, including two recently
constructed North Sea anchor handling towing supply vessels.
CAPITAL EXPENDITURES
As of December 31, 2002, the Company was committed to the construction of 11
vessels, including 6 crew, 4 supply and 1 towing supply. One of these vessels is
committed for resale. Vessel deliveries are expected over the next year. The
inland river business segment has contracts to acquire 61 barges in 2003. The
aggregate cost of the Company's firm commitments for new construction is $108.3
million, of which $25.0 million had been expended as of year end 2002. Following
year end, the Company committed to the construction of 2 additional vessels at
an aggregate cost of $6.9 million. These vessels will be delivered in 2004.
The Company may make selective acquisitions of vessels and barges, fleets of
vessels and barges, oil spill response equipment and helicopters or expand the
scope and nature of its environmental and logistics services, or invest in
businesses related to its existing operations. The Company also may upgrade or
enhance its vessels or construct 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 or shares of Common Stock.
CREDIT FACILITIES AND NOTES
REVOLVING CREDIT FACILITY. On February 5, 2002, the Company completed the
syndication of a $200.0 million, five year, non-reducing, unsecured revolving
credit facility that replaced a $100.0 million unsecured reducing revolving
credit facility. Advances under the new revolving credit facility are available
for general corporate purposes. Interest on advances will be charged at a rate
per annum of LIBOR plus an applicable margin of 65 to 150 basis points based
upon the Company's credit rating as determined by Standard & Poor's and Moody's.
The only consequence of a change in the Company's credit rating would be
adjustments to applicable margin. The Company is not required to maintain a
credit rating under the terms of the facility agreement, and if the Company does
not maintain a credit rating, the applicable margin would be determined by
financial ratios. The new revolving credit facility contains various restrictive
covenants regarding interest coverage, secured debt to total capitalization,
29
funded debt to total capitalization ratios and the maintenance of a minimum
level of consolidated net worth, as well as other customary covenants,
representations and warranties, funding conditions and events of default. The
new revolving credit facility contains no repayment triggers. Amounts available
for future borrowings under the new revolving credit facility totaled $199.8
million at March 21, 2003.
5 7/8% NOTES. On September 27, 2002, SEACOR completed the sale of $200.0 million
aggregate principal amount of its 5 7/8% Senior Notes Due October 1, 2012 (the
"5 7/8% Notes"). The 5 7/8% Notes were issued at a price of 98.839% of principal
amount. Interest on the 5 7/8% Notes is payable semiannually on April 1 and
October 1 of each year commencing April 1, 2003. The 5 7/8% Notes may be
redeemed at any time, in whole or in part, at a price equal to 100% of the
principal amount, plus accrued and unpaid interest to the date of redemption,
plus a specified "make-whole" premium. The 5 7/8% Notes were issued under a
supplemental indenture dated as of September 27, 2002 to the base indenture
relating to SEACOR's senior debt securities, dated as of January 10, 2001,
between SEACOR and U.S. Bank National Association, as trustee.
OTHER NOTES. At December 31, 2002, other note obligations of the Company totaled
$206.4 million, primarily comprised of its 7.2% Notes, 5 3/8% Notes and amounts
owing pursuant to vessel acquisition transactions. In 2003, the Company redeemed
$35.3 million of its 5 3/8% Notes for $35.9 million and repaid indebtedness of
$23.2 million to a corporation from whom the Company acquired vessels. The
redemption of the 5 3/8% Notes, which involved the payment of a small premium to
principal amount, retired the issue. The write-off of related unamortized
deferred financing cost and the recognition of premium expense related to the 5
3/8% Note redemption will result in an after-tax charge of $0.7 million, or
$0.03 per diluted share.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Below is an aggregation of the Company's contractual obligations and commercial
commitments as of December 31, 2002, in thousands of dollars.
Payments Due By Period
-------------------------------------------------------------------
Less than After
Contractual Obligations Total 1 Year 1-3 Years 4-5 Years 5 Years
------------------------------------ ---------- ---------- ----------- ---------- ----------
Long-term Debt..................... $ 406,436 $ 614 $ 35,545 $ 35,632 $ 334,645
Operating Leases................... 117,141 28,586 42,792 24,388 21,375
Construction Commitments(1)........ 83,300 83,300 - - -
---------- ---------- ----------- ---------- ----------
Total Contractual Cash $ 606,877 $ 112,500 $ 78,337 $ 60,020 $ 356,020
Obligations........................ ========== ========== =========== ========== ==========
Amount of Commitment Expiration Per Period
-------------------------------------------------------------------
Total Less than Over 5
Other Commercial Commitments Committed 1 Year 1-3 Years 4-5 Years Years
------------------------------------ ---------- ---------- ----------- ---------- ----------
TMM Joint Venture Guarantee(2)..... $ 6,080 $ 239 $ 785 $ 908 $ 4,148
Pelican Joint Venture Guarantee(3) 1,500 - - 1,500 -
Letter of Credit................... 175 175 - - -
---------- ---------- ----------- ---------- ----------
Total Commercial Commitments.... $ 7,755 $ 414 $ 785 $ 2,408 $ 4,148
========== ========== =========== ========== ==========
--------------------
(1) Following year end, the Company committed to the construction of 2 vessels
for an aggregate cost of $6.9 million. Vessel deliveries are expected in
2004.
(2) Guarantee of amounts owed by the Pelican Joint Venture under its banking
facilities.
(3) Guarantee for non-payment of certain amounts owing under TMM Joint Venture
vessel charter agreements.
GLOBE WIRELESS
Since its inception in the early 1990's, Globe Wireless has focused on expanding
its network of high frequency radio stations and customers base. To support its
continued growth, Globe Wireless completed a private placement offering in 2000
that raised approximately $57.0 million. Although Globe Wireless has experienced
negative cash flow, the management of Globe Wireless presently believes it will
closely approximate operating cash break-even by mid-2003. There can be no
assurances that Globe Wireless' future operations will succeed. Should Globe
Wireless be unable to meet its funding requirements, SEACOR would be required to
commit additional funding or record an impairment charge with respect to its
investment. At December 31, 2002, the carrying value of the Company's investment
in Globe Wireless was $17.8 million.
STOCK AND DEBT REPURCHASE PROGRAM
SEACOR's Board of Directors have previously approved a securities repurchase
plan, which allows the Company to acquire Common Stock, 5 3/8% Notes, 7.2% Notes
and 5 7/8% Notes (collectively, the "SEACOR Securities") and, prior to the
deconsolidation of Chiles in 2000, certain notes of Chiles. During the fourth
quarter of 2002, SEACOR's Board of Directors increased its previously announced
repurchase authority by $25.0 million. In 2002 and 2001, a total of 459,700 and
5,950 shares of Common Stock, respectively, were acquired for treasury at an
aggregate cost of $18.5 million and $0.2 million, respectively. Also during
2002, the Company purchased $13.0 million principal amount of its 7.2% Notes and
$11.0 million principal amount of its 5 3/8% Notes for $15.4 million. As of
December 31, 2002, the Company had approximately $27.8 million available for the
30
repurchase 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. On February 13, 2003, the Board of
Directors again increased repurchase authority under SEACOR's securities
repurchase plan by $25.0 million.
EFFECTS OF INFLATION
The Company's operations expose it to the effects of inflation. Although the
Company does not consider the effects of inflation to be material to its
operating revenues or income from continuing operations, in the event that
inflation becomes a significant factor in the world economy, inflationary
pressures could result in increased operating and financing costs.
RECENT ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supercedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." This new statement also supercedes certain aspects of
Accounting Principle Board Opinion No. 30 ("APB 30"), "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions," with
regard to reporting the effects of a disposal of a segment of a business and
will require expected future operating losses from discontinued operations to be
reported in discontinued operations in the period incurred rather than as of the
measurement date as presently required by APB 30. Additionally, certain
dispositions may now qualify for discontinued operations treatment. The adoption
of this statement did not have a material effect on the Company's financial
statements.
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 143,
"Accounting for Asset Retirement Obligations", which requires recording the fair
value of a liability for an asset retirement obligation in the period incurred.
The standard is effective for fiscal years beginning after June 15, 2002, with
earlier application permitted. Upon adoption of the standard, the Company will
be required to use a cumulative effect approach to recognize transition amounts
for any existing retirement obligation liabilities, asset retirement costs and
accumulated depreciation. The nature of the Company's business and long-lived
assets is such that adoption of this new standard should have no significant
impact on the Company's financial statements.
In May 2002, the FASB issued SFAS 145, "Recission of FASB Statements Nos. 4, 44
and 64, Amendment of FASB Statement No. 13 and Technical Corrections," which is
effective for fiscal years beginning after May 15, 2002. This statement, among
other matters, provides guidance with respect to the accounting for gains or
losses on capital leases which were modified to become operating leases. The
statement also eliminates the requirement that gains or losses on the early
extinguishment of debt be classified as extraordinary items and provides
guidance when gains or losses on the early retirement of debt should or should
not be reflected as an extraordinary item. The adoption of this statement
effective January 1, 2003 will result in the reclassification of the
extraordinary losses recognized in 2002 and 2001 to income from continuing
operations.
In July 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities." This statement requires that costs associated with
terminating employees or contracts or closing or relocating facilities are to be
recognized at fair value at the time the liability is incurred. The Company does
not expect adoption of this statement when it becomes effective for disposal
activities initiated after December 31, 2002 to have a material effect on its
financial statements.
CAUTIONARY STATEMENTS
In addition to the other information contained in this Annual Report, the
following factors should be considered carefully.
THE OFFSHORE MARINE SERVICE SEGMENT AND OFFSHORE AVIATION SEGMENT OF THE COMPANY
ARE SUBJECT TO CYCLICALITY AND A SIGNIFICANT OR PROLONGED DECLINE IN OIL AND GAS
PRICES WOULD LIKELY REDUCE THE LEVEL OF EXPLORATION AND DEVELOPMENT OF OFFSHORE
AREAS, WHICH WOULD REDUCE DEMAND FOR THE COMPANY'S VESSELS AND HELICOPTERS. The
offshore oil and gas industry is highly cyclical. Activity in the offshore oil
and gas exploration and production industry has a significant impact on the
Company's offshore marine operations. The level of exploration and development
of offshore areas is affected by both short-term and long-term trends in oil and
gas prices. In recent years, oil and gas prices have been extremely volatile
and, as a result, the level of offshore exploration and drilling activity also
has been extremely volatile. Reductions in oil and gas prices generally result
in decreased drilling and production and corresponding decreases in demand for
the Company's vessels, logistics services and helicopters. Decreased demand for
these services would reduce the Company's revenues and profitability.
31
THE COMPANY RELIES ON SEVERAL CUSTOMERS FOR A SIGNIFICANT SHARE OF ITS REVENUES,
THE LOSS OF WHICH COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND OPERATING
RESULTS. The Company's customers are primarily the major oil companies, large
independent oil and gas exploration and production companies, members of the
maritime community and owners of refineries, pipelines and tank terminals. The
portion of the Company's revenues attributable to any single customer changes
over time, depending on the level of relevant activity by the customer, the
Company's ability to meet the customer's needs and other factors, many of which
are beyond the Company's control.
THE COMPANY MAY INCUR SIGNIFICANT COSTS, LIABILITIES AND PENALTIES IN COMPLYING
WITH GOVERNMENT REGULATIONS. Government regulation, such as international
conventions, federal, state and local laws and regulations in jurisdictions
where the Company's vessels operate or are registered, have a significant impact
on the Company's offshore marine and "Other" business segments. These
regulations relate to worker health and safety, the manning, construction and
operation of vessels, oil spills and other aspects of the Company's business.
Risks of incurring substantial compliance costs and liabilities and penalties
for non-compliance, particularly with respect to environmental laws and
regulations, are inherent in the Company's business. The occurrence of any of
the foregoing could have a substantial negative impact on the Company's
profitability and financial position. The Company cannot predict whether it will
incur such costs or penalties in the future.
THE COMPANY FACES INTENSE COMPETITION THAT COULD ADVERSELY AFFECT ITS ABILITY TO
INCREASE ITS MARKET SHARE AND REVENUES. The Company's businesses operate in
highly competitive industries. High levels of competition could reduce its
operating revenues, increase its expenses and reduce its profitability. In
addition to price, service and reputation, important competitive factors for
offshore fleets of vessels include customers' national flag preference,
operating conditions and intended use (all of which determine the suitability of
available vessels), complexity of logistical support needs and presence of
equipment in the appropriate geographical locations.
The primary competitive factors in the environmental service business are price,
service, reputation, experience and operating capabilities. In addition, the
Company believes that the absence of uniform environmental regulation and
enforcement on international, federal, state and local levels has lowered
barriers to entry in several market segments and increased the number of
competitors. The Company's environmental service business faces competition from
Marine Spill Response Corporation (a non-profit corporation funded by the major
integrated oil companies), other industry cooperatives and smaller contractors
who target specific market niches.
The inland business is highly competitive and there are few significant barriers
to entry. Certain of the Company's principal competitors have greater financial
resources and/or are less leveraged than the Company and may be better able to
withstand and respond to adverse market conditions within the barging industry.
There can be no assurance that such competition will not have a material adverse
effect on the Company's business, financial condition or results of operations
or that the Company will not encounter increased competition in the future,
which also could have a material adverse effect on its business, financial
condition or results of operations.
AN INCREASE IN SUPPLY OF OFFSHORE SUPPORT VESSELS WOULD LIKELY HAVE A NEGATIVE
EFFECT ON THE CHARTER RATES EARNED BY THE COMPANY'S OFFSHORE SUPPORT VESSELS,
WHICH WOULD REDUCE THE COMPANY'S EARNINGS. Expansion of the worldwide offshore
support vessel fleet would increase competition in the markets where the Company
operates. The refurbishment of disused or "mothballed" vessels, conversion of
vessels from uses other than oil support and related activities or construction
of new vessels could all add vessel capacity to current worldwide levels. A
significant increase in vessel capacity would lower charter rates and result in
a corresponding reduction in revenues and profitability.
VESSEL AND HELICOPTER RELATED RISKS COULD DISRUPT THE COMPANY'S OFFSHORE MARINE
AND HELICOPTER SERVICES AND EXPOSE THE COMPANY TO LIABILITY. The operation of
offshore support vessels and helicopters is subject to various risks, including
catastrophic disaster, adverse weather, mechanical failure, collision, and risks
with respect to vessels additionally include sea conditions, capsizing,
grounding, oil and hazardous substance spills and navigation errors. These risks
could endanger the safety of the Company's personnel, equipment, cargo and other
property, as well as the environment. If any of these events were to occur, the
Company could be held liable for resulting damages. In addition, the affected
vessels or helicopters could be removed from service and would not be available
to generate revenues.
THE COMPANY'S OFFSHORE AVIATION BUSINESS MAY BE SUBJECT TO ADVERSE WEATHER
CONDITIONS AND SEASONALITY. Three types of weather-related and seasonal
occurrences impact the Company's offshore aviation business segment; poor
weather conditions generally, tropical storm season in the U.S. Gulf of Mexico,
and the number of hours of daylight. Poor visibility, high winds, and heavy
precipitation can affect the operation of helicopters and result in reduced
number of flight hours. In the U.S. Gulf of Mexico, the months of December
through February have more days of adverse weather conditions than the other
months of the year and June through November is tropical storm season. During
tropical storms, the Company is unable to operate in the area of the storm
although flight activity may increase due to the evacuation of offshore workers.
In addition, the Company's facilities are located along the U.S. Gulf of Mexico
coast and tropical storms may cause damage to its property. The fall and winter
months have fewer hours of daylight. Consequently, flight hours are generally
lower at these times.
32
A significant portion of the Company's revenues from its offshore aviation
business segment is dependent on actual flight hours and prolonged periods of
adverse weather and the effect of fewer hours of daylight can adversely affect
operating revenues and operating profits of the Company's offshore aviation
business segment.
THE COMPANY'S INSURANCE COVERAGE MAY BE INADEQUATE TO PROTECT THE COMPANY FROM
THE LIABILITIES THAT COULD ARISE IN ITS BUSINESSES. The Company maintains
insurance coverage against the risks related to its businesses. There can be no
assurance, however, that its existing insurance coverage can be renewed at
commercially reasonable rates or that available coverage will be adequate to
cover future claims. If a loss occurs that is partially or completely uninsured,
the Company could be exposed to substantial liability.
THE COMPANY'S SIGNIFICANT GLOBAL OPERATIONS ARE SUBJECT TO CURRENCY EXCHANGE
RISKS. To minimize the financial impact of currency fluctuations and risks
arising from fluctuations in currency exchange rates, the Company attempts to
contract the majority of its services in U.S. dollars. However, in some of its
foreign businesses, the Company collects revenues and pays expenses in local
currency. If the value of foreign currencies decline against the U.S. dollar,
the Company's operating revenues would effectively be reduced. The Company
engages in certain currency hedging arrangements designed to minimize the effect
of fluctuation in Pounds Sterling, the currency in the United Kingdom, where
most of its currency exchange risk arises. There can be no assurance, however,
that the Company will not incur losses in the future as a result of currency
exchange rate fluctuations.
BECAUSE A SIGNIFICANT PROPORTION OF THE COMPANY'S OFFSHORE MARINE OPERATIONS ARE
CONDUCTED IN FOREIGN COUNTRIES, UNSTABLE POLITICAL, MILITARY AND ECONOMIC
CONDITIONS IN THOSE COUNTRIES COULD ADVERSELY AFFECT THE COMPANY'S BUSINESS AND
OPERATING RESULTS. During 2002, approximately 51% of the Company's offshore
marine revenues were derived from foreign operations. These operations are
subject to risks, among other things, of political instability, potential vessel
seizure, terrorist attacks, nationalization of assets, currency restrictions,
import-export quotas and other forms of public and governmental regulation, all
of which are beyond the Company's control. Economic sanctions or an oil embargo,
for example, could have a significant negative impact on activity in the oil and
gas industry and correspondingly on the Company should it operate vessels in the
region of the embargo. In addition, the Company's vessel operations in Mexico
are significantly affected by Mexican government policy. The Company cannot
predict whether any such conditions or events might develop in the future.
THE COMPANY MAY BE UNABLE TO MAINTAIN OR REPLACE ITS VESSELS AS THEY AGE. As of
December 31, 2002, the average age of vessels the Company owned, excluding its
standby safety vessels, was approximately 13.8 years. The Company believes that
after an offshore support vessel has been in service for approximately 25 years,
the expense (which typically increases with age) necessary to satisfy required
marine certification standards may not be economically 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 that its financial resources will be
sufficient to enable it to make expenditures necessary for these purposes or to
acquire or build replacement vessels.
SPILL RESPONSE REVENUE IS DEPENDENT UPON THE MAGNITUDE AND NUMBER OF SPILL
RESPONSES. The Company's environmental service business' spill response revenue
can vary greatly between comparable fiscal periods based on the number and
magnitude of spill responses in any given period. As a result, the Company's
revenue and profitability attributable to this business may vary greatly from
period to period.
A RELAXATION OF OIL SPILL REGULATION OR ENFORCEMENT COULD REDUCE DEMAND FOR THE
COMPANY'S ENVIRONMENTAL SERVICE. The Company's environmental service business is
dependent upon the enforcement of regulations promulgated under OPA 90 and, to a
lesser extent, upon state regulations. Less stringent oil spill regulations or
less aggressive enforcement of these regulations would decrease demand for the
Company's environmental service segment's services. There can be no assurance
that oil spill regulation will not be relaxed or enforcement of existing or
future regulation will not become less stringent. If this happens, the demand
for the Company's oil spill response services could be reduced, which could have
a negative impact on its profitability.
A CHANGE IN, OR REVOCATION OF, NRC'S CLASSIFICATION AS AN "OIL SPILL REMOVAL
ORGANIZATION" WOULD RESULT IN A LOSS OF BUSINESS. NRC is classified as an OSRO.
OSRO classification is a voluntary process conducted by the Coast Guard. The
Coast Guard classifies OSROs based on their overall ability to respond to
various types and sizes of oil spills in different operating environments, such
as rivers/canals, inland waters and oceans. Coast Guard classified OSROs have a
competitive advantage over non-classified service providers. Customers of a
classified OSRO are exempt from regulations that would otherwise require them to
list their oil spill response resources in filings with the Coast Guard. A loss
of NRC's classification or changes in the requirements could eliminate or
diminish NRC's ability to provide customers with this exemption. If this
happens, the Company could lose customers, in which case its revenues and
profitability would decline.
THE COMPANY'S ENVIRONMENTAL SERVICE BUSINESS MAY INCUR LIABILITY IN CONNECTION
WITH PROVIDING SPILL RESPONSE SERVICES. Although the Company's environmental
service business is generally exempt from liability under the federal Clean
Water Act for its own actions and omissions in providing spill response
services, this exemption would not apply if it was found to have been grossly
33
negligent or to have engaged in willful misconduct, or if it fails to provide
these services consistent with applicable regulations and directives under the
Clean Water Act. In addition, the exemption under the federal Clean Water Act
would not protect the Company's environmental service business against liability
for personal injury or wrongful death, or against prosecution under other
federal or state laws. While most of the U.S. states in which the Company's
environmental service business provides service have adopted similar exemptions,
several states have not. If a court or other applicable authority determines
that the Company's environmental service business does not benefit from federal
or state exemptions from liability in providing spill response services, the
Company's environmental service business could be liable together with the local
contractor and the responsible party for any resulting damages, including
damages caused by others.
IF THE COMPANY DOES NOT RESTRICT THE AMOUNT OF FOREIGN OWNERSHIP OF ITS COMMON
STOCK, THE COMPANY COULD BE PROHIBITED FROM OPERATING ITS VESSELS IN PARTS OF
THE U.S., WHICH WOULD ADVERSELY AFFECT ITS BUSINESS AND OPERATING RESULTS. The
Company is subject to the Shipping Act and the 1920 Act. These Acts 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.: (i) the corporation must be organized under the laws of the U.S. or of a
state, territory or possession thereof, (ii) each of the chief executive officer
and the chairman of the board of directors must be a U.S. citizen (and no
officer who is not a U.S. citizen may act in such person's absence), (iii) 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
(iv) at least 75% of the interest in such corporation must be owned by U.S.
"citizens" (as defined in the Acts).
The Company would be prohibited from operating its vessels in the U.S. coastwise
trade during any period in which the Company did not comply with these
regulations. To facilitate compliance with the Acts, the Company's Restated
Certificate of Incorporation: (i) limits the aggregate percentage ownership by
non-U.S. citizens 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,
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.
THE INLAND RIVER BARGES MAY EXPERIENCE SIGNIFICANT VARIABILITY IN FREIGHT RATES.
Freight transportation rates may fluctuate from season to season and year to
year. The level of dry cargoes requiring transportation on the inland waterways
will vary due to numerous factors, including global economic conditions and
business cycles, domestic agricultural production/demand as well as
international agricultural production/demand and the value of the U.S. dollar
relative to other currencies. In addition, the number of barges in the overall
industry fleet available to transport these cargoes will vary from year to year
as older barges are retired and scrapped and new barges are constructed and
placed into service. The resulting relationship between available cargoes and
available barges will vary with periods of low barge availability and high cargo
demand causing higher freight rates and periods of high barge availability and
low cargo demand causing lower freight rates. Significant periods of high barge
availability and low cargo demand could have an adverse affect on the Company's
inland river business.
INLAND RIVER OPERATIONS ARE EXPOSED TO THE LEVEL OF GRAIN EXPORTS. The Company's
inland river business is significantly affected by the level of grain export
volume handled through U.S. Gulf of Mexico ports. Grain exports can vary due to,
among other things, crop harvest yield levels in the United States and abroad.
Overseas grain shortages can increase demand for U.S. grain, while worldwide
over-production can decrease the demand for U.S. grain. This variable nature of
grain exports can result in temporary barge oversupply, which can drive down
freight rates. There can be no assurance that historical levels of grain export
volume will be maintained in the future and, to the extent supply imbalances
were to prevail for a significant period of time, they could have an adverse
affect on the Company's inland river business.
INLAND RIVER OPERATIONS ARE EXPOSED TO INTERNATIONAL ECONOMIC AND POLITICAL
FACTORS. The Company's inland river operations may be affected by actions of
foreign governments and global or regional economic developments. For example,
global economic events such as foreign import/export policy or currency
fluctuations, could affect the level of imports and exports. Foreign
agricultural subsidies can also impact demand for U.S. agricultural exports. In
addition, foreign trade agreements and each country's adherence to the terms of
such agreements can raise or lower demand for U.S. imports and exports. National
and international boycotts and embargoes of other countries' or U.S. imports
and/or exports together with the raising or lowering of tariff rates will affect
the level of cargoes requiring transportation on the Inland Waterways. Changes
in the value of the U.S. dollar relative to other currencies will raise or lower
demand for U.S. exports as well as U.S. demand for foreign produced raw
materials and finished good imports. Such actions or developments could have an
adverse affect on the Company's inland river business.
34
INLAND RIVER OPERATIONS ARE EXPOSED TO SEASONALITY IN ACTIVITY. The Company's
inland river business is seasonal, and its quarterly operating revenues and
operating profits historically have been lower during the first and second
fiscal quarters of the year (January through June) and higher during the third
and fourth fiscal quarters (July through December) due to the grain harvest.
INLAND RIVER OPERATIONS ARE EXPOSED TO RISKS OF ADVERSE WEATHER AND RIVER
CONDITIONS. The Company's barging operations are affected by weather and river
conditions. Varying weather patterns can affect river levels and cause ice in
Northern United States river areas. For example, the Upper Mississippi River
closes annually from approximately mid-December to mid-March and ice conditions
can hamper navigation on the upper reaches of the Illinois River during the
winter months. In addition, adverse river conditions affect towboat speed, tow
size and loading drafts and can delay barge movements. Lock outages due to lock
maintenance and/or other interruptions in normal lock operation can also delay
barge movements. It is likely that the Company's inland river operations will be
subject to adverse weather or river conditions in the future and there can be no
assurance that such weather or river conditions will not adversely affect its
revenues and profitability.
INLAND RIVER OPERATIONS ARE EXPOSED TO FUEL PRICE FLUCTUATIONS. Fuel prices are
subject to fluctuation as a result of domestic and international events. While
the Company does not currently own towboats or fleeting operations, but rather
purchases these services from third party vendors, it is indirectly exposed to
increases in fuel prices in that the vendors will adjust the price of the
services when fuel prices escalate. Thus, there can be no assurance that the
Company will not experience pressure from increased fuel prices in the future,
which could adversely affect the operating expenses and operating profits of its
inland river business.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has foreign currency exchange risks primarily related to its 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.
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. (pound)77.4 million of total net assets before translation
to U.S. dollars are reported in the Company's consolidated balance sheet at
December 31, 2002. A 1% weakening in the exchange rate of the Pound Sterling
against the U.S. dollar would result in an after-tax charge of $0.8 million to
other comprehensive income related to these investments. To protect 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 for U.S. dollars 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 because 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,
2002, there were no outstanding forward exchange contracts for which hedge
accounting criteria were met.
The Company has also entered into forward exchange and futures contracts that
are considered speculative with respect to Norwegian Kroners, Pounds Sterling,
Euros and Singapore Dollars. The Norwegian Kroner contracts enabled the Company
to buy Norwegian Kroners in the future at fixed exchange rates, which could have
offset possible consequences of changes in foreign exchange had the Company
conducted business in Norway. The Pound Sterling, Euro and Singapore Dollar
contracts enable the Company to buy Pounds Sterling, Euros and Singapore Dollars
in the future at fixed exchange rates, which could offset possible consequences
of changes in foreign exchange of the Company's business conducted in the United
Kingdom, the Netherlands, France and Singapore. At December 31, 2002, the
Company had no material outstanding forward exchange and futures contracts.
The Company has entered into and settled various positions in natural gas and
crude oil via swaps, options and futures contracts pursuant to which, on each
applicable settlement date, the Company receives or pays an amount, if any, by
which a contract price for a swap, an option or a futures contract exceeds the
settlement price quoted on the New York Mercantile Exchange ("NYMEX") or
receives or pays the amount, if any, by which the settlement price quoted on the
NYMEX exceeds the contract price. The general purpose of these hedge
transactions is to provide value to the Company should the price of natural gas
and crude oil decline, which over time, if sustained, would lead to a decline in
the Company's offshore assets' market values and cash flows. At December 31,
2002, the fair market value of the Company's positions in commodity contracts
was not material.
The Company, furthermore, beginning in the fourth quarter of 2001, entered into
and settled various positions in U.S. treasury notes and bonds via futures or
35
options on futures and rate-lock agreements on U.S. treasury notes pursuant to
which, on each applicable settlement date, the Company receives or pays an
amount, if any, by which a contract price for an option or a futures contract
exceeds the settlement price quoted on the Chicago Board of Trade ("CBOT") or
receives or pays the amount, if any, by which the settlement price quoted on the
CBOT exceeds the contract price. The general purpose of these hedge transactions
is to provide value to the Company should the price of U.S. treasury notes and
bonds decline, leading to generally higher interest rates which, if sustained
over time, might lead to higher interest costs for the Company. For accounting
purposes, the Company records the change in the market value of its U.S.
treasury positions at the end of each month and recognizes a related gain or
loss. At December 31, 2002, the Company had no outstanding contracts with
respect to U.S. treasury obligations.
SEACOR provides cash advances to wholly-owned subsidiaries, whose functional
currency is Pounds Sterling. At December 31, 2002, the outstanding amount of
these advances totaled $102.0 million, or (pound)63.6 million. SEACOR considers
these advances to be intercompany loans with payment expected in the foreseeable
future. Until repaid, accounting standards require that changes in the exchange
rate from the transaction date until the settlement date with respect to these
intercompany loans be included in the determination of net income. A loan
repayment in 2003 reduced the outstanding balance of the intercompany loans to
approximately $33.2 million, or (pound)20.7 million. A 1% weakening in the
exchange rate of the Pound Sterling currency against the U.S. dollar with
respect to the loans presently outstanding would result in the Company's
recognition of an approximate $0.3 million pre-tax foreign currency transaction
loss.
At December 31, 2002, the Company held fixed income investments having a fair
value of $39.8 million. These fixed income investments included U.S. government
bonds, U.K. government bonds, state and municipal bonds, and corporate notes.
These investments had terms ranging from six months to 34 years. The fair value
of these investments will fluctuate based on the general level of interest rates
and the creditworthiness of the issuers of the investments. A 1% increase in the
level of interest rates would cause the fair value of these investments, and
hence comprehensive income, to decrease by $1.8 million. The fair value of
corporate notes, which bear a greater risk of default, was $19.4 million. The
Company manages its risk associated with these investments by maintaining a
ladder of maturities and analyzing the creditworthiness of issuers. In addition
to fixed income investments, the Company held equity securities with a fair
value of $48.8 million as of December 31, 2002, the majority of which was shares
of ENSCO received in connection with the Chiles Merger of which 1,000,000 shares
were subject to a costless collar as more fully described below. A 10% decline
in the value of these securities would reduce other comprehensive income by $3.2
million. The Company monitors these investments on a regular basis and disposes
of investments when it judges the risk profile to be too high or when it
believes that the investments have reached an attractive valuation.
The Company's debt is primarily in fixed interest rate instruments. While the
fair value of these debt instruments will vary with changes in interest rates,
the Company has fixed most of its cash flow requirements and operations are not
significantly affected by interest rate fluctuations. The Company's only
significant variable rate debt instrument is its revolving credit facility,
under which the Company had no outstanding borrowings at December 31, 2002.
While available for liquidity requirements, the Company has not historically
utilized significant portions of the revolving credit facility for any extended
period of time and thus has not been significantly impacted by fluctuations in
interest rates.
In order to reduce its cost of capital, the Company entered into swap agreements
during the fourth quarter of 2001 and second quarter of 2002 with a major
financial institution with respect to $41.0 million of its 7.2% Notes. Pursuant
to each such agreement, such financial institution agreed to pay to the Company
an amount equal to interest paid on the notional amount of the 7.2% Notes
subject to such agreement, and the Company agreed to pay to such financial
institution an amount equal to interest currently at the rate of approximately
3.3% per annum on the agreed upon price of such notional amount of the 7.2%
Notes as set forth in the applicable swap agreement. Upon termination of each
swap agreement, the financial institution agreed to pay to the Company the
amount, if any, by which the fair market value of the notional amount of the
7.2% Notes subject to such swap agreements on such date exceeded the agreed upon
price of such notional amount as set forth in such swap agreements, and the
Company agreed to pay to such financial institution the amount, if any, by which
the agreed upon price of such notional amount exceeded the fair market value of
such notional amount on such date. The agreed upon price of such notional amount
as set forth in such swap agreements totaled $41,7 million. At December 31,
2002, $41.0 million notional principal amount of the 7.2% Notes were covered by
such swap agreements. During the fourth quarter of 2002, the swap agreements
were extended for an additional twelve months and will now terminate during the
fourth quarter of 2003 and the second quarter of 2004 unless they are extended
further by mutual consent. At December 31, 2002, the unrealized pre-tax gains
that resulted from the fair value of the notional amounts exceeding the agreed
upon price set forth in the swap agreements totaled $3.5 million.
In order to partially hedge the fluctuation in market value for part of the
Company's common stock position in ENSCO that resulted from the Chiles Merger,
the Company entered into various transactions (commonly known as "costless
collars") during 2002 with a major financial institution on 1,000,000 shares of
ENSCO common stock. The effect of these transactions is that the Company will be
guaranteed a minimum value of approximately $24.35 and a maximum value of
approximately $29.80 per share of ENSCO, at expiration. The costless collars
36
will expire during the second quarter 2003. If the share value of ENSCO's common
stock is in excess of approximately $29.80 at expiration, then the Company will
have a choice of either (a) selling the shares to the counterparty for $29.80 or
(b) paying the counterparty the difference between the market value and $29.80,
in cash, and continue to own the shares. If, on the other hand, the share value
of ENSCO's common stock is less than approximately $24.35 at expiration, then
the Company will have a choice of either (a) selling the shares to the
counterparty for $24.35 or (b) receiving the difference between the market value
and $24.35, in cash, and continue to own the shares. If the share value of
ENSCO's common stock is between $24.35 and $29.80 at expiration, then neither
party will have a payment obligation and the Company will continue to own the
shares. The Company establishes the fair value of the costless collar at the end
of each reporting period and the change in value is reported in the financial
statements as derivative income or (loss), net. In 2002, pre-tax unrealized
losses totaled $1.7 million with respect to these costless collars.
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 45 through 76.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Required.
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 AND
RELATED STOCKHOLDER MATTERS
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.
ITEM 14. CONTROLS AND PROCEDURES
(a) The Company maintains disclosure controls and procedures that are designed
to ensure that information required to be disclosed in the Company's filings
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the periods specified in the rules and forms of the Securities
and Exchange Commission. Such information is accumulated and communicated to the
Company's management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and management necessarily is required to apply
judgment in evaluating disclosure controls and procedures.
37
Within 90 days prior to the filing date of this annual report on Form 10-K, the
Company has carried out an evaluation, under the supervision and with the
participation of the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on such evaluation, the Company's Chief Executive Officer and Chief Financial
Officer concluded that the Company's disclosure controls and procedures are
effective.
(b) There have been no significant changes in the Company's internal controls or
in other factors that could significantly affect the internal controls
subsequent to the date of their evaluation in connection with the preparation of
this annual report on Form 10-K.
PART IV
ITEM 15. 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
Schedule
on page 45 of this Form 10-K.
3. Exhibits:
Exhibit
Number Description
------ -----------
2.1 * Agreement and Plan of Merger, dated as of December 19, 2000, by
and between SEACOR SMIT Inc. and SCF Corporation (incorporated by
reference to Exhibit 2.1 of the Company's Registration Statement
on Form S-3 (No. 333-56842) filed with the Commission on March 9,
2001).
2.2 * Stock Exchange Agreement, dated as of January 9, 2001, among
SEACOR SMIT Inc. and the other parties thereto (incorporated by
reference to Exhibit 2.2 of the Company's Registration Statement
on Form S-3 (No. 333-56842) filed with the Commission on March 9,
2001).
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).
38
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).
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).
4.12 * Investment and Registration Rights Agreement, dated as of April
19, 2000, among SEACOR SMIT Inc. and the other parties thereto
(incorporated herein by reference to Exhibit 4.1 of the Company's
Registration Statement on Form S-3 (No. 333-37492) filed with the
Commission on May 19, 2000).
4.13 * Investment and Registration Rights Agreement, dated as of
December 19, 2000, among SEACOR SMIT Inc. and the other parties
thereto (incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-3 (No. 333-56842)
filed with the Commission on March 9, 2001).
4.14 * Investment and Registration Rights Agreement, dated as of January
9, 2001, among SEACOR SMIT Inc. and the other parties thereto
(incorporated by reference to Exhibit 4.2 of the Company's
Registration Statement on Form S-3 (No. 333-56842) filed with the
Commission on March 9, 2001).
4.15 * SEACOR SMIT Inc. 2000 Employee Stock Purchase Plan, as amended
February 14, 2001 (incorporated herein by reference to Exhibit
4.4 to the Company's Registration Statement on Form S-8 (No.
333-56714), filed with the Commission on March 8, 2001).
4.16 * Instrument, dated May 4, 2001, setting forth terms of (pound)
14,668,942 in aggregate principal amount of Fixed Rate Abatable
Loan Notes (including form of Loan Note Certificate as a Schedule
thereto) (incorporated herein by reference to the Company's
Registration Statement on Form 8-K dated May 17, 2001).
4.17 * Form of Indenture, dated as of January 10, 2001, among SEACOR
SMIT Inc. and U.S. Bank Trust National Association as trustee
(incorporated herein by reference to Exhibit 4.2 to Amendment
No.1 to the Company's Registration Statement on Form S-3/A (No.
333-53326) filed with the Commission on January 18, 2001).
39
4.18 * Form of Indenture, dated as of January 10, 2001, among SEACOR
SMIT Inc. and U.S. Bank Trust National Association as trustee
(incorporated herein by reference to Exhibit 4.3 to Amendment No.
1 to the Company's Registration Statement on Form S-3/A (No.
333-53326) filed with the Commission on January 18, 2001).
10.1 * 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).
10.2 *+ 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).
10.3 *+ 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).
10.4 *+ SEACOR SMIT Inc. 2000 Stock Option Plan for Non-Employee
Directors (incorporated herein by reference to Exhibit 10.1 of
the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2000 and filed with the Commission on August 14, 2000).
10.5 *+ 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).
10.6 *+ 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).
10.7 * 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).
10.8 * 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).
10.9 * 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).
10.10 * 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).
10.11 * 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).
10.12 *+ Form of Type A Restricted Stock Grant Agreement (incorporated
herein by reference to Exhibit 10.35 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000
and filed with the Commission on March 30, 2000).
10.13 *+ Form of Type B Restricted Stock Grant Agreement (incorporated
herein by reference to Exhibit 10.36 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000
and filed with the Commission on March 30, 2000).
10.14 *+ Form of Option Agreement for Officers and Key Employees Pursuant
to the SEACOR SMIT Inc. 1996 Share Incentive Plan (incorporated
herein by reference to Exhibit 10.37 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2000
and filed with the Commission on March 30, 2000).
40
10.15 * Stock Purchase Agreement dated as of January 30, 2001, by and
between SEACOR SMIT Inc. and Brian Cheramie (incorporated herein
by reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K, dated February 23, 2001 and filed with the Commission
on March 5, 2001).
10.16 * Letter Agreement dated as of February 23, 2001, amending the
Stock Purchase Agreement dated as of February 23, 2001, amending
the Stock Purchase Agreement dated as of January 30, 2001 by and
between SEACOR SMIT Inc. and Brian Cheramie (incorporated herein
by reference to Exhibit 10.2 of the Company's Current Report on
Form 8-K, dated February 23, 2001 and filed with the Commission
on March 5, 2001).
10.17 * Stock Purchase Agreement dated as of January 30, 2001 by and
among SEACOR SMIT Inc., the persons listed on Exhibit A thereto
and Brian Cheramie, as representative of such persons
(incorporated herein by reference to Exhibit 10.3 of the
Company's Current Report on Form 8-K, dated February 23, 2001 and
filed with the Commission on March 5, 2001).
10.18 * Letter Agreement dated as of February 23, 2001, amending the
Stock Purchase Agreement dated as of January 30, 2001 by and
among SEACOR SMIT Inc., the persons listed on Exhibit A thereto
and Brian Cheramie, as representative of such persons
(incorporated herein by reference to Exhibit 10.4 of the
Company's Current Report on Form 8-K, dated February 23, 2001 and
filed with the Commission on March 5, 2001).
10.19 * Stock Purchase Agreement, dated as of May 4, 2001, by and between
SEACOR SMIT Inc. and the Stirling Vendors (incorporated herein by
reference to the Company's Registration Statement on Form 8-K
dated May 17, 2001).
10.20 * Tax Deed, dated as of May 4, 2001, by and between SEACOR SMIT
Inc. and the Stirling Vendors (incorporated herein by reference
to the Company's Registration Statement on Form 8-K dated May 17,
2001).
10.21 * Revolving Credit Facility Agreement, dated as of February 5, 2002
by and among SEACOR SMIT Inc., the banks and financial
institutions named therein, Fleet National Bank, Den norske Bank
ASA, Nordea and The Governor and Company of the Bank of Scotland
as agents.
10.22 * Securities Purchase Agreement dated as of December 31, 2002 by
and between Offshore Aviation Inc., a wholly-owned subsidiary of
SEACOR SMIT Inc., and Edward L. Behne (Schedules not filed
herewith will be provided to the SEC upon request) (incorporated
herein by reference to Exhibit 10.22 of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002
and filed with the Commission on March 31, 2003).
10.23 * + List of Named Executive Officers which received awards of Type A
Restricted Stock pursuant to a Type A Restricted Stock Grant
Agreement, the form of which is attached hereto as Exhibit 10.12
(incorporated herein by reference to Exhibit 10.23 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and filed with the Commission on March 31,
2003).
10.24 * + List of Named Executive Officers which received awards of Type B
Restricted Stock pursuant to a Type B Restricted Stock Grant
Agreement, the form of which is attached hereto as Exhibit 10.13
(incorporated herein by reference to Exhibit 10.24 of the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and filed with the Commission on March 31,
2003).
21.1 * List of Registrant's Subsidiaries (incorporated herein by
reference to Exhibit 21.1 of the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2002 and filed with
the Commission on March 31, 2003).
23.1 Consent of Ernst & Young LLP.
23.2 Notice Regarding Consent of Arthur Andersen LLP.
99.1 * Certification by the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (incorporated herein by reference to
Exhibit 99.1 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 and filed with the Commission
on March 31, 2003).
99.2 * Certification by the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (incorporated herein by reference to
Exhibit 99.2 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 and filed with the Commission
on March 31, 2003).
99.3 Certification by the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.4 Certification by the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
------------------
* Incorporated herein by reference as indicated.
+ Management contracts or compensatory plans or arrangements required to be
filed as an exhibit pursuant to Item 15 (c) of the rules governing the
preparation of this report.
(b) Reports on Form 8-K: None.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
SEACOR SMIT INC.
(Registrant)
By: /s/ Lenny P. Dantin
--------------------------------
Lenny P. Dantin
Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
Date: April 7, 2003
42
CERTIFICATIONS
I, Charles Fabrikant, certify that:
1. I have reviewed this annual report on Form 10-K of SEACOR SMIT
Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: April 7, 2003
/s/ Charles Fabrikant
------------------------------
Name: Charles Fabrikant
Title: Chief Executive Officer
43
I, Randall Blank, certify that:
1. I have reviewed this annual report on Form 10-K of SEACOR SMIT
Inc.;
2. Based on my knowledge, this annual report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
annual report;
3. Based on my knowledge, the financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a- 14 and 15d-14) for the registrant and have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Dated: April 7, 2003
/s/ Randall Blank
------------------------------
Name: Randall Blank
Title: Chief Financial Officer
44
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Financial Statements:
Page
----
Reports of Independent Public Accountants................................................................ 46
Consolidated Balance Sheets - December 31, 2002 and 2001................................................. 48
Consolidated Statements of Income for the Years Ended
December 31, 2002, 2001 and 2000...................................................................... 49
Consolidated Statements of Changes in Equity for the Years Ended
December 31, 2002, 2001 and 2000..................................................................... 50
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000...................................................................... 51
Notes to Consolidated Financial Statements............................................................... 52
Financial Schedule:
Reports of Independent Public Accountants on Financial
Statement Schedule.................................................................................... 74
Valuation and Qualifying Accounts for the
Years ended December 31, 2002, 2001 and 2000.......................................................... 76
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.
45
REPORT OF INDEPENDENT AUDITORS
To SEACOR SMIT Inc.:
We have audited the accompanying consolidated balance sheet of SEACOR SMIT Inc.
and subsidiaries as of December 31, 2002, and the related consolidated
statements of income, changes in equity and cash flows for the year then ended.
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 audit. The financial statements of SEACOR SMIT Inc. and subsidiaries as
of December 31, 2001 and for each of the two years in the period then ended were
audited by other auditors who have ceased operations and whose report dated
February 21, 2002, expressed an unqualified opinion on those statements,
including an explanatory paragraph that disclosed the Company's adoption of SFAS
133, "Accounting for Derivative Instruments and Hedging Activities," before the
transitional disclosures and reclassification adjustments described in Notes 1
and 13.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SEACOR SMIT Inc.
and subsidiaries at December 31, 2002 and the consolidated results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.
As discussed in Note 1 to the financial statements, effective January 1, 2002,
the Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142).
As discussed above, the financial statements of SEACOR SMIT Inc. and
subsidiaries as of December 31, 2001 and for each of the two years in the period
then ended were audited by other auditors who have ceased operations. As
described in Notes 1 and 13, these financial statements have been revised. Our
procedures with respect to the SFAS 142 transitional disclosures in Note 1
related to 2001 and 2000 included (a) agreeing the previously reported income
before extraordinary item and net income to the previously issued financial
statements and the adjustments representing goodwill amortization (including
related tax effects) recognized in those periods to the Company's underlying
records obtained from management and (b) testing the mathematical accuracy of
the reconciliation of adjusted income before extraordinary item, net income and
the related earnings-per-share amounts. Our procedures with respect to the
disclosures in Note 1 related to 2001 also included agreeing the carrying value
of goodwill and the related 2001 activity by reportable segment, and in total,
to the Company's underlying records obtained from management. We also audited
the reclassification adjustments described in Note 13 that were applied to
revise the 2001 and 2000 financial statements relating to a change in the
composition of reportable segments. In our opinion, the SFAS 142 transitional
disclosures for 2001 and 2000 in Note 1 are appropriate and the reclassification
adjustments applied to the 2001 and 2000 segment disclosures in Note 13 are
appropriate and have been properly applied. However, we were not engaged to
audit, review, or apply any procedures to the 2001 and 2000 financial statements
of the Company other than with respect to such transitional disclosures and
reclassification adjustments and, accordingly, we do not express an opinion or
any other form of assurance on the 2001 and 2000 financial statements taken as a
whole.
/s/ Ernst & Young LLP
New Orleans, Louisiana
February 26, 2003
46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH SEACOR SMIT INC.'S FILING ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN
LLP IN CONNECTION WITH THIS FILING ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2002 AS THEY HAVE CEASED OPERATIONS. SEACOR SMIT INC. IS INCLUDING
THIS COPY OF ARTHUR ANDERSON LLP'S AUDIT REPORT PURSUANT TO RULE 2-02(E) OF
REGULATION S-X UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
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, 2001 and 2000 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, 2001. 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 auditing standards generally accepted
in the United States. 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 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, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 2001 the Company adopted SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities."
/s/ Arthur Andersen LLP
New Orleans, Louisiana
February 21, 2002
47
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 2002 2001
--------------- ---------------
Current Assets:
Cash and cash equivalents............................................................$ 342,046 $ 180,394
Marketable Securities................................................................ 7,984 -
Receivables:
Trade, net of allowance for doubtful accounts of $1,421 and $1,635, respectively.. 81,075 83,597
Other............................................................................. 25,045 20,839
Prepaid expenses and other........................................................... 17,041 6,631
--------------- ---------------
Total current assets............................................................ 473,191 291,461
--------------- ---------------
Investments, at Equity, and Receivables from 50% or Less Owned Companies................ 61,359 153,827
Available-for-Sale Securities........................................................... 80,641 22,371
Property and Equipment:
Vessels and equipment................................................................ 849,921 871,688
Inland barges........................................................................ 71,307 27,370
Construction in progress, primarily offshore marine vessels.......................... 37,475 51,292
Other 29,740 21,271
--------------- ---------------
988,443 971,621
Less-accumulated depreciation........................................................ (250,475) (236,864)
--------------- ---------------
737,968 734,757
--------------- ---------------
Construction Reserve Funds.............................................................. 95,260 55,290
Other Assets............................................................................ 38,688 40,432
--------------- ---------------
$ 1,487,107 $ 1,298,138
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt....................................................$ 614 $ 33,724
Accounts payable and accrued expenses................................................ 31,799 29,070
Accrued wages........................................................................ 7,468 8,471
Accrued interest..................................................................... 7,394 5,384
Accrued vessel construction.......................................................... 8,321 5,752
Accrued liability-short sale of securities........................................... 2,597 7,485
Accrued acquisition costs............................................................ - 10,162
Other current liabilities............................................................ 13,228 13,661
--------------- ---------------
Total current liabilities....................................................... 71,421 113,709
--------------- ---------------
Long-Term Debt ......................................................................... 402,118 256,675
Deferred Income Taxes................................................................... 174,987 148,430
Deferred Income and Other Liabilities................................................... 31,938 24,070
Minority Interest in Subsidiaries....................................................... 1,692 1,556
Common Stock Sold with Equity Forward Transaction....................................... - 10,000
Stockholders' Equity:
Common stock, $.01 par value, 40,000,000 shares authorized; 24,307,235
and 24,027,003 shares issued in 2002 and 2001, respectively....................... 243 238
Additional paid-in capital........................................................... 403,590 384,857
Retained earnings.................................................................... 519,430 472,843
Less 4,386,143 and 3,943,333 shares held in treasury in 2002 and
2001, respectively, at cost....................................................... (127,587) (109,638)
Unamortized restricted stock......................................................... (2,217) (1,985)
Accumulated other comprehensive income (loss) -
Cumulative translation adjustments................................................ 5,750 (2,474)
Unrealized gain (loss) on available-for-sale
securities........................................................................ 5,742 (143)
--------------- ---------------
Total stockholders' equity...................................................... 804,951 743,698
--------------- ---------------
$ 1,487,107 $ 1,298,138
=============== ===============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
48
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
2002 2001 2000
-------------- --------------- ---------------
Operating Revenues.......................................................... $ 403,158 $ 434,790 $ 339,941
-------------- --------------- ---------------
Costs and Expenses:
Operating expenses....................................................... 249,892 234,551 201,452
Administrative and general............................................... 53,265 49,980 39,548
Depreciation and amortization............................................ 56,244 58,324 51,189
-------------- --------------- ---------------
359,401 342,855 292,189
-------------- --------------- ---------------
Operating Income............................................................ 43,757 91,935 47,752
-------------- --------------- ---------------
Other Income (Expense):
Interest income.......................................................... 8,833 13,546 17,423
Interest expense......................................................... (17,064) (21,998) (27,450)
Income from equipment sales or retirements, net.......................... 8,635 9,030 7,628
Gain upon sale of shares of Chiles Offshore Inc.......................... 19,719 - 4,023
Derivative income (loss), net............................................ (5,043) 4,127 6,292
Foreign currency transaction gains (losses), net......................... 6,281 1,247 (1,573)
Other, net............................................................... 3,362 5,834 7,563
-------------- --------------- ---------------
24,723 11,786 13,906
-------------- --------------- ---------------
Income Before Income Taxes, Minority Interest, Equity in Earnings
(Losses) of 50% or Less Owned Companies and Extraordinary Item........... 68,480 103,721 61,658
-------------- --------------- ---------------
Income Tax Expense:
Current.................................................................. 6,825 14,838 4,952
Deferred................................................................. 17,027 21,220 15,628
-------------- --------------- ---------------
23,852 36,058 20,580
-------------- --------------- ---------------
Income Before Minority Interest, Equity in Earnings (Losses) of 50% or
Less Owned Companies and Extraordinary Item.............................. 44,628 67,663 41,078
Minority Interest in Net Income of Subsidiaries............................. (226) (372) (3,393)
Equity in Earnings (Losses) of 50% or Less Owned Companies.................. 3,705 4,306 (3,565)
-------------- --------------- ---------------
Income Before Extraordinary Item............................................ 48,107 71,597 34,120
Extraordinary Item - Loss on Debt Extinguishment............................ (1,520) (896) -
-------------- --------------- ---------------
Net Income.................................................................. $ 46,587 $ 70,701 $ 34,120
============== =============== ===============
Basic Earnings Per Common Share:
Income before extraordinary item......................................... $ 2.41 $ 3.68 $ 2.02
Extraordinary item....................................................... (0.08) (0.05) -
-------------- --------------- ---------------
Net income............................................................... $ 2.33 $ 3.63 $ 2.02
============== =============== ===============
Diluted Earnings Per Common Share:
Income before extraordinary item......................................... $ 2.35 $ 3.47 $ 1.92
Extraordinary item....................................................... (0.07) (0.04) -
-------------- --------------- ---------------
Net income............................................................... $ 2.28 $ 3.43 $ 1.92
============== =============== ===============
Weighted Average Common Shares:
Basic 19,997,625 19,490,115 16,887,176
Diluted.................................................................. 21,057,877 21,335,182 21,234,528
The accompanying notes are an integral part of these financial
statements and should be read in conjunction herewith.
49
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS)
Accumulated
Additional Unamortized Other Compre-
Common Paid-in Retained Treasury Restricted Comprehensive hensive
Stock Capital Earnings Stock Stock Income Income
-------------------------------------------------- -------- ------------ ---------- ----------- ----------- ------------- ---------
2002
--------------------------------------------------
Balance, December 31, 2001....................... $ 238 $ 384,857 $ 472,843 $ (109,638)$ (1,985) $ (2,617) $ -
Add/(Deduct) -
-Net income for fiscal year 2002.............. - - 46,587 - - - 46,587
-Issuance of common stock:
Tex-Air Helicopters, Inc. acquisition...... 1 2,726 - - - - -
Employee Stock Purchase Plan............... - - - 693 - - -
Exercise of stock options.................. 1 3,380 - - - - -
Issuance of restricted stock............... 1 2,655 - - (2,675) - -
Settlement of Equity Forward Transaction... 2 9,998 - - - - -
-Amortization of restricted stock............. - - - - 2,309 - -
-Cancellation of restricted stock, 2,850 shares - - - (134) 134 - -
-Net currency translation adjustments......... - - - - - 8,224 8,224
-Change in unrealized gains (losses) on
available-for-sale securities.............. - - - - - 5,885 5,885
-Conversion of 5 3/8% Convertible Subordinated
Notes due 2006............................. - 1 - - - - -
-Change in share of book value of investment
in Chiles Offshore Inc..................... - (27) - - - - -
-Purchase of treasury shares.................. - - - (18,508) - - -
------- ---------- --------- ----------- -------- ----------- ---------
Balance, December 31, 2002....................... $ 243 $ 403,590 $ 519,430 $ (127,587)$ (2,217) $ 11,492 $ 60,696
====================================================================================================================================
2001
--------------------------------------------------
Balance, December 31, 2000....................... $ 214 $ 278,567 $ 402,142 $ (125,968)$ (1,301) $ (1,102) $ -
Add/(Deduct) -
-Net income for fiscal year 2001.............. - - 70,701 - - - 70,701
-Issuance of common stock:
ERST/O'Brien's Inc. acquisition, 27,877
shares................................... - 1,284 - - - - -
Plaisance Marine Inc. acquisition.......... - - - 3,163 - - -
Stirling Shipping Holdings Limited......... - - - 12,777 - - -
Employee Stock Purchase Plan............... - - - 624 - - -
Exercise of stock options.................. - 272 - - - - -
Issuance of restricted stock............... 1 3,644 - - (2,976) - -
-Amortization of restricted stock............. - - - - 2,272 - -
-Cancellation of restricted stock, 459 shares. - - - (20) 20 - -
-Net currency translation adjustments......... - - - - - (545) (545)
-Change in unrealized gains (losses) on
available-for-sale securities.............. - - - - - (1,055) (1,055)
-Conversion of 5 3/8% Convertible Subordinated
Notes due 2006............................. 23 98,824 - - - - -
-Change in share of book value of investment
in Chiles Offshore Inc..................... - 2,395 - - - - -
-Change in value of shares issued in equity
forward transaction........................ - (164) - - - - -
-Change in fair value of derivatives.......... - - - - - 85 85
-Purchase of TMM's minority interest in
SEACOR Vision LLC.......................... - 35 - - - - -
-Purchase of treasury shares.................. - - - (214) - - -
------- ---------- --------- ----------- -------- ----------- ---------
Balance, December 31, 2001....................... $ 238 $ 384,857 $ 472,843 $ (109,638)$ (1,985) $ (2,617) $ 69,186
====================================================================================================================================
2000
--------------------------------------------------
Balance, December 31, 1999....................... $ 214 $ 274,979 $ 368,022 $ (131,183)$ (1,110) $ (2,792) $ -
Add/(Deduct) -
-Net income for fiscal year 2000.............. - - 34,120 - - - 34,120
-Issuance of common stock:
ERST/O'Brien's Inc. acquisition, 15,254
shares................................... - 920 - - - - -
Putford Enterprises Ltd. acquisition....... - - - 4,086 - - -
SCF Corporation acquisition............... - - - 5,920 - - -
Exercise of stock options................. - 763 - - - - -
Issuance of restricted stock............... - 1,529 - - (1,543) - -
-Amortization of restricted stock............. - - - - 1,337 - -
-Cancellation of restricted stock, 623 shares. - - - (15) 15 - -
-Net currency translation adjustments......... - - - - - (1,721) (1,721)
-Change in unrealized gains (losses) on
available-for-sale securities.............. - - - - - 3,411 3,411
-Change in value of investment in Chiles
Offshore LLC............................... - 380 - - - - -
-Cash in lieu of fractional shares in stock
split...................................... - (4) - - - - -
-Purchase of treasury shares.................. - - - (4,776) - - -
------- ---------- --------- ----------- -------- ----------- ---------
Balance, December 31, 2000....................... $ 214 $ 278,567 $ 402,142 $ (125,968)$ (1,301) $ (1,102) $ 35,810
====================================================================================================================================
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
50
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS)
2002 2001 2000
------------- -------------- -------------
Cash Flows from Operating Activities:
Net income.....................................................................$ 46,587 $ 70,701 $ 34,120
Depreciation and amortization.................................................. 56,244 58,324 51,189
Restricted stock amortization.............................................. 2,309 2,272 1,337
Debt discount/(premium) amortization, net.................................. 522 474 (49)
Bad debt expense........................................................... 9 947 (235)
Deferred income taxes...................................................... 17,027 21,220 15,628
Equity in net (earnings) losses of 50% or less owned companies............. (3,705) (4,306) 3,565
Extraordinary (gain) loss, extinguishment of debt.......................... 1,520 896 -
(Gain) loss from sale of investment in 50% or less owned companies......... - (201) -
Derivative (income) loss................................................... 5,043 (4,127) (6,292)
(Gain) loss from sale of available-for-sale securities, net................ (3,218) (5,689) (7,562)
Gain upon sale of shares of Chiles Offshore Inc............................ (19,719) - (4,023)
Gain from equipment sales or retirements, net.............................. (8,635) (9,030) (7,628)
Amortization of deferred income on sale and leaseback transactions......... (7,396) (5,482) (18,601)
Minority interest in income of subsidiaries................................ 226 372 3,393
Other, net................................................................. 650 504 1,709
Changes in operating assets and liabilities -
Increase in receivables.................................................. (2,075) (3,360) (15,468)
(Increase) decrease in prepaid expenses and other assets................. (13,600) (4,175) 5,985
Increase (decrease) in accounts payable, accrued and other liabilities... (4,994) (7,920) 8,183
------------- -------------- -------------
Net cash provided by operations........................................ 66,795 111,420 65,251
------------- -------------- -------------
Cash Flows from Investing Activities:
Purchases of property and equipment........................................ (139,706) (107,445) (73,750)
Proceeds from the sale of marine vessels and equipment..................... 128,669 60,666 56,772
Investments in and advances to 50% or less owned companies................. (22) (5,763) (7,056)
Principal payments on notes due from 50% or less owned companies........... 20,665 6,040 1,514
Proceeds from sale of investment in 50% or less owned companies............ - 3,076 -
Net increase in construction reserve funds................................. (39,970) (14,531) (18,774)
Proceeds from sale of available-for-sale securities........................ 63,519 145,920 90,309
Purchases of available-for-sale securities................................. (49,603) (74,771) (60,650)
Cash settlements of derivative transactions................................ (5,712) 1,594 (1,454)
Dividends received from 50% or less owned companies........................ 1,889 6,705 9,029
Acquisitions, net of cash acquired......................................... (113) (98,174) (13,110)
Cash of Chiles Offshore LLC, a deconsolidated subsidiary................... - - (11,691)
Cash proceeds from sale of shares of Chiles Offshore Inc................... 25,365 - -
Other, net................................................................. 1,186 45 (2,151)
------------- -------------- -------------
Net cash provided by (used in) investing activities.................... 6,167 (76,638) (31,012)
------------- -------------- -------------
Cash Flows from Financing Activities:
Payments of long-term debt and stockholder loans........................... (93,801) (145,356) (17,240)
Proceeds from issuance of long-term debt .................................. 231 75,563 482
Net proceeds from sale of 5 7/8% Notes..................................... 196,836 - -
Payments on capital lease obligations...................................... - (17,580) (1,675)
Proceeds from issuance of Common Stock..................................... - 10,000 -
Distribution of membership interest to minority shareholders of Chiles
Offshore LLC............................................................. - - 17,651
Termination of swap agreements............................................. - - 19,504
Common stock acquired for treasury......................................... (18,508) (214) (4,776)
Stock options exercised.................................................... 1,754 131 379
Other, net................................................................. 693 1 (103)
------------- -------------- -------------
Net cash provided by (used in) financing activities.................... 87,205 (77,455) 14,222
------------- -------------- -------------
Effects of Exchange Rate Changes on Cash and Cash Equivalents.................. 1,485 (1,152) (2,751)
------------- -------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents........................... 161,652 (43,825) 45,710
Cash and Cash Equivalents, beginning of period................................. 180,394 224,219 178,509
------------- -------------- -------------
Cash and Cash Equivalents, end of period.......................................$ 342,046 $ 180,394 $ 224,219
============= ============== =============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
51
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") is a major provider of offshore support vessel services to the oil
and gas exploration and production industry and is one of the leading providers
of oil spill response services to owners of tank vessels and oil storage,
processing and handling facilities. The Company also operates hopper barges in
its inland river business and provides helicopter transportation services
primarily to companies operating in the U.S. Gulf of Mexico.
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of SEACOR and all majority owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.
The Company employs the equity method of accounting for investments in common
stock when such investments in voting stock gives it the ability to exercise
significant influence over operating and financial policies of an investee even
though the Company holds 50% or less of the voting stock. Significant influence
is generally deemed to exist if the Company owns between 20% and 50% of the
voting stock of an investee. The Company reports its investment in and advances
to equity investees in the Consolidated Balance Sheets as "Investments, at
Equity, and Receivables from 50% or Less Owned Companies." The Company reports
its share of earnings or losses of equity investees in the Consolidated
Statements of Income as "Equity in Earnings (Losses) of 50% or Less Owned
Companies."
The Company employs the cost method of accounting for investments in common
stock in companies over which the Company does not have the ability to exercise
significant influence nor does it own greater than 20% of the investees voting
stock. Such common stock investments are generally investments in private
companies, and are carried at cost and are adjusted only for
other-than-temporary declines in fair value, distributions of earnings and
additional investments.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States 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.
CONCENTRATION OF CREDIT RISK. The Company is exposed to credit risks relating to
its receivables from customers, its cash and cash equivalents, its short-term
and long-term investments and its use of derivative instruments in connection
with the management of interest rate risk and foreign currency risk. The Company
does not generally require collateral or other security to support the
concentration of risks. The Company minimizes its credit risk relating to
receivables from customers by performing ongoing credit evaluations. The Company
also maintains reserves for potential credit losses, which to date have been
within management's expectations. The Company minimizes its credit risk relating
to cash and investments by maintaining such instruments in high-grade
investments through a portfolio of major financial institutions, and by
monitoring the financial condition of those financial institutions. The Company
minimizes its credit risk relating to the counterparties to its derivative
instruments by transacting with multiple, high-quality counterparties, thereby
limiting exposure to individual counterparties, and by monitoring the financial
condition of those counterparties.
CASH EQUIVALENTS. Cash equivalents refer to securities with maturities of three
months or less when purchased.
ACCOUNTS RECEIVABLE. Customers of offshore support vessel services and
helicopter transportation services are primarily major and large independent oil
and gas exploration and production companies. Oil spill and emergency response
services are provided to tank vessel owner/operators, refiners, terminals,
exploration and production facilities and pipeline operators. Barge customers
are primarily major agricultural and industrial companies based within the
United States. All customers are granted credit on a short-term basis and
related credit risks are considered minimal. Although credit risks associated
with these customers are considered minimal, the Company routinely reviews its
accounts receivable balances and makes provisions for probable doubtful
accounts. Accounts receivable are deemed uncollectible and removed from accounts
receivable and allowance for doubtful accounts when collection efforts have been
exhausted.
52
PROPERTY AND EQUIPMENT. Property and equipment, stated at cost, are depreciated
over the estimated useful lives of the assets using the straight-line method.
Offshore support vessels ("vessels") and related equipment are depreciated over
20 to 30 years, inland river hopper barges ("barges") are depreciated over 20
years, helicopters and related equipment are generally depreciated over 12 years
and all other property and equipment are depreciated and amortized over two to
ten years. Depreciation expense totaled $56,239,000, $55,069,000 and $49,617,000
in 2002, 2001 and 2000, respectively.
Vessel, helicopter and barge maintenance and repair and costs of routine drydock
inspections performed on vessels are charged to operating expense as incurred.
Expenditures that extend the useful life or improve the marketing and commercial
characteristics of vessels and helicopters as well as major renewals or
improvements to other properties are capitalized. Certain interest costs
incurred during the construction of equipment was capitalized as part of the
assets' carrying values and are being amortized to expense over such assets
estimated useful lives. Interest capitalized in 2002, 2001 and 2000 totaled
$1,092,000, $760,000 and $639,000, respectively.
Effective January 1, 2002, the Company adopted Financial Accounting Standards
No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived
Assets", which superceded SFAS 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of". This new statement also
superceded certain aspects of Accounting Principle Board Opinion No. 30 ("APB
30"), "Reporting the Results of Operations-Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," with regard to reporting the effects of a disposal of
a segment of a business and requires expected future operating losses from
discontinued operations to be reported in discontinued operations in the period
incurred rather than as of the measurement date as previously required by APB
30. Additionally, certain dispositions may now qualify for discontinued
operations treatment. The adoption of this statement did not have a material
effect on the Company's financial statements.
BUSINESS COMBINATIONS. As discussed in Note 4, business combinations completed
by the Company have been accounted for under the purchase method of accounting.
The cost of each acquired operation is allocated to the assets acquired and
liabilities assumed based on their estimated fair values. These estimates are
revised during an allocation period as necessary when, and if, information
becomes available to further define and quantify the value of the assets
acquired and liabilities assumed. The allocation period does not exceed beyond
one year from the date of the acquisition. To the extent additional information
to refine the original allocation becomes available during the allocation
period, the allocation of the purchase price is adjusted. Should information
become available after the allocation period, those items are included in
operating results. The cost of an enterprise acquired in a business combination
includes the direct cost of the acquisition. The operating results of entities
acquired are included in the Consolidated Statements of Income from the
completion date of the applicable transaction.
GOODWILL. Goodwill represents the excess of purchase price over fair value of
net assets acquired in business combinations.
Effective January 1, 2002, the Company adopted SFAS 141, "Business
Combinations," and SFAS 142, "Goodwill and Other Intangible Assets" and ceased
amortization of its remaining goodwill balance. The following table presents the
Company's comparative operating results for the periods indicated reflecting the
exclusion of goodwill amortization expense in 2001 and 2000.
(in thousands, except per share data) 2002 2001 2000
------------------------------------------- ---------------- --------------- ---------------
Income before extraordinary item:
As reported...............................$ 48,107 $ 71,597 $ 34,120
Goodwill amortization, net of tax.......... - 2,103 905
---------------- --------------- ---------------
As adjusted...............................$ 48,107 $ 73,700 $ 35,025
================ =============== ===============
Net income:
As reported...............................$ 46,587 $ 70,701 $ 34,120
Goodwill amortization, net of tax......... - 2,103 905
---------------- --------------- ---------------
As adjusted...............................$ 46,587 $ 72,804 $ 35,025
================ =============== ===============
Basic earnings per share:
As reported...............................$ 2.33 $ $
3.63 2.02
Goodwill amortization, net of tax......... -
0.11 0.05
---------------- --------------- ---------------
As adjusted...............................$ 2.33 $ $
3.74 2.07
================ =============== ===============
Diluted earnings per share:
As reported...............................$ 2.28 $ 3.43 $ 1.92
Goodwill amortization, net of tax......... - 0.10 0.04
---------------- --------------- ---------------
As adjusted...............................$ 2.28 $ 3.53 $ 1.96
================ =============== ===============
53
SFAS 142 requires that impairment testing of the opening goodwill balances be
performed within six months from the start of the fiscal year in which the
standard is adopted and that any impairment be written off and reported as a
cumulative effect of a change in accounting principle. The Company completed a
transitional goodwill impairment test in March 2002 and determined that goodwill
was not impaired. Additionally, the Company completed its first annual
impairment test as of December 31, 2002 and has determined there is no goodwill
impairment.
DEFERRED FINANCING COSTS. Deferred financing costs, incurred in connection with
the issuance of debt, are amortized over the life of the related debt, ranging
from 5 to 12 years, using the effective interest rate method. Deferred financing
costs amortization expense totaled $526,000 in 2002, $504,000 in 2001 and
$904,000 in 2000 and is included in the Consolidated Statements of Income as
"Interest Expense."
INCOME TAXES. Deferred income tax assets and liabilities have been provided in
recognition of the income tax effect attributable to the difference between
assets and liabilities reported in the tax return and financial statements.
Deferred tax assets or liabilities are provided using the enacted tax rates
expected to apply to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized. Deferred taxes
are not provided on certain undistributed earnings of certain non-U.S.
subsidiaries and joint venture corporations because the Company considers those
earnings to be indefinitely reinvested abroad.
DEFERRED INCOME. The Company has entered into vessel sale and leaseback
transactions and has sold vessels to joint venture corporations in which it
holds an equity ownership interest. Certain of the gains realized from these
transactions were not immediately recognized in income and have been reported in
the Consolidated Balance Sheets as "Deferred Income and Other Liabilities." In
sale and leaseback transactions, gains were deferred to the extent of the
present value of minimum lease payments and are being amortized to income as
reductions in rental expense over the applicable lease terms. In joint venture
sale transactions, gains were deferred to the extent of the Company's ownership
interest, with amortization to income over the applicable vessels' depreciable
lives, and upon receipt of debt securities and an inadequate down payment, with
amortization to income on the installment method.
Income
(in thousands) Deferred
---------------------------------------------------------- --------------
Balance at 12/31/01.......................................$ 21,170
Deferred Income from 2002 Vessel Sales.................... 13,822
2002 Amortization of Deferred Income...................... (7,803)
Other..................................................... 119
--------------
Balance at 12/31/02.......................................$ 27,308
==============
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. Upon consolidating these subsidiaries with SEACOR, their assets and
liabilities are translated to U.S. dollars at currency exchange rates as of the
balance sheet date and for revenues 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 reported in the Consolidated Balance Sheets as
"Accumulated other comprehensive income (loss)."
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. From time to time, SEACOR may advance
funds to wholly-owned subsidiaries whose functional currency differs from the
U.S. dollar. If settlement of such advances are not planned or anticipated to be
paid in the foreseeable future, exchange rate gains and losses relating to the
transactions are deferred and included in the Consolidated Balance Sheets as
"Accumulated other comprehensive income (loss)." Conversely, if settlement of
the advances is expected in the foreseeable future, changes in the exchange rate
from the transaction date until the settlement date with respect to such
advances are included in the Consolidated Statements of Income as "Foreign
currency transaction gains (losses), net." The Company's earnings in 2002 and
2001 included net foreign currency exchange gains of $6,281,000 and $1,247,000,
respectively; whereas, 2000 included net foreign currency exchange losses of
$1,573,000.
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
reported in the Consolidated Balance Sheet as "Accumulated other comprehensive
income (loss)." 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.
54
REVENUE RECOGNITION. The Company's offshore marine business segment earns and
recognizes revenues primarily from the time and bareboat charter-out of vessels
to customers based upon daily rates of hire. A time charter is a lease
arrangement under which the Company provides a vessel to a customer and is
responsible for all crewing, insurance and other operating expenses. In a
bareboat charter, the Company provides only the vessel to the customer, and the
customer assumes responsibility to provide for all of the vessel's operating
expenses and generally assumes all risk of operation. Vessel charters may range
from several days to several years.
Customers of the Company's environmental business segment are charged retainer
fees for ensuring by contract the availability (at predetermined rates) of oil
spill response services and equipment. Such retainer fees are generally
recognized ratably over the terms of the contract. Retainer services include
employing a staff to supervise response to an oil spill and maintaining
specialized equipment. Retainer agreements with vessel owners generally range
from one to three years while retainer arrangements with facility owners are as
long as ten years. Spill response revenues are recognized as the services are
provided based on contract terms and are dependent on the magnitude of any one
spill response and the number of spill responses within a given fiscal year.
Consequently, spill response revenues can vary greatly between comparable
periods. Consulting fees are also earned from preparation of customized training
programs, planning of and participation in customer oil spill response drill
programs and response exercises and other special projects and are recognized as
the services are provided based on contract terms.
The Company's inland river business earns revenues primarily from voyage
affreightments under which customers are charged for a committed space to
transport cargo for a specific time from a point of origin to a destination at
an established rate per ton. The inland river operation also earns revenues
while cargo is stored aboard a barge and when a barge is chartered-out by a
third party.
Helicopters are chartered primarily through master service agreements, term
contracts and day-to-day charter arrangements. Master service agreements require
customers to make incremental payments based on usage, have fixed terms ranging
from one month to five years and generally are cancelable upon notice by either
party in 30 days. Term contracts and day-to-day charter arrangements are
generally non-cancelable and call for a combination of a monthly or daily fixed
rental fee plus a charge based on usage. Rental fee revenues are recognized
ratably over the contract term and revenues for helicopter usage are recognized
as the services are performed.
OTHER, NET. In 2002, 2001 and 2000, other income and expense primarily included
gains and losses from the sale of marketable securities.
DERIVATIVES. Effective January 1, 2001, the Company adopted SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended. The
cumulative effect of adopting SFAS 133 was not material. See Note 2 for
discussion of the Company's derivatives.
STOCK COMPENSATION. 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.
No stock based employee compensation cost is reflected in net income as all
options granted under the Company's option plans had an exercise price equal to
the market value of the underlying common stock at the date of grant. 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, 2002, 2001 and
2000.
2002 2001 2000
------------------------------- -------------------------------- -------------------------
(in thousands, except share data) As Reported Pro forma As Reported Pro forma As Reported Pro forma
--------------------------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net income.......................$ 46,587 $ 44,590 $ 70,701 $ 68,746 $ 34,120 $ 32,211
Earnings per common share:
Basic.........................$ 2.33 $ 2.23 $ 3.63 $ 3.53 $ 2.02 $ 1.91
Diluted........................ 2.28 2.19 3.43 3.34 1.92 1.83
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.
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 38.8%, 37.37% and 38.09% in the years 2002, 2001 and 2000,
respectively, (c) discount rates of 3.76%, 5.31% and 6.21% in the years 2002,
2001 and 2000, respectively, and (d) expected lives of five years.
55
EARNINGS PER SHARE. Basic earnings per common share were computed based on the
weighted-average number of common shares issued and outstanding for the relevant
periods. Diluted earnings per common share were computed based on the
weighted-average number of common shares issued and outstanding plus all
potentially dilutive common shares that would have been outstanding in the
relevant periods assuming the vesting of restricted stock grants and the
issuance of common shares for stock options and convertible subordinated notes
through the application of the treasury stock and if-converted methods. All
computations give effect for the three-for-two stock split effected June 15,
2000. Certain options and share awards, 69,300, 127,580 and 74,140 in 2002, 2001
and 2000, respectively, were excluded from the computation of diluted earnings
per share as the effect would have been antidilutive.
Per
(in thousands, except shares and per share data) Income Shares Share
--------------------------------------------------------------- -------------- ------------- ---------
FOR THE YEAR ENDED 2002-
BASIC EARNINGS PER SHARE:
Income before extraordinary item........................ $ 48,107 19,997,625 $ 2.41
=========
EFFECT OF DILUTIVE SECURITIES:
Options and restricted stock............................ - 257,538
Convertible securities.................................. 1,463 802,714
-------------- ------------
DILUTED EARNINGS PER SHARE:
Income available to common stockholders
plus assumed conversions............................. $ 49,570 21,057,877 $ 2.35
============== ============ =========
FOR THE YEAR ENDED 2001-
BASIC EARNINGS PER SHARE:
Income before extraordinary item........................ $ 71,597 19,490,115 $ 3.68
=========
EFFECT OF DILUTIVE SECURITIES:
Options and restricted stock............................ - 253,260
Convertible securities.................................. 2,596 1,591,807
Common stock sold with equity forward contract, see Note (164) -
--------------- ------------
DILUTED EARNINGS PER SHARE:
Income available to common stockholders
plus assumed conversions............................. $ 74,029 21,335,182 $ 3.47
=============== ============ =========
FOR THE YEAR ENDED 2000-
BASIC EARNINGS PER SHARE:
Income before extraordinary item........................ $ 34,120 16,887,176 $ 2.02
=========
EFFECT OF DILUTIVE SECURITIES:
Options and restricted stock............................ - 220,082
Convertible securities.................................. 6,605 4,127,270
---------------- --------------
DILUTED EARNINGS PER SHARE:
Income available to common stockholders
plus assumed conversions............................. $ 40,725 21,234,528 $ 1.92
================= =============== =========
PENDING ACCOUNTING PRONOUNCEMENTS. In July 2001, the Financial Accounting
Standards Board ("FASB") issued SFAS 143, "Accounting for Asset Retirement
Obligations", which requires recording the fair value of a liability for an
asset retirement obligation in the period incurred. The standard is effective
for fiscal years beginning after June 15, 2002, with earlier application
permitted. Upon adoption of the standard, the Company will be required to use a
cumulative effect approach to recognize transition amounts for any existing
retirement obligation liabilities, asset retirement costs and accumulated
depreciation. The nature of the Company's business and long-lived assets is such
that adoption of this new standard should have no significant impact on the
Company's financial statements.
In May 2002, the FASB issued SFAS 145, "Recission of FASB Statements Nos. 4, 44
and 64, Amendment of FASB Statement No. 13 and Technical Corrections," which is
effective for fiscal years beginning after May 15, 2002. This statement, among
other matters, provides guidance with respect to the accounting for gains or
losses on capital leases which were modified to become operating leases. The
statement also eliminates the requirement that gains or losses on the early
extinguishment of debt be classified as extraordinary items and provides
guidance when gains or losses on the early retirement of debt should or should
not be reflected as an extraordinary item. The adoption of this statement
effective January 1, 2003 will result in the reclassification of the
extraordinary losses recognized in 2002 and 2001 to income from continuing
operations.
In July 2002, the FASB issued SFAS 146, "Accounting for Costs Associated with
Exit or Disposal Activities." This statement requires that costs associated with
terminating employees or contracts or closing or relocating facilities are to be
recognized at fair value at the time the liability is incurred. The Company does
not expect adoption of this statement when it becomes effective for disposal
activities initiated after December 31, 2002 to have a material effect on its
financial statements.
56
COMPREHENSIVE INCOME. 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 transactions with
owners. The Company has chosen to disclose Comprehensive Income in the
Consolidated Statements of Changes in Equity. The Company's other comprehensive
income or loss was comprised of net currency translation adjustments and
unrealized holding gains and losses on available-for-sale securities. Income
taxes allocated to each component of other comprehensive income during the years
indicated are as follows:
Before-Tax Tax (Expense) Net-of-Tax
(in thousands) Amount or Benefit Amount
---------------------------------------------------------------------- ---------------- --------------- ----------------
2002
Foreign currency translation adjustments..............................$ 12,652 $ (4,428) $ 8,224
Unrealized gains on available-for-sale securities:
Unrealized holding gains (losses) arising during period........... 12,272 (4,295) 7,977
Less - reclassification adjustment for (gains) losses included in (3,218) 1,126 (2,092)
net income............................................................
---------------- --------------- ----------------
Other comprehensive income (loss).....................................$ 21,706 $ (7,597) $ 14,109
================ =============== ================
2001
Foreign currency translation adjustments..............................$ (708) $ 248 $ (460)
Unrealized gains on available-for-sale securities:
Unrealized holding gains (losses) arising during period........... 4,066 (1,423) 2,643
Less - reclassification adjustment for (gains) losses included in (5,689) 1,991 (3,698)
net income............................................................
---------------- --------------- ----------------
Other comprehensive income (loss).....................................$ (2,331) $ 816 $ (1,515)
================ =============== ================
2000
Foreign currency translation adjustments..............................$ (2,648) $ 927 $ (1,721)
Unrealized gains on available-for-sale securities:
Unrealized holding gains (losses) arising during period........... 12,809 (4,483) 8,326
Less - reclassification adjustment for (gains) losses included in (7,562) 2,647 (4,915)
net income............................................................
---------------- --------------- ----------------
Other comprehensive income (loss).....................................$ 2,599 $ (909) $ 1,690
================ =============== ================
RECLASSIFICATIONS. Certain reclassifications of prior year information have been
made to conform with the current year presentation.
2. FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's financial instruments have been
determined using available market information and appropriate valuation
methodologies. Considerable judgment was required in developing certain of the
estimates of fair value, and accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
2002 2001
----------------------------- -----------------------------
Carrying Estimated Carrying Estimated
(in thousands) Amount Fair Value Amount Fair Value
------------------------------------------------------------- -------------- ------------- ------------- -------------
ASSETS:
Cash and temporary cash investments...................... $ 342,046 $ 342,046 $ 180,394 $ 180,394
Marketable securities.................................... 88,625 88,625 22,371 22,371
Collateral deposits, notes and other receivables......... 10,146 9,725 30,787 30,717
Construction reserve funds............................... 95,260 95,260 55,290 55,290
Stock investments, carried at cost....................... 1,190 1,190 1,150 1,150
Derivative instruments................................... 3,535 3,535 1,909 1,909
LIABILITIES:
Long-term debt, including current portion................ 402,732 422,557 290,399 295,844
Other current liabilities................................ - - 164 164
Derivative instruments................................... 1,688 1,688 848 848
The carrying value of cash and temporary cash investments, construction reserve
funds, collateral deposits and other receivables approximate fair value. The
fair values of the Company's notes receivable, long-term debt, marketable
securities and derivative instruments were estimated based upon quoted market
prices or by discounting the underlying cash flows using market information as
to interest rates for receivables and indebtedness of similar terms and
maturities.
The Company has foreign currency exchange risks primarily related to its
offshore support vessel operations that are conducted from ports located in the
United Kingdom, where its functional currency is Pounds Sterling. To protect the
U.S. dollar value of certain Pounds Sterling denominated net assets of the
Company from the effects of volatility in foreign currency exchange rates that
might occur prior to their conversion to U.S. dollars, the Company has entered
into forward exchange contracts. The Company considers these forward exchange
contracts as economic hedges of its net investment in the United Kingdom and
resulting gains or losses from those transactions are charged to Accumulated
Other Comprehensive Income in Stockholders' Equity. At December 31, 2002, the
Company had no outstanding Pounds Sterling forward exchange contracts for which
hedge accounting criteria were met.
57
The Company has also entered into forward exchange and futures contracts that
are considered speculative with respect to Norwegian Kroners, Pounds Sterling,
Euros and Singapore Dollars. The Norwegian Kroner contracts enabled the Company
to buy Norwegian Kroners in the future at fixed exchange rates which could have
offset possible consequences of changes in foreign exchange had the Company
decided to conduct business in Norway. The Pound Sterling, Euro and Singapore
Dollar contracts enable the Company to buy Pounds Sterling, Euros and Singapore
Dollars in the future at fixed exchange rates which could offset possible
consequences of changes in foreign exchange of the Company's business conducted
in the United Kingdom, the Netherlands, France and Singapore. Resulting gains or
losses from these transactions are reported in the Consolidated Statements of
Income as "Derivative income (loss)" as they do not meet the criteria for hedge
accounting. For the twelve month periods ending December 31, 2002, 2001 and
2000, the Company recognized net gains of $674,000, net losses of $153,000 and
net gains of $639,000, respectively, from these forward exchange and futures
contracts. At December 31, 2002, the Company had no outstanding Norwegian
Kroner, Pounds Sterling and Euro contracts and the fair market value of its
speculative Singapore Dollar contracts totaled $3,000 and was reported in the
Consolidated Balance Sheets as "Trade and other receivables."
The Company has entered into and settled various positions in natural gas and
crude oil via swaps, options and futures contracts pursuant to which, on each
applicable settlement date, the Company receives or pays an amount, if any, by
which a contract price for a swap, an option or a futures contract exceeds the
settlement price quoted on the New York Mercantile Exchange ("NYMEX") or
receives or pays the amount, if any, by which the settlement price quoted on the
NYMEX exceeds the contract price. The general purpose of these hedge
transactions is to provide value to the Company should the price of natural gas
and crude oil decline which over time, if sustained, would lead to a decline in
the Company's offshore assets' market values and cash flows. For accounting
purposes, the Company records the change in the market value of its commodity
contracts at the end of each month and recognizes a related gain or loss. For
the twelve month periods ending December 31, 2002, 2001 and 2000, the Company
has recognized net gains of $406,000, net gains of $4,584,000 and net losses of
$980,000, respectively, from commodity hedging activities that were reported in
the Consolidated Statements of Income as "Derivative income (loss), net." At
December 31, 2002, the fair market value of the Company's positions in commodity
contracts totaled $49,000 and was reported in the Consolidated Balance Sheets as
"Trade and other receivables."
The Company, beginning in the fourth quarter of 2001, entered into and settled
various positions in U.S. treasury notes and bonds via futures or options on
futures and rate-lock agreements on U.S. treasury notes pursuant to which, on
each applicable settlement date, the Company receives or pays an amount, if any,
by which a contract price for an option or a futures contract exceeds the
settlement price quoted on the Chicago Board of Trade ("CBOT") or receives or
pays the amount, if any, by which the settlement price quoted on the CBOT
exceeds the contract price. The general purpose of these hedge transactions is
to provide value to the Company should the price of U.S. treasury notes and
bonds decline leading to generally higher interest rates which, if sustained
over time, might lead to a higher interest cost for the Company. For accounting
purposes, the Company records the change in the market value of its U.S.
treasury positions at the end of each month and recognizes a related gain or
loss. For the twelve month periods ending December 31, 2002 and 2001, the
Company recognized net losses of $8,310,000 and net gains of $196,000,
respectively, with respect to positions in U.S. treasury obligations that were
reported in the Consolidated Statements of Income as "Derivative income (loss),
net." At December 31, 2002, the Company had no outstanding contracts with
respect to U.S. treasury obligations.
In order to reduce its cost of capital, the Company entered into swap agreements
during the fourth quarter of 2001 and second quarter of 2002 with a major
financial institution with respect to $41,000,000 of its 7.2% Senior Notes due
2009 (the 7.2% Notes"). Pursuant to each such agreement, such financial
institution agreed to pay to the Company an amount equal to interest paid on the
notional amount of the 7.2% Notes subject to such agreement, and the Company
agreed to pay to such financial institution an amount equal to interest
currently at the rate of approximately 3.3% per annum on the agreed upon price
of such notional amount of the 7.2% Notes as set forth in the applicable swap
agreement. Upon termination of each swap agreement, the financial institution
agreed to pay to the Company the amount, if any, by which the fair market value
of the notional amount of the 7.2% Notes subject to such swap agreements on such
date exceeded the agreed upon price of such notional amount as set forth in such
swap agreements, and the Company agreed to pay to such financial institution the
amount, if any, by which the agreed upon price of such notional amount exceeded
the fair market value of such notional amount on such date. The agreed upon
price of such notional amount as set forth in such swap agreements totaled
$41,700,000. At December 31, 2002, $41,000,000 notional principal amount of the
7.2% Notes were covered by such swap agreements. During the fourth quarter of
2002, the swap agreements were extended for an additional twelve months and will
now terminate during the fourth quarter of 2003 and the second quarter of 2004
unless they are extended further by mutual consent. During the twelve months
ended December 31, 2002 and 2001, the Company recorded a gain of $3,877,000 and
a loss of $499,000, respectively, with respect to these swap agreements in the
Condensed Consolidated Statements of Income as "Derivative income (loss), net."
At December 31, 2002, the unrealized gains that resulted from the fair value of
the notional amounts exceeding the agreed upon price set forth in the swap
agreements totaled $3,483,000 and were reported in the Condensed Consolidated
Balance Sheet under "Trade and other receivables."
58
On August 7, 2002, the stockholders of Chiles Offshore Inc. ("Chiles") approved
a merger (the "Chiles Merger") with ENSCO International Incorporated ("ENSCO")
and the merger was completed. Pursuant to the terms of the merger agreement,
Chiles' stockholders received $5.25 and 0.6575 shares of ENSCO common stock for
each share of Chiles' common stock they owned at the time of the merger. Upon
completion of this merger, the Company received $25,364,855 and 3,176,646 shares
of ENSCO's common stock.
In order to partially hedge the fluctuation in market value for part of the
Company's common stock position in ENSCO, the Company entered into various
transactions (commonly known as "costless collars") during 2002 with a major
financial institution on 1,000,000 shares of ENSCO common stock. The effect of
these transactions is that the Company will be guaranteed a minimum value of
approximately $24.35 and up to a maximum value of approximately $29.80 per share
of ENSCO, at maturity. The costless collars will expire during the second
quarter 2003. If the share value of ENSCO's common stock is in excess of
approximately $29.80 at maturity, then the Company will have a choice of either
(a) selling the shares to the counterparty for $29.80 or (b) paying the
counterparty the difference between the market value and $29.80, in cash, and
continue to own the shares. If, on the other hand, the share value of ENSCO's
common stock is less than approximately $24.35 at maturity, then the Company
will have a choice of either (a) selling the shares to the counterparty for
$24.35 or (b) receiving the difference between the market value and $24.35, in
cash, and continue to own the shares. If the share value of ENSCO's common stock
is between $24.35 and $29.80 at maturity, then neither party will have a payment
obligation and the Company will continue to own the shares. The Company
establishes the fair value of the costless collar at the end of each reporting
period and the change in value is recorded in the books of the Company under
"Derivative income (loss), net." At December 31, 2002, the unrealized losses,
totaling $1,688,000, with respect to the costless collars were reported in the
Condensed Consolidated Statement of Income as "Derivative income (loss), net"
and the Condensed Consolidated Balance Sheet under "Other current liabilities."
The market value of ENSCO's common stock at December 31, 2002 was $29.45 per
share.
3. MARKETABLE SECURITIES:
Equity securities that have readily determinable fair values and investments in
debt securities are classified by the Company as investments in
available-for-sale securities. These investments are reported at their fair
values with unrealized holding gains and losses included in the Consolidated
Balance Sheets as "Accumulated other comprehensive income (loss)."
Available-for-sale securities are included in the Consolidated Balance Sheets as
"Marketable Securities" if the Company intends to liquidate the investment
within one year from the balance sheet date and are included as
"Available-for-Sale Securities" if the Company has the intent and ability to
hold such investments for over one year from the balance sheet date. The
amortized cost and fair value of marketable securities at December 31, 2002 and
2001 were as follows, in thousands of dollars:
Amortized Gross Unrealized Holding Fair
---------------------------
Type of Securities Cost Gains Losses Value
------------------------------------------ ----------- ----------- ----------- -----------
2002:
U.S. government and agencies........ $ 3,208 $ 34 $ - $ 3,242
U.S. states and political 12,860 360 - 13,220
subdivisions.............................
Corporate debt securities........... 19,602 - (241) 19,361
UK government securities............ 3,777 186 - 3,963
Equity securities................... 40,343 8,496 - 48,839
----------- ----------- ----------- -----------
$ 79,790 $ 9,076 $ (241) $ 88,625
=========== =========== =========== ===========
2001:
U.S. government and agencies........ $ 2,471 $ - $ (309) $ 2,162
U.S. states and political 11,560 - (596) 10,964
subdivisions.............................
Corporate debt securities........... 1,725 32 (84) 1,673
UK government securities............ 3,759 3 - 3,762
Equity securities................... 3,076 735 (1) 3,810
----------- ----------- ----------- -----------
$ 22,591 $ 770 $ (990) $ 22,371
=========== =========== =========== ===========
The contractual maturities of debt marketable securities at December 31, 2002
were as follows, in thousands of dollars:
Amortized Fair
Maturities Cost Value
----------------------------------------------------------------------- ------------- -------------
Mature in one year or less.........................................$ 7,779 $ 7,984
Mature after one year through five years........................... 8,246 8,076
Mature after five years through ten years.......................... 7,353 7,264
Mature after ten years............................................. 16,069 16,462
----------------- -------------
$ 39,447 $ 39,786
================= =============
During 2002, 2001 and 2000, the sale of available-for-sale securities resulted
in gross realized gains of $5,368,000, $9,587,000 and $8,558,000, respectively,
and gross realized losses of $2,150,000, $3,898,000 and $996,000, respectively.
The specific identification method was used to determine the cost of
59
available-for-sale securities in computing realized gains and losses. During
2002 and 2001, the Company transacted various short sales of equity securities
and at December 31, 2002 and 2001 had recorded a liability in the Consolidated
Balance Sheet as "Accrued liability-short sale of securities" equal to the fair
market value of these equity securities. Gross unrealized gains and losses,
totaling $1,026,000 and $643,000, respectively, in 2002 and $247,000 and
$623,000, respectively, in 2001 resulting from these short sales were recorded
in the Consolidated Statements of Income as "Other, net."
4. ACQUISITIONS AND DISPOSITIONS:
TEX-AIR TRANSACTION. During January and July of 2002, the Company acquired 20
percent of the outstanding common stock of Tex-Air Helicopters, Inc. ("Tex-Air")
through two separate cash transactions totaling $225,000. The Company acquired
the remaining 80 percent of Tex-Air's common stock on December 31, 2002 in a
stock-for-stock transaction whereby the Company issued 68,292 shares of common
stock valued at $3,039,000. As security for the selling stockholder's
obligations under the purchase agreement, 6,097 shares issued pursuant to the
transaction were deposited into escrow for a period of eighteen months. The
selling stockholder of Tex-Air has the opportunity to receive additional
consideration of up to $900,000 based upon certain performance standards over a
twenty-four month period following the date of the acquisition. This additional
consideration, if paid, will be allocated to fixed assets and goodwill.
Tex-Air's long term debt at closing was approximately $6,662,000 and immediately
following the closing of the transaction, the Company repaid $5,838,000 of such
debt.
STIRLING TRANSACTION. On May 4, 2001, the Company completed the acquisition of
all of the issued and outstanding shares of Stirling Shipping Holdings Limited
("Stirling Shipping"). Aggregate consideration was (pound)54,300,000
($77,100,000 based on exchange rates in effect and the price of SEACOR's common
stock, par value $.01 per share ("Common Stock") on the closing date),
consisting of (pound)29,900,000, or $43,000,000, in cash, (pound)14,700,000, or
$21,200,000, in one-year loan notes, and 285,852 shares of Common Stock issued
from treasury, valued at $12,900,000. Stirling Shipping's long term debt at
closing was approximately (pound)43,000,000, or $61,900,000. To fund a portion
of the Stirling Shipping acquisition, the Company borrowed $25,000,000 under its
revolving credit facility, and in the third quarter, repaid this loan. Through
its acquisition of Stirling Shipping, the Company acquired 12 vessels primarily
working in the North Sea, including 9 supply and 3 anchor handling towing supply
vessels, and contracts for the construction of 2 anchor handling towing supply
vessels. The new construction vessels, which have now been delivered to the
Company, were built in the UK. In November 2001, the Company repaid all of the
outstanding indebtedness, totaling (pound)48,316,000 or approximately
$68,250,000 that was included in the Stirling Shipping acquisition. Existing
cash balances and borrowings available under the Company's revolving credit
facility, totaling $30,000,000 at December 31, 2001, were used to liquidate this
obligation.
CHERAMIE TRANSACTION. In February 2001, the Company completed the acquisition of
all of the issued and outstanding shares of Gilbert Cheramie Boats, Inc. and
related companies (collectively, "Cheramie"). Purchase consideration was
$62,800,000 in cash. Through its acquisition of Cheramie, the Company acquired
11 mini-supply, 11 utility and 2 offshore supply vessels operating in the U.S.
Gulf of Mexico. Pursuant to the terms of the purchase agreement, the Company had
an option of making an Internal Revenue Code Section 338(h)(10) election and, in
January 2002, it exercised that option. The election entitled the Company to
full income tax basis in the assets of the Cheramie companies and the
realization of an income tax benefit of the depreciation. In order to induce the
prior shareholders of Cheramie to agree to the election, the Company has agreed
to make them "whole" for the amount of the increase in their total income tax
liability, including the amount of income tax payable by them on the additional
purchase price payment. In January 2002, as a result of making this election,
the Company paid the prior shareholders of Cheramie an additional $10,162,000 in
order to reimburse them for all of their expected additional income tax
obligations, which payment was recorded in the Consolidated Balance Sheet as
"Accrued acquisition costs." The January 2002 payment was intended to reimburse
the selling shareholders for all of their incremental tax liabilities, and
therefore, the Company has recorded an adjustment to the purchase price for the
funds presently held in escrow. Goodwill, as adjusted, of approximately
$11,280,000 was recorded in connection with this acquisition.
RINCON TRANSACTION. In February 2001, the Company acquired two U.S. based towing
supply vessels from Rincon Marine, Inc., a U.S. based operator ("Rincon").
Aggregate consideration paid Rincon was $19,700,000, including $6,100,000 in
cash and the assumption of $13,600,000 of debt due Caterpillar Financial
Services Corporation ("Caterpillar"). In February 2002, the Company repaid all
of the outstanding indebtedness due Caterpillar from working capital.
PLAISANCE TRANSACTION. In January 2001, the Company acquired all of the issued
and outstanding shares of Plaisance Marine, Inc. ("Plaisance") that owns two
mini-supply vessels and acquired four additional mini-supply vessels from
companies affiliated with Plaisance (collectively the "Plaisance Fleet'").
Aggregate consideration paid for the Plaisance Fleet and certain related spares
and other assets was $20,100,000, including $16,200,000 paid in cash, the
assumption of $700,000 of debt and the issuance of 71,577 shares of Common Stock
from treasury, valued at $3,200,000 on the closing date. The Plaisance Fleet
operates in the U.S. Gulf of Mexico.
60
PURCHASE PRICE ALLOCATION. The following table summarizes the allocation of the
purchase price in the Tex-Air acquisition in 2002 and the Stirling Shipping,
Cheramie and Plaisance acquisitions in 2001:
For the Year Ended
-------------------------------
(in thousands) 12/31/02 12/31/01
---------------------------------------------------------- --------------- ---------------
Trade and other receivables .............................$ 3,540 $ 11,092
Prepaid expenses and other............................... 1,747 714
Property and equipment................................... 7,659 197,394
Goodwill(a).............................................. 109 11,813
Other assets............................................. 385 -
Accounts payable and accrued liabilities................. (2,140) (17,854)
Debt..................................................... (6,662) (83,657)
Deferred income taxes.................................... (888) (5,386)
Deferred gains and other liabilities..................... (910) -
Common stock............................................. (1) -
Paid in capital.......................................... (2,726) -
Treasury stock........................................... - (15,942)
--------------- ---------------
Purchase price(b)........................................$ 113 $ 98,174
=============== ===============
-------------------
(a) All goodwill is expected to be tax deductible.
(b) The purchase price is net of cash acquired, totaling $302,000 and $7,958,000
in 2002 and 2001, respectively, and includes acquisition costs, totaling
$190,000 and $1,435,000 in 2002 and 2001, respectively.
UNAUDITED PRO FORMA INFORMATION. The following unaudited pro forma information
has been prepared as if the acquisition of Tex-Air, Stirling Shipping, Cheramie
and Plaisance had occurred at the beginning of each of the periods presented.
This pro forma information has been prepared for comparative purposes only and
is not necessarily indicative of what would have occurred had the acquisition
taken place on the dates indicated, nor does it purport to be indicative of the
future operating results of the Company.
For the Year Ended (unaudited)
--------------------------------
(in thousands, except per share data) 12/31/02 12/31/01
---------------------------------------------------------- ---------------- ---------------
Revenue..................................................$ 420,047 $ 468,582
Income before extraordinary item......................... 47,434 73,748
Net income.......................................... 45,914 72,883
Basic earnings per share................................. 2.29 3.66
VESSEL CONSTRUCTION. Since January 1, 2000, the Company completed the
construction of 11 crew, 3 anchor handling towing supply, 2 mini-supply and 2
towing supply vessels at an approximate aggregate cost of $158,030,000 and 259
barges for an approximate aggregate cost of $62,819,000.
VESSEL DISPOSITIONS. The table below sets forth, during the fiscal years
indicated, the number of vessels sold by type of service. At December 31, 2002,
26 of these vessels, including 15 crew, 5 supply, 2 towing supply, 2 mini-supply
and 2 anchor handling towing supply, were bareboat chartered-in by the Company
pursuant to sale-leaseback transactions.
Type of Vessel 2002 2001 2000
-------------------------------------------------- ------------ ------------ -----------
Anchor handling towing supply.................... 4 1 1
Crew............................................. 10 13 1
Mini-supply...................................... - 3 -
Standby safety................................... 3 6 2
Supply........................................... 2 - 6
Towing supply.................................... 6 5 3
Utility.......................................... 5 7 8
Project.......................................... 1 - -
------------ ------------ -----------
31 35 21
============ ============ ===========
Following year-end, the Company sold five vessels for aggregated cash
consideration of $56,300,000, including two recently constructed North Sea
anchor handling towing supply vessels.
61
5. INVESTMENTS, AT EQUITY, AND RECEIVABLES FROM 50% OR LESS OWNED COMPANIES:
Investments, carried at equity, and advances to 50% or less owned companies at
December 31, 2002 and 2001 were as follows, in thousands of dollars:
Ownership
50% or Less Owned Companies Percentage 2002 2001
------------------------------------------- --------------- ------------- -------------
Chiles Offshore............................ 23.8% $ - $ 77,607
TMM Joint Venture.......................... 40.0% 15,701 26,305
Globe Wireless, L.L.C...................... 38.0% 17,793 20,727
Pelican Offshore Services Pte Ltd.......... 50.0% 9,832 8,436
Ultragas Joint Venture..................... 50.0% 4,477 5,637
Other...................................... 33.3%-50.0% 13,556 15,115
------------- -------------
$ 61,359 $ 153,827
============= =============
CHILES OFFSHORE. Chiles Offshore LLC, the predecessor to Chiles, was formed in
1997 for the purpose of constructing, owning and operating ultra-premium jackup
drilling rigs. The Company consolidated the reporting of financial information
of Chiles from its inception in 1997 until its initial public offering of common
stock in September 2000 (the "Chiles IPO"). As a consequence of the Chiles IPO,
the Company's ownership interest in Chiles was reduced from 55.4% to 27.3%.
Because its ownership interest declined below 50%, the Company ceased its
consolidation of Chiles with that of its own and began accounting for its
ownership interest in Chiles using the equity method.
The Chiles Merger (see discussion in Note 2) resulted in the Company receiving
$5.25 and 0.6575 shares of ENSCO common stock for each share of Chiles' common
stock it owned at the time of the merger. The Company received $25,365,000 in
cash and 3,176,646 shares of ENSCO's common stock, valued at $73,444,000 on date
of close, and recognized an after-tax gain of $12,817,000, or $0.61 per diluted
share.
The following table is unaudited summarized financial information for Chiles for
the periods indicated:
(in thousands) 12/31/01
----------------------------------------------------------- -------------
Current assets............................................. $ 36,292
Noncurrent assets.......................................... 456,272
Current liabilities........................................ 34,211
Noncurrent liabilities..................................... 132,869
For the
1/1/02 Year 01/1/00 09/22/00
to Ended to to
(in thousands) 8/7/02 12/31/01 09/21/00 12/31/00
--------------------------------------- ------------ ------------ ----------- -------------
Operating revenues....................$ 58,405 74,184 $ 37,380 $ 18,626
Operating income................... 4,184 29,688 14,550 6,212
Income (loss) before extraordinary item 11,731 22,546 6,888 (22,791)
Net income (loss)...................... 7,326 22,546 6,888 (24,611)
The Company received approximately $2,006,000, $240,000 and $130,000 during
2002, 2001 and 2000, respectively, for management and legal services provided to
Chiles. Chiles also paid the Company approximately $65,000 for services provided
by one of its offshore marine vessels in 2001.
TMM JOINT VENTURE. In 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 that is comprised of two corporations, Maritima
Mexicana, S.A., a Mexican corporation, and SEAMEX International Ltd., a Liberian
corporation. Since 1994, the Company has sold 10 of its vessels to the joint
venture at a gain, of which a significant portion has been deferred in the
Consolidated Balance Sheets for future income recognition. At December 31, 2002,
the joint venture operated 15 vessels that it owned and bareboat and time
chartered-in 11 vessels, of which 6 were provided by the Company. The Company
guarantees up to 40% of obligations for nonpayment that may arise from the
bareboat charter-in of two vessels by the venture. At December 31, 2002, the
Company's guarantee was limited to approximately $6,080,000 and terminates upon
completion of the charters, expected in 2009.
In connection with the sale of three vessels from the Company to the joint
venture in 2001, promissory notes were issued the Company as partial payment.
During 2002, the outstanding balances of the promissory notes related to two of
the vessels sold were repaid. The outstanding and unpaid principal amount of the
remaining promissory note totaled $750,000 as of December 31, 2002 and is
payable in equal quarterly installments through November 2003. The promissory
note bears interest at 10% and is secured by a first priority maritime mortgage.
Revenues earned by the Company from the charter of vessels and management
services provided to the TMM joint venture in 2002, 2001 and 2000 totaled
$7,041,000, $4,890,000 and $5,760,000, respectively.
62
GLOBE WIRELESS L.L.C. Globe Wireless L.L.C. ("Globe Wireless") and its
subsidiaries operate a worldwide network of high frequency radio stations. The
network of stations is a wireless data network initially targeted at the
maritime industry that supports Internet messaging, telex and facsimile
communications. Globe Wireless also provides Satellite messaging services to the
maritime industry. At present, through its ownership of senior convertible
preferred units, the Company controls approximately 38% of the voting units
issued by Globe Wireless.
Since inception in the early 1990's, Globe Wireless has focused on expanding its
network of high frequency radio stations and customers base. To support its
continued growth, Globe Wireless completed a private placement offering in 2000
that raised approximately $57,000,000. Although Globe Wireless has experienced
negative cash flow, the management of Globe Wireless presently believes the
company will closely approximate cash break-even by mid-2003. There can be no
assurances that Globe Wireless' future operations will succeed. Should Globe
Wireless be unable to meet its funding requirements, SEACOR would be required to
commit additional funding or record an impairment charge with respect to its
investment.
Globe Wireless provides the Company's offshore marine business segment with a
"ship-to-shore" communication network and has provisioned and installed certain
computer hardware, software and electronic equipment aboard its vessels. In
fiscal 2002, 2001 and 2000, approximately $1,904,000, $2,126,000 and $1,237,000,
respectively, was paid to Globe Wireless for services and merchandise provided
the Company.
PELICAN OFFSHORE SERVICES PTE LTD. During 2000, the Company entered into a joint
venture owned 50% by each of the Company and Penguin Boat International Limited,
a Singapore corporation, ("Penguin"). The joint venture, Pelican Offshore
Services Pte Ltd, also a Singapore corporation ("Pelican"), owns 9 newly built
Fast Support Intervention Vessels (also known as multipurpose crew vessels) that
operate in Asia. At December 31, 2002, the Company had outstanding loans to
Pelican totaling approximately $3,100,000. The Company also presently guarantees
up to $1,500,000 of amounts owed by the Pelican joint venture under its banking
facilities that is expected to mature in 2006.
ULTRAGAS JOINT VENTURE. In 1996, the Company acquired an equity interest in
Ultragas Smit Lloyd Ltda ("Ultragas") and certain other entities affiliated with
Ultragas that own and operate vessels. Since 1996, the Company and Sociedad
Naviera Ultragas Ltda, the Company's joint venture partner in Ultragas and its
affiliated companies, formed additional corporations for purposes of owning and
operating additional vessels. As of December 31, 2002, this joint venture owned
6 vessels that were operating in Chile, Argentina and Brazil.
OTHER. The Company's other joint ventures are primarily vessel owning
corporations servicing the offshore oil and gas exploration and production
industries but also include environmental service businesses, an entity whose
principal activity is to develop and sell software to the ship brokerage and
shipping industry and a corporation that owns a Handymax Dry-Bulk ship. During
2001, the Company sold its interest in two offshore marine service joint
ventures for approximately $3,076,000 and recorded a nominal gain. At December
31, 2002, 15 vessels were owned by offshore marine joint venture corporations
and operated in England, Trinidad, Asia, the Middle East, the Mediterranean,
West Africa and Venezuela. At December 31, 2002, the Company had outstanding
loans, totaling $2,752,000, to its other joint ventures.
At December 31, 2002, the amount of consolidated retained earnings that
represents undistributed earnings of 50% or less owned companies accounted for
by the equity method was $5,790,000. Deferred taxes have not been recorded with
respect to $14,957,000 of those earnings.
COMBINED CONDENSED FINANCIALS, EXCLUDING CHILES. The unaudited combined
condensed financial position and results of operations of the Company's equity
basis affiliates, excluding Chiles, are summarized below:
(in thousands) 2002 2001
---------------------------------------------------------------- ------------- --------------
Current assets..................................................$ 78,433 $ 67,171
Noncurrent assets............................................... 111,516 134,535
Current liabilities............................................. 28,233 42,327
Noncurrent liabilities.......................................... 38,390 38,808
(in thousands) 2002 2001 2000
------------------------------------------------- ------------- ------------- --------------
Operating revenues...............................$ 112,725 $ 103,990 $ 86,905
Operating income................................. 16,601 2,697 (5,467)
Income (loss) before extraordinary item.......... 8,690 3,265 1,672
Net income....................................... 8,690 3,265 1,672
63
6. CONSTRUCTION RESERVE FUNDS:
Over the past several years, the Company has established, pursuant to Section
511 of the Merchant Marine Act, 1936, as amended, joint depository construction
reserve fund accounts with the Maritime Administration. In accordance with this
statute, the Company has been permitted to deposit proceeds from the sale of
certain vessels into the joint depository construction reserve fund 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. From date of deposit, withdrawals from the joint depository
construction reserve fund accounts are subject to prior written approval of the
Maritime Administration, and the funds on deposit must be committed for
expenditure within three years or be released for the Company's general use.
Construction reserve funds are classified as non-current assets as the Company
has the intent and ability to maintain the funds for more than one year and/or
use the funds to acquire fixed assets. Income from vessel sales previously
deferred would become immediately taxable upon release to the Company of sale
proceeds that were deposited into joint depository construction reserve fund
accounts.
7. INCOME TAXES:
Income 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) 2002 2001 2000
----------------------------------------------------- ------------ ----------- -----------
United States.........................................$ 27,967 $ 64,474 $ 56,743
Foreign............................................... 40,513 39,247 4,915
------------ ----------- -----------
$ 68,480 $ 103,721 $ 61,658
============ =========== ===========
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) 2002 2001 2000
----------------------------------------------------- ------------ ----------- -----------
Current:
State..............................................$ 991 $ 790 $ 741
Federal............................................ 2,924 8,331 (600)
Foreign............................................ 2,910 5,717 4,811
Deferred:
Federal............................................ 16,996 21,123 14,351
Foreign............................................ 31 97 1,277
------------ ----------- -----------
$ 23,852 $ 36,058 $ 20,580
============ =========== ===========
The following table reconciles the difference between the statutory federal
income tax rate for the Company to the effective income tax rate:
2002 2001 2000
----------------- ------------------ ------------------
Statutory rate........................... 35.0% 35.0 35.0%
Foreign and state taxes.................. 1.4% 1.0% 1.2%
Other.................................... (1.6)% (1.2)% (2.8)%
----------------- ------------------ ------------------
34.8% 34.8% 33.4%
================= ================== ==================
The components of the net deferred income tax liability were as follows, for the
years ended December 31:
(in thousands) 2002 2001
---------------------------------------------------------------------- ------------ -----------
Deferred tax assets:
Net operating loss carryforwards............................... $ - $ 13,889
Foreign tax credit carryforwards............................... 6,816 7,370
Alternative minimum tax credit carryforward................... 2,728 -
Subpart F loss................................................. 1,887 3,500
Nondeductible accruals......................................... 621 645
Other.......................................................... - 1,391
------------ -----------
Total deferred tax assets................................ 12,052 26,795
------------ -----------
Deferred tax liabilities:
Property and equipment......................................... 162,673 149,919
Investment in subsidiaries..................................... 6,574 24,141
Other.......................................................... 17,724 1,058
------------ -----------
Total deferred tax liabilities........................... 186,971 175,118
------------ -----------
Net deferred tax liabilities....................... $ 174,919 $ 148,323
============ ===========
64
The Company has not recognized a deferred tax liability of $11,054,000 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, 2002, the undistributed earnings of these
subsidiaries and joint venture corporations were $31,583,000. As of December 31,
2002, the Company also has foreign tax credit carryforwards for income tax
purposes approximating $6,816,000 that expire from 2004 through 2007. The
Company believes that it will be able to utilize the foreign tax credit
carryforwards through future earnings or tax strategies of the Company and
therefore no valuation allowance on the related deferred tax assets has been
recorded. We reduce federal, state and foreign income taxes payable by the tax
benefits associated with the exercise of stock options. For employee stock
options that are exercised, the Company receives an income tax benefit based on
the difference between the option exercise price and the fair market value of
the stock at the time the option is exercised. This benefit, which is recorded
in stockholders' equity, was $1,628,000 and $140,000 in 2002 and 2001,
respectively.
8. LONG-TERM DEBT:
Long-term debt balances, maturities and interest rates are as follows as of
December 31, in thousands of dollars:
2002 2001
---------------- ----------------
7.2% Senior Notes due 2009, interest payable semi-annually..............................$ 134,500 $ 147,500
5 3/8% Convertible Subordinated Notes due 2006, interest payable semi-annually 35,319 46,320
5 7/8% Senior Notes due 2012, interest payable semi-annually............................ 200,000 -
Revolving Credit Facility maturing in 2007, bearing interest at 3.49% as of
December 31, 2002 payable quarterly................................................. - 30,000
5.467% Subordinated Promissory Notes due SMIT in 2004, interest payable quarterly ...... 23,200 23,200
Promissory Notes, due prior shareholders of Stirling Shipping, bearing interest
at 4.0%, repaid May 2002, see Note 4................................................ - 21,358
Promissory Notes, due Caterpillar, interest rates ranging from approximately
7.5% to 8.0%, repaid February 2002, see Note 4 ..................................... - 12,132
Promissory Notes due the prior shareholders of Putford Enterprises Ltd., bearing
Interest at 4%, principal and interest due April 2005, see Note 4................... 12,032 10,920
Promissory Notes due various financial institutions, primarily secured by property
and equipment, interest rates ranging from approximately 6.75% to 8.9%,
principal repayments at various dates through 2010.................................. 521 672
Promissory Note due a bank, payable in equal quarterly installments through 2003,
Bearing interest at LIBOR plus 2.5%................................................. 40 121
Promissory Note due various financial institutions/vendors, primarily secured by
equipment, interest ranging from 5.25% to 10%, principal repayments through 2007.... 824 -
---------------- ----------------
406,436 292,223
Less - Portion due within one year.................................................... (614) (33,724)
- Debt premium or (discount), net................................................ (3,704) (1,758)
---------------- ----------------
$ 402,118 $ 256,741
================ ================
Maturities of long-term debt following December 31, 2002 are as follows:
(in thousands) 2003 2004 2005 2006 2007 Thereafter
----------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Amount................................... $ 614 $ 23,387 $ 12,158 $ 35,444 $ 188 $ 334,645
========== ========== ========== ========== ========== ==========
7.2% NOTES. The 7.2% Notes were issued under an indenture (the "1997 Indenture")
between the Company and First Trust National Association, as trustee. Interest
on the 7.2% Notes is payable semi-annually on March 15 and September 15 of each
year. The 7.2% Notes may be redeemed at any time at the option of the Company,
in whole or from time to time in part, at a price equal to 100% of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
redemption plus a Make-Whole Premium, if any, relating to the then prevailing
Treasury Yield and the remaining life of the 7.2% Notes. The 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. During 2002, the Company
purchased $13,000,000, principal amount of its 7.2% Notes in the open market. As
a result of the purchase of the 7.2% Notes during 2002, the Company recorded an
after-tax extraordinary loss of $989,000, or $0.04 per diluted share, net of
income taxes totaling $533,000, upon recognizing a premium and writing off
deferred financing costs related to the 7.2% Notes redemption.
5 3/8% CONVERTIBLE NOTES. The 5 3/8% Convertible Subordinated Notes due November
15, 2006 (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 $44.00 per share
(equivalent to a conversion rate of 22.7272 shares of Common Stock per $1,000
principal amount of the 5 3/8% Notes), subject to adjustment in certain
circumstances. The 5 3/8% Notes are redeemable at the Company's option at any
time on or after November 24, 1999 at the redemption prices specified therein,
together with accrued and unpaid interest to the date of repurchase. The 5 3/8%
Notes are general unsecured obligations of the Company, subordinated in right of
65
"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. Interest is payable on May 15 and
November 15 of each year.
In 2001, the Company called for the redemption of $100,000,000 of the
$181,600,000 aggregate principal amount outstanding of the 5 3/8% Notes. The
redemption price was $1,029.90 per $1,000 principal amount of notes plus accrued
interest to the applicable redemption date. Holders of 5 3/8% Notes being called
were able to convert any or all of their notes into 22.7272 shares of Common
Stock per $1,000 principal amount of notes. The call, together with certain
privately negotiated transactions, resulted in the conversion of $99,166,000
principal amount of the 5 3/8% Notes into 2,285,878 shares of Common Stock and
redemption of $36,114,000 principal amount of the 5 3/8% Notes for approximately
$37,970,000, including accrued interest. The Company recognized an extraordinary
after-tax charge of $896,000, or $0.04 per diluted share, net of income taxes
totaling $482,000, upon writing-off deferred financing costs related to the 5
3/8% Notes redemption.
Pursuant to an amended and restated standby purchase agreement between Credit
Suisse First Boston ("CSFB") and SEACOR, CSFB was obligated, subject to several
conditions, to purchase from SEACOR, at a purchase price of $46.26 per share,
the number of shares of Common Stock necessary to provide SEACOR with the
proceeds to pay the aggregate total redemption price of up to $100,000,000 face
amount of the 5 3/8% Notes that SEACOR redeemed. During 2001, CSFB purchased
216,170 shares of Common Stock to provide SEACOR with proceeds to redeem
$10,000,000 principal amount of its 5 3/8% Notes that were called but not
converted. Related underwriting and legal and professional fees expensed in 2001
totaled $586,000.
SEACOR entered into an equity forward transaction with Credit Suisse First
Boston International ("CSFBi"), an affiliate of CSFB, with respect to the shares
of Common Stock that CSFB did purchase from SEACOR under the standby purchase
agreement. At December 31, 2001, the $10,000,000 paid by CSFB for the purchase
of 216,170 shares of Common Stock was reported in the Consolidated Balance
Sheets as "Common Stock Sold with Equity Forward Transaction." During the first
quarter of 2002, SEACOR paid CSFBi a nominal amount to settle the equity forward
transaction and the $10,000,000 previously reported as common stock sold with
equity forward transaction was permanently reclassified to the Company's common
stock and additional paid-in capital accounts.
In 2002, the Company called for the redemption of $10,000,000 of the 5 3/8%
Notes. The redemption price was $1,023.90 per $1,000 principal amount of notes
plus accrued interest to the applicable redemption date. Holders of 5 3/8% Notes
being called were able to convert any or all of their notes into 22.7272 shares
of Common Stock per $1,000 principal amount of notes. The entire $10,000,000 was
redeemed for cash totaling $10,352,472, including a premium and accrued
interest. Also during 2002, the Company purchased $1,000,000 principal amount of
the 5 3/8% Notes in the open market and $1,000 principal amount of the 5 3/8%
Notes were voluntarily converted into 22.7272 shares of Common Stock. In
connection with the redemptions and purchase of the 5 3/8% Notes during 2002,
the Company recorded an after-tax extraordinary loss of $360,000, or $0.02 per
diluted share, net of income taxes totaling $194,000, upon recognizing a premium
and writing off deferred financing costs related to the 5 3/8% Notes redemption.
On February 20, 2003, the Company redeemed all of the then outstanding principal
amount of the 5 3/8% Notes, totaling $35,319,000, in exchange for $35,949,000 in
cash and 45.4544 shares of Common Stock. The write-off of related unamortized
deferred financing costs and the recognition of premium expense will result in
an after-tax charge of $731,000, or $0.03 per diluted share, net of income taxes
totaling $394,000.
5 7/8% SENIOR NOTES. During the third quarter of 2002, SEACOR completed the sale
of $200,000,000 aggregate principal amount of its 5 7/8% Senior Notes Due
October 1, 2012 (the "5 7/8% Notes"). The 5 7/8% Notes were issued at a price of
98.839% of principal amount. Interest on the 5 7/8% Notes is payable
semiannually on April 1 and October 1 of each year commencing April 1, 2003. The
5 7/8% Notes may be redeemed at any time, in whole or in part, at a price equal
to 100% of the principal amount, plus accrued and unpaid interest to the date of
redemption, plus a specified "make-whole" premium. The 5 7/8% Notes were issued
under a supplemental indenture dated as of September 27, 2002 to the base
indenture relating to SEACOR's senior debt securities, dated as of January 10,
2001, between SEACOR and U.S. Bank National Association, as trustee. The Company
incurred $842,000 of net underwriting fees.
REVOLVING CREDIT FACILITY. On February 5, 2002, the Company completed the
syndication of a $200,000,000, five year, non-reducing, unsecured revolving
credit facility that replaced a $100,000,000 unsecured reducing revolving credit
facility of which $25,683,000 was available for future borrowing upon
termination. Advances under the new revolving credit facility are available for
general corporate purposes. Interest on advances will be charged at a rate per
annum of LIBOR plus an applicable margin of 65 to 150 basis points based upon
the Company's credit rating as determined by Standard and Poor's and Moody's,
equivalent to 2.75% on February 5, 2002. Adjustments to the applicable margin
are the only consequence of a change in the Company's credit rating. The Company
66
is not required to maintain a credit rating under the terms of the facility
agreement, and if the Company does not maintain a credit rating, the applicable
margin would be determined by financial ratios. The new revolving credit
facility contains various restrictive covenants covering interest coverage,
secured debt to total capitalization, funded debt to total capitalization
ratios, the maintenance of a minimum level of consolidated net worth, as well as
other customary covenants, representations and warranties, funding conditions
and events of default. The new revolving credit facility contains no repayment
triggers. During 2002, the Company repaid the outstanding borrowings, totaling
$30,000,000, and a letter of credit representing a guarantee on notes issued by
the Company in connection with the acquisition of Stirling Shipping was
canceled. As of December 31, 2002, the Company had an outstanding letter of
credit in the amount of $175,000 and approximately $199,825,000 available for
future borrowings under the new revolving credit facility.
5.467% SMIT NOTES. Pursuant to a February 1998 letter agreement between the
Company and SMIT Internationale N.V. ("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 vessel purchase
transaction. 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 bear interest at 5.467%
per annum payable quarterly in arrears.
9. COMMON STOCK:
The Company's Board of Directors have previously approved a securities
repurchase plan, which allows the Company to acquire Common Stock, 5 3/8% Notes,
7.2% Notes and 5 7/8% Notes (collectively, the "SEACOR Securities") and, prior
to the deconsolidation of Chiles in 2000, certain notes of Chiles. During the
fourth quarter of 2002, the Company's Board of Directors increased its
previously announced repurchase authority by $25,000,000. In 2002 and 2001, a
total of 459,700 and 5,950 shares of Common Stock, respectively, were acquired
for treasury at an aggregate cost of $18,508,000 and $214,000, respectively.
Also during 2002, the Company purchased $13,000,000 principal amount of its 7.2%
Notes and $11,000,000 principal amount of its 5 3/8% Notes for a total of
$15,407,940. As of December 31, 2002, the Company had approximately $27,753,000
available for the repurchase 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. In February 2003, the
Company's Board of Directors increased its previously announced repurchase
authority by $25,000,000.
10. BENEFIT PLANS:
SEACOR SAVINGS PLAN. The Company provides a defined contribution plan to its
employees. The Company's contribution is limited to 50% of the employee's first
6% of wages invested in such defined contribution plan and is subject to annual
review by the Board of Directors. The Company's contributions to the plan were
$1,106,000, $1,088,000 and $977,000 for the years ended December 31, 2002, 2001
and 2000, 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 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 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"). Seven hundred fifty thousand
shares of Common Stock have been reserved for issuance under each of the Stock
Option Plan and the Share Incentive Plan. During 2002 and 2001, 62,360 and
174,380 shares and/or options to purchase shares of Common Stock, respectively,
were granted pursuant to the Plans. As of December 31, 2002, there were 153,140
shares available for future grant under the Plans.
During January 2003, the Compensation Committee granted to certain officers and
key employees of the Company, 85,635 restricted shares of Common Stock with an
aggregate market value of $3,565,000 on the grant dates. On January 2, 2003, the
Compensation Committee also granted a certain officer options to purchase 1,000
shares of Common Stock at an exercise price of $44.47 per share of Common Stock.
Additionally, on January 15, 2003 and February 5, 2003, the Compensation
Committee granted to certain officers and key employees of the Company and
agreed, conditionally, to grant in installments during 2003 options to purchase
an aggregate of 83,800 shares of Common Stock. The options granted on January
15, 2003 and February 5, 2003 were granted at an exercise price of $41.60 per
share of Common Stock. The options that the Compensation Committee agreed to
grant in installments during 2003 will have an exercise price of the fair market
value per share of Common Stock on the date of each installment. Grants with
respect to 23,750 shares of Common Stock to be made in installments during 2003
67
are subject to approval by the stockholders of SEACOR of an amendment to the
Share Incentive Plan increasing the number of shares of Common Stock available
thereunder.
On May 23, 2000, the stockholders of SEACOR approved the 2000 Employee Stock
Purchase Plan (the "Stock Purchase Plan") that permits SEACOR to offer Common
Stock for purchase by eligible employees at a price equal to 85% of the lesser
of (i) the fair market value of Common Stock on the first day of the offering
period or (ii) the fair market value of Common Stock on the last day of the
offering period. Common Stock will be available for purchase under the Stock
Purchase Plan for six-month offering periods. Three hundred thousand shares of
Common Stock are reserved for issuance under the Stock Purchase Plan during the
ten years following its adoption. The Stock Purchase Plan is intended to comply
with Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
but is not intended to be subject to Section 401(a) of the Code or the Employee
Retirement Income Security Act of 1974. The Board of Directors of SEACOR may
amend or terminate the Stock Purchase Plan at any time; however, no increase in
the number of shares of Common Stock reserved for issuance under the Stock
Purchase Plan may be made without stockholder approval. During 2002 and 2001,
19,684 and 15,923 shares, respectively, of Common Stock were issued from
treasury pursuant to the Stock Purchase Plan.
On May 23, 2000, the stockholders of SEACOR also approved the 2000 Stock Option
Plan for Non-Employee Directors (the "Non-Employee Director Plan"). Under the
Non-Employee Director Plan, each member of the Board of Directors who is not an
employee of SEACOR or any subsidiary will be granted an option to purchase 3,000
shares of Common Stock on the date of each annual meeting of the stockholders of
SEACOR through and including the 2004 Annual Meeting of Stockholders. The
exercise price of the options granted under the Non-Employee Director Plan will
be equal to 100% of the fair market value per share of Common Stock on the date
the options are granted. One hundred fifty thousand shares of Common Stock have
been reserved under the Non-Employee Director Plan. Options granted under the
Non-Employee Director Plan will be exercisable at any time following the earlier
of the first anniversary of, or the first annual meeting of SEACOR's
stockholders after, the date of grant, for a period of up to ten years from date
of grant. Subject to the accelerated vesting of options upon a non-employee
Director's death or disability, if a non-employee Director's service as a
director of SEACOR is terminated, his or her options will terminate with respect
to the shares of Common Stock as to which such options are not then exercisable.
A non-employee Director's options that are vested but not exercised may, subject
to certain exceptions, be exercised within three months after the date of
termination of service as a director in the case of termination by reason of
voluntary retirement, failure of SEACOR to nominate such director for
re-election or failure of such director to be re-elected by stockholders after
nomination by SEACOR, or within one year in the case of termination of service
as a director by reason of death or disability. In 2002 and 2001, options were
granted for the purchase of 21,000 and 24,000, respectively, shares of Common
Stock. If the SEACOR SMIT Inc. 2003 Non-Employee Director Share Incentive Plan
is approved by stockholders at the 2003 Annual Meeting of Stockholders, no
further awards will be made to non-employee directors under applicable
provisions of the Non-Employee Director Plan, which will be terminated.
SHARE AWARD TRANSACTIONS. The following transactions have occurred in the
Plans during the periods ended December 31:
2002 2001 2000
----------------------------- ---------------------------- ----------------------------
Wt'ed Avg. Wt'ed Avg. Wt'ed Avg.
Number of Exercise/ Number of Exercise/ Number of Exercise/
Shares Grant Price Shares Grant Price Shares Grant Price
------------- -------------- ------------ -------------- ------------ --------------
Stock Option Activities -
Outstanding, at beginning of year.. 807,752 $ 25.05 681,212 $ 20.80 545,871 $ 16.31
Granted......................... 21,900 $ 48.69 139,800 $ 44.73 172,616 $ 32.81
Exercised....................... (150,458) $ 11.66 (11,760)$ 11.20 (36,750)$ 10.32
Canceled........................ (21,300) $ 44.38 (1,500)$ 40.00 (525)$ 32.10
------------- ------------ ------------
Outstanding, at end of year........ 657,894 $ 28.27 807,752 $ 25.05 681,212 $ 20.80
============= ============ ============
Options exercisable at year end.... 530,062 $ 25.01 549,113 $ 18.35 452,511 $ 14.30
=============
============ ============
Weighted average fair value of
Options granted.................$ 20.03 $ 26.21 $ 34.70
============= ============ ============
Restricted stock awards granted........ 61,460 $ 43.53 58,580 $ 50.80 44,018 $ 35.04
============= ============ ============
Shares available for future grant...... 243,140 302,350 498,771
============= ============ ============
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 38.8%, 37.37% and 38.09% in the years 2002, 2001 and 2000,
respectively, (c) discount rates of 3.76%, 5.31% and 6.21% in the years 2002,
2001 and 2000, respectively, and (d) expected lives of five years.
68
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 2002, 2001 and 2000, compensation cost recognized
in connection with restricted stock awards totaled $2,309,000, $2,272,000 and
$1,337,000, respectively. At December 31, 2002, there were 92,314 shares of
unvested restricted stock outstanding at a weighted average price of $44.81. Of
the unvested shares outstanding, 54,703, 24,585 and 13,026 shares will vest in
2003, 2004 and 2005, respectively.
The following table summarizes certain information about the options outstanding
at December 31, 2002 grouped into three exercise price ranges:
Exercise Price Range
------------------------------------------------------------
$6.43 - $16.63 $20.50 - $29.67 $30.71 - $52.25
------------------- ------------------- -------------------
Options outstanding at December 31, 2002................................ 234,192 73,953 349,749
Weighted-average exercise price.........................................$ 12.37 $ 28.94 38.78
Weighted-average remaining contractual life (years)..................... 1.32 5.29 7.32
Options exercisable at December 31, 2002................................ 234,192 73,953 221,917
Weighted average exercise price of exercisable options..................$ 12.37 $ 28.94 37.04
11. RELATED PARTY TRANSACTIONS:
The Company manages barge pools, pursuant to which the operating revenues and
expenses of participating barges in a pool are combined and the net results are
allocated to participating barge owners based upon the number of days any one
participating owner's barges bear to the total number of days of all barges
participating in a pooling arrangement. Mr. Fabrikant, the Chief Executive
Officer of SEACOR, companies controlled by Mr. Fabrikant and trusts for the
benefit of Mr. Fabrikant's two children own barges that participate in the barge
pools managed by the Company. In 2002, the Company distributed $433,636 of barge
pool results to Mr. Fabrikant and his affiliates, net of $86,509 in management
fees paid to the Company.
12. COMMITMENTS AND CONTINGENCIES:
At December 31, 2002, the Company was committed to the construction of 11
vessels and 61 barges at an approximate aggregate cost of $108,300,000, of which
$25,000,000 had been expended. Two of the vessels are omitted for resale and the
remaining vessels and barges are expected to enter service at various times
during 2003. Following year-end, the Company committed to the construction of 2
additional vessels at an approximate aggregate cost of $6,900,000. The 2 vessels
are expected to be delivered to the Company during the first six months of 2004.
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.
The Company leases 41 vessels, resulting primarily from sale-leaseback
transactions, 19 helicopters and certain facilities and equipment. These leasing
agreements have been classified as operating leases for financial reporting
purposes and related rental fees are charged to expense over the lease term as
they become payable. Vessel leases generally 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 1 to 7 years. Certain of the
gains realized from various sale-leaseback transactions, totaling $13,822,000,
$11,447,000 and $1,394,000 in 2002, 2001 and 2000, respectively, have been
deferred in the Consolidated Balance Sheets and are being credited to income as
reductions in rental expense over the lease terms. The total rental expense for
the Company's operating leases in 2002, 2001 and 2000 totaled $18,783,000,
$12,945,000 and $5,107,000, respectively. Future minimum payments under
operating leases that have a remaining term in excess of one year at December
31, 2002 are as follows in thousands:
Minimum
In the Years Ending December 31, Payment
--------------------------------------- -------------
2003...................................$ 28,586
2004................................... 23,600
2005................................... 19,192
2006................................... 13,780
2007................................... 10,608
Years subsequent to 2007............... 21,375
69
The Company has entered into sale-type lease transactions for four vessels that
expire in 2004 and contain options that permit the lessee to purchase the
vessels at various dates during the lease terms. The minimum lease payments and
unguaranteed residual values accruing to the Company under these leases have
been recorded as a gross investment in the leases. The difference between the
gross investment and the sum of the present values of the two components of the
gross investment has been recorded as unearned income to be amortized over the
lease term using the interest method. The amortization of unearned income in the
years ended December 31, 2002, 2001 and 2000, totaled $700,000, $595,000 and
$492,000, respectively. The net investment in sale-type leases at December 31,
2002 was comprised of minimum lease payment receivables totaling $3,292,000,
estimated residual values of $1,200,000 and unearned income of $718,000. Minimum
lease payments, totaling $1,833,000 and $1,459,000, are due in 2003 and 2004,
respectively. As of December 31, 2002, $1,135,000 and $3,774,000 of the net
investment in the sale-type leases were reported in the Consolidated Balance
Sheets as "Prepaid expenses and other" and "Other Assets", respectively.
13. MAJOR CUSTOMERS AND SEGMENT DATA:
SFAS 131 requires companies to provide certain information about their operating
segments. SFAS 131 also established standards for related disclosures about
products and services, geographic areas and major customers. Operating segments
are defined 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's offshore marine services business is primarily dedicated to
operating a diversified fleet of offshore support vessels serving offshore oil
and gas exploration and production facilities mainly in the U.S. Gulf of Mexico,
the North Sea, Latin America, West Africa and Asia. Our vessels deliver cargo
and personnel to offshore installations, handle anchors for drilling rigs and
other marine equipment, support offshore construction and maintenance work and
provide standby safety support and oil spill response services. From time to
time, vessels service special projects, such as well stimulation, seismic data
gathering, salvage and freight hauling. In addition to vessel services, the
Company's offshore marine service business offers logistics services, which
include shorebase, marine transport and other supply chain management services
also in support of offshore oil and gas exploration and production operations.
The Company's other activities include its environmental service and inland
river barge businesses and all non-offshore marine service segment equity in
earnings of 50% or less owned companies. Prior to 2002, the Company presented
its environmental service business as a separate reportable business segment.
Effective January 1, 2002, the environmental service business is no longer
reported as a separate segment as it does not meet the criteria for reporting
segregation pursuant to accounting standards.
The Company evaluates business performance based upon operating profit plus any
gains and losses from equipment sales and retirements, the sale of interest in
50% or less owned companies and foreign currency translation and equity in
earnings and losses of 50% or less owned companies, but excluding, interest
income and expense, gain from Chiles Merger, gain upon sale of shares of Chiles,
gains or losses from derivative transactions and the sale of marketable
securities, corporate expenses, income taxes and minority interest in income or
losses of subsidiaries. Operating profit is defined as Operating Income as
reported in "Item 8. Financial Statements and Supplementary Data - Consolidated
Statements of Income" included in Part IV of this Annual Report on Form 10-K
excluding corporate expenses and net of certain other income and expense items.
The disaggregation of financial results has been prepared using a management
approach. Segment assets exclude those which the Company considers to be of a
corporate nature, including unrestricted cash, marketable securities, certain
other assets and property and equipment related to corporate activities.
70
Revenues earned by the Company's offshore marine and environmental services
businesses for services rendered to divisions or subsidiaries of one customer
totaled $42,240,000, or 10%, of revenues in 2001. In 2000 and 2002, the Company
did not earn revenues from a single customer that was greater than or equal to
10% of total revenues. Information about profit and loss and assets by business
segment is as follows for the years ended December 31, in thousands of dollars:
Twelve Month Period Ending December 31,
--------------------------------------------
2000 Marine Other Total
------------------------------------------------------------- ------------- -------------- -------------
OPERATING REVENUES :
External Customers.........................................$ 276,473 $ 63,468 $ 339,941
Intersegment................................................ 458 - 458
-
Elimination................................................. - (458) (458)
------------- -------------- -------------
$ 276,931 $ 63,010 $ 339,941
============= ============== =============
REPORTABLE SEGMENT PROFIT:
Operating Profit...........................................$ 35,403 $ 18,470 $ 53,873
Income from Equipment Sales and Retirements, net............ 7,616 13 7,629
Equity in Net Losses of 50% or Less Owned Companies......... (396) (4,590) (4,986)
Other, primarily Foreign Currency Exchange Gains (Losses)... (1,573) - (1,573)
------------- -------------- -------------
$ 41,050 $ 13,893 54,943
============= ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES, MINORITY
INTEREST,
EQUITY EARNINGS AND EXTRAORDINARY ITEM:
Interest Expense .......................................... (27,450)
Interest Income............................................ 17,423
Derivative Income, net..................................... 6,292
Gains from Sale of Marketable Securities, net.............. 7,562
Gain upon Sale of Shares of Chiles Offshore................ 4,023
Corporate Expenses......................................... (6,121)
Equity in Net Losses of 50% or Less Owned Companies........ 4,986
-------------
$ 61,658
=============
ASSETS:
Investments in and Receivables from 50% or Less Owned $ 43,078 $ 94,616 $ 137,694
Companies.....................................................
Goodwill.................................................... 2,644 14,894 17,538
Other Segment Assets........................................ 632,564 34,889 667,453
------------- -------------- -------------
$ 678,286 $ 144,399 822,685
============= ==============
Corporate................................................... 310,045
-------------
$ 1,132,730
=============
-------------
CAPITAL EXPENDITURES:
Segment....................................................$ 46,824 $ 26,814 $ 73,638
============= ==============
Corporate................................................... 112
-------------
$ 73,750
=============
DEPRECIATION AND AMORTIZATION:
Segment....................................................$ 41,910 $ 9,253 $ 51,163
============= ==============
Corporate................................................... 26
-------------
$ 51,189
-----------------------------------------------------------------------------------------------------------
2001
-------------------------------------------------------------
OPERATING REVENUES:
External Customers.........................................$ 398,345 $ 36,445 $ 434,790
Intersegment................................................ 778 - 778
Elimination................................................. - (778) (778)
------------- -------------- -------------
$ 399,123 $ 35,667 $ 434,790
============= ============== =============
REPORTABLE SEGMENT PROFIT:
Operating Profit...........................................$ 96,821 $ 4,245 $ 101,066
Income (Loss) from Equipment Sales or Retirements, net...... 9,180 (150) 9,030
Gain from Sale of Interest in 50% or Less Owned Companies... 201 - 201
Equity in Net Earnings of 50% or Less Owned Companies....... 5,181 1,111 6,292
Other, primarily Foreign Currency Exchange Gains............ 1,183 8 1,191
------------- -------------- -------------
$ 112,566 $ 5,214 117,780
============= ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES, MINORITY
INTEREST,
EQUITY EARNINGS AND EXTRAORDINARY ITEM:
Interest Expense........................................... (21,998)
Interest Income............................................ 13,546
Derivative Income, net..................................... 4,127
Gains from Sale of Marketable Securities, net.............. 5,689
Corporate Expenses......................................... (9,131)
Equity in Net Earnings of 50% or Less Owned Companies...... (6,292)
-------------
$ 103,721
=============
=============
ASSETS:
Investments in and Receivables from 50% or Less Owned $ 49,618 $ 104,209 $ 153,827
Companies.....................................................
Goodwill.................................................... 12,537 15,695 28,232
Other Segment Assets........................................ 862,611 45,027 907,638
------------- -------------- -------------
$ 924,766 $ 164,931 1,089,697
============= ==============
Corporate................................................... 208,441
-------------
$ 1,298,138
=============
CAPITAL EXPENDITURES:
Segment....................................................$ 92,495 $ 14,903 $ 107,398
============= ==============
Corporate................................................... 47
-------------
$ 107,445
=============
DEPRECIATION AND AMORTIZATION:
Segment....................................................$ 52,871 $ 5,398 $ 58,269
============= ==============
Corporate................................................... 55
-------------
$ 58,324
-----------------------------------------------------------------------------------------------------------
71
Twelve Month Period Ending December 31,
----------------------------------------------
2002 Marine Other Total
------------------------------------------------------------- ------------- -------------- -------------
OPERATING REVENUES :
External Customers.........................................$ 367,702 $ 35,456 $ 403,158
Intersegment................................................ 267 - 267
Elimination................................................. - (267) (267)
------------- -------------- -------------
$ 367,969 $ 35,189 $ 403,158
============= ============== =============
REPORTABLE SEGMENT PROFIT:
Operating Profit...........................................$ 45,598 $ 5,324 $ 54,922
Income from Equipment Sales or Retirements, net............. 8,625 10 8,635
Equity in Net Earnings (Losses) of 50% or Less Owned 5,995 (2,796) 3,199
Companies.....................................................
Other, primarily Foreign Currency Exchange 6,307 118 6,425
Gains............
------------- -------------- -------------
$ 70,525 $ 2,656 73,181
============= ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES, MINORITY
INTEREST,
EQUITY EARNINGS AND EXTRAORDINARY ITEM:
Interest Expense........................................... (17,064)
Interest Income............................................ 8,833
Derivative Loss, net....................................... (5,043)
Gains from Sale of Marketable Securities, net.............. 3,218
Gain upon Sale of Shares of Chiles Offshore................ 19,719
Corporate Expenses......................................... (11,165)
Equity in Net Earnings (Losses) of 50% or Less Owned (3,199)
Companies.....................................................
-------------
$ 68,480
=============
ASSETS:
Investments in and Receivables from 50% or Less Owned $ 39,155 $ 22,204 $ 61,359
Companies.....................................................
Goodwill.................................................... 12,646 15,695 28,341
Other Segment Assets........................................ 878,526 83,667 962,193
------------- -------------- -------------
$ 930,327 $ 121,566 1,051,893
============= ==============
Corporate................................................... 435,214
-------------
$ 1,487,107
=============
CAPITAL EXPENDITURES:
Segment....................................................$ 94,037 $ 45,273 $ 139,310
============= ==============
Corporate................................................... 396
-------------
$ 139,706
=============
DEPRECIATION AND AMORTIZATION:
Segment....................................................$ 50,846 $ 5,165 56,011
============= ==============
Corporate................................................... 233
-------------
$ 56,244
-----------------------------------------------------------------------------------------------------------
Revenues attributed to geographic areas were based upon the country of domicile
for offshore marine and drilling 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 for the years ending
December 31.
(in thousands) 2002 2001 2000
------------------------------------------------ ------------ ------------- ------------
Revenues:
United States of America................... $ 212,291 $ 267,195 $ 236,841
United Kingdom............................. 83,033 74,477 39,565
Nigeria.................................... 36,130 29,425 15,544
Other...................................... 71,704 63,693 47,991
------------ ------------- ------------
$ 403,158 $ 434,790 $ 339,941
============ ============= ============
Long-Lived Assets:
United States of America................... $ 365,474 $ 335,648 $ 302,417
United Kingdom............................. 182,741 186,686 47,898
Nigeria.................................... 42,121 39,973 40,119
Other...................................... 147,632 172,450 136,644
------------ ------------- ------------
$ 737,968 $ 734,757 $ 527,078
============ ============= ============
For the years ended December 31, 2002, 2001 and 2000, approximately 47%, 39% and
30%, respectively, of the Company's operating revenues were derived from its
foreign operations. The Company's foreign operations, primarily contained in its
offshore marine service segment, 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,
terrorist attacks, 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 and barge and helicopter operations are limited to the U.S.
72
14. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED):
On March 4, 2003, the Company repaid all of the then outstanding principal
amount of the 5.467% Subordinated Promissory Notes due SMIT, totaling
$23,200,000.
15. SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS:
(in thousands) 2002 2001 2000
---------------------------------------------------------------------------------------- -------- --------- ---------
Cash income taxes paid.................................................................. $ 15,435 $ 14,244 $ 5,539
Cash interest paid...................................................................... 16,194 21,262 28,942
Schedule of Non-Cash Investing and Financing Activities:
Property exchanged for investment in and notes receivable from 50% or less owned
company........................................................................... - 17,688 -
Conversion of 5 3/8% Notes into Common Stock........................................ 1 98,824 -
Acquisition of ERST/O'Brien's Inc. with
- Common Stock................................ - 1,284 920
Acquisition of Boston Putford with - Common Stock................................ - - 4,086
- notes, including debt discount.............. - - 9,818
Acquisition of SCF with - Common Stock................................ - - 5,920
- assumption of debt.......................... - - 552
Acquisition of Plaisance with - Common Stock................................ - 3,163 -
- assumption of debt.......................... - 700 -
Acquisition of Rincon vessels with - assumption of debt.......................... - 13,600 -
Acquisition of Stirling Shipping with - Common Stock................................ - 12,777 -
- assumption of debt.......................... - 61,900 -
- notes, including debt discount.............. - 21,200 -
Acquisition of Tex-Air with - Common Stock................................ 2,727 - -
- assumption of debt.......................... 6,662 - -
Purchase of vessels with - deferred payment obligation................. - - 7,754
16. OTHER ASSETS: Other assets include the following:
(in thousands) 2002 2001
---------------------------------------------------------- ----------- ------------
Goodwill................................................... $ 36,738 $ 36,629
Deferred financing
costs...................................................... 6,920 4,970
Net sale-type leases, see Note 12.......................... 2,443 3,774
Notes receivable........................................... 15 4,797
Common stock investments, carried at cost.................. 1,190 1,150
Refundable deposits........................................ 2,684 -
Other...................................................... 960 659
----------- ------------
50,950 51,979
Less accumulated amortization.............................. (12,262) (11,547)
----------- ------------
Total other assets......................................... $ 38,688 $ 40,432
=========== ============
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Selected financial information for interim periods are presented below. 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.
Quarter Ended
--------------------------------------------------------------
(in thousands, except share data) Dec. 31, Sept. 30, June 30, March 31,
----------------------------------------------------- ----------- ----------- ----------- -----------
2002:
Revenue.............................................. $ 99,708 $ 102,137 $ 97,670 $ 103,643
Operating Income..................................... 3,743 10,025 9,738 20,251
Income before extraordinary item..................... 1,638 22,815 12,248 11,406
Basic earnings per common share -
Income before extraordinary item................. 0.08 1.14 0.61 0.57
Extraordinary item............................... - (0.08) - -
----------- ----------- ----------- -----------
Net Income....................................... $ 0.08 $ 1.06 $ 0.61 $ 0.57
=========== =========== =========== ===========
Diluted earnings common per share -
Income before extraordinary item................. $ 0.08 $ 1.09 $ 0.59 $ 0.55
Extraordinary item............................... - (0.07) - -
----------- ----------- ----------- -----------
Net Income....................................... $ 0.08 $ 1.02 $ 0.59 $ 0.55
=========== =========== =========== ===========
2001:
Revenue.............................................. $ 109,804 $ 119,358 $ 112,428 $ 93,200
Operating Income..................................... 22,212 30,195 26,333 13,195
Income before extraordinary item..................... 18,679 22,506 18,278 12,134
Basic earnings per common share -
Income before extraordinary item................. 0.93 1.13 0.92 0.67
Extraordinary item............................... - - (0.04) -
----------- ----------- ----------- -----------
Net Income....................................... $ 0.93 $ 1.13 $ 0.88 $ 0.67
=========== =========== =========== ===========
Diluted earnings common per share -
Income before extraordinary item................. $ 0.93 $ 0.97 $ 0.88 $ 0.62
Extraordinary item............................... - - (0.04) -
----------- ----------- ----------- -----------
Net Income....................................... $ 0.93 $ 0.97 $ 0.84 $ 0.62
=========== =========== =========== ===========
73
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE
We have audited the consolidated financial statements of SEACOR SMIT Inc. and
subsidiaries as of December 31, 2002 and for the year then ended, and have
issued our report thereon dated February 26, 2003 (included elsewhere in this
Form 10-K). Our audit also included the financial statement schedule listed in
Item 15(a) of this Form 10-K as of and for the year ended December 31, 2002.
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audit. The financial
statement schedule listed in Item 15(a) of this Form 10-K as of December 31,
2001 and for each of the two years in the period then ended were audited by
other auditors who have ceased operations and whose report dated February 21,
2002, expressed an unqualified opinion.
In our opinion, the 2002 financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
New Orleans, Louisiana
February 26, 2003
74
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP ON
FINANCIAL STATEMENT SCHEDULE IN CONNECTION WITH SEACOR SMIT INC.'S FILING ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001. THIS AUDIT REPORT HAS NOT
BEEN REISSUED BY ARTHUR ANDERSEN LLP IN CONNECTION WITH THIS FILING ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002 AS THEY HAVE CEASED OPERATIONS.
SEACOR SMIT INC. IS INCLUDING THIS COPY OF ARTHUR ANDERSON LLP'S AUDIT REPORT
PURSUANT TO RULE 2-02(E) OF REGULATION S-X UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
To SEACOR SMIT Inc.:
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of SEACOR SMIT Inc. and its
subsidiaries and have issued our report thereon dated February 21, 2002. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule on page 76 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.
/s/ Arthur Andersen LLP
New Orleans, Louisiana
February 21, 2002
75
SEACOR SMIT INC. AND SUBSIDIARIES
SCHEDULE LL
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
(IN THOUSANDS)
Balance Charges to Balance
Beginning Cost and (a) End
Description of Year Expenses Deductions of Year
------------------------------------------------ ------------- -------------- ------------- --------------
Year Ended December 31, 2002
Allowance for doubtful accounts
(deducted from accounts receivable)..... $ 1,635 $ 9 $ 223 $ 1,421
============= ============== ============= ==============
Year Ended December 31, 2001
Allowance for doubtful accounts
(deducted from accounts receivable)..... $ 1,310 $ 947 $ 622 $ 1,635
============= ============== ============= ==============
Year Ended December 31, 2000
Allowance for doubtful accounts
(deducted from accounts receivable)..... $ 1,567 $ (235) $ 22 $ 1,310
============= ============== ============= ==============
(a) Accounts receivable amounts deemed uncollectible and removed from accounts
receivable and allowance for doubtful accounts.
76