Commission File No. 333-8878
FORM 6-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of August, 2006
ULTRAPETROL (BAHAMAS) LIMITED
(Translation of registrant's name into English)
H & J Corporate Services Ltd.
Ocean Centre, Montague Foreshore
East Bay St.
Nassau, Bahamas
P.O. Box SS-19084
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(1): _______
Indicate by check mark if the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule 101(b)(7): _______
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Set forth herein are a copy of the Company's report for the six months
ended June 30, 2006, containing certain unaudited financial information and a
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ULTRAPETROL (BAHAMAS) LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005
(UNAUDITED)
The following discussion and analysis should be read in conjunction
with the unaudited condensed consolidated financial statements of Ultrapetrol
(Bahamas) Limited (the "Company") and subsidiaries for the six months ended June
30, 2006 and June 30 2005 included elsewhere in this report.
Our Company
We are a diverse marine transportation company involved in the global
carriage of dry bulk and liquid cargos, supplies, equipment and passengers. We
serve the shipping markets for grain, forest products, minerals, crude oil,
petroleum, and refined petroleum products, as well as the offshore oil platform
supply market, and the leisure passenger cruise market through our operations in
the following four segments of the marine transportation industry.
o Our River Business, with approximately 490 barges, is the largest
owner and operator of river barges and pushboats that transport dry
bulk and liquid cargos through the Hidrovia Region of South America, a
large area with growing agricultural, forest and mineral related
exports. This region is crossed by navigable rivers which flow through
Argentina, Bolivia, Brazil, Paraguay and Uruguay, to ports serviced by
ocean export vessels.
o Our Offshore Supply Business owns and operates vessels that provide
critical logistical and transportation services for offshore petroleum
exploration and production companies, primarily in the North Sea and
the coastal waters of Brazil. Our Offshore Supply Business fleet
currently consists of proprietarily designed, technologically advanced
platform supply vessels, or PSVs, including three in operation and
three under construction to be delivered in 2006 and 2007.
o Our Ocean Business owns and operates six oceangoing vessels, including
three versatile Suezmax/Oil-Bulk-Ore, or Suezmax OBO, vessels, one
Aframax tanker, one semi-integrated tug/barge unit and one
chemical/product tanker carrier. Our Ocean Business fleet has an
aggregate capacity of approximately 600,000 dwt, and our three Suezmax
OBOs are capable of carrying either dry bulk or liquid cargos,
providing flexibility as dynamics change between these market sectors.
o Our Passenger Business fleet consists of two vessels with a total
carrying capacity of approximately 1,600 passengers, and operates
primarily in the European cruise market. We currently employ each of
our passenger vessels under seasonal charters with a tour operator. In
addition, we are currently negotiating opportunities to operate these
vessels during periods outside the European travel season.
Our business strategy is to continue to operate as a diversified
marine transportation company with an aim to maximize our growth and
profitability while limiting our exposure to the cyclical behavior of individual
sectors of the marine transportation industry.
Developments in 2006
In March 2006, we commenced preparation for an initial public
offering of the shares of our common stock to be registered in the United States
of America. The shares held directly by our existing shareholders prior to the
initial public offering will be entitled to seven votes per share and the shares
held by all other holders will be entitled to one vote per share. The special
voting rights of the existing shareholders will not be transferable. Following
the completion of the initial public offering, our existing shareholders will
continue to have a majority of the voting power of our common shares.
On March 20, 2006, we purchased all of the issued and outstanding
capital stock of Ravenscroft Shipping (Bahamas) S.A. from two of our related
parties, Crosstrade Maritime Inc., and Crosstrees Maritime Inc., for the
purchase price of $11.5 million. The purchase price included a building in Coral
Gables, Florida, U.S.A., independently valued at $4.5 million. Ravenscroft
Shipping (Bahamas) S.A. is a holding company that is the ultimate parent of our
vessel managers, Ravenscroft Ship Management Inc., which manages the vessels in
our Ocean Business and Offshore Supply Business, and Elysian Ship Management
Inc., which manages the vessels in our Passenger Business. We have the option to
cause Crosstrade Maritime Inc., and Crosstrees Maritime Inc, to purchase from us
all, but not less than all, of the Ravenscroft shares purchased for the original
consideration at any time prior to September 30, 2006, but not later than the
closing of any initial public offering of our common stock. The purchase price
of this acquisition was paid in the form of a non-interest bearing promissory
notes secured by a pledged of the shares of Ravenscroft payable upon the earlier
of (i) the closing of any initial public offering of our common stock or (ii)
September 30, 2006. In compliance with the requirements of our indenture related
to the 9% First Preferred Ship Mortgage Notes due 2014, or, the Notes, we
obtained a fairness opinion from an internationally recognized accounting firm
in connection with this acquisition.
Separately, we purchased 66.67% of the issued and outstanding capital
stock of UP Offshore (Bahamas) Ltd.("UP Offshore"), a company through which we
operate our Offshore Supply Business, from LAIF XI Ltd., or LAIF, an affiliate
of Solimar, one of our shareholders, for a purchase price of $48.0 million on
March 21, 2006. Following this acquisition, we hold 94.45% of the issued and
outstanding shares of UP Offshore. We have the option to cause LAIF to purchase
from us all, but not less than all, of the UP Offshore shares purchased for the
original consideration at any time prior to September 30, 2006, but not later
than the closing of any initial public offering of our common stock. The
purchase price of this acquisition was paid in the form of a non-interest
bearing promissory note secured by a pledge of the purchased shares of UP
Offshore and payable upon the earlier of (i) the closing of any initial public
offering of our common stock or (ii) September 30, 2006. In compliance with the
requirements of our indenture related to the Notes, we obtained a fairness
opinion from an internationally recognized accounting firm in connection with
this acquisition.
If we exercise our options to cause Crosstrade Maritime Inc. and
Crosstrees Maritime Inc. to purchase from us all of the shares of Ravenscroft
and cause LAIF to purchase from us all of the shares of UP Offshore that we
purchased, our financial results may be negatively affected.
On May 3,2006 we signed an agreement with International Finance
Corporation, or IFC, to purchase from IFC the 7.14% of UP River (Holdings) Ltd.,
an entity that owns 50% of UABL, that we do not own for the price of $6.1
million plus accrued interest from May 15th 2006 to the date of closing of any
initial public offering. As part of this agreement, IFC agreed to waive its
option to convert its interest in UP River into shares in the Company and its
right to participate in any initial public offering of our common stock. This
agreement is subject to the successful completion of an initial public offering
and our obligation under this agreement will be paid from proceeds of our
initial public offering.
On March 20, 2006, Los Avellanos and Avemar Holdings (Bahamas) Ltd.,
or Avemar, two of our shareholders, subject to the successful completion of an
initial pubic offering, cancelled their agreement pursuant to which Avemar had
previously granted Los Avellanos an irrevocable proxy to vote our shares owned
by Avemar. The shareholders have further agreed to distribute proportionately
the shares owned by Avemar upon the closing of an initial public offering. As a
consequence, if we effect an initial public offering, Solimar will own 63.36% of
our shares and the remaining 36.64% will be directly and indirectly owned by Los
Avellanos.
On March 20, 2006, we exercised our option to repurchase from Los
Avellanos 25,212 shares of our common stock for a total consideration of
$894,999, and the $894,999 note originally issued in connection with the option
was cancelled.
On June 10th 2003 we had sold the Princess Marina to Maritima SIPSA
S.A. ("Maritima SIPSA") a related company, under the terms of that agreement,
Maritima SIPSA S.A. pays us installments of the purchase price on a monthly
basis that we record as charter revenue (for the six months ended June 30, 2006,
Maritima SIPSA paid to us $1.4 million in respect thereof).
In June 2006, we and Maritima SIPSA extended the date on which we are
obligated to repurchase (and Maritima SIPSA is obligated to sell to us) the
vessel Princess Marina from June 10, 2006, to February 10, 2007.
As a consequence of this agreement the re-purchase price that we have
to pay, Maritima SIPSA originally agreed at $7.7 million has been renegotiated
to $5.99 million.
Factors Affecting Our Results of Operations
We have organized our business and evaluate performance by the
operating segments of the Ocean Business, River Business, and, beginning in
2005, the Offshore Supply Business and Passenger Business. The accounting
policies of the reportable segments are the same as those for the unaudited
condensed consolidated financial statements. Other than for allocation of
overhead, we do not have significant intersegment transactions.
Revenues
In our River Business, we currently contract substantially all of our
capacity under COAs, most of which have terms from one to four years. Most of
these COAs currently provide for adjustments to the freight rate based on
changes in the price of fuel.
In our Offshore Business, during the six months ended June 30, 2006,
two PSVs owned by UP Offshore were, by virtue of chartering arrangements,
operated by us in the North Sea. The revenues of these charters are recognized
in our unaudited condensed consolidated financial statements.
In our Ocean Business, we contract our cargo vessels either on a time
charter basis or on a contract of affreightment, or COA, basis. Some of the
differences between time charters and COAs are summarized below.
Time Charter
------------
o We derive revenue from a daily rate paid for the use of the
vessel, and
o the charterer pays for all voyage expenses, including fuel
and port charges.
Contract of Affreightment (COA)
-------------------------------
o We derive revenue from a rate based on tonnage shipped
expressed in dollars per metric ton of cargo, and
o we pay for all voyage expenses, including fuel and port
charges.
Our ships on time charters generate both lower revenues and lower
expenses for us than those under COAs. At comparable price levels both time
charters and COAs result in approximately the same operating income, although
the operating margin as a percentage of revenues may differ significantly.
In our Passenger Business ,the structure of our seasonal contracts
provides us with a stable revenue stream as well as the flexibility to operate
the vessels in other regions of the world at the end of the contract term. We
are currently negotiating opportunities to employ these vessels during periods
other than the European travel season.
Time charter revenues accounted for 52% of the total revenues from
our businesses for the first quarter 2006, and COA revenues accounted for 48%.
With respect to COA revenues in the first quarter 2006, 83% were in respect of
repetitive voyages for our regular customers and 17% in respect of single
voyages for occasional customers.
In our River Business, demand for our services is driven by
agricultural, mining and forestry activities in the Hidrovia Region. Droughts
and other adverse weather conditions, such as floods, could result in a decline
in production of the agricultural products we transport, which would likely
result in a reduction in demand for our services. Continuing drought conditions
have also affected the size of the Paraguayan soybean crop in 2006. Further,
most of the operation in our River Business occur in the Parana and Paraguay
Rivers, and any changes adversely affecting negatively of either of these
rivers, such as low water levels, could reduce or limit our ability to
effectively transport cargo on the rivers.
In our Ocean Business, we employed a significant part of our ocean
fleet on time charter to different customers during the six months ended June
30, 2006. During the first half of 2006 the international dry bulk freight
markets were lower than during the equivalent period of 2005.
In our Passenger Business, demand for our services is driven
primarily by movements of tourists during the European summer cruise season.
Expenses
Our operating expenses generally include the cost of all vessel
management, crewing, spares and stores, insurance, lubricants, repairs and
maintenance. Generally, the most significant of these expenses are repairs and
maintenance, wages paid to marine personnel, catering and marine insurance
costs. However, there are significant differences in the manner in which these
expenses are recognized in the different segments in which we operate.
When a cost that is expensed for annual reporting purposes clearly
benefits two or more interim periods, each interim period is charged for an
appropriate portion of the annual cost by the use of deferrals.
In addition to the vessel operating expenses, our other primary
operating expenses in the first quarter 2006 included general and administrative
expenses as well as vessel management and administration fees paid to
Oceanmarine and Ravenscroft, both related parties, that provided certain
administrative services and vessel management services respectively. We paid
Oceanmarine a monthly fee of $10,000 per oceangoing vessel for administrative
services including general administration and accounting (financial reporting
and preparation of tax returns), use of office premises, a computer network,
secretarial assistance and other general duties. We also paid Ravenscroft a
monthly technical vessel management fee of $12,500 per PSV and oceangoing vessel
and (euro)20,000 (equivalent to US $24,200 as of March 31, 2006) per passenger
vessel for services, including technical management, crewing, provisioning,
superintendence and related accounting functions. We also paid Ravenscroft a
(euro)25,000 (equivalent to US $30,300 as of March 31, 2006) administrative and
operational fee per month per passenger vessel for all operational functions as
well as administering the subcontractors, concessions and credit card/collection
system onboard. During the first quarter of 2006, we acquired Ravenscroft and
the administrative-related assets and personnel of Oceanmarine. Accordingly,
these tasks are now performed in-house.
Our operating expenses include the cost of all vessel management,
crewing, spares and stores, insurance, lubricants, repairs and maintenance. All
vessel management services have been performed, and all operating expenses paid,
in-house. UABL employs the services of Tecnical Services S.A., a related party,
to provide crew recruitment services in Argentina and Paraguay. We pay Tecnical
Services S.A. $144,000 per year, plus an additional $50 for each active crew
member hired. Since Tecnical Services S.A. is now a wholly-owned subsidiary of
Ravenscroft, beginning in the first quarter of 2006 these services have been
performed in-house. We do not expect to pay fees to any related entity other
than those described here for management and administration functions.
In our River Business, our voyage expenses include port expenses and
bunkers as well as charter hire paid to third parties.
In our Offshore Supply Business, voyage expenses include the
charterhire paid by us to UP Offshore , until the end of the first quarter of
2006, and brokerage commissions paid by us to third parties including Gulf
Offshore North Sea (UK) which provide brokerage services.
In our Passenger Business, operating expenses include all vessel
management, crewing, stores, insurance, lubricants, repairs and maintenance and
may include catering, housekeeping and entertainment staff if the charter party
so specifies. Voyage expenses may include port expenses and bunkers if such
services are for our account. Similarly, they may include the cost of food and
beverages if such amounts are for our account under the charter agreement.
Through our River Business, we own a drydock and a repair facility
for our river fleet at Pueblo Esther, Argentina, land for the construction of
two terminals in Argentina and 50% joint venture participations in two grain
loading terminals in Paraguay. UABL also rents offices in Asuncion, Paraguay and
Buenos Aires, Argentina and a drydock facility in Ramallo, Argentina. Also,
through Ultracape Delaware LLC, we own land for expansion of a liquids terminal
in Mexico.
Through our acquisition of UP Offshore, we now hold a lease for
office space in Rio de Janeiro, Brazil. In addition, through our recent
acquisition of Ravenscroft, we own a building located at 3251 Ponce de Leon
Boulevard, Coral Gables, Florida, United States of America. Through our
acquisition of the administrative functions of Oceanmarine, a related party, we
now hold a sublease to an office in Buenos Aires, Argentina.
Foreign Currency Transactions
During the six months ended June 30, 2006, 78% of our revenues were
denominated in U.S. dollars, 10% of our revenues were denominated and collected
in Euros and 12% of our revenues were denominated and collected in British
Pounds. Furthermore, 15% of our total revenues were denominated in U.S. dollars
but collected in Argentine Pesos and Paraguayan Guaranies. Significant amounts
of our expenses were denominated in dollars and 34% of our total out of pocket
operating expenses were paid in Argentine Pesos and Paraguayan Guaranies.
Our operating results, which we report in U.S. dollars, may be
affected by fluctuations in the exchange rate between the U.S. dollar and other
currencies. For accounting purposes, we use U.S. dollars as our functional
currency. Therefore, revenue and expense accounts are translated into U.S.
dollars at the average exchange rate prevailing on the month of each
transaction.
Inflation and Fuel Price Increases
We do not believe that inflation has had a material impact on our
operations, although certain of our operating expenses (e.g., crewing, insurance
and drydocking costs) are subject to fluctuations as a result of market forces.
In 2005 and prior, in our River Business, we adjusted the fuel
component of our cost into the freights on a seasonal or yearly basis, and
therefore we were adversely affected during that period by rising bunker prices
only partially offset by a hedge of a minor part of our consumption and by
bunker price adjustment formulas on some of our contracts. In 2006, we have
negotiated and intend to continue to negotiate fuel price adjustment clauses in
most of our contracts.
In the Offshore Supply and Passenger Businesses, the risk of
variation of fuel prices under the vessels' current employment is generally
borne by the charterers, since the charterers are generally responsible for the
supply of fuel.
In our Ocean Business, inflationary pressures on bunker costs are not
expected to have a material effect on our immediate future operations which are
currently chartered to third parties, since it is the charterers who pay for
fuel. When our ocean vessels are employed under COAs, freight rates for voyage
charters are generally sensitive to the price of a vessel's fuel. However, a
sharp rise in bunker prices may have a temporary negative effect on results
since freights generally adjust only after prices settle at a higher level.
Seasonality
Each of our businesses has seasonal aspects, which affect its
revenues on a quarterly basis. The high season for our River Business is
generally between the months of March and September, in connection with the
South American harvest and higher river levels. However, growth in the soy
pellet manufacturing, minerals and forest industries may help offset some of
this seasonality. The Offshore Supply Business operates year-round, particularly
off the coast of Brazil, although weather conditions in the North Sea may reduce
activity from December to February. In the Ocean Business, demand for oil
tankers tends to be strongest during the winter months in the Northern
hemisphere. Demand for dry bulk transportation tends to be fairly stable
throughout the year, with the exceptions of the Chinese New Year in our first
quarter and the European summer holiday season in our third quarter, which
generally show lower charter rates. Under existing arrangements, our Passenger
Business currently generates its revenue during the European cruise season,
majorily from May through October of each year.
Legal Proceedings
Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
Customs Tax Authorities over the alleged infringement of customs regulations by
the Alianza G-3 and Alianza Campana (collectively, the "Alianza Campana") in
Brazil during 2004. As a result, the Brazilian Customs Tax Authorities commenced
an administrative proceeding and applied the penalty of apprehension of the
Alianza Campana which required the Alianza Campana to remain in port or within a
maximum of five nautical miles from the Brazilian maritime coast. The maximum
customs penalty that could be imposed would be confiscation of the Alianza
Campana, which is estimated by the Brazilian Customs tax authorities to be
valued at $4.56 million. On February 22, 2005, we were notified of the decision
that grounds on which the tax assessment was based were ratified. In response to
this decision, on February 28, 2005, we presented a specific request for
clarification of the decision. We simultaneously presented a petition to the
Secretary of the Brazilian Internal Revenue Service requesting the replacement
of the confiscation penalty applied to the Alianza Campana by a penalty
corresponding to one percent (1%) of the value of the Alianza Campana. The tax
authorities determined that the petition requesting clarification of the
decision could not be considered because the decree that regulates the
administrative proceeding does not provide the possibility of filing this
petition. The Secretary of the Brazilian Internal Revenue Service sent the
administrative proceeding to tax authorities in Fortaleza, Brazil, for them to
consider if the vessel could be imported under the REPETRO regime. Tax
authorities in Fortaleza alleged that they would not be competent to analyze
such issue. Thus, the administrative proceeding records were sent to Rio de
Janeiro. Tax authorities of such State issued a report in which they affirmed
that the vessel could be imported under the REPETRO regime. Currently, the
administrative proceeding records are in Brasilia, waiting for a final decision
in relation to our request to the replacement of the confiscation penalty.
On the same day that Ultrapetrol S.A. presented its defense to the
above mentioned administrative proceeding, a writ of injunction was filed on
behalf of Ultrapetrol S.A. seeking a judicial authorization allowing the return
of the Alianza Campana to Boias de Xareu, which is located approximately 20
nautical miles from the Brazilian coast, so that the Alianza Campana could
resume its prior services. The preliminary injunction was granted by the court
in favor of Ultrapetrol S.A. on September 17, 2004, conditioned on the weekly
presentation of shipping letters describing the location of the Alianza Campana,
and the Alianza Campana is now back in service at Boias de Xareu. The tax
authorities filed an unsuccessful interlocutory appeal against the preliminary
injunction that was granted in our favor. In view of this decision, tax
authorities filed an appeal to the Superior Court of Justice and Ultrapetrol
filed its counterargument. Currently, our lawsuit and the appeal of tax
authorities are pending judgment.
Based upon the facts and circumstances of the case, including the
fact that the Alianza Campana was operating under a specific written
authorization officially granted by the Brazilian government, and the existing
regulations, we do not believe that the outcome of this matter will have a
material impact on our financial position or results of operations. In case we
are not successful on the merits, under our insurance coverage we could request
an indemnity corresponding to the value of the AlianzaG3 and Alianza Campana
from The Standard Club, the vessels P&I insurer.
On September 21, 2005, the local customs authority of Ciudad del
Este, Paraguay issued a finding that certain UABL entities owe taxes to that
authority in the amount of $2.2 million, together with a fine for non-payment of
the taxes in the same amount, in respect of certain operations of our River
Business for the prior three-year period. This matter was referred to the
Central Customs Authority of Paraguay (the "Paraguay Customs Authority"). We
believe that this finding is erroneous and UABL has formally replied to the
Paraguay Customs authority contesting all of the allegations upon which the
finding was based. After review of the entire case the Paraguayan Central Tax
authorities who have jurisdiction over the matter have confirmed the Company has
no liability in respect of two of the three matters at issue, while they held a
dissenting view on the third issue for which the Company's liability, if such
interpretation was upheld in court, would be $409,189. Simultaneously with
above, the Central Customs authorities issued a resolution confirming the
original determination made by the Customs Authorities at Ciudad del Este
therefore committing the matter to a resolution by the Court. The Company has
entered a plea with the respective court requesting a confirmation of the
release of liability in the two issues where such view was upheld by the Tax
authorities and contending the interpretation on the third where the Company
claims to be equally non-liable. We have been advised by UABL's counsel in the
case that there is only a remote possibility that a court would find UABL liable
for any of these taxes or fines.
Results of Operations
Six months ended June 30, 2006 compared to the six months ended June 30, 2005.
The following table sets forth certain unaudited historical income
statement data for the periods indicated derived from our unaudited condensed
consolidated statements of operations expressed in thousands of dollars.
Six Months Ended June 30,
------------------- -----------------------
2006 2005 Percent Change
---- ---- --------------
Revenues
Attributable to River Business $36,939 $29,607 25%
Attributable to Offshore Supply Business 10,400 -- --
Attributable to Ocean Business 20,454 32,678 -37%
Attributable to Passenger Business 9,363 6,628 41%
------------------- -------------------
Total 77,156 68,913 12%
------------------- -------------------
Voyage expenses
Attributable to River Business (15,931) (12,574) 27%
Attributable to Offshore Supply Business (3,161) -- --
Attributable to Ocean Business (422) (947) -55%
Attributable to Passenger Business (1,704) (611) 179%
------------------- -------------------
Total (21,218) (14,132) 50%
------------------- -------------------
Running cost
Attributable to River Business (9,263) (8,442) 10%
Attributable to Offshore Supply Business (1,830) -- --
Attributable to Ocean Business (6,875) (6,238) 10%
Attributable to Passenger Business (4,999) (3,486) 43%
------------------- -------------------
Total (22,967) (18,166) 26%
------------------- -------------------
Amortization of dry docking expense (4,185) (3,515) 19%
Depreciation of vessels and equipment (8,606) (7,172) 20%
Amortization of intangible assets (196) -- --
Management fees and administrative and commercial expenses (5,540) (4,264) 30%
Other operative income 0 21,867
------------------- -------------------
Operating profit 14,444 43,531 -67%
------------------- -------------------
Financial expense $(9,669) $(9,317) 4%
Financial income 273 263 4%
Investment in affiliates 724 (163) --
Other income 62 (22) --
------------------- -------------------
Total other expenses (8,610) (9,239) -7%
Income before income taxes and minority interest 5,834 34,292 --
Income taxes (79) (11) 618%
Minority interest (445) (9,503) -95%
------------------- -------------------
Net Income for the period $5,310 $24,778 --
------------------- -------------------
Revenues. Total revenues from our River Business increased by 25%
from $29.6 million for the six months ended June 30, 2005 to $36.9 million for
the same period in 2006. This growth is primarily attributable to the price
increases negotiated in late 2005, which increased freight rates for the same
period in 2006 when compared to the equivalent freights rates for the same
period in 2005.
Total revenues from our Offshore Supply Business increased from $0
for six months ended June 30, 2005 to $10.4 million for the same period in 2006.
This increase is attributable to the time charter revenues of our new PSVs UP
Esmeralda and UP Safira, which we operated temporarily under a bareboat charter
by our subsidiary Corporacion de Navegacion Mundial S.A. during the three months
of 2006 and to the effect of the consolidation of UP Offshore as our subsidiary
from the second quarter of 2006.
Total revenues from our Ocean Business decreased from $32.7 million
for the six months ended June 30, 2005 to $20.5 million for the six months ended
June30, 2006, or a decrease of 37%. This decrease is attributable to the sale of
the Cape Pampas in May 2005 and the lower time charter rate of the Suezmax
fleet. These decreases were partially offset by the revenues generated by our
newly acquired vessel, Miranda I.
Total revenues from our Passenger Business increased 41% from $6.6
million in the first six months of 2005 to $9.4 million in the same period of
2006. This increase is attributable to the effect of higher revenues from the
New Flamenco and the additional revenues of the Grand Victoria which was not in
operation in the equivalent period of 2005.
Voyage expenses. In the six months ended June 30, 2006, voyage
expenses of our River Business were $15.9 million, as compared to $12.6 million
for 2005, an increase of $3.3 million. The increase is primarily attributable to
the increase in our fuel expenditure.
In the six months ended June 30, 2006, voyage expenses of our
Offshore Supply Business were $3.2 million, as compared to $0 in 2005. The
increase is attributable to the bareboat charter paid for our new PSVs UP
Esmeralda and UP Safira during the first quarter of 2006 and the effect of the
consolidation of UP Offshore as our subsidiary from the second quarter of 2006.
In the six months ended June 30, 2006, voyage expenses of our Ocean
Business were $0.4 million, as compared to $0.9 million for the same period in
2005. The decrease is primarily attributable to a decrease in brokerage
commissions.
In the six months ended June 30, 2006, voyage expenses of our
Passenger Business were $1.7 million as compared to $0.6 million for the same
period in 2005. The increase is primarily attributable to the effect of the
higher voyage activity of the New Flamenco and the addition of Grand Victoria.
Running costs. For the six months ended June 30, 2006, running costs
of our River Business were $9.3 million, as compared to $8.4 million for the
same period in 2005, an increase of $0.9 million. The increase is primarily
attributable to the effect of the additional river equipment acquired during
2005.
For the six months ended June 30, 2006, running costs of our Offshore
Supply Business were $1.8 million, as compared to $0 for the same period in
2005. This increase is attributable to the running cost incurred with the new
PSVs UP Esmeralda and UP Safira owned by UP Offshore and operated temporarily by
our subsidiary Corporacion de Navegacion Mundial S.A. under a bareboat charter
in the first quarter of 2006 and the effect of the consolidation of UP Offshore
as our subsidiary from the second quarter of 2006.
For the six months ended June 30, 2006, running costs of our Ocean
Business were $6.9 million, as compared to $6.2 million for the same period in
2005. The increase in running costs relating to the operation of our newly
acquired vessel Miranda I as well as increased running costs related to the rest
of the fleet partially offset by the decrease in running cost attributable to
the sale of the Cape Pampas in May 2005.
For the six months ended June 30, 2006, running costs of our
Passenger Business were $5.0 million, compared to $3.5 for the same period in
2005. This increase is attributable to the effect of the running cost of our
vessel New Flamenco during the full six months ended June 30, 2006 as compared
to only four months of operations during the same period in 2005 and the
additional operation of the Grand Victoria in 2006.l
Amortization of drydocking. Amortization of drydocking and special
survey costs increased by $0.7 million, or 19%, to $4.2 million for the six
months ended June 30, 2006 as compared to $3.5 million for the same period in
2005. The increase is primarily attributable to the amortization expenses of
Princess Marina dry dock and the increase in the numbers of vessels in our river
fleet partially offset by the decrease of amortization of drydocking expense
attributable to the sale of Cape Pampas in May 2005.
Depreciation of vessels and equipment. Depreciation increased by $1.4
million, or 20%, to $8.6 million for the six months ended June 30, 2006 as
compared to $7.2 million for the same period in 2005. This increase is primarily
attributable to the effect of the consolidation of UP Offshore as our subsidiary
from the second quarter of 2006 and the purchase of new tugs and river barges as
well as the commencement of service of our vessels Miranda I and Grand Victoria
which was partially offset by the sale of Cape Pampas in May 2005.
Amortization of intangible assets. Amortization of intangible assets
were $0.2 million for the six months ended June 30, 2006 as compared to $0
million for the same period in 2005. The increase is primarily attributable to
the amortization expenses attributable to the purchase of Ravenscroft as our
subsidiary from the second quarter of 2006.
Management fees and administrative expenses. Management fees and
administrative expenses were $5.5 million for the six months ended June 30, 2006
as compared to $4.3 million for the same period in 2005. This increase of $1.2
million is attributable mainly to the effect of the consolidation of UP Offshore
as our subsidiary from the second quarter of 2006. As well as additional fees
and expenses incurred in the first quarter of 2006 in connection with our
passenger vessels.
Other operating income (expenses). Other operating income was $0.0
million for the six months ended June 30, 2006 as compared to $21.9 million for
the six months ended June 30, 2005. The decrease of $21.9 million is
attributable to the effect of Cape Pampas sale.
Operating profit. Operating profit for the six months ended June 30,
2006 was $14.4 million, a decrease of $29.1 million from the same period in
2005. The difference is mainly attributable to the sale of our vessel Cape
Pampas and the effect of the lower charter rates obtained for our Suezmax fleet
in the first half of 2006 partially offset by the result of newly acquired
Miranda I, the effect of the consolidation of UP Offshore as our subsidiary from
the second quarter of 2006 and a higher operating profit from our river business
in the six months ended June 30, 2006 compared to the same period of 2005.
Financial expense. Financial expense increased by approximately $0.4
million or 4%, to $9.7 million in the six months ended June 30, 2006 as compared
to $9.3 million in the same period of 2005. This variation is mainly
attributable to the effect of the consolidation of UP Offshore as our subsidiary
from the second quarter of 2006 and an increase in the interest rate of our
variable rate debt in our River Business which was partially offset by lower
level of financial debt.
Minority Interest. Minority interest decreased from $9.5 million in
the six months ended June 30, 2005 to $0.4 million for the same period of 2006.
This variation is mainly attributable to the effect of 40% gain of the sale of
Cape Pampas in May 2005
LIQUIDITY AND CAPITAL RESOURCES
We are a holding company and operate in a capital-intensive industry
requiring substantial ongoing investments in revenue producing assets. Our
subsidiaries have historically funded their vessel acquisitions through a
combination of bank indebtedness, shareholder loans, cash flow from operations
and equity contributions.
The ability of our subsidiaries to make distributions to us may be
restricted by, among other things, restrictions under our credit facilities and
applicable laws of the jurisdictions of their incorporation or organization.
As of June 30, 2006, we had aggregate indebtedness of $308.5, $249.0
million of which consisting of $180.0 million due under the Notes, the
indebtedness of our subsidiary UABL of $17.9 million under a senior loan
facility with IFC and $8.0 million with other lenders and indebtedness of our
new subsidiary UP Offshore of $ 41.3 million under a senior loan facility with
DVB NV , plus accrued interest of $1.8 million. Additionally, as of June 30,
2006, we had indebtedness of $59.5 million related to the promissory notes
issued in connection with the Ravenscroft Acquisition and the UP Offshore
Acquisition.
At June 30, 2006, we had cash and cash equivalents on hand of $8.6
million. In addition, we had $ 3.7 million in current restricted cash.
Operating Activities
In the six months ended June 30, 2006, we generated $ 12.1 million in
cash flow from operations compared to $15.9 million in the same period of 2005.
We had a net income of $5.3 million for the first six months ended June 30,
2006, as compared to a net income of $24.8 million in the same period 2005, a
decrease of $19.5 million.
Net cash provided by operating activities consists of our net income
(loss) increased by non-cash expenses, such as depreciation and amortization of
deferred charges, and adjusted by changes in working capital and expenditures
for dry docking.
Investing Activities
During the six months ended June 30, 2006, we disbursed $ 9.4 million
to refurbish the New Flamenco and to recertify and recommission the Grand
Victoria, $3.5 million to purchase additional equipment and renew bottom of
barges in our river business and $3.1 million in respect of PSV vessels under
construction. Also we received net proceeds of $11.4 million from our related
party UP Offshore Bahamas.
Financing Activities
Net cash disbursed into financing activities was $6.8 million during
the six months ended June 30, 2006, compared to net cash provided by financing
activities of $6.7 million during the same period of 2005. The decrease in cash
disbursed into financing activities in this period is mainly attributable to the
repayments of principal of our financial debt made during the six months ended
June 30, 2006 and the deferred costs related to the initial public offerings.
Future Capital Requirements
Our near-term cash requirements are primarily related to funding
operations. We cannot assure you that our actual cash requirements will not be
greater that we currently expect. If we cannot generate sufficient cash flow
from operations, we may obtain additional funding through capital market
transactions, although it is possible these sources will not be available to us.
Recent Developments
On August 8, 2006 we took delivery of our new PSV, UP Topazio which
will be commissioned into service in the near future.
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
TABLE OF CONTENTS TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS PAGE
-------- ----
o Financial statements
- Condensed Consolidated Balance Sheets at June 30,
2006 (unaudited) and December 31, 2005
- Condensed Consolidated Statements of Operations
for the six-month periods ended June 30, 2006 and
2005 (unaudited)
- Condensed Consolidated Statements of Changes in
Shareholders' Equity for the six-month periods
ended June 30, 2006 and 2005 (unaudited)
- Condensed Consolidated Statements of Cash Flows
for the six-month periods ended June 30, 2006 and
2005 (unaudited)
- Notes to Condensed Consolidated Financial
Statements
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Stated in thousands of U.S. dollars, except par value and share amounts)
June 30, December 31,
2006 2005
----------------- --------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,558 $ 7,914
Restricted cash 3,726 3,638
Accounts receivable, net of allowance for doubtful accounts
of $361 and $324 in 2006 and 2005, respectively 14,377 9,017
Receivables from related parties 4,330 17,944
Marine and river operating supplies 4,031 3,547
Prepaid expenses 5,897 3,239
Other receivables 7,866 4,997
----------------- --------------------
Total current assets 48,785 50,296
----------------- --------------------
NONCURRENT ASSETS
Other receivables 8,541 7,330
Receivables from related parties 1,710 1,995
Restricted cash 993 68
Vessels and equipment, net 305,761 182,069
Dry dock 9,294 12,743
Investment in affiliates 2,532 15,698
Intangible assets 4,142 -
Goodwill 3,800 -
Other assets 8,841 7,548
----------------- --------------------
Total noncurrent assets 345,614 227,451
----------------- --------------------
Total assets $ 394,399 $ 277,747
================= ====================
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 20,811 $ 12,696
Payable to related parties 59,500 2,008
Current portion of long-term financial debt 12,504 8,322
Other payables 703 917
----------------- --------------------
Total current liabilities 93,518 23,943
----------------- --------------------
NONCURRENT LIABILITIES
Long-term debt 180,000 180,000
Financial debt, net of current portion 56,527 22,953
Other payables 1,900 -
----------------- --------------------
Total noncurrent liabilities 238,427 202,953
----------------- --------------------
Total liabilities 331,945 226,896
----------------- --------------------
MINORITY INTEREST 5,284 2,479
----------------- --------------------
MINORITY INTEREST SUBJECT TO PUT RIGHTS 4,957 4,898
----------------- --------------------
REDEEMABLE PREFERED SHARES 3,445 -
----------------- --------------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value: 10,625,000 shares;
2,705,787 shares held in treasury (Note 2.d and 9) 106 106
Additional paid-in capital (Note 9) 68,799 68,799
Treasury stock (Note 9) (20,332) (20,332)
Accumulated earnings (deficit) 15 (5,295)
Accumulated other comprehensive income 180 196
------------------ --------------------
Total shareholders' equity 48,768 43,474
------------------ --------------------
Total liabilities, minority interests, redeemable
preferred shares and shareholders' equity $ 394,399 $ 277,747
================== ====================
The accompanying notes are an integral part of
these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Stated in thousands of U.S. dollars, except share and per share data)
Six-month periods ended June 30,
-----------------------------------
2006 2005
----------------- -----------------
REVENUES
Revenues from third parties $ 75,729 $ 67,680
Revenues from related parties 1,427 1,233
----------------- -----------------
Total revenues 77,156 68,913
----------------- -----------------
OPERATING EXPENSES
Voyage expenses (21,218) (14,132)
Running costs (22,967) (18,166)
Amortization of dry docking (4,185) (3,515)
Depreciation of vessels and equipment (8,606) (7,172)
Management fees to related parties (511) (864)
Amortization of intangible assets (196) -
Administrative and commercial expenses (5,029) (3,400)
Gain on disposal of vessels - 21,867
----------------- -----------------
----------------- -----------------
(62,712) (25,382)
----------------- -----------------
Operating profit 14,444 43,531
----------------- -----------------
OTHER INCOME (EXPENSES)
Financial expense (9,669) (9,317)
Financial income 273 263
Investment in affiliates 724 (163)
Other income (expense) 62 (22)
----------------- -----------------
Total other expenses (8,610) (9,239)
----------------- -----------------
Income before income taxes and minority interest 5,834 34,292
Income taxes (79) (11)
Minority interest (445) (9,503)
----------------- -----------------
Net income $ 5,310 $ 24,778
================= =================
Basic net income per share (Note 2.d) $ 0.67 $ 3.13
Diluted net income per share (Note 2.d) $ 0.66 $ 3.09
Basic weighted average number of shares 7,919,213 7,919,213
Diluted weighted average number of shares 8,019,557 8,019,557
Pro forma basic and diluted net income per share (Note 2.d) $ 0.50
Pro forma basic weighted average number of shares 10,625,000
Pro forma diluted weighted average number of shares 10,725,344
The accompanying notes are an integral part of
these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(Stated in thousands of U.S. dollars)
Additional Accumulated
Common paid-in Treasury Accumulated other
stock capital stock earnings comprehensive
Balance (Note 2.d) (Note 9) (Note 9) (deficit) income Total
----------------------------------- ---------------- ------------- ---------------- --------------- -------------- -----------
December 31, 2004 $ 106 $ 68,799 $ (20,332) $ (19,863) $ 200 $ 28,910
Net income and comprehensive income - - - 24,788 - 24,788
--------------- -------------- ---------------- --------------- ------------- -----------
June 30, 2005 $ 106 $ 68,799 $ (20,332) $ 4,925 $ 200 $ 53,698
=============== ============== ================ =============== ============= ===========
December 31, 2005 $ 106 $ 68,799 $ (20,332) $ (5,295) $ 196 $ 43,474
Comprehensive income:
- Release of accumulated other
comprehensive income to net income - - - - (16) (16)
- Net income - - - 5,310 - 5,310
--------------- -------------- ---------------- --------------- -------------------------
Total comprehensive income - - - 5,310 (16) 5,294
--------------- -------------- ---------------- --------------- -------------------------
June 30, 2006 $ 106 $ 68,799 $ (20,332) $ 15 $ 180 $ 48,768
=============== ============== ================ =============== =========================
The accompanying notes are an integral part of
these condensed consolidated financial statements
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in thousands of U.S. dollars)
Six-month periods ended June 30,
---------------------------------------
2006 2005
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,310 $ 24,778
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation of vessels and equipment 8,606 7,172
Amortization of dry docking 4,185 3,515
Expenditure for dry docking (736) (2,872)
Note issuance expenses amortization 534 406
Minority interest in equity of subsidiaries 445 9,503
Amortization of intangible assets 196 -
(Gain) on disposal of vessels - (21,867)
Net (gain) loss from investment in affiliates (724) 163
Allowance for doubtful accounts 337 121
Changes in assets and liabilities net of effects from purchase of UP Offshore
(Bahamas) and Ravenscroft companies:
(Increase) decrease in assets:
Accounts receivables (5,072) (2,351)
Receivable from related parties (654) (2,917)
Marine and river operating supplies (484) (852)
Prepaid expenses (1,585) (1,641)
Other receivables (1,686) 1,699
Other (259) (310)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 5,224 2,751
Payable to related parties (770) (385)
Other (790) (1,016)
---------------------------------------
Net cash provided by operating activities 12,077 15,897
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase in vessels and equipment (16,250) (27,819)
Proceeds from disposals of vessels - 37,880
Decrease in loans to related parties 11,391 -
Other 206 3
---------------------------------------
Net cash (used in) provided by investing activities (4,653) 10,064
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
(Increase) decrease in restricted cash (324) 14,520
Payments of long-term financial debt (5,009) (15,175)
Proceeds from long-term financial debt - 7,500
Payments of deferred costs related to the initial public offering (1,335) -
Redemption of minority interest - (13,400)
Other (112) (119)
---------------------------------------
Net cash (used in) financing activities (6,780) (6,674)
---------------------------------------
Net increase in cash and cash equivalents 644 19,287
Cash and cash equivalents at the beginning of year $ 7,914 $ 11,602
---------------------------------------
Cash and cash equivalents at the end of period $ 8,558 $ 30,889
---------------------------------------
The accompanying notes are an integral part of
these condensed consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands of U.S. dollars, except otherwise indicated)
(Information pertaining to the six-month periods ended
June 30, 2006 and 2005 is unaudited)
1. CORPORATE ORGANIZATION AND CONSOLIDATED COMPANIES
Organization
Ultrapetrol (Bahamas) Limited ("Ultrapetrol Bahamas", "the Company", "us"
or "we") is a company organized and registered as a Bahamas Corporation
since December 1997.
The Company is a diversified ocean and river transportation company
involved in the carriage of dry and liquid cargoes as well as passengers.
In our Ocean Business, we are an owner and operator of oceangoing vessels
that transport petroleum products and dry cargo. In our Passenger
Business, we are an owner of cruise vessels that transport passengers
primarily cruising the Mediterranean and Black Sea. In our River Business
we are an owner and operator of river barges and push boats in the
Hidrovia region of South America, a region of navigable waters on the
Parana, Paraguay and Uruguay Rivers and part of the River Plate, which
flow through Brazil, Bolivia, Uruguay, Paraguay and Argentina. In
addition in our Offshore Supply Business we are an owner and operator of
Platform Supply Vessels (PSV) that provide critical logistical and
transportation services for offshore petroleum exploration and production
companies, primarily in the North Sea and the coastal waters of Brazil.
In March 2006, the Company commenced preparation for an initial public
offering of its common shares to be registered in the United States of
America. The shares held directly by our existing shareholders will be
expressly entitled to seven votes per share and all other holders of our
common shares will be entitled to one vote per share. The special voting
rights of the existing shareholders are not transferable. Following the
completion of the initial public offering, our existing shareholders will
continue to have a majority of the voting power of our common shares.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America ("US
GAAP") for interim financial information. The consolidated balance
sheet at December 31, 2005, has been derived from the audited
financial statement at that date. The unaudited condensed
consolidated financial statements and the consolidated balance sheet
do not include all of the information and footnotes required by US
GAAP for complete financial statements. All adjustments which, in
the opinion of the management of the Company, are considered
necessary for a fair presentation of the results of operations for
the periods shown are of a normal, recurring nature and have been
reflected in the unaudited condensed consolidated financial
statements. When a cost that is expensed for annual reporting
purposes clearly benefits two or more interim periods, each interim
period is charged for an appropriate portion of the annual cost by
the use of deferrals. The results of operations for the periods
presented are not necessarily indicative of the results expected for
the full fiscal year or for any future period.
The condensed consolidated financial statements include the accounts
of the Company and its subsidiaries, both majority and wholly owned.
Significant intercompany accounts and transactions have been
eliminated in this consolidation. Investments in 50% or less owned
affiliates, in which the Company exercises significant influence,
are accounted for by the equity method.
The condensed financial statements for 2005 have been reclassified
to conform with the 2006 presentation of certain items.
b) Identifiable intangible assets
As a result of the Ravenscroft acquisition (see Note 3), the Company
recorded identifiable intangible assets including a safety
management system, software and customer existent contracts, among
others, which are being amortized over useful lives ranging from
three to eight years.
c) Goodwill
Goodwill is accounted for under the provisions of Statement of
Financial Accounting Standards No.142, Goodwill and Other Intangible
Assets ("SFAS 142"). Goodwill is recorded when the purchase price
paid for an acquisition exceeds the estimated fair value of net
identified tangible and intangible assets acquired. In accordance
with SFAS 142, the Company will perform an annual impairment test of
goodwill and further periodic tests to the extent indicators of
impairment develop between annual impairment tests. The Company's
impairment review process compares the fair value of the reporting
unit to its carrying value, including the goodwill related to the
reporting unit. To determine the fair value of the reporting unit,
the Company uses a discounted future cash flow approach that uses
estimates for revenue, estimated costs and appropriate discount
rates, among others. These various estimates will be reviewed each
time the Company tests goodwill for impairment and many are
developed as part of the Company's routine business planning and
forecasting process. The Company believes its estimates and
assumptions are reasonable; however, variations from those estimates
could produce materially different results.
d) Stock split and pro forma net income per share:
For purpose of effecting a reduction in the unit price of the common
shares in order to improve their marketability, on July 20, 2006,
the shareholders of the Company resolved to declare a stock split of
our common stock. On the date of such stock split, 5.03736 common
shares were issued for each common share held by the existing
shareholders of the Company.
Therefore, the Company will distribute to our existing shareholders
8,515,760 additional common shares on a proportionate basis. After
this stock split, the issued and outstanding shares will be
increased from 2,109,240 to 10,625,000.
A capitalization of $85 from "Additional Paid-in Capital" to the
"Common Stock" account has been reflected retroactively for all of
the periods presented.
Consequently, net income per share has been presented for all
periods presented based on the common shares outstanding of
Ultrapetrol (Bahamas) Limited as adjusted for this stock split net
of the shares held in treasury.
Accordingly, 7,919,213 common shares have been considered as being
outstanding for all of the periods presented for purposes of
determination of net income per share. Diluted net income per share
reflects the potential dilution that would occur if securities or
other contracts to issue common stock result in the issuance of such
stock.
In addition basic and diluted pro forma net income per share, as
disclosed in the statement of operations for the six-month period
ended June 30, 2006, has been presented giving effect to the
distribution to the existing shareholders of the treasury stock
mentioned in Note 9, which will become effective on or immediately
prior to the initial public offering mentioned in Note 1.
The following table sets forth the computation of basic and diluted
net income per share.
2006 2005
------------------------------------
Numerator:
Numerator for basic and diluted net income per share - Net income $ 5,310 $ 24,778
====================================
Denominator:
Denominator for basic net income per share - Weighted
average shares 7,919,213 7,919,213
Effect of diluted shares - Warrants issued 100,344 100,344
------------------------------------
Denominator for diluted net income per
share - Adjusted weighted average shares 8,019,557 8,019,557
====================================
Basic net income per share $ 0.67 $ 3.13
====================================
Diluted net income per share $ 0.66 $ 3.09
====================================
Pro forma denominator:
Pro forma denominator for basic net income per share -
Weighted average shares 10,625,000
Effect of diluted shares - Warrants issued 100,344
------------
Pro forma denominator for diluted net income per share -
Adjusted weighted average shares 10,725,344
============
Pro forma basic and diluted net income per share $ 0.50
=============
e) New accounting pronouncements:
In June 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an interpretation of FAS109, Accounting for Income Taxes (FIN 48),
to create a single model to address accounting for uncertainty in
tax positions. FIN 48 clarifies the accounting for income taxes, by
prescribing a minimum recognition threshold a tax position is
required to meet before being recognized in the financial
statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting in
interim periods, disclosure and transition. FIN 48 is effective for
fiscal years beginning after December 15, 2006. The Company does not
expect that the adoption of FIN 48 will have a significant impact on
the Company's financial position and results of operations.
3. BUSINESS ACQUISITIONS
a) Acquisition of 100% of Ravenscroft
On March 20, 2006, we purchased, for $11.5 million all of the issued
and outstanding capital stock of Ravenscroft Shipping (Bahamas) S.A.
(Ravenscroft) from two of our related companies Crosstrade Maritime
Inc. and Crosstrees Maritime Inc. Ravenscroft and its affiliated
entities manage the vessels in our Ocean Business, Offshore Supply
Business and Passenger Business.
The results of the Ravenscroft acquisition are consolidated in the
condensed consolidated financial statements since the date of
acquisition.
The Company expects with this acquisition to open new business
opportunities and to eliminate the management fees paid to related
parties, while bringing the costs of ship management in-house.
The purchase price of this acquisition was paid in the form of a
non-interest bearing promissory note payable upon the earlier of (i)
the successful completion of the initial public offering or (ii)
September 30, 2006. The promissory note is secured by a
first-ranking pledge over the shares purchased. We have the option
to cause Crosstrade Maritime Inc. and Crosstrees Maritime Inc. to
repurchase all, but not less than all, of the Ravenscroft shares
purchased for the original consideration. The put option shall
commence on the first day after the closing of this acquisition and
shall terminate upon the earlier of (i) the successful completion of
the initial public offering (ii) or September 30, 2006.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed and allocation of purchase
price at the date of acquisition. This purchase price allocation is
preliminary and is subject to refinement.
Current assets $ 1,459
Buildings and equipment 4,644
Identifiable intangible assets 4,338
Goodwill 3,800
----------------------
Total assets acquired 14,241
----------------------
Current liabilities 1,582
Noncurrent liabilities 1,159
----------------------
Total liabilities assumed 2,741
----------------------
Total purchase price $ 11,500
======================
Due to immateriality, the Company has not prepared pro forma
information respective to this business combination.
b) Acquisition of an additional 66.67% of UP Offshore (Bahamas)
On March 21, 2006, we purchased for $48 million, an additional
66.67% of the issued and outstanding capital stock of UP Offshore
(Bahamas) Ltd., from LAIF XI Ltd. (LAIF), an affiliate of Solimar
Holdings Ltd, one of our shareholders. Following the acquisition of
the shares of UP Offshore (Bahamas) from LAIF, we hold 94.45% of the
issued and outstanding shares of UP Offshore (Bahamas).
The results of UP Offshore (Bahamas) acquisition are consolidated in
the condensed consolidated financial statements since the date of
acquisition.
The purchase price was paid in the form of a non-interest bearing
promissory note payable upon the earlier of (i) the successful
completion of the initial public offering or (ii) September 30,
2006. The promissory note is secured by a first-ranking pledge over
the shares purchased. We have the option to cause LAIF to repurchase
from us all, but not less than all, of the UP Offshore shares
purchased for the original consideration. The put option shall
commence on the first day after the closing of this acquisition and
shall terminate upon the earlier of (i) the successful completion of
the initial public offering or (ii) September 30, 2006.
The following table summarizes the estimated fair values of the
assets acquired and liabilities assumed and allocation of purchase
price at the date of acquisition. This purchase price allocation is
preliminary and is subject to refinement.
Current assets $ 1,547
Vessels and equipment 79,227
Other noncurrent assets 1,517
------------------------
Total assets acquired 82,291
------------------------
Current liabilities 6,070
Noncurrent liabilities 25,955
------------------------
Total liabilities assumed 32,025
------------------------
Redeemable preferred shares assumed 2,266
------------------------
Total purchase price $ 48,000
========================
If the transaction had been consummated on January 1, 2005, the
Company's pro forma revenues and net income for the six-month
periods ended June 30, 2006 and 2005, would have been as shown
below. However, such pro forma information is not necessarily
indicative of what actually would have occurred had the transaction
occurred on such date.
For the six-month
periods ended June 30,
---------------------------
2006 2005
---------------------------
Revenues $ 77,483 $ 68,913
Net income $ 6,112 $ 24,640
Basic net income per share $ 0.77 $ 3.11
Diluted net income per share $ 0.76 $ 3.07
Pro forma basic net income per share $ 0.58
Pro forma diluted net income per share $ 0.57
c) UP River (Holdings) Ltd.
On June 2003, the Company sold to International Finance Corporation
(IFC) a 7.14% interest in UP River (Holdings) Ltd.
Also the Company agreed to pay to IFC 7.14% of the amount of the
respective Charter Party Payments pursuant to the Charter Party
Agreements between Ultrapetrol and UABL.
In full consideration for (a) the sale of the shares, and (b) the
right to receive a portion of the Charter Party Payments IFC paid to
the Company $5,000.
During the period beginning on December 31, 2009 and ending on
December 31, 2010, IFC will be able to exercise an option to put all
of the shares of UP River (Holdings) Ltd. then owned by it to UP
River (Holdings) Ltd. for an amount in cash equal to $5,000 minus
the amount of any cash received by IFC in respect of ownership of
such shares (whether by dividend, proceeds from Charter Party
Payments or otherwise) plus interest thereon, compounded annually
calculated as a rate equal to LIBOR plus 200 basis points.
Also, Ultrapetrol shall have the right, exercisable from time to
time to purchase from the IFC all of the shares of UP River
(Holdings) Ltd. then owned by IFC. The purchase price for the shares
to be purchased, which shall be an amount sufficient to result in a
realized internal return rate to the IFC on such shares equal to 18%
per annum.
Upon the occurrence of an Ultrapetrol IPO, the IFC has the right to
receive in exchange for all but not less than all of the shares
owned by it in UP River (Holdings) Ltd., at the option of
Ultrapetrol (a) a number of registered Ultrapetrol shares that, when
multiplied by the Ultrapetrol IPO price, gives the IFC a realized
internal return rate of 12% per annum on its investment in the UP
River (Holdings) Ltd's shares or (b) a number of Ultrapetrol
shares (valued at the Ultrapetrol IPO price) and an amount of cash
that, in the aggregate, gives the IFC a realized internal return
rate of 12% per annum on its investment in the UP River (Holdings)
LTD's shares.
On May 3, 2006 we signed an agreement with the IFC, to purchase from
the IFC the 7.14% of UP River (Holdings) Ltd., which we do not own
for the price of $6,100, plus accrued interest from May 15, 2006 to
the date of the closing of the initial public offering mentioned in
note 1. As part of this agreement the IFC will waive its option to
convert its interest in UP River (Holdings) Ltd. to our shares and
its right to participate in the initial public offering of the
Company. This agreement is subject to the successful completion of
the offering and the purchase price will be paid from proceeds of
the offering.
At June 30, 2006 and December 31, 2005, the Company presents $4,957
and $4,898, respectively, as a "Minority interest subject to put
rights", which represents the initial proceeds received by the IFC
plus accrued interest less Charter Party Payments made to the IFC.
d) Other
In March 2006 we hired the administrative personnel and purchased
the administrative related assets of Oceanmarine for $321 (See Note
8 - Management fee).
4. VESSELS AND EQUIPMENT, NET
The capitalized cost of the vessels and equipment, and the related
accumulated depreciation at June 30, 2006 and December 31, 2005 is
as follows:
June 30, December 31,
2006 2005
------------------------------------
Original book value
------------------------------------
Ocean-going vessels $ 128,873 $ 126,776
River barges and pushboats 117,761 116,054
PSV 65,489 -
Construction of PSV in progress 49,315 -
Passenger vessels 37,710 28,105
Furniture and equipment 7,427 6,173
Building, land and operating base 9,356 6,525
-------------- ----------------
Total original book value 415,931 283,633
Accumulated depreciation (110,170) (101,564)
-------------- ----------------
Net book value $ 305,761 $ 182,069
============== ================
At June 30, 2006, the net book value of the assets pledged as a
guarantee of the debt was approximately $235 million.
- PSVs Construction
In June 2003, UP Offshore Apoio Maritimo Ltdo. (our wholly owned
subsidiary in the Offshore Supply Business) signed shipbuilding contracts
for construction of four PSVs with EISA Estaleiro Ilha S/A (EISA), a
Brazilian corporation. During November 2005 UP Offshore Apoio Maritimo
Ltda. and EISA amended some conditions of the shipbuilding contracts,
including the purchase price and the delivery dates.
The four PSVs are to be built by EISA at a combined cost of $69,750. In
February 2006, the first of the four PSVs, named UP Agua Marinha was
delivered. The total remaining commitment at June 30, 2006 for the three
PSVs cost is $22 million, which includes the minimum contractual
obligation with the shipyard and the remaining necessary expenditure to
commission the three PSVs in service.
In August 2006, the second of the four PSVs, named UP Topazio was
delivered.
5. LONG-TERM DEBT AND OTHER FINANCIAL DEBT
Balances of financial debt at June 30, 2006 and December 31, 2005:
Nominal value
Financial ---------------------- Accrued
institution / Other Due-year Current Noncurrent interest Total Average rate
------------------- -------- ------- ---------- -------- ----- ------------
Ultrapetrol (Bahamas) Ltd Private Investors (Notes) 2014 $ - $ 180,000 $ 1,620 $ 181,620 9.000%
UP Offshore Panama DVB Tranche A Through 2015 1,800 22,400 15 24,215 Libor + 1.875%
UP Offshore Panama DVB Tranche B Through 2008 1,333 1,333 2 2,668 Libor + 2.250%
UP Offshore Apoio DVB Tranche A Through 2016 900 11,800 42 12,742 Libor + 2.250%
UP Offshore Apoio DVB Tranche B Through 2009 667 1,111 6 1,784 Libor + 2.875%
UABL Barges IFC Tranche A Through 2011 2,143 9,643 48 11,834 Libor + 3.750%
UABL Barges IFC Tranche B Through 2009 1,000 2,500 14 3,514 Libor + 3.500%
UABL Barges KFW Through 2009 2,000 5,000 28 7,028 Libor + 3.500%
UABL Paraguay IFC Through 2009 750 1,875 12 2,637 Libor + 5.000%
UABL Paraguay Citibank NA Through 2010 124 865 - 989 Libor + 2.750%
June 30, 2006 $ 10,717 $ 236,527 $ 1,787 $ 249,031
======== ========== ======== ==========
December 31, 2005 $ 6,599 $ 2 02,953 $ 1,723 $ 211,275
a) Loan with the DVB Bank America NV (DVB NV) of up to $30,000:
On April 27, 2005 UP Offshore (Panama) S.A. (a wholly owned subsidiary of
UP Offshore) as Holding Company entered into a $30,000 loan agreement with
DVB NV for the purpose of providing post delivery financing of two PSVs
named UP Esmeralda and UP Safira, which were delivered in May and June
2005, and repaying existing financing and shareholder loans.
This loan is divided into two tranches:
- Tranche A, amounting to $26,000, shall be repaid by (i) 40 consecutive
quarterly installments of $450 each beginning in September 2005 and
(ii) a balloon repayment of $8,000 together with the 40 installment and
accrues interest at LIBOR rate plus 1.625% per annum if the Holding
Company Guaranty has been issued or 1.875% per annum if the Holding
Company Guaranty has not been issued, and
- Tranche B, amounting to $4,000, shall be repaid by 12 consecutive
quarterly installments of $333 each beginning in September 2005 and
accrues interest at LIBOR rate plus 2% per annum if the Holding Company
Guaranty has been issued or 2.25% per annum if the Holding Company
Guaranty has not been issued.
At June 30, 2006, the Holding Company Guaranty has not been issued.
The loan is secured by a mortgage on the UP Safira and UP Esmeralda and is
jointly and severally irrevocable and unconditionally guaranteed by Packet
Maritime Inc. and Padow Shipping Inc. The loan also contains customary
covenants that limit, among other things, the Borrower's and the
Guarantors' ability to incur additional indebtedness, grant liens over
their assets, sell assets, pay dividends, repay indebtedness, merge or
consolidate, change lines of business and amend the terms of subordinated
debt. The agreement governing the facility also contains customary events
of default.
If an event of default occurs and is continuing, DVB NV may require the
entire amount of the loan be immediately repaid in full. Further, the loan
agreement requires until June 2008 that the PSVs pledged as security have
an aggregate market value of at least 85% of the value of the loan amount
and at all times thereafter an aggregate market value of at least 75% of
the value of the loan.
At June 30, 2006, the outstanding principal balance under the loan
agreement was $26,866 and the aggregate net book value of the assets
pledged was $41,095.
b) Loan with DVB Bank AG (DVB AG) of up to $15,000
On January 17, 2006 UP Offshore Apoio Maritimo Ltda. (a wholly owned
subsidiary of UP Offshore) as Borrower, Packet Maritime Inc. and Padow
Shipping Inc. as Guarantors and UP Offshore as Holding Company entered
into a $15,000 loan agreement with DVB AG for the purposes of providing
post delivery financing of one PSV named UP Agua Marinha delivered in
February 2006.
This loan is divided into two tranches:
- Tranche A, amounting to $13,000, shall be repaid by (i) 120 consecutive
monthly installments of $75 each beginning in March 2006 and (ii) a
balloon repayment of $4,000 together with the 120 installments which
accrue interest at LIBOR rate plus 2.25% per annum for so long as the
PSV is registered under Brazilian flag or 1.875% per annum for so long
as PSV is registered under an approved flag other than Brazilian flag,
and
- Tranche B, amounting to $2,000, shall be repaid by 35 consecutive
installments of $56 each beginning in March 2006 which accrues interest
at LIBOR rate plus 2.875% per annum for so long as the PSV is
registered under Brazilian flag or 1.875% per annum for so long as PSV
is registered under an approved flag other than Brazilian flag.
The loan is secured by a mortgage on the UP Agua Marinha and is jointly
and severally irrevocable and unconditionally guaranteed by Packet
Maritime Inc. and Padow Shipping Inc. The loan also contains customary
covenants that limit, among other things, the Borrower's and the
Guarantors' ability to incur additional indebtedness, grant liens over
their assets, sell assets, pay dividends, repay indebtedness, merge or
consolidate, change lines of business and amend the terms of subordinated
debt. The agreement governing the facility also contains customary events
of default. If an event of default occurs and is continuing, DVB AG may
require the entire amount of the loan be immediately repaid in full.
Further, the loan agreement requires until February 2009 that the PSV
pledged as security has an aggregate market value of at least 117.6% of
the value of the loan amount and at all times thereafter an aggregate
market value of at least 133.3% of the value of the loan.
At June 30, 2006 the outstanding principal balance under the loan
agreement was $14,478 and the aggregate net book value of the assets
pledged was $22,216.
6. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings, claims and contingencies
arising in the ordinary course of business. When such amounts can be
estimated and the contingency is probable, management accrues the
corresponding liability. While the ultimate outcome of lawsuits or other
proceedings against the Company cannot be predicted with certainty,
management does not believe the costs of such actions will have a material
effect on the Company's consolidated financial position or results of
operations.
Paraguayan Customs Dispute
On September 21, 2005 the local customs authority of Ciudad del Este,
Paraguay issued a finding that certain UABL entities owe taxes to that
authority in the amount of $2,200, together with a fine for non-payment of
the taxes in the same amount, in respect of certain operations of our
River Business for the prior three-year period. This matter was referred
to the Central Customs Authority of Paraguay. We believe that this finding
is erroneous and UABL has formally replied to the Paraguay Customs
Authority contesting all of the allegations upon which the finding was
based.
After review of the entire case the Paraguayan Central Tax authorities who
have jurisdiction over the matter have confirmed the Company has no
liability in respect of two of the three matters at issue, while they held
a dissenting view on the third issue for which the Company's liability, if
such interpretation was upheld in court, would be $409. Simultaneously
with above, the Central Customs authorities issued a resolution confirming
the original determination made by the Customs Authorities at Ciudad del
Este therefore committing the matter to a resolution by the Court. The
Company has entered a plea with the respective court requesting a
confirmation of the release of liability in the two issues where such view
was upheld by the Tax authorities and contending the interpretation on the
third where the Company claims to be equally non-liable.
We have been advised by UABL's counsel in the case that they believe that
there is only a remote possibility that a court would find UABL liable for
any of these taxes or fines.
Brazilian Customs Dispute
Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
Customs Tax Authorities over the alleged infringement of customs
regulations by the Alianza G-3 and Alianza Campana (collectively, the
"Alianza Campana") in Brazil during 2004. As a result, the Brazilian
Customs Tax Authorities commenced an administrative proceeding and applied
the penalty of apprehension of the Alianza Campana which required the
Alianza Campana to remain in port or within a maximum of five nautical
miles from the Brazilian maritime coast. The maximum customs penalty that
could be imposed would be confiscation of the Alianza Campana, which is
estimated by the Brazilian Customs Tax Authorities to be valued at $4,560.
On February 22, 2005, we were notified of the decision that grounds on
which the tax assessment was based were ratified. In response to this
decision, on February 28, 2005, we presented a specific request
clarification of the decision. We simultaneously presented a petition to
the Secretary of the Brazilian Internal Revenue Service requesting the
replacement of the confiscation penalty applied to the Alianza Campana by
a penalty corresponding to one percent (1%) of the value of the Alianza
Campana. The tax authorities determined that the petition requesting
clarification of the decision could not be considered because the Decree
that regulates the administrative proceeding does not provide the
possibility of filing this petition. The Secretary of the Brazilian
Internal Revenue Service sent the administrative proceeding to tax
authorities in Fortaleza, Brazil, for them to consider if the vessel could
be imported under the REPETRO regime. Tax authorities in Fortaleza alleged
that they would not be competent to analyze such issue. Thus, the
administrative proceeding records were sent to Rio de Janeiro. Tax
authorities of such State issued a report in which they affirmed that the
vessel could be imported under the REPETRO regime. Currently, the
administrative proceeding records are in Brasilia, waiting for a final
decision in relation to our request to the replacement of the confiscation
penalty.
On the same day that Ultrapetrol S.A. presented its defense to the above
mentioned administrative proceeding, a writ of injunction was filed on
behalf of Ultrapetrol S.A. seeking a judicial authorization allowing the
return of the Alianza Campana to Boias de Xareu, which is located
approximately 20 nautical miles from the Brazilian coast, so that the
Alianza Campana could resume its prior services. The preliminary
injunction was granted by the court in favor of Ultrapetrol S.A. on
September 17, 2004, conditioned on the weekly presentation of shipping
letters describing the location of the Alianza Campana, and the Alianza
Campana is now back in service at Boias de Xareu. The tax authorities
filed an unsuccessful interlocutory appeal against the preliminary
injunction that was granted in our favor. In view of this decision, tax
authorities filed an appeal to the Superior Court of Justice and
Ultrapetrol filed its counterargument. Currently, our lawsuit and the
appeal of tax authorities are pending judgment.
Based upon the facts and circumstances of the case, including the fact
that the Vessel was operating under a specific written authorization
officially granted by the Brazilian government and the existing
regulations, the Company does not believe that the outcome of this matter
should have an adverse impact on its financial position or results of
operations. In case the Company is not successful on the merits, under
applicable insurance coverage, it could request from, the Vessel's P&I
insurer, an indemnity corresponding to the value of the Vessel.
7. INCOME TAXES
The Company operates through its subsidiaries, which are subject to
several tax jurisdictions, as follows:
a) Bahamas
The earnings from shipping operations were derived form sources outside
the Bahamas and such earnings were not subject to Bahamanian taxes.
b) Panama
The earnings from shipping operations were derived from sources outside
Panama and such earnings were not subject to Panamanian taxes.
c) Paraguay
Two of our Ocean Business subsidiaries, Parfina S.A. and Oceanpar S.A. and
four or our River Business subsidiaries, UABL Paraguay, Parabal S.A.,
Yataiti and Riverpar are subject to Paraguayan corporate income taxes.
d) Argentina
Ultrapetrol S.A., one of our Ocean Business subsidiaries and three of our
River Business subsidiaries, UABL S.A., Argenpar S.A. and Sernova S.A.,
are subject to Argentine corporate income taxes.
In Argentina, the tax on minimum presumed income ("TOMPI"), supplements
income tax since it applies a minimum tax on the potential income from
certain income generating-assets at a 1% tax rate. The Company's tax
obligation in any given year will be the higher of these two tax amounts.
However, if in any given tax year tax on minimum presumed income exceeds
income tax, such excess may be computed as payment on account of any
excess of income tax over TOMPI that may arise in any of the ten following
years.
e) Brazil
Our subsidiaries in the Offshore Supply Business, UP Offshore Apoio
Maritimo Ltda. and Agriex Importadora e Exportadora de Generos
Alimenticios Ltda. are subject to Brazilian corporate income taxes.
f) Chile
Corporacion de Navegacion Mundial S.A. is subject to Chilean corporate
income taxes.
g) The United States
Pursuant to Section 883 of the US tax code and the final regulations
thereunder which became effective for calendar year taxpayers commencing
January 1, 2005, a foreign corporation which meets the definition of a
"Qualified Foreign Corporation", will be exempt from United States of
America corporate income tax on its U.S. source shipping income which, as
defined, means 50% of the income derived by a corporation from the
international operation of a ship or ships and the performance of certain
services directly related thereto that is attributable to the transport of
cargo to or from U.S. ports.
A corporation will be considered a Qualified Foreign Corporation if (i)
its country of incorporation is a "Qualified Foreign Country" which, as
defined, is a foreign country that exempts US corporations from income tax
on the type(s) of shipping income (bareboat, time or voyage income) for
which exemption is being claimed (the "Incorporation Test"), (ii) it meets
the "Ultimate Owner Test", and (iii) it files a US Federal income tax
return (Form 1120F) to claim the Section 883 exemption.
A foreign corporation meets the Ultimate Owner Test if (a) more than 50%
of the value of its stock is ultimately owned for more than half the days
of the tax year by "Qualified Shareholders" which, as defined includes an
individual who is a tax resident of a Qualified Foreign Country, an
individual tax resident of a Qualified Foreign Country that is a
beneficiary of a pension plan administered in or by such country or
another Qualified Foreign Country, the government (or a political
subdivision or local authority) of a Qualified Foreign Country and certain
not-for-profit organizations organized in a Qualified Foreign Country.
For the six-month periods ended June 30, 2006 and 2005 the Company and its
subsidiaries have not earned any U.S. source shipping income.
8. RELATED PARTY TRANSACTIONS
At June 30, 2006 and December 31, 2005, the balances of receivable from
related parties were as follows:
June 30, 2006 December 31, 2005
--------------------- ----------------------
Current:
Receivable from related parties
- UP Offshore Bahamas Ltd. and its subsidiaries (1) - 13,726
- Maritima Sipsa S.A. 365 16
- Puertos del Sur S.A. and O.T.S. 2,542 1,612
- Other 1,423 2,590
------------------ ----------------------
$ 4,330 $ 17,944
================== ======================
(1) This loan accrues interest at a nominal interest rate of 9.50% per year. The
principal and the interest accrued have been repaid in full in February,
2006.
Noncurrent:
Loans receivable from related parties
- Puerto del Sur S.A. (1) $ 1,710 $ 1,995
--------------------- ----------------------
$ 1,710 $ 1,995
===================== ======================
(1) This loan accrues interest at a nominal interest rate of 3% per year,
payable annually. The principal will be repaid in 8 equal annual
installments, beginning on June 30, 2006. The current portion is included in
current receivables from related parties.
At June 30, 2006 and December 31, 2005 the balance of payable to related
parties were as follows:
June 30, 2006 December 31, 2005
------------------- --------------------
Payable to related parties
- LAIF XI Ltd. (Note 3.b) $ 48,000 $ -
- Crosstrade Maritime Inc. and Crosstrees Maritime Inc. (Note 3.a) 11,500 -
- Ravencroft Shipping Inc - 2,008
------------------- --------------------
$ 59,500 $ 2,008
=================== =====================
For the six-month periods ended June 30, 2006 and 2005, the revenues
derived from related parties were as follows:
For the six-month periods
ended June 30,
--------------------------------------------
2006 2005
------------------- --------------------
- Maritima Sipsa S.A. $ 1,427 $ 1,233
------------------- --------------------
Total $ 1,427 $ 1,233
==================== ====================
Sale and repurchase of vessel Princess Marina
In 2003, the Company entered into certain transactions to sell, and
repurchase in 2006, to and from Maritima Sipsa S.A., a 49% owned company,
the vessel Princess Marina. The combined effect of the sale at $15,100,
repurchase at $7,700 and a loan granted to Maritima Sipsa S.A. for $7,400
resulted in no cash flow on a consolidated basis at the time of
execution. The loan is repaid to the Company on a quarterly basis over a
three-year period ended June 2006. In June 2006, the Company and Maritima
Sipsa S.A. entered into an amended agreement to modify the repurchase
price in $4,200 and the delivery date of the vessel to February 2007. The
transaction was recognized in the Company's statements of operations as a
lease, reflecting quarterly payments as charter revenues for $ 1,427 and
$ 1,233 for the six-month periods ended June 30, 2006 and 2005,
respectively, while the vessel remains presented in the accompanying
balance sheets as an asset.
Bareboat charter paid to related parties
Since the second quarter of 2005, through our subsidiary, Corporacion de
Navegacion Mundial S.A., the Company entered into a bareboat charter with
UP Offshore (Panama) S.A., a wholly owned subsidiary of UP Offshore for
the rental of the two PSVs named UP Safira and UP Esmeralda for a daily
lease amount for each one. Since March 21, 2006, the date of UP Offshore
additional acquisition, our condensed consolidated financial statements
included the operations of UP Offshore (Panama) S.A., a wholly owned
subsidiary of UP Offshore, on a consolidated basis. Therefore, these
transactions have been eliminated in the condensed consolidated financial
statements since that date. Prior to the additional acquisition, the
equity method was used.
For the six-month period ended June 30, 2006 the charters amounted to
$2,640.
Management fee
For the six-month periods ended June 30, 2006 and 2005, management fees
were expensed with the following related parties to:
For the six-month periods
ended June 30,
--------------------------------------
2006 2005
------------------ -------------------
Oceanmarine (1) $ 150 $ 300
Ravenscroft Shipping Inc. (2) 361 564
------------------ -------------------
Total $ 511 $ 864
================== ===================
(1) The Company through certain of its subsidiaries has contracted with
Oceanmarine, a company under the same control group as Inversiones
Los Avellanos S.A., for certain administrative services. This
agreement stipulates a fee of $10 per month and per ocean going
cargo vessel.
(2) Pursuant to the individual ship management agreement between
Ravenscroft Ship Management Ltd., a Bahamas Corporation
("Ravenscroft Bahamas") a company of the same control group as
Inversiones Los Avellanos S.A., and the Company's relevant
vessel-owning subsidiaries, Ravenscroft Bahamas has agreed to
provide certain ship management services for all of the Company's
vessels. Ravenscroft Bahamas has subcontracted the provision of
these services to Ravenscroft Shipping Inc., a Miami-based related
party of the Company. This agreement stipulates a fee of $12.5 per
month per ocean going cargo vessel.
Under these contracts, these related parties are to provide all
services necessary for such companies to operate, including but not
limited to crewing, insurance, accounting and other required
services. Additionally, commissions and agency fees are paid to
those related parties.
In addition, the Company pays Ravenscroft a monthly technical ship
management fee of (euro)20 (equivalent to $25.6 at June 30, 2006)
per passenger vessel for services including technical management,
crewing, provisioning, superintendence and related accounting
functions. The Company pays Ravenscroft for each passenger vessel
(euro)25 (equivalent to $32 at June 30, 2006) administrative and
operational fee per month for all operational functions as well as
administering the subcontractors, concessions and credit
card/collection system onboard.
We purchased Ravenscroft (see Note 3) and hired the administrative
personnel and purchased the administration related assets of Oceanmarine
in March 2006 (see Note 3); accordingly, after those acquisitions, we
will not pay fees to these related parties, but will directly incur
in-house all costs of ship management and administration.
Brokerage commissions
Ravenscroft from time to time acts as a broker in arranging charters for
the Company's oceangoing vessels for which Ravenscroft charges brokerage
commissions of 1.25% on the freight, hire and demurrage of each such
charter. Total commission expenses incurred by the Company under this
arrangement amounted to $319 and $541 respectively, for the six-month
periods ended June 30, 2006 and 2005, respectively.
In addition, during the six-month period ended June 30, 2005, the Company
paid to Ravenscroft $399 for its participation in the sale of one of our
vessels.
Since March 20, 2006, the date of Ravenscroft acquisition, our condensed
consolidated financial statements included the operations of Ravenscroft,
on a consolidated basis. Therefore, these transactions have been
eliminated in the condensed consolidated financial statements since that
date.
Administration agreement with UP Offshore
On June 25, 2003 the Company signed an administration agreement with UP
Offshore.
Under this agreement Ultrapetrol agrees to assist UP Offshore by
providing management services required by the latter, including providing
the services of the Chief Executive Officer and to provide ongoing
management and commercial advisory services up to the year 2013.
The parties agreed that Ultrapetrol professional fees under this
agreement shall be the 2% of UP Offshore annual EBITDA as defined in the
agreement. For the six-month period ended June 30, 2006 the professional
fee amounted $40. Since March 21, 2006, the date of UP Offshore
additional acquisition, our condensed consolidated financial statements
included the operations of UP Offshore, on a consolidated basis.
Therefore, these transactions have been eliminated in the condensed
consolidated financial statements since that date. Prior to acquisition,
the equity method was used. For the six-month period ended June 30, 2005,
no fees were recognized because UP Offshore had no EBITDA.
Commercial agreement with Comintra
On June 25, 2003, UP Offshore signed a commercial agreement with
Comintra.
Under this agreement Comintra agrees to assist UP Offshore regarding the
commercial activities of UP Offshore's fleet of six PSVs with the
Brazilian offshore oil industry. Comintra's responsibilities, among
others, include marketing the PSVs in the Brazilian market and
negotiating the time charters or other revenues contracts with
prospective charterers of the PSVs.
The parties agreed that Comintra's professional fees under this agreement
shall be 2% of the gross time charters revenues from Brazilian charters
collected by UP Offshore on a monthly basis.
Comintra's services in connection with this agreement began on June 25,
2003, and, unless earlier terminated end on June 25, 2013.
UP Offshore may terminate this agreement (a) at any time upon 30 days
notice if (i) PSVs representing more than 50% of the gross time charter
revenues of UP Offshore arising from contracts in Brazil are sold or (ii)
Ultrapetrol and LAIF cease owning, jointly or separately, more than 50%
of UP Offshore's outstanding voting stock; (b) Comintra breaches any
material term of this agreement; (c) in the event of gross negligence or
material failure to perform the services by Comintra, or (d) upon mutual
agreement.
In the event of termination under subsections (a) or (d) above, such
termination shall not be effective unless and until UP Offshore shall
have also paid to Comintra $2,500 (less any fees already paid to Comintra
through the termination date). Other than the figures mentioned above no
further indemnification will be due by UP Offshore to Comintra.
During 2005 UP Offshore paid in advance to Comintra fees under this
agreement in the amount of $1,500.
For the six-month period ended June 30, 2006 the fees amounted to $40.
None of such fees has been expensed in the six-month period ended June
30, 2005 because UP Offshore had no revenues from Brazilian charters.
9. SHARE CAPITAL
On June 28, 2001, the Company issued 138,443 new shares for $5,295 which
were totally subscribed by Inversiones Los Avellanos SA, one of the
Company's original shareholders and was paid $3,297 in 2001 and $1,104 in
2002 and the balance was payable in July 2006. The Company has an option
to repurchase 25,212 of its shares for a total price of $894 from
Inversiones Los Avellanos S.A. until July 2006.
On March 20, 2006, we exercised our option to repurchase, from
Inversiones Los Avellanos S.A., 25,212 shares of our common stock for a
total price of $894 and the $894 Note issued in connection with the
option was cancelled. The shares were also cancelled.
On October 12, 2000 the Company through a wholly owned subsidiary, Avemar
Holdings (Bahamas) Limited ("Avemar"), purchased 537,144 shares of the
Company.
Therefore, the Company recorded $20,332 in the "Treasury stock" account
in the shareholders' equity, $20,000 of which relates to the amount paid
to SII and $322 relates to direct cost of acquisition.
On March 20, 2006 two of our shareholders, Inversiones Los Avellanos S.A.
and Avemar (our wholly owned subsidiary), subject to the successful
completion of the initial public offering mentioned in Note 1, cancelled
their agreement pursuant to which Avemar had previouly granted
Inversiones Los Avellanos S.A. an irrevocable proxy to vote our shares
owned by Avemar.
On July 20, 2006, the two shareholders amended and restated their
agreement for which upon the closing of the initial public offering or
immediately prior thereto, Avemar and the Company will transfer the
shares owned by Avemar to the remaining shareholders of the Company, in
proportion to their existing ownership in the Company. If the initial
public offering has not taken place by September 30, 2006 this amendment
shall be deemed to be null and void. Thus, this transaction partakes of
the nature of a stock split.
At June 30, 2006 the shareholders of Ultrapetrol Bahamas are Solimar
Holdings Ltd., Inversiones Los Avellanos S.A., Hazels (Bahamas)
Investments Inc. (a wholly owned subsidiary of Inversiones Los Avellanos
S.A.) and Avemar, our wholly owned subsidiary, in the proportion of
46.66%, 24.43%, 3.74% and 25.17%, respectively. Since Avemar granted an
irrevocable proxy to Inversiones Los Avellanos S.A. in full for all of
its voting powers related to its interest in the Company, at June 30,
2006, Inversiones Los Avellanos S.A. held directly and indirectly 53.34%
of the Company's voting rights. However, pursuant to a shareholder
agreement between Solimar Holdings Ltd. and Inversiones Los Avellanos
S.A., both shareholders hold sufficient participating rights in the
operation of the Company that results in neither shareholder having
control of the Company.
On July 20, 2006, the Company adopted a resolution authorizing the
amendment and restatement of its Memorandum and Articles of Association
which provides among other things for the authorized capital stock of the
Company to increase to 100,000,000 shares of common stock, par value
$0.01 per share. Such amendment will be effective upon closing of the
offering.
10. PREFERRED SHARES OF UP OFFSHORE (BAHAMAS) LTD.
In January 2004, UP Offshore issued 3,000,000 of its Series A 6%
non-voting redeemable preferred shares for a subscription price of
$3,000.
The preferred shares shall accrue cumulative preferred dividends (whether
or not declared, whether or not UP Offshore has earnings or profits, and
whether or not there are funds legally available for the payment of such
dividends) at the annual rate of 6% of the purchase price of such shares.
Any holder of preferred shares may elect, on or after December 15, 2010,
to have UP Offshore redeem all, but not less than all, of the Series A
preferred shares at an amount in cash equal to the amount paid for the
Series A preferred shares (Subscription amount) plus an amount equal to
the product of (i) the EBITDA for the fiscal year ending immediately
prior to the fiscal year on which such redemption occurs, multiplied by
(ii) (x) if the EBITDA is greater than $30,000,000, 0,03, or (y) if the
EBITDA is equal to or less than $30,000,000, 0.04, multiplied by (iii) a
fraction, the numerator of which is the Subscription amount at such time
and the denominator of which is $10,000,000.
UP Offshore may, at any time, redeem all, but not less than all, of the
Series A preferred shares. If UP Offshore exercises this right prior to
December 15, 2010, the redemption price shall be an amount equal to the
amount necessary to cause the holder to realize an internal rate of
return between 14% and 18% per annum on the subscription amount of such
shares. If UP Offshore elects to redeem the Series A preferred shares
after December 15, 2010 the redemption price shall be the same as if the
holder of the Series A preferred shares decides the redemption.
Also, the preferred shares may be redeemed if a change of control of UP
Offshore occurs.
The shares shall become mandatorily redeemable once notification from the
holder is received.
At June 30, 2006 and December 31, 2005, the Series A preferred shares were
disclosed under the caption "Redeemable preferred shares" in the balance
sheets.
11. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION
The Company organizes its business and evaluates performance by its
operating segments, Ocean, River, Offshore Supply and starting in 2005 the
new Passenger Business. The accounting policies of the reportable segments
are the same as those for the condensed consolidated financial statements.
The Company does not have significant intersegment transactions. These
segments and their respective operations are as follows:
Ocean Business: In our Ocean Business, we own and operate five oceangoing
vessels and semi-integrated oceangoing tug barge units under the trade
name Ultrapetrol. Our Suezmax and Aframax vessels transport dry and liquid
bulk goods on major trade routes around the globe. Major products carried
include liquid cargo such as petroleum and petroleum derivatives, as well
as dry cargo such as iron ore, coal and other bulk cargoes.
River Business: In our River Business, we own and operate several dry and
tanker barges, and push boats. In addition, we use one barge from our
ocean fleet, the Alianza G2, as a transfer station. The dry barges
transport basically agricultural and forestry products, iron ore and other
cargoes, while the tanker barges carry petroleum products, vegetable oils
and other liquids.
We operate our push boats and barges on the navigable waters of Parana,
Paraguay and Uruguay Rivers and part of the River Plate in South America,
also known as the Hidrovia region.
Offshore Supply Business: We operate our Offshore Supply Business, using
PSVs of UP Offshore (Bahamas), two of them are employed in the spot market
in the North Sea and the third one in the Brazilian market. PSVs are
designed to transport supplies such as containerized equipment, drill
casing, pipes and heavy loads on deck, along with fuel, water, drilling
fluids and bulk cement in under deck tanks and a variety of other supplies
to drilling rigs and platforms.
Passenger Business: We own two vessels purchased in 2005. Operations were
concentrated in the Mediterranean and Black Sea.
Ultrapetrol's vessels operate on a worldwide basis and are not restricted
to specific locations. Accordingly, it is not possible to allocate the
assets of these operations to specific countries. In addition, the Company
does not manage its operating profit on a geographic basis.
For the six-month periods
ended June 30,
--------------------------------------------
2006 2005
--------------------- ----------------------
Revenues (1)
- South America $ 37,596 $ 29,302
- Europe 36,143 29,262
- Asia 2,289 9,092
- Other 1,128 318
---------------------- ----------------------
---------------------- ----------------------
$ 77,156 $ 67,974
====================== ======================
(1) Classified by country of domicile of charterers.
The following schedule presents segment information about the Company's
operations for the six-month period ended June 30, 2006:
Offshore
Ocean River Supply Passenger
Business Business Business Business Total
-------- -------- -------- -------- -----
Revenues $ 20,454 $ 36,939 $ 10,400 $ 9,363 $ 77,156
Running and voyage expenses 7,297 25,194 4,991 6,703 44,185
Depreciation and amortization 7,101 3,913 652 1,125 12,791
Segment operating profit 3,415 5,632 4,049 1,348 14,444
Segment assets 103,810 128,290 122,731 39,568 394,399
Investments in affiliates 387 2,145 - - 2,532
Income (loss) from investment
in affiliates 422 (20) 322 - 724
Additions to long-lived assets 1,146 2,369 3,129 9,606 16,250
The following schedule presents segment information about the Company's
operations for the six-month period ended June 30, 2005:
Offshore
Ocean River Supply Passenger
Business Business Business Business Total
-------- -------- -------- -------- -----
Revenues $ 32,678 $29,607 $ - $ 6,628 $ 68,913
Running and voyage expenses 7,185 21,016 - 4,097 32,298
Depreciation and amortization 6,870 3,375 - 442 10,687
Gain on disposal of vessels 21,867 - - - 21,867
Segment operating profit 37,148 4,482 - 1,901 43,531
Additions to long-lived assets 2,340 8,074 - 17,405 27,819
12. SUPPLEMENTAL GUARANTOR INFORMATION
On November 24, 2004, the Company issued $180 million 9% First Preferred
Ship Mortagage Notes due 2014.
The 2014 Senior Notes are fully and unconditionally guaranteed on a joint
and several senior basis by the majority of the Company's subsidiaries
directly involved in our ocean business.
The Indenture provides that the 2014 Senior Notes and each of the
guarantees granted by Subsidiaries, other than the Mortgage, are governed
by, and construed in accordance with, the laws of the state of New York.
Each of the mortgaged vessels is registered under either the Panamanian
flag, or another jurisdiction with similar procedures. All of the
Subsidiary Guarantors are outside of the United States.
Supplemental condensed combining financial information for the Guarantor
Subsidiaries for the 2014 Senior Notes is presented below. This
information is prepared in accordance with the Company's accounting
policies. This supplemental financial disclosure should be read in
conjunction with the condensed consolidated financial statements.
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF JUNE 30, 2006 (UNAUDITED)
(stated in thousands of U,S, dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Current assets
Receivables from related parties $ 150,124 $ 4,694 $ 9,547 $ (160,035) $ 4,330
Other current assets 740 17,374 26,341 - 44,455
-------------------------------------------------------------------------------------
Total current assets 150,864 22,068 35,888 (160,035) 48,785
-------------------------------------------------------------------------------------
Noncurrent assets
Property and equipment, net - 133,658 173,900 (1,797) 305,761
Investment in affiliates 135,698 - 2,532 (135,698) 2,532
Other noncurrent assets 7,174 11,642 18,505 - 37,321
-------------------------------------------------------------------------------------
Total noncurrent assets 142,872 145,300 194,937 (137,495) 345,614
-------------------------------------------------------------------------------------
Total assets $ 293,736 $ 167,368 $ 230,825 $ (297,530) $ 394,399
Current liabilities
Payables to related parties $ 62,597 $ 129,431 $ 27,507 $ (160,035) $ 59,500
Other financial debt 1,620 - 10,884 - 12,504
Other current liabilities 751 6,472 14,291 - 21,514
-------------------------------------------------------------------------------------
Total current liabilities 64,968 135,903 52,682 (160,035) 93,518
-------------------------------------------------------------------------------------
Noncurrent liabilities
Long-term debt 180,000 - - - 180,000
Other financial debt, net of
current portion - - 56,527 - 56,527
Other noncurrent liabilities - - 1,900 - 1,900
Total noncurrent liabilities 180,000 - 58,427 - 238,427
-------------------------------------------------------------------------------------
Total liabilities 244,968 135,903 111,109 (160,035) 331,945
-------------------------------------------------------------------------------------
Minority interests - - - 5,284 5,284
Minority interests subject to put right - - - 4,957 4,957
Redeemable preferred shares - - 3,445 - 3,445
Shareholders' equity $ 48,768 $ 31,465 $ 116,271 $ (147,736) $ 48,768
-------------------------------------------------------------------------------------
Total liabilities, minority interests
and shareholders' equity $ 293,736 $ 167,368 $ 230,825 $ (297,530) $ 394,399
-------------------------------------------------------------------------------------
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF DECEMBER 31, 2005 (UNAUDITED)
(stated in thousands of U,S, dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Current assets
Receivables from related parties $ 150,558 $ 4,147 $ 5,580 $ (142,341) $ 17,944
Other current assets 3,207 11,200 17,945 - 32,352
-------------------------------------------------------------------------------------
Total current assets 153,765 15,347 23,525 (142,341) 50,296
Noncurrent assets
Property and equipment, net - 128,589 54,696 (1,216) 182,069
Investment in affiliates 68,150 - 15,698 (68,150) 15,698
Other noncurrent assets 6,260 14,128 9,296 - 29,684
-------------------------------------------------------------------------------------
Total noncurrent assets 74,410 142,717 79,690 (69,366) 227,451
-------------------------------------------------------------------------------------
Total assets $ 228,175 $ 158,064 $ 103,215 $ (211,707) $ 277,747
Current liabilities
Payables to related parties $ 3,056 $ 119,972 $ 21,321 $ (142,341) $ 2,008
Other financial debt 1,620 - 6,702 - 8,322
Other current liabilities 25 6,433 7,155 - 13,613
-------------------------------------------------------------------------------------
Total current liabilities 4,701 126,405 35,178 (142,341) 23,943
Noncurrent liabilities
Long-term debt 180,000 - - - 180,000
Other financial debt, net of current portion - - 22,953 - 22,953
Total noncurrent liabilities 180,000 - 22,953 - 202,953
-------------------------------------------------------------------------------------
Total liabilities 184,701 126,405 58,131 (142,341) 226,896
Minority interests - - - 2,479 2,479
Minority interests subject to put right - - - 4,898 4,898
Shareholders' equity 43,474 31,659 45,084 (76,743) 43,474
-------------------------------------------------------------------------------------
Total liabilities, minority interests and
shareholders' equity $ 228,175 $ 158,064 $ 103,215 $ (211,707) $ 277,747
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2006 (UNAUDITED)
(stated in thousands of U,S, dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Revenues $ - $ 42,464 $ 43,064 $ (8,372) $ 77,156
Operating expenses (706) (35,308) (35,040) 8,342 (62,712)
--------------------------------------------------------------------------------------
Operating profit (loss) (706) 7,156 8,024 (30) 14,444
Investment in affiliates 6,270 - 724 (6,270) 724
Other income (expenses) (254) (7,257) (1,823) - (9,334)
--------------------------------------------------------------------------------------
Income before income tax and minority 5,310 (101) 6,925 (6,300) 5,834
interest
Income taxes - (93) 14 - (79)
Minority interest - - - (445) (445)
--------------------------------------------------------------------------------------
Net income $ 5,310 $ (194) $ 6,939 $ (6,745) $ 5,310
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2005 (UNAUDITED)
(stated in thousands of U,S, dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Revenues $ - $ 38,843 $ 33,391 $ (3,321) $ 68,913
Operating expenses (761) (20,191) (7,751) 3,321 (25,382)
---------------------------------------------------------------------------------
Operating profit (loss) (761) 18,652 25,640 - 43,531
Investment in affiliates 25,103 - (163) (25,103) (163)
Other income (expenses) 436 (8,134) (1,378) - (9,076)
---------------------------------------------------------------------------------
Income before income tax and minority
interest 24,778 10,518 24,099 (25,103) 34,292
Income taxes - 4 (15) - (11)
Minority interest - - - (9,503) (9,503)
---------------------------------------------------------------------------------
Net income $ 24,778 $ 10,522 $ 24,084 $ (34,606) $ 24,778
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2006 (UNAUDITED)
(stated in thousands of U,S, dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Net income $ 5,310 $ (194) $ 6,939 $ (6,745) $ 5,310
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities (4,346) 10,404 (6,036) 6,745 6,767
----------------------------------------------------------------------------------
Net cash used in provided by operating 964 10,210 903 - 12,077
activities
Intercompany sources (13,507) - - 13,507 -
Non-subsidiary sources 11,391 (12,392) (3,652) - (4,653)
----------------------------------------------------------------------------------
Net cash provided by (used in) investing (2,116) (12,392) (3,652) 13,507 (4,653)
activities
Intercompany sources - 5,332 8,175 (13,507) -
Non-subsidiary sources (1,357) - (5,423) - (6,780)
----------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities (1,357) 5,332 2,752 (13,507) (6,780)
----------------------------------------------------------------------------------
Net increase (decrease) in cash and cash $ (2,509) $ 3,150 $ 3 $ - $ 644
equivalents
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2005 (UNAUDITED)
(stated in thousands of U,S, dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Net income $ 24,778 $ 10,522 $ 24,084 $ (34,606) $ 24,778
Adjustments to reconcile net income to
net cash (used in) provided by
operating activities (25,023) 387 (18,851) 34,606 (8,881)
-------------------------------------------------------------------------
Net cash used in provided by operating (245) 10,909 5,233 - 15,897
activities
Intercompany sources 5,393 - (3,000) (2,393) -
Non-subsidiary sources - (19,742) 29,806 - 10,064
-------------------------------------------------------------------------
Net cash provided by (used in) investing
activities 5,393 (19,742) 26,806 (2,393) 10,064
-------------------------------------------------------------------------
Intercompany sources 3,000 9,107 (14,500) 2,393 -
Non-subsidiary sources 15,006 (3) (21,677) - (6,674)
Net cash provided by (used in) financing
activities 18,006 9,104 (36,177) 2,393 (6,674)
-------------------------------------------------------------------------
Net increase (decrease) in cash and cash
equivalents $ 23,154 $ 271 $ (4,138) $ - $ 19,287
13. SUBSEQUENT EVENTS
We have adopted an equity incentive plan, or the Plan, dated July 20, 2006
which will entitle our officers, key employees and directors to receive
restricted stock units, stock appreciation rights and options to acquire
common stock. Under the Plan, a total of 947,950 shares of common stock
will be reserved for issuance. The Plan will be administered by our board
of directors. Under the terms of the Plan, our board of directors would be
able to grant new options exercisable at a price per share to be
determined by our board of directors. Under the terms of the Plan, no
options would be able to be exercised until at least one year after the
closing of the offering. Any shares received on exercise of the options
would not be able to be sold until one year after the date of the stock
option grant. All options will expire ten years from the date of grant.
The Plan will expire ten years from the closing of the offering.
In addition, on July 20, 2006 we entered into separate consulting
agreements that will become effective upon completion of the offering with
companies controlled by our chief executive officer, executive vice
president, chief financial officer and chief accountant for work they
perform for us in various different jurisdictions. These consulting
agreements obligate us to grant to these companies an aggregate of 212,500
shares of restricted stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ULTRAPETROL (BAHAMAS) LIMITED
(registrant)
Dated: August 15, 2006 By: /s/ Felipe Menendez R.
----------------------
Felipe Menendez R.
President
SK 02351 0009 695309