Item 3. Legal Proceedings
The Company is involved in various legal and other proceedings that are incidental to the conduct of its business. The Company believes that none of these proceedings, if adversely determined, would have a material adverse effect on its financial condition, results of operations or cash flows.
Item 4.
Item 4. Submission of Matters To a Vote Of Security Holders
None.
Item 4A. Executive Officers of The Registrant
The name, age and offices held by each of the executive officers of the Company as of March 11, 1999 are as follows:
Ronald O. Palmer has been a director of the Company since October 1993 and Chairman of the Board since May 1997. Mr. Palmer also served as Executive Vice President from February 1995 to May 1997. Mr. Palmer joined Mr. Fairley in founding the Company's predecessor in 1980 and served as Vice President, Treasurer and Chief Financial Officer until February 1995. From 1974 to 1980, Mr. Palmer was employed by GATX Leasing Corporation ("GATX") where he was responsible for the marketing of financial leases for industrial and marine equipment in eight southwestern states and all marine activity in the Gulf of Trans Marine International ("TMI"), an offshore marine service company and wholly-owned subsidiary of GATX.
Thomas E. Fairley, who co-founded the Company's predecessor with Mr. Palmer in 1980, has been President and Chief Executive Officer and a director of the Company since October 1993. From October 1993 to May 1997, Mr. Fairley also served as Chairman of the Board of the Company. From 1978 to 1980, Mr. Fairley served as Vice President of TMI and from 1975 to 1978, Mr. Fairley served as General Manager of International Logistics, Inc. ("ILI"), a company engaged in the offshore marine industry. For more than five years prior to joining ILI, Mr. Fairley held various positions with Petrol Marine Company, an offshore marine service company. Mr. Fairley is also a director of Gulf Island Fabrication, Inc.
Victor M. Perez has served as Vice President, Chief Financial Officer and Treasurer of the Company since February 1995. From 1990 to 1995, Mr. Perez served as Senior Vice President--Corporate Finance of Offshore Pipelines, Inc. Mr. Perez was Vice President--Investments for Graham Resources, Inc., from August 1987 to October 1990 and from January 1976 to August 1987 served as a Vice President with InterFirst Bank Dallas in its international and energy banking groups.
Kenneth W. Bourgeois has served as the Company's Vice President and Controller since October 1993. Mr. Bourgeois also served as Controller of the Company's predecessor from December 1981 to October 1993. From 1972 to December 1981, Mr. Bourgeois worked for George Engine Company, Inc., where he held the position of Assistant Controller and subsequently, Director of Internal Auditing. From 1969 to 1972, Mr. Bourgeois was employed by Price Waterhouse & Co. Mr. Bourgeois is a Certified Public Accountant.
Michael D. Cain has served as the Company's Vice President--Marketing since February 1993. From 1986 to 1993, Mr. Cain served as Marketing Manager for the Company's predecessor. Prior to 1986, Mr. Cain served in the same capacity for Seahorse, Inc., an offshore marine services company.
C. Douglas Stroud joined the Company in October 1998 and has served as the Company's Vice President, Business Development since March 1999. Mr. Stroud was formerly with Ceanic Corporation (now Stolt Comex Seaway) from April 1997 to September 1998 as Corporate Vice President for Technical Sales, and from 1984 to 1997 as Vice President of Sales and Marketing for Perry Tritech, Inc., a leading subsea robotic and ROV manufacturing company.
Charles E. Tizzard has served as the Company's Vice President-- Administration since June 1997. From October 1994 to June 1997, Mr. Tizzard served as Manager of Administration and Planning for the Company. From 1987 to October 1994, Mr. Tizzard served as Vice President and General Manager of Chrysler Capital Corporation's ("Chrysler Capital") Marine Asset Management subsidiary and from 1979 to 1987 he served as District Operations Manager for Chrysler Capital.
PART II
Item 5.
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The Company's common stock, $0.01 par value per share (the "Common Stock"), is listed for quotation on the Nasdaq National Market under the symbol "TMAR." At March 19, 1999, the Company had 143 holders of record of Common Stock.
The following table sets forth the range of high and low closing bid prices of the Company's Common Stock as reported by the Nasdaq National Market for the periods indicated below (adjusted to give retroactive effect for a 100% stock dividend paid in June 1997).
The Company has never paid cash dividends on its Common Stock. The Company intends to retain any future earnings otherwise available for cash dividends on its Common Stock for use in its operations and for expansion and does not anticipate paying any cash dividends. In addition, the Company's Bank Credit Facility contains provisions that prohibit the Company from paying dividends on its Common Stock. Any future determination to pay cash dividends will be made by the Board of Directors in light of the Company's earnings, financial position, capital requirements, credit agreements and such other factors as the Board of Directors deems relevant at that time.
Item 6.
Item 6. Selected Financial Data
The selected financial data presented below for the five fiscal years ended December 31, 1998 is derived from the Company's audited Consolidated Financial Statements and Notes thereto. This information should be read in conjunction with the Consolidated Financial Statements and Notes thereto included elsewhere in this report and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
- ------- (1) The data for 1997 reflects results of operations of Saevik Supply for December 1997 only and the consolidation of Saevik Supply's assets and liabilities with those of the Company at December 31, 1997. (2) Per share data has been adjusted to reflect a 3.0253-for-1 common stock split effective April 26, 1996 and a 100% stock dividend effective June 9, 1997.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
The Company's business strategy has focused on growth and diversifying its operations through acquisitions. Trico is now the second largest owner and operator of supply boats in the Gulf and a leading operator in the North Sea. Trico implemented this strategy by acquiring Saevik Supply in December 1997 for a total acquisition cost of approximately $293.7 million in cash and purchasing, during 1996 and 1997, 37 supply boats for use in the Gulf at an aggregate cost of $177.0 million. The Company has also constructed, or is completing the construction of, six new vessels, and has upgraded and refurbished the majority of its Gulf supply boat fleet. The Company's newly- constructed vessels are specially designed vessels to increase the Company's international and deepwater capabilities.
The Company's results of operations are affected primarily by day rates and fleet utilization. Demand for the Company's vessels is primarily impacted by the level of offshore oil and gas drilling activity, which can be influenced by a number of factors, including oil and gas prices and drilling budgets of exploration and production companies, and, to a lesser extent, the market for the maintenance, repair and salvage of existing platforms. As a result, trends in oil and gas prices may significantly affect utilization and day rates. The weakness in oil and gas prices experienced in 1998, which resulted in the lowest price for both oil and gas in recent years, has led to
a general decline in activity in most areas of the Company's business and has significantly affected the Company's 1998 results of operations. Day rates and fleet utilization for the Company's Gulf supply boat fleet have continued to decrease in 1999 primarily as a result of decreased drilling and development activity in the Gulf. The Company cannot predict when, or if, oil and gas prices will return to levels sufficient to cause industry activity levels to increase.
The Company's day rates and utilization rates are also affected by the size, configuration and capabilities of the Company's fleet. In the case of supply boats, PSVs and AHTSs, the deck space and liquid mud and dry bulk cement capacity are important attributes. In certain markets and for certain customers, horsepower and dynamic positioning systems are also important requirements. For crew boats, size and speed are important factors, and in the case of lift boats, longer leg length and greater crane capacity add versatility and marketability. The Company's day rates and utilization can also be affected by the supply of other vessels available in a given market with a similar configuration and capabilities.
The Company's operating costs primarily are a function of fleet size and utilization levels. The most significant direct operating costs are wages paid to vessel crews, maintenance and repairs and marine insurance. Generally, increases or decreases in vessel utilization only affect that portion of the Company's direct operating costs that is incurred when the vessels are active. As a result, direct operating costs as a percentage of revenues may vary substantially due to changes in day rates and utilization.
In addition to these variable costs, the Company incurs fixed charges related to the depreciation of its fleet and costs for the routine drydock inspection, maintenance and repair designed to ensure compliance with U.S. Coast Guard regulations and to maintain ABS certification for its vessels. Maintenance and repair expense and marine inspection amortization charges are generally determined by the aggregate number of drydockings and other repairs undertaken in a given period. Costs incurred for drydock inspection and regulatory compliance are capitalized and amortized over the period between such drydockings, typically two to three years.
Results of Operations
The table below sets forth by vessel class, the average day rates and utilization for the Company's vessels and the average number of vessels owned during the periods indicated.
- ------- (1) Includes results of operations of the vessels purchased through the acquisition of Saevik Supply in December 1997. The 1997 day rate and utilization data is for December only.
Set forth below is the Company's internal allocation of its charter revenues and charter revenues less direct operating expenses among vessel classes for each of the periods indicated.
- ------- (1) Includes results of operations of the vessels purchased through the acquisition of Saevik Supply in December 1997. Data for 1997 is for December only.
Comparison of the Year Ended December 31, 1998 to the Year Ended December 31,
Revenues for 1998 were $186.2 million, an increase of 48.4%, compared to $125.5 million in revenues for 1997. This increase was primarily due to the addition, for a full year, of North Sea operations that were acquired in December 1997. The increase in revenues from the Company's North Sea operations was partially offset by a decrease in revenues from the Gulf of Mexico, principally due to the decrease in average day rates and utilization for the Company's supply boats. This decrease in supply boat day rates and utilization was the result of reduced industry activity in the Gulf. Day rates and utilization for the Company's supply boats was also impacted by the market entry of newly-constructed vessels, which have increased the competitive environment in the Gulf.
Average supply boat day rates in the Gulf decreased 7.2% to $6,844 for 1998, compared to $7,377 for 1997; average lift boat day rates increased 4.1% to $6,199, compared to $5,955 for 1997; and average day rates for the Company's crew boats and line handling vessels increased 4.7% to $2,056, compared to $1,964 during 1997.
Utilization rates for the Company's Gulf supply boats was also impacted by the significant vessel downtime associated with the Company's extensive vessel upgrade and refurbishment program for the Gulf of Mexico supply boat fleet. Utilization for the Company's Gulf supply boat fleet decreased to 62% in 1998 from 85% in 1997. Utilization for the Company's lift boats was 63% during 1998, compared to 71% for the year-ago period. Utilization for the crew boats and line handling vessels decreased to 94% in 1998, compared to 97% in 1997.
During 1998, direct vessel operating expenses increased to $71.8 million (38.6% of revenues), compared to $42.2 million (33.6% of revenues) for 1997, due to the addition of the North Sea fleet and the consolidation for accounting purposes of the Company's Brazilian subsidiary on July 1, 1998. Direct vessel operating expenses increased as a percentage of revenues as a result of the decrease in average vessel day rates and utilization levels during 1998 in the Gulf.
Depreciation and amortization expense increased to $29.5 million for 1998, up from $12.7 million for 1997, due to the acquisition of the North Sea vessels in December 1997, and the expanded vessel fleet in the Gulf of Mexico and Brazil. Amortization of marine inspection costs increased to $8.9 million for 1998, from $3.0 million in 1997, because of the amortization of increased drydocking and marine inspection costs associated with the Company's fleet upgrade and refurbishment program.
General and administrative expenses increased to $10.9 million (5.9% of revenues) in 1998, from $5.7 million (4.6% of revenues) for 1997, as a result of the addition of the North Sea operations and the consolidation of the Company's Brazilian subsidiary beginning July 1, 1998. General and administrative expenses, as a percentage of revenues, increased in 1998 due to the decrease in average supply boat day rates and utilization levels in the Gulf of Mexico.
Interest expense increased to $27.7 million during 1998 compared to $8.0 million for 1997. This increase was due to increased debt in 1998 associated with the acquisition of the North Sea fleet in December 1997 and increased borrowings that were used to partially fund the Company's vessel construction and vessel upgrade and refurbishment program.
In 1998, the Company had income tax expense of $11.8 million, compared to income tax expense of $19.0 million in 1997.
Comparison of the Year Ended December 31, 1997 to the Year Ended December 31,
Revenues for 1997 were $125.5 million, an increase of 134.6%, compared to $53.5 million in revenues for 1996. This increase was primarily due to the growth in the Company's Gulf fleet, improved average vessel day rates for the Company's vessels and the addition of North Sea operations beginning in December 1997.
Average supply boat day rates in the Gulf rose 50% to $7,377 for 1997, compared to $4,917 for 1996; average lift boat day rates increased 19.2% to $5,955, compared to $4,995 for 1996; and average day rates for the Company's crew boats and line handling vessels increased 24.3% to $1,964, compared to $1,579 during 1996. The increase in vessel day rates was primarily the result of strong market conditions in the Gulf for marine support vessels and, with respect to the lift boats, improved market conditions in the Gulf for offshore platform repair and maintenance and well-servicing activities.
While the Company's supply boats experienced strong demand and effectively full utilization during the year, utilization for the Company's Gulf of Mexico supply boat fleet decreased in 1997 due to the large number of scheduled vessel drydockings in 1997 compared to 1996. Utilization for the Company's lift boats was 71% during 1997, compared to 67% for the year-ago period. Utilization for the crew boats and line handling vessels increased to 97% in 1997, compared to 95% in 1996 due to continued strong demand for crew boats in the Gulf and the long-term contracts for the line handling vessels in Brazil.
During 1997, direct vessel operating expenses increased to $42.2 million (33.6% of revenues), compared to $24.5 million (45.7% of revenues) for 1996, due to the expanded vessel fleet and increased labor, repair and maintenance costs. Direct vessel operating expenses decreased as a percentage of revenues due to the increase in average vessel day rates during 1997 and the growth in the Company's supply boat fleet which enjoys higher profit margins than the overall fleet.
Depreciation and amortization expense increased to $12.7 million for 1997, up from $4.5 million for 1996 due to the expanded vessel fleet. Amortization of marine inspection costs increased to $3.0 million for 1997, from $2.2 million in 1996, due to the amortization of increased drydocking and marine inspection costs associated with the Company's larger vessel fleet and the Company's fleet refurbishment program.
General and administrative expenses increased to $5.7 million (4.6% of revenues) in 1997, from $3.3 million (6.1% of revenues) for 1996, due to additions of personnel in connection with the growth in the Company's operations. General and administrative expenses, as a percentage of revenues, decreased in 1997 as the increase in revenues and additions to the vessel fleet did not require proportionate increases in administrative expenses.
Interest expense increased to $8.0 million during 1997 compared to $2.3 million for 1996. This increase was due to increased borrowings in 1997 which were used to fund the Company's acquisition of supply boats in the Gulf, the Company's various vessel construction and upgrade projects and the acquisition of Saevik Supply. In July 1997, the Company issued $110.0 million principal amount of 8 1/2% Senior notes due 2005 (the "Notes"), the proceeds of which were used to purchase 11 supply boats in the Gulf and to repay outstanding amounts
under the Company's revolving credit facility. In November and December 1997, the Company issued an additional $170 million principal amount of the Notes, the proceeds of which were used to fund the acquisition of Saevik Supply. Interest expense decreased in 1996 due to the repayment of all borrowings under the Company's credit facility and all of its subordinated debt in May 1996 with proceeds from the Company's initial public offering.
In 1997, the Company had income tax expense of $19.0 million, compared to income tax expense of $5.8 million in 1996.
Comparison of the Year Ended December 31, 1996 to the Year Ended December 31,
Revenues for 1996 were $53.5 million, an increase of 100% compared to $26.7 million in revenues for 1995. This increase was primarily due to the expansion in the Company's vessel fleet, both in the Gulf and offshore Brazil, the strong improvement in average day rates and utilization for the Company's supply boats, and the increase in utilization for the Company's lift boats.
In 1996, the Company added 26 vessels to its total fleet. In March 1996, the Company acquired eight line handling vessels, including one vessel owned by the Company's then 40%-owned affiliate, that currently operate under charters offshore Brazil. In May 1996 with the proceeds from the Company's initial public offering, the Company acquired four supply boats and in the remainder of 1996, acquired a total of 13 additional supply boats in three separate transactions.
All classes of vessels in the Company's fleet reported higher utilization during 1996 compared to 1995. The greatest increase in utilization was experienced by the Company's supply boats and lift boats. Supply boat utilization averaged 94% for 1996, up from 78% for 1995. Average supply boat day rates for 1996 increased 60.7% to $4,917 compared to $3,060 for 1995. These increases reflected strong market conditions in the Gulf during 1996 and the substantial downtime incurred in 1995 for the vessel upgrade program, during which three of the Company's supply boats were lengthened from 165 feet to 180, one was lengthened from 165 feet to 190 feet, and the boats' capacities for liquid mud and bulk cargo were increased. Additionally, the Company rebuilt and lengthened a crew boat which was placed in service late in 1995.
Utilization of the Company's lift boats increased to 67% for 1996, from 45% during 1995. The lift boats experienced unusually low utilization in 1995 due to drydocking related downtime and weak market conditions which existed in the first half of 1995. The Company's lift boats are operated by Power Offshore, a leading operator of lift boats in the Gulf. Management and incentive fees payable to Power Offshore in 1996 totaled $979,000 as compared to $468,000 for 1995 due to the increased revenue and operating income generated by the lift boats.
Utilization of the crew boats and line handling vessels increased to 95% for 1996, compared to 85% during the same period in 1995, due to the improved market conditions in the Gulf for crew boats and the additional eight line handling vessels acquired in March 1996, which operate under long-term charters offshore Brazil.
During 1996, direct vessel operating expenses increased to $24.2 million from $17.0 million during 1995, due to the expanded vessel fleet and increased labor, repair and maintenance costs. Due to the increase in average vessel day rates, direct vessel operating expenses decreased as a percentage of revenues from 63.6% during 1995 to 45.2% during 1996.
Depreciation expense increased to $4.5 million during 1996 from $2.7 million for 1995 due to the expanded vessel fleet. Amortization of marine inspection costs increased to $2.2 million during 1996 from $1.9 million for 1995 due to the amortization of increased drydocking and marine inspection costs.
General and administrative expense increased to $3.3 million during 1996 from $2.5 million during 1995 due to the additional personnel needed in connection with the growth in the Company's vessel fleet and the addition of operations in Brazil. General and administrative expenses, as a percentage of revenues,
decreased from 9.4% during 1995 to 6.1% in 1996 because the increase in revenues and additions to the vessel fleet did not require proportionate increases in administrative expenses.
Interest expense decreased to $2.3 million for 1996, from $3.9 million for 1995. The decrease in interest expense was due to a reduction in the Company's average bank debt outstanding and lower borrowing costs for the Company in 1996 as compared to 1995. As a result of the Company's two public offerings of Common Stock completed in May and November 1996, respectively, average bank debt outstanding decreased to $18.5 million for 1996, compared to $26.6 million for 1995. In 1995 the Company recorded gains on the sales of certain crew boats of $247,000 versus gains of $50,000 in 1996.
In 1996, the Company had income tax expense of $5.8 million compared to an income tax benefit of $670,000 in 1995.
As a result of the prepayment of all debt outstanding under the Company's bank credit facility and its subordinated debt in the second quarter of 1996, the Company recorded an extraordinary charge of $917,000, net of taxes of $494,000, for the write-off of unamortized debt issuance costs.
Liquidity and Capital Resources
The Company's business strategy for the past several years has been to enhance its position as a leading supplier of marine support services by pursuing opportunities to acquire vessel fleets and by diversifying into international markets. Primarily as a result of acquisitions, the Company's total assets have grown from $52.1 million at December 31, 1995, to $768.9 million at December 31, 1998. During 1996 and 1997, the Company completed the acquisition of Saevik Supply, a publicly traded Norwegian company, for a total acquisition cost of approximately $293.7 million, including transaction costs, and acquired 37 supply boats in the Gulf for $177.0 million.
The Company has also constructed, or is in the process of constructing, six new vessels, to increase its international market presence and increase its deepwater capabilities. Additionally, in 1998, the Company completed its vessel upgrade and refurbishment program involving a significant portion of its Gulf supply boat fleet. While this program resulted in significant vessel downtime in 1998, the Company believes it has extended the service lives of many of its vessels and has significantly reduced required maintenance spending in the future.
Capital expenditures for 1998 consisted principally of $101.4 million for the construction of new vessels and other vessel improvements, and $24.2 million of U.S. Coast Guard drydocking and vessel refurbishment costs. During 1998, $158.2 million in funds were provided by borrowings under the Company's bank credit facilities, $84.9 million in funds from operating activities and $6.9 million from the sale of assets. During the period, the Company repaid $123.3 million of debt.
The Company has outstanding $280.0 million in aggregate principal amount of the Notes. The Notes are unsecured and are required to be guaranteed by all of the Company's Significant Subsidiaries (as such term is defined in the indenture governing the Notes, the "Subsidiary Guarantors"). Except in certain circumstances, the Notes may not be prepaid until August 1, 2001, at which time they may be redeemed, at the option of the Company, in whole or in part, at a redemption price equal to 104.25% plus accrued and unpaid interest, with the redemption price declining ratably on August 1 of each of the succeeding three years. The indenture governing the Notes contains certain covenants that, among other things, limit the ability of the Company to incur additional indebtedness, pay dividends or make other distributions, create certain liens, sell assets, or enter into certain mergers or acquisitions.
The Company maintains a bank credit facility that provides up to a $100.0 million revolving line of credit that can be used for acquisitions and general corporate purposes (the "Bank Credit Facility"). The Bank Credit Facility is collateralized by a mortgage on certain of the Company's vessels. Amounts borrowed under the Bank Credit Facility mature on December 1, 2002 and bear interest at a Eurocurrency rate plus a margin that depends on the Company's leverage ratio. The weighted average interest rate for the Bank Credit Facility was 6.8% as of March 1, 1999. The Bank Credit Facility was amended in December 1998 to reduce permitted borrowings to $85
million and increasing to $100 million after June 30, 1999 depending on the Company's leverage ratio. The Bank Credit Facility requires the Company to maintain certain financial ratios and limits the ability of the Company to incur additional indebtedness, make capital expenditures, pay dividends or make certain other distributions, create certain liens, sell assets or enter into certain mergers or acquisitions. Although the Bank Credit Facility does impose some limitations on the ability of the Company's subsidiaries to make distributions to the Company, it expressly permits distributions to the Company by the Subsidiary Guarantors for scheduled principal and interest payments on the Notes.
In June 1998, the Company refinanced Saevik Supply's existing bank credit facilities with a revolving credit facility in the amount of NOK 650 million, or $81.8 million (the "Saevik Bank Facility"). As of March 1, 1999, the Company had approximately NOK 395 million ($49.7 million) of debt outstanding under the Saevik Bank Facility. The Saevik Bank Facility is collateralized by a security interest in certain of the Company's North Sea vessels, requires Saevik Supply to maintain certain financial ratios and limits the ability of Saevik Supply to create liens, or merge or consolidate with other entities. Amounts borrowed under the Saevik Bank Facility bear interest at NIBOR (Norwegian Interbank Offered Rate) plus a margin. The weighted average interest rate for the Saevik Bank Facility was 7.66% as of March 1, 1999. The commitment amount for the Saevik Bank Facility reduces by NOK 50 million ($6.3 million) every six months beginning December 1998, with the balance of the commitment to expire in June 2003.
In connection with the construction of the Company's SWATH vessel, in April 1998 the Company issued $10.0 million aggregate principal amount of 8 year, 6.08% Ship Financing Bonds (the "Ship Bonds") guaranteed by the United States Government. The Ship Bonds are due in 16 semi-annual installments of principal and interest, with the first principal payment due March 1, 1999, and are secured by a first preferred ship mortgage on the SWATH vessel and by an assignment of the vessel's charter. The proceeds of the Ship Bonds were used to repay a portion of the amounts outstanding under the Company's Bank Credit Facility.
Due to industry conditions, the Company intends to limit 1999 capital expenditures to those required to complete existing vessel construction projects and regulatory-mandated drydocking costs. In order to further reduce its maintenance capital expenditures, the Company expects to deactivate, or "stack," an average of between 10 and 12 of its Gulf supply boats during 1999 that were not refurbished as part of its vessel upgrade and refurbishment program.
Capital expenditures planned for 1999 consist primarily of the remaining costs to complete two new vessels currently under construction. Expenditures for the two new vessels in 1999 are expected to total approximately $24.4 million. The Company is completing construction in Norway of the Northern Admiral, a 275-foot, technologically advanced AHTS with 23,800 horsepower that is scheduled to be delivered in June 1999. The Company is also completing construction in the Gulf of the Hondo River, the second of two deepwater 230- foot supply vessels. The first vessel, the Spirit River, was delivered in December 1998, while the Hondo River will be completed in the second quarter of 1999. The Company has a pending application and expects to receive a commitment from the U.S. Maritime Administration's Title XI ship financing program to provide long-term financing for approximately $18.8 million of the cost of the Spirit River and the Hondo River.
The Company believes that cash generated from operations together with available borrowings under its bank credit facilities will be sufficient to fund the Company's currently planned capital projects and working capital requirements. The Company's business strategy has historically been to grow through acquisitions to expand its operating capabilities and international operations. As a result of depressed worldwide oil prices and reduced drilling and development activity in most international areas, the Company believes that in 1999 it may identify additional acquisition opportunities. Depending upon the size of any acquisition, it is likely that the Company would require additional equity financing and may incur additional debt financing in order to complete the acquisition. The Company believes that any such financing would involve the issuance of either common stock, convertible preferred stock or other securities entitling the holders to acquire common stock.
Year 2000 Compliance
In accordance with the U.S. Securities and Exchange Commission's ("SEC") Staff Legal Bulletin No. 5 and the SEC's subsequent interpretive release, the Company has assessed both the cost of addressing and the cost
or the consequence of incomplete or untimely resolution of the Year 2000 ("Y2K") issue. This process includes (i) the development of Y2K awareness, (ii) a comprehensive review to identify systems that could be affected by the Y2K issue, (iii) an assessment of potential risk factors (including non- compliance by the Company's suppliers, subcontractors and customers), (iv) the allocation of required resources, (v) a determination of the extent of remediation work required, (vi) the development of an implementation plan and time table, and (vii) the development of contingency plans.
The Company, in the normal course of business, is in the process of replacing its accounting and certain other information systems, and has established a target date of mid-1999 for their installation at all locations. While the Company's growth is driving the Company's efforts to replace these systems, the Company does expect the implementation of the new systems to mitigate any potential Y2K issues related to any of its existing systems.
In addition, the Company's information systems personnel are currently working with its third party vendors to resolve the potential problems associated with the year 2000 and the processing of date sensitive information by the Company's computer and other systems. The Company is still evaluating the Y2K effect on other computer systems and non-information technology systems, including telephone systems, office and vessel-based electronic equipment and devices with embedded microprocessors. Additionally, the Company has contacted key vendors and suppliers to ensure that they have a Y2K compliance plan in an effort to minimize the Company's exposure to their potential Y2K problems. The Company anticipates completion of its evaluation of non-information technology equipment, key vendors and suppliers and any remedial action and/or a contingency plan, if necessary, by mid-1999.
Because of the Company's purchase of new software and conversions to new software, the Y2K issue is not expected to pose significant operational problems for the Company's computer systems. However, if such modifications or conversions are not made or are not completed on time, the Y2K issue could have an adverse impact on the Company's operations. Among other things the Company could be impacted by: the inability of the Company to retain qualified personnel and outside consultants to successfully remediate Y2K issues and implement a new business system as demand for their services rises; the inability of the Company's customers to accurately and timely pay invoices; the inability of the Company to access necessary capital from lenders or other sources when required; and the inability of the Company's significant suppliers, subcontractors and others to provide the necessary materials, services or systems required to operate the Company's business.
The Company believes that it will be able to implement successfully the changes necessary to address the Y2K issues with reliance on its third party vendors and does not expect the cost of such changes to have a material impact on the Company's financial position, results of operations or cash flows in future periods.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company is currently evaluating the impact SFAS No. 133 will have on its financial statements, if any.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk exposures primarily include interest rate and exchange rate fluctuation on derivative and financial instruments as detailed below. The Company's market risk sensitive instruments are classified as "other than trading". The following sections address the significant market risks associated with the financial activities of the Company during 1998. The Company's exposure to market risk as discussed below includes "forward-looking statements" and represents estimates of possible changes in fair values, future earnings or cash flows that would occur assuming hypothetical future movements in foreign currency exchange rates or interest rates. The Company's views on market risk are not necessarily indicative of actual results that may occur and do not represent the maximum possible gains and losses that may occur, since actual gains and losses will differ from those estimated, based upon actual fluctuations in foreign currency exchange rates, interest rates and the timing of transactions.
Interest Rate Sensitivity
The Company has entered into a number of variable and fixed rate debt obligations, denominated in both the U.S. Dollar and the Norwegian Kroner (Norwegian debt payable in Norwegian Kroner), as detailed in Note 7 to the Company's December 31, 1998 financial statements. These instruments are subject to interest rate risk.
The Company manages this risk by monitoring its ratio of fixed and variable rate debt obligations in view of changing market conditions and from time to time altering that ratio by, for example, refinancing balances outstanding under its variable rate bank credit facilities with fixed-rate debt or by entering into interest rate swap agreements.
As of December 31, 1998 the Company had $60.0 million (NOK 455.0 million) in variable rate, Norwegian denominated debt. The Company has entered into an interest rate swap agreement in order to manage its interest rate exposure on this debt. The agreement requires the Company to pay a fixed rate of interest on a notional amount of principal to a counterparty. The counterparty, in turn, pays the Company a variable rate of interest on the same notional amount of principal. The effect of the swap is to limit the interest rate exposure to a fixed percentage on the related debt obligation.
As of December 31, 1998, the carrying value of the Company's long-term fixed rate debt, including accrued interest, was approximately $303.7 million, which included the Notes ($289.9 million), the Ship Bonds ($10.2 million) and the Norwegian fixed rate debt ($3.6 million). The fair value of this debt was approximately $253.4 million. Fair value was determined using quoted market prices, where available, or discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements as of the balance sheet date. A hypothetical 1% increase in the applicable interest rates would decrease the fair value of the Company's long- term fixed rate debt by approximately $9.3 million. The hypothetical fair values are based on the same assumptions utilized in computing fair values at December 31, 1998.
As of December 31, 1998, the carrying value of the Company's long-term variable rate debt, including accrued interest, was approximately $111.5 million and included the Company's Bank Credit Facility and the Saevik Bank Facility. The fair value of this debt approximates the carrying value because the interest rates are based on floating rates identified by reference to market rates. A hypothetical 1% increase in the applicable interest rates would increase interest expense by approximately $1.1 million.
As of December 31, 1998, the Company's interest rate swap agreement had a fair value of $179,000 based on estimated amounts that the Company would receive or pay to terminate the contract at the reporting date. A hypothetical 1% increase in the pay rate would result in an increase in interest expense of approximately $264,000. A hypothetical 1% increase in the receive rate would decrease interest expense by a corresponding amount.
Foreign Currency Exchange Rate Sensitivity
The Company's foreign subsidiaries collect revenues and pay expenses in several different foreign currencies. The Company monitors the exchange rate of its foreign currencies and, when deemed appropriate, entries into hedging transactions in order to mitigate the risk from foreign currency fluctuations. The Company also manages its foreign currency risk by attempting to contract foreign revenue in U.S. Dollars whenever practicable.
The Company has exposure to fluctuations in foreign currency exchange rates resulting from several of its Norwegian vessels operating in the United Kingdom under long-term contracts denominated in the Great Britain Pound (GBP). As of December 31, 1998, the Company had approximately $7.1 million of firmly committed sales contracts through December 31, 1999, denominated in the GBP. A hypothetical 10% increase in the applicable exchange rates would result in an increase in future cash flows of approximately $706,000. A 10% decrease would result in a corresponding decrease in future cash flows. The Company manages this risk through the use of foreign currency forward exchange contracts.
The Company's foreign currency forward exchange contracts would offset the resulting increases/decreases in cash flows generated by exchange rate fluctuations of firmly committed sales contracts. A hypothetical 10% increase in the applicable exchange rates would result in approximately $918,000 decrease in future cash flows. A 10% decrease would result in a corresponding increase in future cash flows. Foreign currency forward exchange contracts had a fair value of $139,000 as of December 31, 1998. Fair value is estimated by obtaining quotes from brokers.
Item 8.
Item 8. Financial Statements and Supplementary Data
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Trico Marine Services, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, comprehensive income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of Trico Marine Services, Inc. and Subsidiaries (the "Company") at December 31, 1998 and 1997, and results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
February 17, 1999
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1998 and 1997
The accompanying notes are integral part of these consolidated financial statements.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended December 31, 1998, 1997 and 1996
The accompanying notes are an integral part of these consolidated financial statements.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the years ended December 31, 1998, 1997 and 1996
The accompanying notes are an integral part of these consolidated financial statements.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
for the years ended December 31, 1998, 1997 and 1996
Share amounts have been adjusted to reflect a 3.0253-for-1 common stock split effective April 26, 1996 and a 100% stock dividend effective June 9, 1997.
The accompanying notes are an integral part of these consolidated financial statements.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1998, 1997 and 1996
The accompanying notes are an integral part of these consolidated financial statements.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The Company:
Trico Marine Services, Inc. (the "Company") is a leading provider of marine support vessels and related services to the oil and gas industry in the U.S. Gulf of Mexico (the "Gulf"), offshore Brazil and the North Sea. The Company is the second largest owner and operator of supply boats in the Gulf and a leading operator in the North Sea. At December 31, 1998, the Company had a total fleet of 99 vessels, including 54 supply vessels, 11 large capacity platform supply vessels ("PSV"), six large anchor handling, towing and supply vessels ("AHTS"), 13 crew boats, six lift boats and nine line-handling vessels. The services provided by the Company's diversified fleet include transportation of drilling materials, supplies and crews to offshore facilities and support for the construction, installation, maintenance and removal of those facilities.
The Company's financial position, results of operations and cash flows are affected primarily by day rates and fleet utilization in the Gulf of Mexico and the North Sea which primarily depend on the level of drilling activity, which ultimately is dependent upon both short-term and long-term trends in oil and natural gas prices.
2. Summary of Significant Accounting Policies:
Consolidation Policy
The consolidated financial statements include the Company and its subsidiaries, including wholly-owned Trico Marine Assets, Inc. ("Trico Assets"), Trico Marine Operators, Inc. ("Trico Operators"), Saevik Supply, ASA ("Saevik") which was acquired December 1, 1997, and Trico Servicos Maritimos, Ltd. ("TSM") which became wholly-owned effective July 1, 1998. Prior to July 1, 1998 the Company's 40% investment in TSM was accounted for using the equity method. (See Note 3). All significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
All highly liquid debt instruments with original maturity dates of three months or less are considered to be cash equivalents.
Property and Equipment
Marine vessels, transportation and other equipment are stated at cost. Depreciation for financial statement purposes is provided on the straight-line method, assuming 10% salvage value for marine vessels. Marine vessels are depreciated over a useful life of fifteen to thirty years from the date of acquisition. Buildings and improvements are depreciated over a useful life of fifteen to forty years. Major modifications which extend the useful life of marine vessels are capitalized and amortized over the adjusted remaining useful life of the vessel. When assets are retired or disposed, the cost and accumulated depreciation thereon are removed and any resultant gains or losses are recognized in current operations. Depreciation expense amounted to approximately $26,286,000, $12,378,000 and $4,478,000 in 1998, 1997 and 1996, respectively.
Interest is capitalized in connection with the construction of vessels. The capitalized interest is recorded as part of the asset to which it relates and is amortized over the asset's estimated useful life. In 1998 and 1997, $3,271,000 and $421,000 of interest was capitalized, respectively. No interest was capitalized in 1996.
Marine vessel spare parts are stated at average cost.
Drydocking expenditures incurred in connection with marine inspections are capitalized and amortized on a straight-line basis over the period to be benefited (generally 24 to 36 months).
Deferred Financing Costs
Deferred financing costs include costs associated with the issuance of the Company's debt and are amortized on a straight-line basis over the life of the related debt agreement.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Goodwill
Goodwill, or cost in excess of fair value of the net assets of companies acquired, is amortized on a straight-line basis over 8 to 37.5 years. On an annual basis, the Company reviews the recoverability of goodwill based primarily upon an analysis of undiscounted cash flows from the acquired businesses. Accumulated amortization amounted to approximately $3,642,000 and $399,000 at December 31, 1998 and 1997, respectively.
Income Taxes
The Company accounts for income taxes using the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"). Deferred income taxes are provided at the currently enacted income tax rates for the difference between the financial statement and income tax bases of assets and liabilities and carryforward items.
Revenue and Expense Recognition
Charter revenue is earned and recognized on a daily rate basis. Operating costs are expensed as incurred.
Direct Vessel Operating Expenses
Direct vessel operating expenses principally include crew costs, insurance, repairs and maintenance, management fees, and casualty losses.
Foreign Currency Translation
All assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of the period, and revenue and expenses are translated at weighted average exchange rates prevailing during the period. The resulting translation adjustments are reflected within the stockholders' equity component, accumulated other comprehensive loss.
Stock Compensation
On January 1, 1996, the Company elected to continue to use the intrinsic value method of accounting for stock-based compensation prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and, accordingly, adopted only the disclosure provisions of Statement of Financial Accounting Standards No. 123 "Accounting for Stock- based Compensation" ("SFAS No. 123").
Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.
Authorized Shares and Stock Splits
On April 26, 1996, the Company's Board of Directors approved a 3.0253-for-1 split of the Company's common stock in the form of a stock dividend. The financial statements have been restated to reflect the effects of this stock split, including all share amounts and per share data.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
On May 22, 1997, the Company's stockholders approved an amendment to the Company's Certificate of Incorporation to increase the number of shares of common stock which the Company is authorized to issue from 15 million to 40 million (the "Amendment"). A two-for-one split of the Company's common stock in the form of a 100% stock dividend that was previously declared by the Company's Board of Directors, subject to approval of the Amendment by the Company's stockholders, was paid on June 9, 1997. The financial statements have been restated to reflect the effects of this stock split, including all share amounts and per share data.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Standards
During the year, the Company adopted Statement of Financial Accounting Standards, No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosures of certain financial information that historically has not been recognized in the calculation of net income. Prior periods presented herein have been reclassified in accordance with SFAS No. 130.
The Company also adopted Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS No. 131") and No. 132, "Employers' Disclosures About Pensions and Other Postretirement Benefits" ("SFAS No. 132"). SFAS No. 131 establishes standards for the way enterprises report information about operating segments and related disclosures about products and services, geographic areas and major customers. SFAS No. 132 revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of these plans.
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards, No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"), effective for all fiscal quarters of fiscal years beginning after June 15, 1999. The Company is currently evaluating the impact SFAS No. 133 will have on its financial statements, if any.
Reclassifications
Certain prior-period amounts have been reclassified to conform with the presentation shown in the current year's financial statements. These reclassifications had no effect on net income, total stockholders' equity or cash flows.
3. Acquisitions:
Saevik Acquisition
On December 1, 1997, the Company acquired approximately 99% of the outstanding shares of Saevik Supply ASA, a publicly traded Norwegian company ("Saevik") for approximately $293,654,000, including transaction costs. Subsequent to December 31, 1997, the Company acquired the remaining outstanding shares of Saevik. Saevik provides marine support and transportation services to companies engaged in offshore exploration and production of oil and gas in the North Sea.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The acquisition has been accounted for by the purchase method, and Saevik's results are included in the accompanying consolidated financial statements from the date of acquisition. Goodwill of $118,310,000 was recorded in conjunction with the purchase of Saevik. The goodwill is being amortized over 37.5 years.
The effect of the acquisition of Saevik at the date of purchase on the consolidated financial statements was as follows for the year ended December 31, 1997 (in thousands):
The following table reflects, on an unaudited pro forma basis, the combined operations of the Company and Saevik as though the acquisition had taken place at the beginning of the respective periods presented. Appropriate adjustments have been made to reflect the accounting basis used in recording the acquisition. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have resulted had the combination been in effect on the dates indicated, that have resulted since the date of acquisition or that may result in the future (in thousands except share and per share amounts).
TSM Acquisition
On March 15, 1996, the Company acquired seven line handling vessels and a 40% interest in TSM, a marine operating company located in Brazil, for a combined price of $4,200,000. TSM owned an eighth line handling vessel and operated it and the seven other acquired vessels under long-term contracts with a customer located in Brazil. Of the purchase price, $3,565,000 was allocated to the acquired vessels based upon their relative fair value, $270,000 was allocated to the Company's investment in the stock of TSM with the remaining $365,000 allocated to goodwill. In addition to the purchase price above, $300,000 of contingent purchase price was paid on August 27, 1996 based upon the attainment by the Company of a certain contract to provide offshore marine services in Brazil. This amount has been recorded as additional goodwill. An additional $119,000 was recorded as goodwill in 1997 relating to the realization of certain acquired assets and liabilities. Prior to July 1, 1998, the
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Company's investment in TSM was accounted for using the equity method. On July 1, 1998, the Company acquired the remaining 60% of the outstanding shares of TSM. The total cost of acquiring the remaining 60% of TSM was approximately $41,000. The acquisition has been accounted for by the purchase method and TSM's results are included in the accompanying consolidated financial statements from July 1, 1998. Total goodwill of $1,375,000, which is being amortized over eight years, has been recorded in conjunction with the 1998 and 1996 acquisitions of TSM.
Other Acquisitions
On May 22, 1996, the Company acquired for $11,000,000 all of the outstanding capital stock of HOS Marine Partners, Inc. ("HOS"), a special purpose company whose sole assets consisted of four supply vessels. HOS was subsequently merged into Trico Assets. In addition to the purchase price, the Company recognized, in accordance with SFAS No. 109, a deferred income tax liability of $5,780,000 for the deferred tax consequences of the differences between the assigned values and the tax bases of the assets owned by HOS.
In 1996, the Company acquired an additional 13 supply vessels for $55,050,000. The acquisitions were funded with borrowings under the Company's credit agreement and cash generated from operations.
In January 1997, the Company entered into agreements with two companies to acquire seven supply vessels and one utility vessel for $36,300,000. The first transaction for the acquisition of five of the supply vessels and the utility vessel was completed on January 31, 1997, with the Company borrowing $22,000,000 under its bank credit facility to fund a portion of the purchase price. The second transaction for two supply vessels was completed with the acquisition of the first vessel on June 25, 1997 and the second vessel on July 3, 1997. The Company borrowed $8,000,000 under its bank credit facility to fund a portion of the purchase price of these two vessels.
In June 1997 the Company entered into an agreement to acquire 12 supply vessels for $69,000,000. Eleven of the vessels were acquired for a total of $62,000,000 on July 21, 1997. The purchase was funded with a portion of the proceeds of the Company's $110,000,000 of 8 1/2% Senior Notes issued July 21, 1997. The Company acquired the twelfth vessel on October 29, 1997, with the Company borrowing $4,500,000 under its bank credit facility to fund a portion of the purchase.
4. Public Offerings of Common Stock:
In May 1996, the Company completed an initial public offering of 6,585,000 shares of $.01 par value common stock. The proceeds received from the offering were $48,394,000, net of underwriting discounts and other costs of $4,286,000. Of the proceeds, the Company used $31,150,000 to repay senior debt, $6,065,000 to pay subordinated debt and $11,000,000 to acquire four supply vessels. The balance of the proceeds was used by the Company for additional working capital.
In November 1996, the Company completed a second offering that included the issuance of 1,700,000 shares of $.01 par value common stock. The proceeds from the offering were $31,144,000, net of underwriting discounts and other costs of $2,006,000. The proceeds were used to repay $30,500,000 of the Company's revolving line of credit, with the balance of the proceeds used for working capital and other purposes.
In December 1997, the Company completed an offering that included the issuance of 4,600,000 shares of $.01 par value common stock. The proceeds from the offering were $123,305,000, net of underwriting discounts and other costs of $5,495,000. The net proceeds were used to repay a portion of the indebtedness incurred to fund the acquisition of Saevik (see Note 3) and certain related expenses.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Accounts Receivable:
The Company's accounts receivable, net consists of the following at December 31, 1998 and 1997 (in thousands):
The Company's receivables are primarily due from entities operating in the oil and gas industry in the Gulf of Mexico, Brazil and the North Sea.
6. Other Assets:
The Company's other assets, net consists of the following at December 31, 1998 and 1997 (in thousands):
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. Long-Term Debt:
The Company's long-term debt consists of the following at December 31, 1998 and 1997 (in thousands):
Annual maturities on long-term debt during the next five years are as follows:
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1995, the Company had a revolving credit and term loan agreement with BankBoston (the "Credit Agreement"). Availability under the revolving loan was based on the Company's accounts receivable. Substantially all of the Company's assets served as collateral for the Credit Agreement.
Effective June 28, 1995, the Company amended its Credit Agreement ("Second Amendment") to establish $5,000,000 of availability under the revolving credit loan and extend principal payments. Under the Second Amendment, the Company had the right to convert $2,000,000 of outstanding amounts under the revolving credit loan into a term loan. The Company converted $1,700,000 of its outstanding revolving credit loan into a term loan in November 1995 and $300,000 of amounts outstanding under the revolving credit loan were converted into a term loan in January 1996.
Effective March 6, 1996, the Company amended its Credit Agreement ("Third Amendment") to provide for an increased total credit facility, extend principal payments and restructure other portions of the Credit Agreement. The Third Amendment contained a revolving credit facility and term loan provisions. The $3,000,000 revolving credit facility, which would have matured in July 1997, bore interest at 1.75% above a base rate. The Third Amendment contained $33,000,000 of term loans in three separate tranches which all bore interest at 1.75% above a base rate.
The outstanding principal balance of the Credit Agreement of $31,150,000 was repaid on May 21, 1996, together with a prepayment fee of $75,000, from the proceeds of the Company's initial public offering of common stock. The balance of $6,065,000 of the Company's 9% Subordinated Notes and accrued interest thereon was also retired with proceeds from the initial public offering. As a result of the prepayment of all of the Company's senior and subordinated debt, the Company recorded an extraordinary charge of $917,000, net of taxes of $494,000, for the write-off of the unamortized balance of related debt issuance costs.
Effective July 26, 1996, the Company executed a new $30,000,000 revolving credit agreement (the "Bank Credit Facility") with the same group of lenders that provided the Company's previous Credit Agreement, which was prepaid on May 21, 1996 with proceeds from the initial public offering. The Bank Credit Facility was increased to $35,000,000 effective August 26, 1996 and to $50,000,000 effective October 8, 1996. The Bank Credit Facility bore interest at LIBOR plus 1 1/2% per annum with a commitment fee of 3/8% per annum on the undrawn portion. The Bank Credit Facility contained certain covenants which required the Company to maintain certain debt coverage ratios and net worth levels, limit capital expenditures and prohibit equity distributions.
In connection with the acquisition of Saevik, on December 1, 1997, the Company amended and restated the Bank Credit Facility to provide for a $150,000,000 revolving line of credit and $200,000,000 in term loans (the "Amended and Restated Facility"). The Amended and Restated Facility matures December 1, 2002 and bears interest at a Eurocurrency rate plus a margin that depends on the Company's leverage ratio with a commitment fee of .25% to .5% on the undrawn portion. The Amended and Restated Facility was collateralized, to the extent permitted by the indentures that govern the Senior Notes (as defined herein), by a security interest in substantially all of the assets of the Company's subsidiaries and a pledge of the stock of certain of the Company's subsidiaries. The Amended and Restated Facility contains certain covenants which require the Company to maintain certain debt coverage ratios and minimum net worth and which restrict the Company's ability to incur additional indebtedness, pay dividends or make certain other distributions. The Amended and Restated Facility may be used to borrow in U.S. Dollars or Norwegian Kroner.
During 1998, the Amended and Restated Facility was amended to reduce permitted borrowings to $85,000,000, increasing to $100,000,000 after June 30, 1999, depending upon the Company's leverage ratio, and to reduce the collateral requirements to certain U.S. flag vessels and related assets.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1997, the Company issued three Series of 8 1/2% Senior Notes due 2005, Series A/B Notes--$110,000,000, Series C/D Notes--$100,000,000 and Series E/F Notes--$70,000,000 (the "Senior Notes"). The Senior Notes are uncollateralized and are required to be guaranteed by all of the Company's Significant Subsidiaries (as such term is defined in the Indentures that govern the Senior Notes). Interest on the Senior Notes is payable semi- annually on February 1 and August 1 of each year commencing February 1, 1998. Except in certain circumstances the Senior Notes may not be prepaid until August 1, 2001, at which time they may be redeemed, at the option of the Company, in whole or in part, at a redemption price equal to 104.25%, plus accrued and unpaid interest, with the redemption price declining ratably on August 1 of each of the succeeding three years. No sinking fund payments are required on the Senior Notes until their final maturity. In November 1998, the Company combined the A/B, C/D and E/F Series Notes, which comprise the Senior Notes, into one series known as the Series G Notes. The terms and conditions of the Series G Notes are identical to the predecessor Senior Notes. The Senior Notes contain certain covenants that, among other things, limit the ability of the Company to incur additional indebtedness, pay dividends or make other distributions, create certain liens, sell assets, or enter into certain mergers or acquisitions.
In April 1998, the Company issued $10,000,000 principal amount of eight year United States Government Guaranteed Ship Financing Bonds, SWATH Series I, at an interest rate of 6.08% (the "Bonds"). The Bonds are due in 16 semi-annual installments of principal and interest. The Bonds are collateralized by a first preferred ship mortgage on the Stillwater River, a small waterplane area twin hull ("SWATH") vessel, and by an assignment of the charter contract that the vessel commenced upon its completion. The proceeds from the Bonds were released to the Company upon completion and delivery of the vessel in November 1998.
In June of 1998, the Company refinanced a significant portion of its debt, which was held at the Saevik level and due to a certain lender, into a single NOK 650,000,000 ($85,755,000) revolving credit facility (the "Saevik Bank Facility") bearing interest at NIBOR plus .75%, which reduces in ten semiannual installments of NOK 50,000,000 ($6,597,000) and one balloon payment of NOK 150,000,000 ($19,800,000), due at maturity in June 2003. The Saevik Bank Facility is collateralized by a security interest in certain of the Company's North Sea vessels and requires Saevik to maintain certain financial ratios and limits the ability of Saevik to create liens or merge or consolidate with other entities.
The Company has a pending application and expects to receive a commitment from the U.S. Maritime Administration's Title XI ship financing program to provide long-term financing for two vessels, the Spirit River and the Hondo River. The Spirit River was delivered in December 1998 and the Hondo River is scheduled to be delivered in the second quarter of 1999.
8. Financial Instruments:
During 1998, the Company entered into several foreign currency forward exchange contracts to hedge certain exposures relating to currency fluctuations between the Norwegian Kroner and the Great Britain Pound resulting from several of the Saevik vessels operating in the United Kingdom under long-term contracts denominated in the Great Britain Pound. As of December 31, 1998, the Company had foreign currency forward exchange contracts outstanding of approximately $9,272,000. These foreign currency forward exchange contracts expire at various points through December 31, 1999. Gains and losses on the contracts are deferred until the hedged transaction is completed. As of December 31, 1998, losses of $102,000 were recognized on completed foreign currency forward exchange contracts. Deferred gains of approximately $54,000 were included in the consolidated balance as accrued expenses at December 31, 1998. The foreign currency forward exchange contracts had a fair value of $139,000 at December 31, 1998.
During 1998, the Company entered into a swap agreement expiring in June 2003, with an aggregate notional amount of NOK 200,000,000 ($26,400,000). The agreement requires the Company to pay a fixed rate of interest on the notional amount, and the Company, in turn, receives a variable rate of interest on the same notional amount. The effect of the swap agreement is to limit the interest rate exposure to 5.7% on NOK 200,000,000 ($26,400,000) of the Saevik Bank Facility. Amounts to be paid or received under the swap agreement
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
are accrued as interest rate changes and are recognized over the life of the agreement as an adjustment to interest expense. As a result of this swap agreement, interest expense was increased by approximately NOK 1,500,000 ($198,000) in 1998. The estimated fair value of the interest rate swap as of December 31, 1998 was NOK 1,360,000 ($179,000).
9. Income Taxes:
Earnings (loss) before income taxes and extraordinary item derived from U.S. and international operations for the years ended December 31 are as follows (in thousands):
The components of income tax expense (benefit) from continuing operations of the Company for the periods ended December 31, 1998, 1997 and 1996, are as follows (in thousands):
The Company has not recognized a deferred tax liability of approximately $2,642,000 for the undistributed earnings of a non-U.S. subsidiary because the Company currently does not expect those unremitted earnings to reverse and become taxable to the Company in the foreseeable future. A deferred tax liability will be recognized when the Company expects that it will realize those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of investments. As of December 31, 1998, the undistributed earnings of this subsidiary were approximately $37,743,000.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's deferred income taxes at December 31, 1998 and 1997 represent the tax effect of the following temporary differences between the financial reporting and income tax accounting bases of its assets and liabilities (in thousands):
The provisions (benefits) for income taxes as reported are different from the provisions (benefits) computed by applying the statutory federal income tax rate. The differences are reconciled as follow (in thousands):
A tax benefit for the exercise of stock options in the amount of $279,000 and $1,026,000 that was not included in income for financial reporting purposes was credited directly to additional paid-in capital as of December 31, 1998 and 1997, respectively.
The net operating loss carryforwards for federal and state tax purposes are approximately $60,000,000 at December 31, 1998 and expire in 2018. Alternative minimum tax credits at December 31, 1998 are approximately $5,142,000. The Company completed an initial public offering in May 1996, which is considered a change of control for federal income tax purposes. This will limit the utilization of approximately $14,500,000 of net operating loss carryforwards to a set level as provided by regulations.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Preferred Stock:
In February 1998, the Company's Board of Directors approved the adoption of a Stockholder Rights Plan ("Plan"). In connection with the Plan, the Board of Directors approved the authorization of 100,000 shares of $0.01 par value preferred stock, designated the Series AA Participating Cumulative Preference Stock. Under the Plan, Preference Stock Purchase Rights (the "Rights") will be distributed as a dividend at a rate of one Right for each share of the Company's common stock held as of record as of the close of business on March 6, 1998. Each Right will entitle holders of the Company's common stock to buy a fraction of a share of the new series of the Company's preferred stock at an exercise price of $105. The Rights will become exercisable and detach from the common stock, only if a person or group, with certain exceptions, acquires 15% or more of the outstanding common stock, or announces a tender or exchange offer that, if consummated would result in a person or group beneficially owning 15% or more of outstanding common stock. Once exercisable, each Right will entitle the holder (other than the acquiring person) to acquire common stock with a value of twice the exercise price of the Rights. The Company will generally be able to redeem the Rights at $0.01 per Right at any time until the close of business on the tenth day after the Rights become exercisable.
11. Common Stock Option Plans:
The Company sponsors two stock-based incentive compensation plans, the "1993 Stock Option Plan" (the "1993 Plan") and the "1996 Stock Incentive Plan" (the "1996 Plan"). Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS No. 123") became effective for the Company in 1996. As allowed by SFAS No. 123, the Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") in accounting for its stock option plans. Under APB 25, the Company does not recognize compensation expense on the issuance of its stock options because the option terms are fixed and the exercise price equals the market price of the underlying stock on the grant date.
Under the 1993 Plan, the Company is authorized to issue shares of common stock pursuant to "Awards" granted in the form of incentive stock options (qualified under Section 422 of the Internal Revenue Code of 1986, as amended) and non-qualified stock options. Awards may be granted to key employees of the Company. The Compensation Committee administers the Plan and has broad discretion in selecting Plan participants and determining the vesting period and other terms applicable to Awards granted under the Plan.
According to the 1993 Plan, Awards may be granted with respect to a maximum of 1,455,018 shares of common stock. As of December 31, 1996, Awards have been granted with respect to all 1,455,018 shares. All these Awards have a ten-year term and are fully exercisable. As of December 31, 1998 there were 1,043,480 options outstanding under the 1993 Plan.
Under the 1996 Plan, the Company is authorized to issue shares of common stock pursuant to "Awards" granted in the form of incentive stock options (qualified under Section 422 to the Internal Revenue Code of 1986, as amended), non-qualified stock options, restricted stock, stock awards, or any combination of these forms of Awards. Awards may be granted to key employees of the Company, including directors who are also considered employees of the Company for purposes of the Plan. The Compensation Committee administers the Plan and has broad discretion in selecting Plan participants and determining the vesting period and other terms applicable to Awards granted under the Plan.
According to the 1996 Plan, Awards may be granted with respect to a maximum of 900,000 shares of common stock. No participant may be granted, in any calendar year, Awards with respect to more than 100,000 shares of common stock. In 1996, the Company granted a total of 221,000 Awards in the form of incentive stock options under the Plan at exercise prices equal to the fair value of the Company's stock at that time, which ranged from $8.00 to $10.94 per share. The Awards have a ten-year term and vested in the
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
first year following their grant, except for 15,000 awards which were 25% vested at the date of grant and vest in annual increments of 25% over the three years following their grant.
In 1997, the Company granted 191,000 Awards in the form of incentive stock options under the 1996 Plan at exercise prices equal to the fair value of the Company's stock at that time which ranged from $20.13 to $23.13 per share. The Awards have a ten-year term and vest in annual increments of 25% over the four years following their grant, except for 18,000 awards which vested at the date of grant.
During 1998, the Company granted 218,500 Awards in the form of incentive stock options under the 1996 Plan at exercise prices equal to the fair value of the Company's stock at that time which ranged from $6.63 to $19.50. The Awards expire in 10 years and vest in annual increments of 25% over the four years following their grant, except for 8,000 awards which vested at the date of grant.
As of December 31, 1998, there were 562,375 options outstanding under the 1996 Plan.
A summary of the status of the Company's stock options as of December 31, 1998, 1997 and 1996 and the changes during the years ended on those dates are presented below:
Weighted average fair value of options granted during 1998, 1997 and 1996 were $7.05, $9.30 and $4.25, respectively.
The fair value of each stock option granted is estimated on the date of grant using the minimum value method of option pricing with the following weighted-average assumptions for grants in 1998, 1997, 1996, respectively: no dividend yield; risk-free interest rates are 5.56%, 6.40% and 6.56%, expected terms of the options are 5 to 6 years; and the expected volatility is 38.54%, 39.35% and 43.91%.
The following table summarizes information about stock options outstanding at December 31, 1998:
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had the compensation cost for the Company's stock-based compensation plans been determined consistent with SFAS No. 123, the Company's net income and net income per common share for 1998, 1997 and 1996 would approximate the pro forma below:
The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts.
12. Earnings Per Share:
Following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands except share and per share data).
Options to purchase 562,375 shares of common stock at prices ranging from $6.63 to $23.13 were outstanding during 1998 but were not always included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of common shares at certain points during the year. The options were still outstanding at the end of 1998.
13. Other Related Party Transactions:
Pursuant to an agreement effective October 29, 1993, Berkshire Partners, a shareholder, was entitled to receive $16,666 each month for five years for providing certain management and other consulting services (the "Berkshire Agreement"). The Berkshire Agreement was automatically renewable on an annual basis after the initial five year period upon agreement of the parties. The Berkshire Agreement was terminated upon the successful completion of the Company's initial public offering in May 1996.
14. Employee Benefit Plans:
Profit Sharing Plan
The Company has a defined contribution profit sharing plan under Section 401(k) of the Internal Revenue Code (the "Plan") that covers substantially all U.S. employees meeting certain eligibility requirements. Employees may contribute up to 15% (subject to certain ERISA limitations) of their eligible compensation on a
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
pre-tax basis. The Company will match 25% of the participants' before tax savings contributions up to 5% of the participants' taxable wages or salary. The Company may also make a matching contribution to the Plan at its discretion. The Company expensed contributions to the Plan for the years ended December 31, 1998, 1997 and 1996 of $255,000, $129,000 and $113,000, respectively.
Pension Plan and Employee Benefits:
Substantially all of the Company's Norwegian and United Kingdom employees are covered by a number of noncontributory, defined benefit pension plans which were acquired in association with the acquisition of Saevik. Benefits are based primarily on participants' compensation and years of credited services. The Company's policy is to fund contributions to the plans based upon actuarial computations. Plan assets include investments in debt and equity securities and property.
The vested benefit obligation is calculated as the actuarial present value of the vested benefits to which employees are currently entitled based on the employees' expected date of separation or retirement.
Due to the timing of the acquisition of Saevik, the Company's net periodic benefit cost reflected above for the year ending December 31, 1997 represents one-twelfth of the total net pension benefit cost for the year.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $656,000, $492,000 and $364,000, respectively, as of December 31, 1998.
15. Commitment and Contingencies:
The Company has an agreement with an unrelated company to provide management and operating services for certain lift boats. The agreement provides for management and incentive fees to be paid to the unrelated company based on percentages of gross monthly income and net operating income, respectively. Management fees of $1,143,000, $1,271,000 and $979,000 were included in direct vessel operating expenses for the years ended December 31, 1998, 1997 and 1996, respectively. Pursuant to the agreement, the operator has been granted a right of first refusal on any sale of the lift boats.
In the ordinary course of business, the Company is involved in certain personal injury, pollution and property damage claims and related threatened or pending legal proceedings. Management, after review with legal counsel and insurance representatives, is of the opinion these claims and legal proceedings will be settled within the limits of the Company's insurance coverages. At December 31, 1998 and 1997, the Company has accrued a liability in the amount of $1,997,000 and $1,560,000, respectively, based upon the insurance deductibles that management believes it may be responsible for paying in connection with these matters. The amounts the Company will ultimately be responsible for paying in connection with these matters could differ materially in the near term from amounts accrued.
During 1997, Saevik commenced construction of a 275-foot, technologically advanced anchor handling, towing and supply vessel ("AHTS"), with 23,800 horsepower that is scheduled to be delivered in June 1999. Also, the Company began construction during 1997 of the Hondo River, a 230-foot offshore supply vessel that is scheduled to be delivered in the second quarter of 1999. Total remaining committed costs of the two vessels are expected to be approximately $24,454,000.
16. Fair Value of Financial Instruments:
The estimated fair values of financial instruments have been determined by the Company using available market information and valuation methodologies described below. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein may not be indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies may have a material effect on the estimated fair value amounts.
Cash and cash equivalents: The carrying amounts approximate fair value due to the short-term nature of these instruments.
Long-term debt: The carrying amounts of the Company's variable rate debt approximate fair value because the interest rates are based on floating rates identified by reference to market rates. The fair value of the Company's fixed rate debt is based on quoted market prices, where available, or discounted future cash flows based on the Company's current incremental borrowing rates for similar types of borrowing arrangements as of the balance sheet date. The carrying amounts and fair values of long-term debt, including accrued interest, as of December 31, 1998 and 1997 were as follows:
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Foreign currency forward exchange contracts: Fair value is estimated by obtaining quotes from brokers.
Interest swap agreements: Fair value is based on estimated amounts that the Company would receive or pay to terminate the contract at the reporting date.
17. Quarterly Financial Data (Unaudited):
- ------- (1) Earnings per share data has been restated to reflect a 100% stock dividend effective June 9, 1997. Additionally, in accordance with SFAS No. 128 the Company has restated earnings per share data for all prior periods to reflect basic earnings per share and diluted earnings per share.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
18. Segment and Geographic Information (In Thousands):
The Company is a provider of marine supply vessels and related services to the oil and gas industry. Substantially all revenues result from the charter of vessels owned by the Company. The Company's three reportable segments are based on geographic area, consistent with the Company's management structure. The accounting policies of the segments are the same as those described in the summary of significant accounting policies except for purposes of income taxes and intercompany transactions and balances. The North Sea segment provides for a flat tax rate of 28% which is the Norwegian statutory tax rate. Additionally, segment data includes intersegment revenues, receivables and payables, and investments in consolidated subsidiaries. The Company evaluates performance based on net income (loss). The U.S. segment represents the domestic operations, the North Sea segment includes Norway and the United Kingdom, and the Other segment includes primarily Brazil. Long-term debt and the related interest expense associated with the acquisitions of foreign subsidiaries are reflected in the U.S. segment. Segment data as of and for the years ended December 31, 1998, 1997 and 1996 are as follows:
As of and for the year ended December 31, 1996, the Company had primarily domestic operations.
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of segment data to consolidated data as of December 31, 1998 and 1997 is as follows:
For the year ended December 31, 1998, revenues from one customer of the Company's North Sea segment represents approximately $29,757,000, or $16%, of the Company's consolidated revenues. For the years ended December 31, 1997 and 1996, no customer accounted for more than 10% of the Company's revenues.
19. Separate Financial Statements For Subsidiary Guarantors:
Pursuant to the terms of the indentures governing the Senior Notes, the Senior Notes must be guaranteed by each of the Company's "significant subsidiaries" (the "Subsidiary Guarantors"), whether such subsidiary was a "significant subsidiary" at the time of the issuance of the Senior Notes or becomes a "significant subsidiary" thereafter. Separate financial statements of the Subsidiary Guarantors are not included in this report because (a) the Company is a holding company with no assets or operations other than its investments in its subsidiaries, (b) the Subsidiary Guarantors are wholly- owned subsidiaries of the Company, comprise all of the Company's direct and indirect subsidiaries (other than inconsequential subsidiaries) and, on a consolidated basis, represent substantially all of the assets, liabilities, earnings and equity of the Company, (c) each of the Subsidiary Guarantors must fully and unconditionally guarantee the Company's obligations under the Senior Notes on a joint and several basis (subject to a standard fraudulent conveyance savings clause) and (d) management has determined that separate financial statements and disclosures concerning the Subsidiary Guarantors are not material to investors. During 1998, Saevik and its wholly-owned subsidiary, Saevik Shipping, AS, executed guarantees of the Senior Notes that were deemed to be effective December 2, 1997.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information concerning the Company's directors and officers called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1999 Annual Meeting of stockholders and is incorporated herein by reference.
Item 11.
Item 11. Executive Compensation
Information concerning the compensation of the Company's executives called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1999 Annual Meeting of stockholders and is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners and management called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1999 Annual Meeting of stockholders and is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions called for by this item will be included in the Company's definitive Proxy Statement prepared in connection with the 1999 Annual Meeting of stockholders and is incorporated herein by reference.
PART IV
Item. 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following financial statements, schedules and exhibits are filed as part of this Report:
(1) Financial Statements. Reference is made to Item 8 hereof.
(2) Financial Statement Schedules
Report of Independent Accountants on Financial Statement Schedule Schedule II -- Valuation and Qualifying Accounts
(3) Exhibits. See Index to Exhibits on page E-1. The Company will furnish to any eligible stockholder, upon written request of such stockholder, a copy of any exhibit listed upon the payment of a reasonable fee equal to the Company's expenses in furnishing such exhibit.
(b) Reports on Form 8-K:
The Company filed a current report, dated November 19, 1998, on Form 8-K under Items 5 and 7 on November 23, 1998.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRICO MARINE SERVICES, INC. (Registrant)
/s/ Thomas E. Fairley By:____________________________________ Thomas E. Fairley President and Chief Executive Officer
Date: March 26, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Trico Marine Services, Inc.
Our report on the consolidated financial statements of Trico Marine Services, Inc. and Subsidiaries is included in Item 8 of this Form 10-K. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in Item 14(a) of this Form 10- K. This financial statement schedule is the responsibility of the Company's management.
In our opinion, this financial schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
PricewaterhouseCoopers LLP
February 17, 1999
S-1
Schedule II
TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts for the years ended December 31, 1998, 1997 and 1996
(in thousands)
S-2
TRICO MARINE SERVICES, INC.
EXHIBIT INDEX
- -------- (1) Incorporated by reference to the Company's Current Report on Form 8-K dated July 21, 1997. (2) Incorporated by reference to the Company's Registration Statement on Form S-1 (Registration Statement No. 333-2990). (3) Incorporated by reference to the Company's Current Report on Form 8-K dated November 19, 1998. (4) Incorporated by reference to the Company's 1997 Annual Report on Form 10-K dated March 6, 1998. +Management Contract or Compensation Plan or Arrangement.
E-1