SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-12289
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SEACOR HOLDINGS INC.
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(Exact name of Registrant as Specified in Its Charter)
Delaware 13-3542736
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(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
11200 Richmond Avenue,
Suite 400, Houston, Texas 77082
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (281) 899-4800
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Securities registered pursuant to Section 12 (b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Common Stock, par value $.01 per share New York Stock Exchange
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Securities registered pursuant to Section 12 (g) of the Act:
None
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. __
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). X Yes No
--- ---
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of June 30, 2003 was approximately $639,012,000 based on the
closing price on the New York Stock Exchange on such date. The total number of
shares of Common Stock issued and outstanding as of March 8, 2004 was
18,624,825.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A within 120
days after the end of the Registrant's last fiscal year is incorporated by
reference into Part III of this Annual Report on Form 10-K.
EXPLANATORY NOTE
This amendment to the Annual Report on Form 10-K of SEACOR Holdings Inc. for the
fiscal year ended December 31, 2003, that was originally filed on March 15,
2004, is being filed solely to correct a typographical error in Item 15 of Part
IV. Specifically, in a table in Note 5: "Acquisitions and Dispositions" of the
Notes to Consolidated Financial Statements, under the sub-heading "Unaudited Pro
Forma Information" net income for 2001 was $72,883 and not $73,72,883. This
amendment does not reflect events occurring after the filing of the original
10-K.
2
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. and 2. Financial Statements and Financial Statement Schedules.
See Index to Consolidated Financial Statements and Financial Statement
Schedule on page 48 of this Form 10-K.
3. Exhibits:
Exhibit
Number Description
------ -----------
2.1 * Agreement and Plan of Merger, dated as of December 19,
2000, by and between SEACOR SMIT Inc. and SCF Corporation
(incorporated by reference to Exhibit 2.1 of the Company's
Registration Statement on Form S-3 (No. 333-56842) filed
with the Commission on March 9, 2001).
2.2 * Stock Exchange Agreement, dated as of January 9, 2001, among
SEACOR SMIT Inc. and the other parties thereto (incorporated
by reference to Exhibit 2.2 of the Company's Registration
Statement on Form S-3 (No. 333-56842) filed with the
Commission on March 9, 2001).
3.1 * Restated Certificate of Incorporation of SEACOR SMIT Inc.
(incorporated herein by reference to Exhibit 3.1(a) to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997 and filed with the Commission on
August 14, 1997).
3.2 * Certificate of Amendment to the Restated Certificate of
Incorporation of SEACOR SMIT Inc. (incorporated herein by
reference to Exhibit 3.1(b) to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30,
1997 and filed with the Commission on August 14, 1997).
3.3 * Amended and Restated By-laws of SEACOR Holdings, Inc.
(incorporated herein by reference to Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (No. 333-12637)
of SEACOR Holdings, Inc. filed with the Commission on
September 25, 1996).
4.1 * Indenture, dated as of November 1, 1996, between First Trust
National Association, as trustee, and SEACOR Holdings, Inc.
(including therein forms of 5-3/8% Convertible Subordinated
Notes due November 15, 2006 of SEACOR Holdings, Inc.)
(incorporated herein by reference to Exhibit 4.0 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996 and filed with the
Commission on November 14, 1996).
3
4.2 * Indenture, dated as of September 22, 1997, between SEACOR
SMIT Inc. and First Trust National Association, as trustee
(including therein form of Exchange Note 7.20% Senior Notes
Due 2009)(incorporated herein by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-4 (No.
333-38841) filed with the Commission on October 27, 1997).
4.3 * Investment and Registration Rights Agreement, dated as of
March 14, 1995, by and among SEACOR Holdings, Inc., Miller
Family Holdings, Inc., Charles Fabrikant, Mark Miller,
Donald Toenshoff, Alvin Wood, Granville Conway and Michael
Gellert (incorporated herein by reference to Exhibit 4.0 of
the Company's Current Report on Form 8-K dated March 14,
1995, as amended).
4.4 * Investment and Registration Rights Agreement, dated as of
May 31, 1996, among SEACOR Holdings, Inc. and the persons
listed on the signature pages thereto (incorporated herein
by reference to Exhibit 10.8 to the Company's Current Report
on Form 8-K dated May 31, 1996 and filed with the Commission
on June 7, 1996).
4.5 * Registration Rights Agreement, dated November 5, 1996,
between SEACOR Holdings, Inc. and Credit Suisse First Boston
Corporation, Salomon Brothers Inc. and Wasserstein Perella
Securities, Inc. (incorporated herein by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended September 30, 1996 and filed
with the Commission on November 14, 1996).
4.6 * Investment and Registration Rights Agreement, dated as of
December 19, 1996, by and between SEACOR Holdings, Inc. and
Smit International Overseas B.V. (incorporated herein by
reference to Exhibit 4.0 to the Company's Current Report on
Form 8-K dated December 19, 1996 and filed with the
Commission on December 24, 1996).
4.7 * Investment and Registration Rights Agreement, dated as of
January 3, 1997, among SEACOR Holdings, Inc., Acadian
Offshore Services, Inc., Galaxie Marine Service, Inc.,
Moonmaid Marine, Inc. and Triangle Marine, Inc.
(incorporated herein by reference to Exhibit 4.6 to the
Company's Registration Statement on Form S-3 (No. 333-20921)
filed with the Commission on January 31, 1997).
4.8 * Investment and Registration Rights Agreement, dated October
27, 1995, by and between SEACOR Holdings, Inc. and Coastal
Refining and Marketing, Inc. (incorporated herein by
reference to Exhibit 4.2 of the Company's Registration
Statement on Form S-3 (No. 33-97868) filed with the
Commission on November 17, 1995).
4.9 * Investment and Registration Rights Agreement, dated November
14, 1995, by and between SEACOR Holdings, Inc. and Compagnie
Nationale de Navigation (incorporated herein by reference to
Exhibit 4.3 of the Company's Registration Statement on Form
S-3 (No. 33-97868) filed with the Commission on November 17,
1995).
4.10 * Registration Agreement, dated as of September 22, 1997,
between the Company and the Initial Purchasers (as defined
therein)(incorporated herein by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-4 (No.
333-38841) filed with the Commission on October 27, 1997).
4.11 * Restated Stockholders' Agreement dated December 16, 1992
(incorporated herein by reference to Exhibit 10.12 to the
Annual Report on Form 10-K of SEACOR Holdings, Inc. for the
fiscal year ended December 31, 1992).
4.12 * Investment and Registration Rights Agreement, dated as of
April 19, 2000, among SEACOR SMIT Inc. and the other parties
thereto (incorporated herein by reference to Exhibit 4.1 of
the Company's Registration Statement on Form S-3 (No.
333-37492) filed with the Commission on May 19, 2000).
4.13 * Investment and Registration Rights Agreement, dated as of
December 19, 2000, among SEACOR SMIT Inc. and the other
parties thereto (incorporated by reference to Exhibit 4.1 of
the Company's Registration Statement on Form S-3 (No.
333-56842) filed with the Commission on March 9, 2001).
4.14 * Investment and Registration Rights Agreement, dated as of
January 9, 2001, among SEACOR SMIT Inc. and the other
parties thereto (incorporated by reference to Exhibit 4.2 of
the Company's Registration Statement on Form S-3 (No.
333-56842) filed with the Commission on March 9, 2001).
4.15 * SEACOR SMIT Inc. 2000 Employee Stock Purchase Plan, as
amended February 14, 2001 (incorporated herein by reference
to Exhibit 4.4 to the Company's Registration Statement on
Form S-8 (No. 333-56714), filed with the Commission on March
8, 2001).
4
4.16 * Instrument, dated May 4, 2001, setting forth terms of
(pound) 14,668,942 in aggregate principal amount of Fixed
Rate Abatable Loan Notes (including form of Loan Note
Certificate as a Schedule thereto) (incorporated herein by
reference to the Company's Registration Statement on Form
8-K dated May 17, 2001).
4.17 * Form of Indenture, dated as of January 10, 2001, among
SEACOR SMIT Inc. and U.S. Bank Trust National Association as
trustee (incorporated herein by reference to Exhibit 4.2 to
Amendment No.1 to the Company's Registration Statement on
Form S-3/A (No. 333-53326) filed with the Commission on
January 18, 2001).
4.18 * Form of Indenture, dated as of January 10, 2001, among
SEACOR SMIT Inc. and U.S. Bank Trust National Association as
trustee (incorporated herein by reference to Exhibit 4.3 to
Amendment No. 1 to the Company's Registration Statement on
Form S-3/A (No. 333-53326) filed with the Commission on
January 18, 2001).
10.1 * Lease Agreement, dated September 1, 1989, between The Morgan
City Fund and NICOR Marine Inc. (SEACOR Marine Inc., as
successor lessee) (incorporated herein by reference to
Exhibit 10.33 to the Company's Registration Statement on
Form S-1 (No. 33-53244) filed with the Commission on
November 10, 1992).
10.2 *+ SEACOR Holdings, Inc. 1992 Non-Qualified Stock Option Plan
(incorporated herein by reference to Exhibit 10.45 to the
Company's Registration Statement on Form S-1 (No. 33-53244)
filed with the Commission on November 10, 1992).
10.3 *+ SEACOR Holdings, Inc. 1996 Share Incentive Plan
(incorporated herein by reference to SEACOR Holdings, Inc.'s
Proxy Statement dated March 18, 1996 relating to the Annual
Meeting of Stockholders held on April 18, 1996).
10.4 *+ SEACOR SMIT Inc. 2000 Stock Option Plan for Non-Employee
Directors (incorporated herein by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q for the
period ended June 30, 2000 and filed with the Commission on
August 14, 2000).
10.5 *+ Benefit Agreement, dated May 1, 1989, between NICOR Marine
Inc. and Lenny P. Dantin (assumed by SEACOR Holdings, Inc.)
(incorporated herein by reference to Exhibit 10.51 to the
Company's Registration Statement on Form S-1 (No. 33-53244)
filed with the Commission on November 10, 1992).
10.6 *+ Employment Agreement, dated December 24, 1992, between
SEACOR Holdings, Inc. and Milton Rose (incorporated herein
by reference to Exhibit 10.61 to the Annual Report on Form
10-K of SEACOR Holdings, Inc. for the fiscal year ended
December 31, 1992).
10.7 * Management and Services Agreement, dated January 1, 1985,
between NICOR Marine (Nigeria) Inc. and West Africa Offshore
Limited (assumed by SEACOR Holdings, Inc.) (incorporated
herein by reference to Exhibit 10.55 to the Company's
Registration Statement on Form S-1 (No. 33-53244) filed with
the Commission on November 10, 1992).
10.8 * Joint Venture Agreement, dated December 19, 1996, between
SEACOR Holdings, Inc. and Smit-Lloyd (Antillen) N.V.
(incorporated herein by reference to Exhibit 10.0 to the
Company's Current Report on Form 8-K dated December 19, 1996
and filed with the Commission on December 24, 1996).
10.9 * Form of Management Agreement (incorporated herein by
reference to Exhibit 10.4 to the Company's Current Report on
Form 8-K dated December 19, 1996 and filed with the
Commission on December 24, 1996).
10.10 * License Agreement, dated December 19, 1996, between SEACOR
Holdings, Inc., certain subsidiaries of SEACOR Holdings,
Inc. and Smit Internationale N.V. (incorporated herein by
reference to Exhibit 10.6 to the Company's Current Report on
Form 8-K dated December 19, 1996 and filed with the
Commission on December 24, 1996).
10.11 * Purchase Agreement, dated as of September 15, 1997, between
the Company and Salomon Brothers Inc., individually and as
representative of the Initial Purchasers (as defined
therein)(incorporated herein by reference to Exhibit 4.2 to
the Company's Registration Statement on Form S-4 (No.
333-38841) filed with the Commission on October 27, 1997).
5
10.12 *+ Form of Type A Restricted Stock Grant Agreement
(incorporated herein by reference to Exhibit 10.35 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 and filed with the Commission on
March 30, 2000).
10.13 *+ Form of Type B Restricted Stock Grant Agreement
(incorporated herein by reference to Exhibit 10.36 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 and filed with the Commission on
March 30, 2000).
10.14 *+ Form of Option Agreement for Officers and Key Employees
Pursuant to the SEACOR SMIT Inc. 1996 Share Incentive Plan
(incorporated herein by reference to Exhibit 10.37 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 and filed with the Commission on
March 30, 2000).
10.15 * Stock Purchase Agreement dated as of January 30, 2001, by
and between SEACOR SMIT Inc. and Brian Cheramie
(incorporated herein by reference to Exhibit 10.1 of the
Company's Current Report on Form 8-K, dated February 23,
2001 and filed with the Commission on March 5, 2001).
10.16 * Letter Agreement dated as of February 23, 2001, amending the
Stock Purchase Agreement dated as of February 23, 2001,
amending the Stock Purchase Agreement dated as of January
30, 2001 by and between SEACOR SMIT Inc. and Brian Cheramie
(incorporated herein by reference to Exhibit 10.2 of the
Company's Current Report on Form 8-K, dated February 23,
2001 and filed with the Commission on March 5, 2001).
10.17 * Stock Purchase Agreement dated as of January 30, 2001 by and
among SEACOR SMIT Inc., the persons listed on Exhibit A
thereto and Brian Cheramie, as representative of such
persons (incorporated herein by reference to Exhibit 10.3 of
the Company's Current Report on Form 8-K, dated February 23,
2001 and filed with the Commission on March 5, 2001).
10.18 * Letter Agreement dated as of February 23, 2001, amending the
Stock Purchase Agreement dated as of January 30, 2001 by and
among SEACOR SMIT Inc., the persons listed on Exhibit A
thereto and Brian Cheramie, as representative of such
persons (incorporated herein by reference to Exhibit 10.4 of
the Company's Current Report on Form 8-K, dated February 23,
2001 and filed with the Commission on March 5, 2001).
10.19 * Stock Purchase Agreement, dated as of May 4, 2001, by and
between SEACOR SMIT Inc. and the Stirling Vendors
(incorporated herein by reference to the Company's
Registration Statement on Form 8-K dated May 17, 2001).
10.20 * Tax Deed, dated as of May 4, 2001, by and between SEACOR
SMIT Inc. and the Stirling Vendors (incorporated herein by
reference to the Company's Registration Statement on Form
8-K dated May 17, 2001).
10.21 * Revolving Credit Facility Agreement, dated as of February 5,
2002 by and among SEACOR SMIT Inc., the banks and financial
institutions named therein, Fleet National Bank, Den norske
Bank ASA, Nordea and The Governor and Company of the Bank of
Scotland as agents.
10.22 * Securities Purchase Agreement dated as of December 31, 2002
by and between Offshore Aviation Inc., a wholly-owned
subsidiary of SEACOR SMIT Inc., and Edward L. Behne.
(Incorporated by reference to Exhibit 10.22 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2002 and filed with the Commission on March 31,
2003.)
10.23 *+ List of Named Executive Officers which received awards of
Type A Restricted Stock pursuant to a Type A Restricted
Stock Grant Agreement, the form of which is attached hereto
as Exhibit 10.12. (Incorporated by reference to Exhibit
10.23 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 and filed with the
Commission on March 15, 2004.)
10.24 *+ List of Named Executive Officers which received awards of
Type B Restricted Stock pursuant to a Type B Restricted
Stock Grant Agreement, the form of which is attached hereto
as Exhibit 10.13. (Incorporated by reference to Exhibit
10.24 of the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 and filed with the
Commission on March 15, 2004.)
10.25 * SEACOR SMIT Inc. 2003 Non-Employee Director Share Incentive
Plan. (Incorporated by reference to Exhibit 10.25 of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2003 and filed with the Commission on
March 15, 2004.)
10.26 * SEACOR SMIT Inc. 2003 Share Incentive Plan. (Incorporated by
reference to Exhibit 10.26 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 and
filed with the Commission on March 15, 2004.)
21.1 * List of Registrant's Subsidiaries. (Incorporated by
reference to Exhibit 21.1 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2003 and
filed with the Commission on March 15, 2004.)
23.1 * Consent of Ernst & Young LLP. (Incorporated by reference to
Exhibit 23.1 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2003 and filed with the
Commission on March 15, 2004.)
6
23.2 * Notice Regarding Consent of Arthur Andersen LLP.
(Incorporated by reference to Exhibit 23.2 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 and filed with the Commission on March 15,
2004.)
23.3 Consent of Ernst & Young LLP.
23.4 Notice Regarding Consent of Arthur Andersen LLP.
31.1 * Certification by the Chief Executive Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
(Incorporated by reference to Exhibit 31.1 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 and filed with the Commission on March 15,
2004.)
31.2 * Certification by the Chief Financial Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
(Incorporated by reference to Exhibit 31.2 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 2003 and filed with the Commission on March 15,
2004.)
31.3 Certification by the Chief Executive Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.4 Certification by the Chief Financial Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.1 * Certification by the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Incorporated by reference
to Exhibit 32.1 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 and filed with
the Commission on March 15, 2004.)
32.2 * Certification by the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Incorporated by reference
to Exhibit 32.2 of the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 and filed with
the Commission on March 15, 2004.)
32.3 Certification by the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.4 Certification by the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
---------------------------
* Incorporated herein by reference as indicated.
+ Management contracts or compensatory plans or arrangements required to
be filed as an exhibit pursuant to Item 15 (c) of the rules governing
the preparation of this report.
(b) Reports on Form 8-K:
The Company filed a report on For 8-K dated November 5, 2003. Under
Item 7 and item 12, the Company filed as an exhibit a Press Release
reporting the Company's financial results for the third quarter of
2003.
7
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
SEACOR Holdings Inc.
(Registrant)
/s/ Randall Blank
-------------------------------
Randall Blank
Executive Vice President, Chief
Financial Officer and Secretary
(Principal Financial Officer)
April 6, 2004
8
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
Consolidated Financial Statements:
Page
Reports of Independent Auditors................................................ 10
Consolidated Balance Sheets as of December 31, 2003 and 2002................... 12
Consolidated Statements of Income for the Years Ended
December 31, 2003, 2002 and 2001............................................ 13
Consolidated Statements of Changes in Equity for the Years Ended
December 31, 2003, 2002 and 2001............................................ 14
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2003, 2002 and 2001............................................ 15
Notes to Consolidated Financial Statements..................................... 16
Financial Schedule:
Reports of Independent Auditors on Financial
Statement Schedule.......................................................... 37
Valuation and Qualifying Accounts for the
Years ended December 31, 2003, 2002 and 2001................................ 39
All Financial Schedules, except those set forth above, have been omitted since
the information required is either included in the consolidated financial
statements, not applicable or not required.
9
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Board of Directors
SEACOR SMIT Inc.
We have audited the accompanying consolidated balance sheets of SEACOR SMIT Inc.
and subsidiaries as of December 31, 2003 and 2002, and the related consolidated
statements of income, changes in equity and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits. The financial statements of SEACOR SMIT Inc. and subsidiaries for
the year ended December 31, 2001 were audited by other auditors who have ceased
operations and whose report dated February 21, 2002 expressed an unqualified
opinion on those statements, including an explanatory paragraph that disclosed
the Company's adoption of SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," before the transitional disclosures and reclassification
adjustments described in Notes 1 and 14.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of SEACOR SMIT Inc.
and subsidiaries at December 31, 2003 and 2002 and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.
As discussed in Note 1 to the financial statements, effective January 1, 2002,
the Company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142).
As discussed above, the financial statements of SEACOR SMIT Inc. and
subsidiaries for the year ended December 31, 2001 were audited by other auditors
who have ceased operations. As described in Notes 1 and 14, these financial
statements have been revised. Our procedures with respect to the SFAS 142
transitional disclosures in Note 1 related to 2001 included (a) agreeing the
previously reported net income to the previously issued financial statements and
the adjustments representing goodwill amortization (including related tax
effects) recognized in those periods to the Company's underlying records
obtained from management, and (b) testing the mathematical accuracy of the
determination of the impact on net income and earnings-per-share. Our procedures
with respect to the disclosures in Note 1 related to 2001 also included agreeing
the carrying value of goodwill and the related 2001 activity by reportable
segment, and in total, to the Company's underlying records obtained from
management. We also audited the reclassification adjustments described in Note
14 that were applied to revise the 2001 financial statements relating to a
change in the composition of reportable segments. In our opinion, the SFAS 142
transitional disclosures for 2001 in Note 1 are appropriate and the
reclassification adjustments applied to the 2001 segment disclosures in Note 14
are appropriate and have been properly applied. However, we were not engaged to
audit, review, or apply any procedures to the 2001 financial statements of the
Company other than with respect to such transitional disclosures and
reclassification adjustments and, accordingly, we do not express an opinion or
any other form of assurance on the 2001 financial statements taken as a whole.
/s/ Ernst & Young LLP
New Orleans, Louisiana
March 9, 2004
10
REPORT OF INDEPENDENT AUDITORS
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH SEACOR SMIT INC.'S FILING ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN
LLP IN CONNECTION WITH THIS FILING ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2003 AS THEY HAVE CEASED OPERATIONS. SEACOR SMIT INC. IS INCLUDING
THIS COPY OF ARTHUR ANDERSON LLP'S AUDIT REPORT PURSUANT TO RULE 2-02(E) OF
REGULATION S-X UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
To SEACOR SMIT Inc.:
We have audited the accompanying consolidated balance sheets of SEACOR SMIT Inc.
(a Delaware corporation) and subsidiaries as of December 31, 2001 and 2000 and
the related consolidated statements of income, changes in equity and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of SEACOR SMIT Inc. and
subsidiaries as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.
As discussed in Note 2 to the consolidated financial statements, effective
January 1, 2001 the Company adopted SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities."
/s/ Arthur Andersen LLP
New Orleans, Louisiana
February 21, 2002
11
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS 2003 2002
-------------- --------------
Current Assets:
Cash and cash equivalents......................................................... $ 263,135 $ 342,046
Available-for-Sale Securities..................................................... 48,856 7,984
Receivables:
Trade, net of allowance for doubtful accounts of $2,800 and $1,421
in 2003 and 2002, respectively............................................ 81,491 81,075
Other.......................................................................... 27,185 25,045
Prepaid expenses and other........................................................ 23,551 17,041
-------------- --------------
Total current assets......................................................... 444,218 473,191
-------------- --------------
Investments, at Equity, and Receivables from 50% or Less Owned Companies............. 59,848 61,359
Available-for-Sale Securities........................................................ - 80,641
Property and Equipment:
Offshore vessels and equipment.................................................... 822,871 849,921
Inland river barges and boats..................................................... 89,046 71,307
Helicopters....................................................................... 37,284 15,311
Construction in progress.......................................................... 47,134 37,475
Equipment, furniture, fixtures, vehicles and other ............................... 25,368 14,429
-------------- --------------
1,021,703 988,443
Accumulated depreciation.......................................................... (283,487) (250,475)
-------------- --------------
738,216 737,968
-------------- --------------
Construction Reserve Funds........................................................... 126,140 95,260
Other Assets......................................................................... 34,189 38,688
-------------- --------------
$ 1,402,611 $ 1,487,107
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt................................................. $ 93 $ 614
Accounts payable and accrued expenses............................................. 30,333 31,799
Accrued wages and benefits........................................................ 12,840 11,549
Accrued interest.................................................................. 5,759 7,394
Accrued income taxes.............................................................. 4,337 1,053
Deferred income taxes............................................................. 4,092 -
Accrued construction costs........................................................ 4,314 8,321
Accrued liability-short sale of securities........................................ 3,680 2,597
Other current liabilities......................................................... 12,067 8,094
-------------- --------------
Total current liabilities.................................................... 77,515 71,421
-------------- --------------
Long -Term Debt ..................................................................... 332,179 402,118
Deferred Income Taxes................................................................ 190,704 174,987
Deferred Income and Other Liabilities................................................ 29,858 31,938
Minority Interest in Subsidiaries.................................................... 1,909 1,692
Stockholders' Equity:
Common stock, $.01 par value, 40,000,000 shares authorized; 24,466,010
and 24,307,235 shares issued in 2003 and 2002, respectively.................... 245 243
Additional paid-in capital........................................................ 408,828 403,590
Retained earnings................................................................. 531,384 519,430
Less 5,884,971 and 4,386,143 shares held in treasury in 2003 and
2002, respectively, at cost.................................................... (183,531) (127,587)
Unamortized restricted stock...................................................... (2,998) (2,217)
Accumulated other comprehensive income -
Cumulative translation adjustments............................................. 12,994 5,750
Unrealized gain on available-for-sale securities............................... 3,524 5,742
-------------- --------------
Total stockholders' equity................................................... 770,446 804,951
-------------- --------------
$ 1,402,611 $ 1,487,107
============== ==============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
12
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE DATA)
2003 2002 2001
-------------- --------------- ---------------
Operating Revenues......................................................... $ 406,209 $ 403,158 $ 434,790
-------------- --------------- ---------------
Costs and Expenses:
Operating expenses...................................................... 287,290 249,892 234,551
Administrative and general.............................................. 57,684 53,265 49,980
Depreciation and amortization........................................... 55,506 56,244 58,324
-------------- --------------- ---------------
400,480 359,401 342,855
-------------- --------------- ---------------
Operating Income........................................................... 5,729 43,757 91,935
-------------- --------------- ---------------
Other Income (Expense):
Interest income......................................................... 7,531 8,833 13,546
Interest expense........................................................ (19,313) (17,064) (21,998)
Debt extinguishments.................................................... (2,091) (2,338) (1,383)
Income from equipment sales or retirements, net......................... 17,522 8,635 9,030
Gain upon sale of shares of Chiles Offshore Inc......................... - 19,719 -
Derivative income (loss), net........................................... 2,389 (5,043) 4,127
Foreign currency transaction gains, net................................. 3,739 6,281 1,247
Marketable securities sale gains, net................................... 6,595 3,218 5,689
Other, net.............................................................. (652) 144 145
-------------- --------------- ---------------
15,720 22,385 10,403
-------------- --------------- ---------------
Income Before Income Taxes, Minority Interest and Equity in Earnings
of 50% or Less Owned Companies.......................................... 21,449 66,142 102,338
-------------- --------------- ---------------
Income Tax Expense:
Current................................................................. 618 6,007 14,351
Deferred................................................................ 9,778 17,027 21,220
-------------- --------------- ---------------
10,396 23,034 35,571
-------------- --------------- ---------------
Income Before Minority Interest and Equity in Earnings of 50% or Less
Owned Companies......................................................... 11,053 43,108 66,767
Minority Interest in Net Income of Subsidiaries............................ (517) (226) (372)
Equity in Earnings of 50% or Less Owned Companies.......................... 1,418 3,705 4,306
-------------- --------------- ---------------
Net Income................................................................. $ 11,954 $ 46,587 $ 70,701
============== =============== ===============
Basic Earnings Per Common Share............................................ $ 0.63 $ 2.33 $ 3.63
============== =============== ===============
Diluted Earnings Per Common Share.......................................... $ 0.63 $ 2.28 $ 3.43
============== =============== ===============
Weighted Average Common Shares
Basic................................................................... 19,012,899 19,997,625 19,490,115
Diluted................................................................. 19,279,568 21,057,877 21,335,182
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
13
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS, EXCEPT SHARE DATA)
Accumulated
Additional Unamortized Other
Common Paid-in Retained Treasury Restricted Comprehensive Comprehensive
Stock Capital Earnings Stock Stock Income Income
------------------------------------------ -------- ------------ ---------- ----------- ------------- -------------- --------------
2003
------------------------------------------
Balance, December 31, 2002................ $ 243 $ 403,590 $ 519,430 $ (127,587) $ (2,217) $ 11,492 $ -
Add/(Deduct) -
-Net income for fiscal year 2003....... - - 11,954 - - - 11,954
-Issuance of common stock:.............
Employee Stock Purchase Plan........ - - - 670 - - -
Exercise of stock options........... 1 1,543 - - - - -
Director stock awards............... - 116 - - - - -
Issuance of restricted stock........ 1 3,585 - - (3,716) - -
-Amortization of restricted stock...... - - - - 2,855 - -
-Cancellation of restricted stock,
1,857 shares........................ - (8) - (72) 80 - -
-Net currency translation adjustments.. - - - - - 7,244 7,244
-Change in unrealized gains (losses)
on available-for-sale securities.... - - - - - (2,218) (2,218)
-Conversion of 5 3/8% Convertible
Subordinated Notes due 2006......... - 2 - - - - -
-Purchase of treasury shares........... - - - (56,542) - - -
-------- ------------ ---------- ----------- ------------- -------------- --------------
Balance, December 31, 2003................ $ 245 $ 408,828 $ 531,384 $ (183,531) $ (2,998) $ 16,518 $ 16,980
===================================================================================================================================
2002
------------------------------------------
Balance, December 31, 2001................ $ 238 $ 384,857 $ 472,843 $ (109,638) $ (1,985) $ (2,617) $ -
Add/(Deduct) -
-Net income for fiscal year 2002....... - - 46,587 - - - 46,587
-Issuance of common stock:.............
Tex-Air Helicopters, Inc.
acquisition....................... 1 2,726 - - - - -
Employee Stock Purchase Plan........ - - - 693 - - -
Exercise of stock options.......... 1 3,380 - - - - -
Issuance of restricted stock........ 1 2,655 - - (2,675) - -
Settlement of equity forward
transaction....................... 2 9,998 - - - - -
-Amortization of restricted stock...... - - - - 2,309 - -
-Cancellation of restricted stock,
2,850 shares........................ - - - (134) 134 - -
-Net currency translation
adjustments......................... - - - - - 8,224 8,224
-Change in unrealized gains (losses)
on available-for-sale securities.... - - - - - 5,885 5,885
-Conversion of 5 3/8% Convertible
Subordinated Notes due 2006........ - 1 - - - - -
-Change in share of book value of
investment in Chiles Offshore
Inc................................. - (27) - - - - -
-Purchase of treasury shares........... - - - (18,508) - - -
-------- ------------ ---------- ----------- ------------- -------------- --------------
Balance, December 31, 2002................ $ 243 $ 403,590 $ 519,430 $ (127,587) $ (2,217) $ 11,492 $ 60,696
===================================================================================================================================
2001
------------------------------------------
Balance, December 31, 2000................ $ 214 $ 278,567 $ 402,142 $ (125,968) $ (1,301) $ (1,102) $ -
Add/(Deduct) -
-Net income for fiscal year 2001....... - - 70,701 - - - 70,701
-Issuance of common stock:.............
ERST/O'Brien's Inc. acquisition,
27,877 shares..................... - 1,284 - - - - -
Plaisance Marine Inc. acquisition... - - - 3,163 - - -
Stirling Shipping Holdings
Limited acquisition............... - - - 12,777 - - -
Employee Stock Purchase Plan........ - - - 624 - - -
Exercise of stock options........... - 272 - - - - -
Issuance of restricted stock........ 1 3,644 - - (2,976) - -
-Amortization of restricted stock...... - - - - 2,272 - -
-Cancellation of restricted stock,
459 shares.......................... - - - (20) 20 - -
-Net currency translation
adjustments......................... - - - - - (545) (545)
-Change in unrealized gains (losses)
on available-for-sale securities.... - - - - - (1,055) (1,055)
-Conversion of 5 3/8% Convertible
Subordinated Notes due 2006......... 23 98,824 - - - - -
-Change in share of book value of
investment in Chiles Offshore Inc... - 2,395 - - - - -
-Change in value of shares issued
in equity forward transaction....... - (164) - - - - -
-Change in fair value of derivatives... - - - - - 85 85
-Purchase of TMM's minority interest
in SEACOR Vision LLC................ - 35 - - - - -
-Purchase of treasury shares........... - - - (214) - - -
-------- ------------ ---------- ----------- ------------- -------------- --------------
Balance, December 31, 2001................ $ 238 $ 384,857 $ 472,843 $ (109,638) $ (1,985) $ (2,617) $ 69,186
===================================================================================================================================
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
14
SEACOR SMIT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)
2003 2002 2001
------------- -------------- -------------
Cash Flows from Operating Activities:
Net income................................................................. $ 11,954 $ 46,587 $ 70,701
Depreciation and amortization.............................................. 55,506 56,244 58,324
Restricted stock amortization.............................................. 2,855 2,309 2,272
Director stock awards...................................................... 116 - -
Debt discount amortization, net............................................ 326 522 474
Bad debt expense........................................................... 829 9 947
Deferred income taxes...................................................... 9,778 17,027 21,220
Equity in net earnings of 50% or less owned companies...................... (1,418) (3,705) (4,306)
Gain from sale of investment in 50% or less owned companies................ - - (201)
Extinguishment of debt..................................................... 2,091 1,520 896
Derivative (income) loss................................................... (2,389) 5,043 (4,127)
Foreign currency transaction gains, net.................................... (3,739) (6,281) (1,247)
Gain from sale of available-for-sale securities, net....................... (6,595) (3,218) (5,689)
Impairment on other investments............................................ 1,254 - -
Gain upon sale of shares of Chiles Offshore Inc............................ - (19,719) -
Gain from equipment sales or retirements, net.............................. (17,522) (8,635) (9,030)
Amortization of deferred income on sale and leaseback transactions......... (6,342) (7,396) (5,482)
Minority interest in income of subsidiaries................................ 517 226 372
Other, net................................................................. 450 6,931 1,751
Changes in operating assets and liabilities -
(Increase) decrease in receivables....................................... 3,559 (2,075) (3,360)
Increase in prepaid expenses and other assets............................ (4,433) (13,600) (4,175)
Decrease in accounts payable, accrued and other liabilities.............. (1,801) (4,994) (7,920)
------------- -------------- -------------
Net cash provided by operations........................................ 44,996 66,795 111,420
------------- -------------- -------------
Cash Flows from Investing Activities:
Purchases of property and equipment........................................ (161,842) (139,706) (107,445)
Proceeds from the sale of marine vessels, other equipment and property..... 143,797 128,669 60,666
Investments in and advances to 50% or less owned companies................. (7,992) (22) (5,763)
Principal payments on notes due from 50% or less owned companies........... 1,875 20,665 6,040
Dividends received from 50% or less owned companies........................ 11,569 1,889 6,705
Proceeds from sale of investment in 50% or less owned companies............ - - 3,076
Net increase in construction reserve funds................................. (30,880) (39,970) (14,531)
Proceeds from sale of available-for-sale securities........................ 84,255 63,519 145,920
Purchases of available-for-sale securities................................. (40,161) (49,603) (74,771)
Cash settlements of derivative transactions................................ 3,330 (5,712) 1,594
Acquisitions, net of cash acquired......................................... (7,756) (113) (98,174)
Cash proceeds from sale of shares of Chiles Offshore Inc................... - 25,365 -
Other, net................................................................. 2,064 1,186 45
------------- -------------- -------------
Net cash provided by (used in) investing activities.................... (1,741) 6,167 (76,638)
------------- -------------- -------------
Cash Flows from Financing Activities:
Payments of long-term debt and stockholder loans........................... (71,557) (93,801) (145,356)
Premium paid with 5 3/8 % Note extinguishment.............................. (632) - -
Proceeds from issuance of long-term debt .................................. 107 231 75,563
Net proceeds from sale of 5 7/8% Notes..................................... - 196,836 -
Payments on capital lease obligations...................................... - - (17,580)
Proceeds from issuance of Common Stock..................................... - - 10,000
Common stock acquired for treasury......................................... (56,542) (18,508) (214)
Stock options exercised.................................................... 936 1,754 131
Other, net................................................................. 163 693 1
------------- -------------- -------------
Net cash provided by (used in) financing activities.................... (127,525) 87,205 (77,455)
------------- -------------- -------------
Effects of Exchange Rate Changes on Cash and Cash Equivalents.................. 5,359 1,485 (1,152)
------------- -------------- -------------
Net Increase (Decrease) in Cash and Cash Equivalents........................... (78,911) 161,652 (43,825)
Cash and Cash Equivalents, beginning of period................................. 342,046 180,394 224,219
------------- -------------- -------------
Cash and Cash Equivalents, end of period....................................... $ 263,135 $ 342,046 $ 180,394
============= ============== =============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
15
SEACOR SMIT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND ACCOUNTING POLICIES:
NATURE OF OPERATIONS. SEACOR SMIT Inc. ("SEACOR") and its subsidiaries
(collectively referred to as the "Company") is a major provider of offshore
support vessel services to the oil and gas exploration and production industry
and is one of the leading providers of oil spill response services to owners of
tank vessels and oil storage, processing and handling facilities. The Company
also operates inland river dry cargo barges primarily for the agriculture and
industrial sectors strategically aligned along the Mississippi River and its
tributaries and also provides helicopter transportation services primarily to
companies operating in the U.S. Gulf of Mexico.
BASIS OF CONSOLIDATION. The consolidated financial statements include the
accounts of SEACOR and all of its majority owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in consolidation.
The Company employs the equity method of accounting for investments in business
ventures when it has the ability to exercise significant influence over the
operating and financial policies of the venture. Significant influence is
generally deemed to exist if the Company has between 20% and 50% of the voting
rights of an investee. The Company reports its investment in and advances to
equity investees in the Consolidated Balance Sheets as "Investments, at Equity,
and Receivables from 50% or Less Owned Companies." The Company reports its share
of earnings or losses of equity investees in the Consolidated Statements of
Income as "Equity in Earnings of 50% or Less Owned Companies."
The Company employs the cost method of accounting for investments in other
business ventures which the Company does not have the ability to exercise
significant influence. These investments are in private companies, carried at
cost, and are adjusted only for other-than-temporary declines in fair value and
capital distributions.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION. The Company's offshore marine business segment earns and
recognizes revenues primarily from the time and bareboat charter-out of vessels
to customers based upon daily rates of hire. A time charter is a lease
arrangement under which the Company provides a vessel to a customer and is
responsible for all crewing, insurance and other operating expenses. In a
bareboat charter, the Company provides only the vessel to the customer, and the
customer assumes responsibility to provide for all of the vessel's operating
expenses and generally assumes all risk of operation. Vessel charters may range
from several days to several years.
Customers of the Company's environmental business segment are charged retainer
fees for ensuring by contract the availability (at predetermined rates) of oil
spill response services and equipment. Such retainer fees are generally
recognized ratably over the terms of the contract. Retainer services include
employing a staff to supervise response to an oil spill and maintaining
specialized equipment. Retainer agreements with vessel owners generally range
from one to three years while retainer arrangements with facility owners are as
long as ten years. Spill response revenues are recognized as the services are
provided based on contract terms and are dependent on the magnitude of any one
spill response and the number of spill responses within a given fiscal year.
Consequently, spill response revenues can vary greatly between comparable
periods. Consulting fees are also earned from preparation of customized training
programs, planning of and participation in customer oil spill response drill
programs and response exercises and other special projects and are recognized as
the services are provided based on contract terms. Industrial and remediation
services are provided on both a time and material basis and on a fixed fee bid
basis. In both cases the total fees charged are dependent upon the scope of work
to be accomplished and the labor and equipment to carry it out.
The Company's inland river business earns revenues primarily from voyage
affreightments under which customers are charged for a committed space to
transport cargo for a specific time from a point of origin to a destination at
an established rate per ton. The inland river operation also earns revenues
while cargo is stored aboard a barge and when a barge is chartered-out by a
third party.
Helicopters are chartered primarily through master service agreements, term
contracts and day-to-day charter arrangements. Master service agreements require
customers to make incremental payments based on usage, have fixed terms ranging
from one month to five years and generally are cancelable upon notice by either
party in 30 days. Term contracts and day-to-day charter arrangements are
generally non-cancelable and call for a combination of a monthly or daily fixed
rental fee plus a charge based on usage. Rental fee revenues are recognized
ratably over the contract term and revenues for helicopter usage are recognized
as the services are performed.
16
CASH EQUIVALENTS. Cash equivalents refer to securities with maturities of three
months or less when purchased.
ACCOUNTS RECEIVABLE. Customers of offshore support vessel services and
helicopter transportation services are primarily major and large independent oil
and gas exploration and production companies. Oil spill and emergency response
services are provided to tank vessel owner/operators, refiners, terminals,
exploration and production facilities and pipeline operators. Barge customers
are primarily major agricultural and industrial companies based within the
United States. All customers are granted credit on a short-term basis and
related credit risks are considered minimal. Although credit risks associated
with these customers are considered minimal, the Company routinely reviews its
accounts receivable balances and makes provisions for probable doubtful
accounts. Accounts receivable are deemed uncollectible and removed from accounts
receivable and allowance for doubtful accounts when collection efforts have been
exhausted.
DERIVATIVES. Effective January 1, 2001, the Company adopted SFAS 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended, and
accounts for all of its derivative positions at fair value. The cumulative
effect of adopting SFAS 133 was not material.
CONCENTRATIONS OF CREDIT RISK. The Company is exposed to concentrations of
credit risks relating to its receivables due from customers in the industries
described above. The Company does not generally require collateral or other
security to support its outstanding receivables. The Company minimizes its
credit risk relating to receivables by performing ongoing credit evaluations
and, to date, credit losses have been within management's expectations. The
Company is also exposed to concentrations of credit risks associated with its
cash and cash equivalents, its available-for-sale securities, and its derivative
instruments. The Company minimizes its credit risk relating to these positions
by monitoring the financial condition of the financial institutions and
counterparties involved.
PROPERTY AND EQUIPMENT. Equipment, stated at cost, is depreciated over the
estimated useful lives of the assets using the straight-line method. Offshore
support vessels ("vessels") and related equipment are depreciated over 20 to 30
years, inland river dry cargo barges are depreciated over 20 years, helicopters
and related equipment are generally depreciated over 12 years, and all other
equipment is depreciated and amortized over 2 to 10 years. Depreciation expense
totaled $55,501,000, $56,239,000 and $55,069,000 in 2003, 2002 and 2001,
respectively.
Effective January 1, 2003, the Company changed its estimated residual value for
newly constructed supply vessels, towing and supply vessels, and anchor handling
towing supply vessels from 10% to 5%. The effect on income of this change in
accounting estimate was not material.
Vessel, helicopter and barge maintenance and repair costs and the costs of
routine drydock inspections performed on vessels are charged to operating
expense as incurred. Expenditures that extend the useful life or improve the
marketing and commercial characteristics of vessels and helicopters as well as
major renewals or improvements to other properties are capitalized. Certain
interest costs incurred during the construction of equipment was capitalized as
part of the assets' carrying values and are being amortized to expense over such
assets estimated useful lives. Capitalized interest totaled $2,272,000,
$1,092,000 and $760,000 in 2003, 2002 and 2001, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS. In accordance with SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, the Company reviews long-lived
assets for impairment when events or changes in circumstances indicate that the
carrying amount of any asset may not be recoverable. As of December 31, 2003,
the Company was not aware of any indicators that would have required an
impairment review.
BUSINESS COMBINATIONS. As discussed in Note 4, business combinations completed
by the Company have been accounted for under the purchase method of accounting.
The cost of each acquired operation is allocated to the assets acquired and
liabilities assumed based on their estimated fair values. These estimates are
revised during an allocation period as necessary when, and if, information
becomes available to further define and quantify the value of the assets
acquired and liabilities assumed. The allocation period does not exceed beyond
one year from the date of the acquisition. Should information become available
after the allocation period, those items are included in operating results. The
cost of an enterprise acquired in a business combination includes the direct
cost of the acquisition. The operating results of entities acquired are included
in the Consolidated Statements of Income from the completion date of the
applicable transaction.
GOODWILL. Goodwill represents the excess of purchase price over fair value of
net assets acquired in business combinations. Effective January 1, 2002, the
Company adopted SFAS 142, "Goodwill and Other Intangible Assets" and ceased
amortization of its remaining goodwill balance. The Company now performs annual
testing based upon a fair value approach and, based on its annual impairment
test as of December 31, 2003, has determined there is no goodwill impairment.
Application of the non-amortization provisions of SFAS 142 would have increased
net income by $2,103,000, or $0.10 per diluted share, in 2001.
17
DEFERRED FINANCING COSTS. Deferred financing costs, incurred in connection with
the issuance of debt, are amortized over the life of the related debt, ranging
from 4 to 9 years, using the effective interest rate method. Deferred financing
costs amortization expense totaled $474,000, $526,000 and $504,000 in 2003, 2002
and 2001, respectively, is included in the Consolidated Statements of Income as
"Interest Expense."
SELF-INSURANCE LIABILITIES. The Company maintains business insurance programs
with significant self-insured retention, primarily relating to its offshore
support vessels. In addition, the Company maintains self-insured health benefit
plans for its participating employees. The Company limits its exposure to the
business insurance programs and health benefit plans by maintaining stop-loss
and aggregate liability coverages. Self-insurance losses for claims filed and
claims incurred but not reported are accrued based upon the Company's historical
loss experience and valuations provided by independent third-party consultants.
To the extent that estimated self-insurance losses differ from actual losses
realized, the Company's insurance reserves could differ significantly and may
result in either higher or lower insurance expense in future periods.
INCOME TAXES. Deferred income tax assets and liabilities have been provided in
recognition of the income tax effect attributable to the difference between
assets and liabilities reported in the tax return and financial statements.
Deferred tax assets or liabilities are provided using the enacted tax rates
expected to apply to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized. Deferred taxes
are not provided on undistributed earnings of certain non-U.S. subsidiaries and
business ventures because the Company considers those earnings to be
indefinitely reinvested abroad.
The Company records a valuation allowance to reduce its deferred tax assets if
it is more likely than not that some portion or all of the deferred assets will
not be realized. While the Company has considered future taxable income and
ongoing prudent and feasible tax strategies in assessing the need for the
valuation allowance, the Company may be required to adjust its valuation
allowance if these estimates and assumptions change in the period such
determination is made.
DEFERRED INCOME. The Company has entered into vessel sale and leaseback
transactions and has sold vessels to business ventures in which it holds an
equity ownership interest. Certain of the gains realized from these transactions
were not immediately recognized in income and have been reported in the
Consolidated Balance Sheets as "Deferred Income and Other Liabilities." In sale
and leaseback transactions, gains were deferred to the extent of the present
value of minimum lease payments and are being amortized to income as reductions
in rental expense over the applicable lease terms. In business venture sale
transactions, gains were deferred to the extent of the Company's ownership
interest with amortization to income over the applicable vessels' depreciable
lives and upon receipt of debt securities with amortization to income on the
installment method.
Deferred
(in thousands) Income
------------------------------------------------------ --------------
Balance at 12/31/02................................... $ 27,308
Deferred income from 2003 vessel sales................ 5,596
2003 amortization of deferred income.................. (7,015)
Currency translation.................................. 10
--------------
Balance at 12/31/03................................... $ 25,899
==============
FOREIGN CURRENCY TRANSLATION. The assets, liabilities and results of operations
of certain SEACOR subsidiaries are measured using the currency of the primary
foreign economic environment within which they operate, their functional
currency. Upon consolidating these subsidiaries with SEACOR, their assets and
liabilities are translated to U.S. dollars at currency exchange rates as of the
balance sheet date and their revenues and expenses at the weighted average
currency exchange rates during the applicable reporting periods. Translation
adjustments resulting from the process of translating these subsidiaries'
financial statements are reported in the Consolidated Balance Sheets as
"Accumulated other comprehensive income."
FOREIGN CURRENCY TRANSACTIONS. Certain SEACOR subsidiaries enter into
transactions denominated in currencies other than their functional currency.
Changes in currency exchange rates between the functional currency and the
currency in which a transaction is denominated is included in the determination
of net income in the period in which the currency exchange rates change. From
time to time, SEACOR may advance funds to wholly-owned subsidiaries whose
functional currency differs from the U.S. dollar. If settlement of such advances
are not planned or anticipated to be paid in the foreseeable future, exchange
rate gains and losses relating to the transactions are deferred and included in
the Consolidated Balance Sheets as "Accumulated other comprehensive income."
Conversely, if settlement of the advances is expected in the foreseeable future,
changes in the exchange rate from the transaction date until the settlement date
with respect to such advances are included in the Consolidated Statements of
Income as "Foreign currency transaction gains, net."
18
EARNINGS PER SHARE. Basic earnings per common share were computed based on the
weighted-average number of common shares issued and outstanding for the relevant
periods. Diluted earnings per common share were computed based on the
weighted-average number of common shares issued and outstanding plus all
potentially dilutive common shares that would have been outstanding in the
relevant periods assuming the vesting of restricted stock grants and the
issuance of common shares for stock options and convertible subordinated notes
through the application of the treasury stock and if-converted methods. Certain
options and share awards, 364,805, 69,300 and 127,580 in 2003, 2002 and 2001,
respectively, were excluded from the computation of diluted earnings per share
as the effect would have been antidilutive.
Per
(in thousands, except share data) Income Shares Share
--------------------------------------------------------------- --------------- ------------- --------
FOR THE YEAR ENDED 2003-
Basic Earnings Per Share:
Net income.......................................... $ 11,954 19,012,899 $ 0.63
========
Effect of Dilutive Securities:
Options and restricted stock........................ - 163,308
Convertible securities.............................. 167 103,361
--------------- -------------
Diluted Earnings Per Share:
Net income available to common stockholders
plus assumed conversions......................... $ 12,121 19,279,568 $ 0.63
=============== ============= ========
FOR THE YEAR ENDED 2002-
Basic Earnings Per Share:
Net income.......................................... $ 46,587 19,997,625 $ 2.33
========
Effect of Dilutive Securities:
Options and restricted stock........................ - 257,538
Convertible securities.............................. 1,463 802,714
--------------- -------------
Diluted Earnings Per Share:
Net income available to common stockholders
plus assumed conversions.......................... $ 48,050 21,057,877 $ 2.28
=============== ============= ========
FOR THE YEAR ENDED 2001-
Basic Earnings Per Share:
Net income.......................................... $ 70,701 19,490,115 $ 3.63
========
Effect of Dilutive Securities:
Options and restricted stock........................ - 253,260
Convertible securities.............................. 2,596 1,591,807
Common stock sold with equity forward contract,
see Note 8........................................ (164) -
--------------- -------------
Diluted Earnings Per Share:
Net income available to common stockholders
plus assumed conversions......................... $ 73,133 21,335,182 $ 3.43
=============== ============= ========
COMPREHENSIVE INCOME. Comprehensive income is defined as the total of net income
and all other changes in equity of an enterprise that result from transactions
and other economic events of a reporting period other than transactions with
owners. The Company has chosen to disclose Comprehensive Income in the
Consolidated Statements of Changes in Equity. The Company's other comprehensive
income was comprised of net currency translation adjustments and unrealized
holding gains and losses on available-for-sale securities. Income taxes
allocated to each component of other comprehensive income during the years
indicated are as follows:
Before-Tax Tax (Expense) Net-of-Tax
(in thousands) Amount or Benefit Amount
-------------------------------------------------------------------------- --------------- --------------- ---------------
2003
Foreign currency translation adjustments................................ $ 11,145 $ (3,901) $ 7,244
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period...................... 3,117 (1,091) 2,026
Less - reclassification adjustment for gains included in net income. (6,529) 2,285 (4,244)
--------------- --------------- ---------------
Other comprehensive income.............................................. $ 7,733 $ (2,707) $ 5,026
=============== =============== ===============
2002
Foreign currency translation adjustments................................ $ 12,652 $ (4,428) $ 8,224
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period...................... 12,272 (4,295) 7,977
Less - reclassification adjustment for gains included in net income. (3,218) 1,126 (2,092)
--------------- --------------- ---------------
Other comprehensive income ............................................. $ 21,706 $ (7,597) $ 14,109
=============== =============== ===============
2001
Foreign currency translation and derivative adjustments................. $ (708) $ 248 $ (460)
Unrealized gains on available-for-sale securities:
Unrealized holding gains arising during period...................... 4,066 (1,423) 2,643
Less - reclassification adjustment for gains included in net income. (5,689) 1,991 (3,698)
--------------- --------------- ---------------
Other comprehensive loss................................................ $ (2,331) $ 816 $ (1,515)
=============== =============== ===============
19
STOCK COMPENSATION. Under Statement of Financial Accounting Standards No. 123
("SFAS 123"), companies could either adopt a "fair value method" of accounting
for its stock based compensation plans or continue to use the "intrinsic value
method" as prescribed by APB Opinion No. 25. The Company has elected to continue
accounting for its stock compensation plans using the intrinsic value method.
Had compensation costs for the plans been determined using a fair value method
consistent with SFAS 123, the Company's net income and earnings per share would
have been reduced to the following pro forma amounts for the following years
ended December 31:
(in thousands, except share and option data) 2003 2002 2001
------------------------------------------------------ ------------- -------------- -------------
Net income, as reported............................. $ 11,954 $ 46,587 $ 70,701
Add: stock based compensation included in net
income........................................... 1,931 1,501 1,477
Less: stock based compensation using fair value
method........................................... (3,163) (3,498) (3,432)
------------- -------------- -------------
Net income, Pro forma............................... $ 10,722 $ 44,590 $ 68,746
============= ============== =============
Basic earnings per common share:
As reported....................................... $ 0.63 $ 2.33 $ 3.63
Pro forma......................................... 0.56 2.23 3.53
Diluted earnings per share:
As reported....................................... $ 0.63 $ 2.28 $ 3.43
Pro forma......................................... 0.56 2.19 3.34
Weighted average fair value of options granted...... $ 13.99 $ 20.03 $ 26.21
============= ============== =============
Weighted average fair value of restricted stock
granted........................................... $ 41.44 $ 43.53 $ 50.80
============= ============== =============
Weighted average fair value of stock granted to
non-employee directors............................ $ 38.62 $ - $ -
============= ============== =============
The effects of applying a fair value method consistent with SFAS 123 in this pro
forma disclosure are not indicative of future events and the Company anticipates
that it will award additional stock based compensation in future periods.
The fair value of each option granted during the periods presented is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: (a) no dividend yield, (b) weighted average expected
volatility of 37.2%, 38.8% and 37.37% in the years 2003, 2002 and 2001,
respectively, (c) weighted average discount rates of 2.93%, 3.76% and 5.31% in
the years 2003, 2002 and 2001, respectively, and (d) expected lives of five
years.
NEW ACCOUNTING PRONOUNCEMENTS. In January 2003, the Financial Accounting
Standards Board issued Interpretation No. 46, Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51 ("FIN 46"), as revised. This
interpretation provides guidance on the identification of, and the financial
reporting for, variable interest entities, as defined. Consolidation of variable
interest entities is required under FIN 46 only when a company will absorb a
majority of the variable interest entity's expected losses, receive a majority
of the variable interest entity's expected residual returns, or both. This
interpretation applied immediately to a variable interest entity created or
acquired after January 31, 2003. For variable entities acquired before February
1, 2003, this interpretation was applied effective December 31, 2003. The
adoption of FIN 46 did not have a material impact on the Company's financial
position or results of its operations.
In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150").
This statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This statement applied immediately for financial instruments entered
into or modified after May 31, 2003. For financial instruments entered into or
modified before June 1, 2003, this statement was applied effective July 1, 2003.
The adoption of SFAS 150 did not have a material impact on the Company's
financial position or results of its operations.
Effective January 1, 2003, the Company adopted Statement of Financial Accounting
Standard No. 145, Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of
FASB Statement No. 13 and Technical Corrections ("SFAS 145"). This statement,
among other matters, eliminates the requirement that gains or losses on the
early extinguishment of debt be classified as extraordinary items and provides
guidance when gains or losses on the early retirement of debt should or should
not be reflected as an extraordinary item. The Company recognized losses on debt
extinguishments of $2,091,000, $2,338,000 (previously reported as an
extraordinary item, net of tax), and $1,383,000 (previously reported as an
extraordinary item, net of tax) in 2003, 2002 and 2001, respectively. These
charges against income consisted of premium payments and the write off of
related unamortized deferred financing costs and debt discount.
RECLASSIFICATIONS. Certain reclassifications of prior year information have been
made to conform to the presentation of current year information.
20
2. FINANCIAL INSTRUMENTS:
2003 2002
----------------------------- -----------------------------
Carrying Estimated Carrying Estimated
(in thousands) Amount Fair Value Amount Fair Value
------------------------------------------------------------- -------------- ------------- ------------- -------------
ASSETS:
Cash and cash equivalents............................... $ 263,135 $ 263,135 $ 342,046 $ 342,046
Available-for-sale securities........................... 48,856 48,856 88,625 88,625
Collateral deposits and notes receivables............... 6,220 5,975 10,146 9,725
Construction reserve funds.............................. 126,140 126,140 95,260 95,260
Business ventures, carried at cost...................... 700 see below 1,190 see below
Derivative instruments.................................. 338 338 3,535 3,535
LIABILITIES:
Long-term debt, including current portion............... 332,272 357,490 402,732 422,557
Short-sale of securities................................ 3,680 3,680 2,597 2,597
Derivative instruments.................................. - - 1,688 1,688
The carrying value of cash, cash equivalents and collateral cash deposits
approximates fair value. The carrying value of construction reserve funds,
primarily consisting of auction rate certificates, approximates fair value. The
fair values of the Company's available-for-sale securities, notes receivable,
derivative instruments, long-term debt, and short-sales of marketable securities
were estimated based upon quoted market prices or by using discounted cash flow
analyses based on estimated current rates for similar type of arrangements. It
was not practicable to estimate the fair value of the Company's historical cost
investments in business ventures because of the lack of a quoted market price
and the inability to estimate fair value without incurring excessive costs.
Considerable judgment was required in developing certain of the estimates of
fair value and, accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.
3. DERIVATIVE INSTRUMENTS:
The Company's foreign currency exchange risks primarily relates to its offshore
support vessel operations that are conducted from ports located in the United
Kingdom, where its functional currency is Pounds Sterling. To protect the U.S.
dollar value of certain Pounds Sterling denominated net assets of the Company
from the effects of volatility in foreign currency exchange rates that might
occur prior to their conversion to U.S. dollars, the Company has entered into
forward exchange contracts. The Company considers these forward exchange
contracts as economic hedges of its net investment in the United Kingdom with
the resulting gains or losses from those transactions being charged to
Accumulated Other Comprehensive Income in Stockholders' Equity. For the year
ended December 31, 2001, recognized net gains of $85,000 from these contracts.
At December 31, 2003, the Company had no outstanding Pounds Sterling forward
exchange contracts for which hedge accounting criteria were met.
The Company has entered into forward exchange and futures contracts that are
considered speculative with respect to Norwegian Kroners, Pounds Sterling,
Euros, Japanese Yen and Singapore Dollars. The Norwegian Kroner contracts
enabled the Company to buy Norwegian Kroners in the future at fixed exchange
rates which could have offset possible consequences of changes in foreign
exchange had the Company decided to conduct business in Norway. The Pound
Sterling, Euro, Yen and Singapore Dollar contracts enable the Company to buy
Pounds Sterling, Euros, Yen and Singapore Dollars in the future at fixed
exchange rates which could offset possible consequences of changes in foreign
exchange of the Company's business conducted in Europe and the Far East.
Resulting gains or losses from these transactions are reported in the
Consolidated Statements of Income as "Derivative income (loss), net" as they do
not meet the criteria for hedge accounting. For the years ended December 31,
2003, 2002 and 2001, the Company recognized net gains of $1,343,000, net gains
of $674,000 and net losses of $153,000, respectively, from these forward
exchange and futures contracts. At December 31, 2003, the fair market value of
the Company's speculative Pound Sterling, Euro, Japanese Yen and Singapore
Dollar contracts was an unrealized gain of $238,000 included in the Consolidated
Balance Sheets as "Other receivables." At December 31, 2003, the Company had no
outstanding Norwegian Kroner contracts.
The Company has entered into and settled various positions in natural gas and
crude oil via swaps, options and futures contracts pursuant to which, on each
applicable settlement date, the Company receives or pays an amount, if any, by
which a contract price for a swap, an option or a futures contract exceeds the
settlement price quoted on the New York Mercantile Exchange ("NYMEX") or
receives or pays the amount, if any, by which the settlement price quoted on the
NYMEX exceeds the contract price. The general purpose of these hedge
transactions is to provide value to the Company should the price of natural gas
and crude oil decline which over time, if sustained, would lead to a decline in
the Company's offshore assets' market values and cash flows. Resulting gains or
losses from these transactions are reported in the Consolidated Statements of
Income as "Derivative income (loss), net" as they do not meet the criteria for
hedge accounting. For the years ended December 31, 2003, 2002 and 2001, the
Company has recognized net losses of $743,000, net gains of $406,000 and net
gains of $4,584,000, respectively, from these commodity hedging activities. At
December 31, 2003, the fair market value of the Company's positions in commodity
contracts was an unrealized gain of $177,000 included in the Consolidated
Balance Sheets as "Other receivables."
21
The Company has entered into and settled various positions in U.S. treasury
notes and bonds via futures or options on futures and rate-lock agreements on
U.S. treasury notes pursuant to which, on each applicable settlement date, the
Company receives or pays an amount, if any, by which a contract price for an
option or a futures contract exceeds the settlement price quoted on the Chicago
Board of Trade ("CBOT") or receives or pays the amount, if any, by which the
settlement price quoted on the CBOT exceeds the contract price. The general
purpose of these transactions is to provide value to the Company should the
price of U.S. treasury notes and bonds decline leading to generally higher
interest rates which, if sustained over time, might lead to a higher interest
cost for the Company. Resulting gains or losses from these transactions are
reported in the Consolidated Statements of Income as "Derivative income (loss),
net" as they do not meet the criteria for hedge accounting. For the years ended
December 31, 2003, 2002 and 2001, the Company recognized net gains of $52,000,
net losses of $8,312,000 and net gains of $195,000, respectively, with respect
to derivative positions in U.S. treasury obligations. At December 31, 2003, the
fair market value of the Company's derivative positions in U.S. treasury
obligations was an unrealized loss of $77,000 included in the Consolidated
Balance Sheets as "Other receivables."
In order to reduce its cost of capital, the Company entered into swap agreements
with a major financial institution with respect to $41,000,000 of its 7.2%
Senior Notes due 2009 (the 7.2% Notes"). Pursuant to each such agreement and
subsequent extensions, such financial institution agreed to pay to the Company
an amount equal to interest paid on the notional amount of the 7.2% Notes
subject to such agreement, and the Company agreed to pay to such financial
institution an amount equal to an agreed upon reduced interest rate on the price
of such notional amount of the 7.2% Notes, as set forth in the applicable swap
agreements. Upon termination of each swap agreement, the financial institution
agreed to pay to the Company the amount, if any, by which the fair market value
of the notional amount of the 7.2% Notes subject to such swap agreements on such
date exceeded the agreed upon price of such notional amount as set forth in such
swap agreements, and the Company agreed to pay to such financial institution the
amount, if any, by which the agreed upon price of such notional amount exceeded
the fair market value of such notional amount on such date. As of December 31,
2003, the Company had terminated all outstanding swap agreements. For the years
ended December 31, 2003, 2002 and 2001, the Company recorded a gain of $49,000,
a gain of $3,877,000 and a loss of $499,000, respectively, with respect to these
swap agreements in the Condensed Consolidated Statements of Income as
"Derivative income (loss), net."
In order to partially hedge the fluctuation in market value for part of the
Company's common stock investment in ENSCO International Incorporated ("ENSCO")
acquired in connection with the Chiles Merger (see discussion in Note 5), the
Company entered into various transactions (commonly known as "costless collars")
during 2002 with a major financial institution on 1,000,000 shares of ENSCO
common stock. The effect of these transactions was that the Company would be
guaranteed a minimum value of approximately $24.35 and a maximum value of
approximately $29.80 per share of ENSCO, at expiration. These costless collars
expired during the second quarter of 2003 and, as the share value of ENSCO's
common stock was between $24.35 and $29.80 at expiration, neither party had a
payment obligation under these transactions. For the years ended December 31,
2003 and 2002, the Company recorded a gain of $1,688,000 and a loss of
$1,688,000, respectively, with respect to these costless collars in the
Condensed Consolidated Statement of Income as "Derivative income (loss), net".
4. MARKETABLE SECURITIES:
Marketable equity securities with readily determinable fair values and debt
securities are classified by the Company as investments in available-for-sale
securities. Available-for-sale securities are current assets representing the
investment of cash available for current operations. These investments are
reported at their fair values with unrealized holding gains and losses included
in the Consolidated Balance Sheets as "Accumulated other comprehensive income."
The amortized cost and fair value of marketable securities at December 31, 2003
and 2002 were as follows:
(in thousands) Gross Unrealized Holding
------------------------------------------ Amortized --------------------------- Fair
Type of Securities Cost Gains Losses Value
------------------------------------------ ----------- ----------- ----------- -----------
2003:
Corporate debt securities........ $ 1,793 $ 630 $ (15) $ 2,408
Equity securities................ 41,640 5,229 (421) 46,448
----------- ----------- ----------- -----------
$ 43,433 $ 5,859 $ (436) $ 48,856
=========== =========== =========== ===========
2002:
U.S. government and agencies..... $ 3,208 $ 34 $ - $ 3,242
U.S. states and political
subdivisions.................. 12,860 360 - 13,220
Corporate debt securities........ 19,602 - (241) 19,361
UK government securities......... 3,777 186 - 3,963
Equity securities................ 40,343 8,496 - 48,839
----------- ----------- ----------- -----------
$ 79,790 $ 9,076 $ (241) $ 88,625
=========== =========== =========== ===========
At December 31, 2003, the corporate debt securities have contractual maturities
in 2006 and 2007.
22
For the years ended December 31, 2003, 2002 and 2001, the sale of
available-for-sale securities resulted in gross realized gains of $6,845,000,
$4,342,000 and $8,944,000, respectively, and gross realized losses of $316,000,
$1,903,000 and $3,275,000, respectively. The specific identification method was
used to determine the cost of available-for-sale securities in computing
realized gains and losses.
Short sales of marketable equity securities are temporary trading positions held
by the Company in anticipation of short-term market movements. The liabilities
arising from these positions are reported at fair value with both realized and
unrealized gains and losses included in the Consolidated Statement of Income as
"Marketable securities sale gains, net." For the years ended December 31, 2003,
2002 and 2001, short sales of marketable securities resulted in gross realized
and unrealized gains of $772,000, $1,026,000 and $643,000, respectively, and
gross realized and unrealized losses of $706,000, $247,000 and $623,000,
respectively.
5. ACQUISITIONS AND DISPOSITIONS:
FES ACQUISITION. On October 31, 2003, the Company acquired all of the issued and
outstanding shares of Foss Environmental Services, Inc. ("FES") for $7,769,000.
The selling stockholder of FES has the opportunity to receive additional
consideration of up to $41,000,000 based upon certain performance standards over
a period following the date of the acquisition through December 31, 2008. This
additional consideration, if paid, will be allocated to fixed assets and
goodwill.
YARNELL ACQUISITION. On June 30, 2003, the Company acquired a controlling
interest in Yarnell Marine, LLC ("Yarnell") for $248,000. Previous to this
transaction, the Company had a 50% interest in this business venture and
accounted for its investment using the equity method.
TEX-AIR ACQUISITION. During January and July of 2002, the Company acquired an
aggregate 20 percent of the outstanding common stock of Tex-Air Helicopters,
Inc. ("Tex-Air") through two separate cash transactions totaling $225,000. The
Company acquired the remaining 80 percent of Tex-Air's common stock on December
31, 2002 in a stock-for-stock transaction whereby the Company issued 68,292
shares of SEACOR's common stock, par value $.01 per share ("Common Stock")
valued at $3,039,000. As security for the selling stockholder's obligations
under the purchase agreement, 6,097 shares issued pursuant to the transaction
were deposited into escrow for a period of eighteen months. The selling
stockholder of Tex-Air has the opportunity to receive additional consideration
of up to $900,000 based upon certain performance standards through 2004. This
additional consideration, if paid, will be allocated to fixed assets and
goodwill. Tex-Air's long term debt at closing was approximately $6,662,000 and
immediately following the closing of the transaction, the Company repaid
$5,838,000 of such debt.
STIRLING ACQUISITION. On May 4, 2001, the Company completed the acquisition of
all of the issued and outstanding shares of Stirling Shipping Holdings Limited
("Stirling Shipping"). Aggregate consideration was (pound)54,300,000
($77,100,000 based on exchange rates in effect and the price of SEACOR's Common
Stock on the closing date, consisting of (pound)29,900,000, or $43,000,000, in
cash, (pound)14,700,000, or $21,200,000, in one-year loan notes, and 285,852
shares of Common Stock issued from treasury, valued at $12,900,000. Stirling
Shipping's long term debt at closing was approximately (pound)43,000,000, or
$61,900,000. In November 2001, the Company repaid all of the outstanding
indebtedness, totaling (pound)48,316,000 or approximately $68,250,000 that was
included in the Stirling Shipping acquisition.
CHERAMIE ACQUISITION. In February 2001, the Company completed the acquisition of
all of the issued and outstanding shares of Gilbert Cheramie Boats, Inc. and
related companies (collectively, "Cheramie"). Purchase consideration was
$62,800,000 in cash. Pursuant to the terms of the purchase agreement, the
Company had an option of making an Internal Revenue Code Section 338(h)(10)
election and, in January 2002, it exercised that option. The election entitled
the Company to full income tax basis in the assets of the Cheramie companies and
the realization of an income tax benefit of the depreciation. In order to induce
the prior shareholders of Cheramie to agree to the election, the Company had
agreed to make them "whole" for the amount of the increase in their total income
tax liability, including the amount of income tax payable by them on the
additional purchase price payment. In January 2002, as a result of making this
election, the Company paid the prior shareholders of Cheramie an additional
$10,162,000 in order to reimburse them for all of their expected additional
income tax obligations, which payment was recorded in the Consolidated Balance
Sheet as "Accrued acquisition costs." The January 2002 payment was intended to
reimburse the selling shareholders for all of their incremental tax liabilities,
and therefore, the Company has recorded an adjustment to the purchase price for
the funds presently held in escrow. Goodwill, as adjusted, of approximately
$11,280,000 was recorded in connection with this acquisition.
23
RINCON ACQUISITION. In February 2001, the Company acquired two U.S. based towing
supply vessels from Rincon Marine, Inc., a U.S. based operator ("Rincon").
Aggregate consideration paid Rincon was $19,700,000, including $6,100,000 in
cash and the assumption of $13,600,000 of debt due Caterpillar Financial
Services Corporation ("Caterpillar"). In February 2002, the Company repaid all
of the outstanding indebtedness due Caterpillar from working capital.
PLAISANCE ACQUISITION. In January 2001, the Company acquired all of the issued
and outstanding shares of Plaisance Marine, Inc. ("Plaisance") that owns two
mini-supply vessels and acquired four additional mini-supply vessels from
companies affiliated with Plaisance (collectively the "Plaisance Fleet'").
Aggregate consideration paid for the Plaisance Fleet and certain related spares
and other assets was $20,100,000, including $16,200,000 paid in cash, the
assumption of $700,000 of debt and the issuance of 71,577 shares of Common Stock
from treasury, valued at $3,200,000 on the closing date.
UNAUDITED PRO FORMA INFORMATION. The following unaudited pro forma information
has been prepared as if the acquisitions of FES, Yarnell, Tex-Air, Stirling
Shipping, Cheramie and Plaisance had occurred at the beginning of each of the
periods presented. This pro forma information has been prepared for comparative
purposes only and is not necessarily indicative of what would have occurred had
the acquisition taken place on the dates indicated, nor does it purport to be
indicative of the future operating results of the Company.
For the Year Ended December, 31
-------------------------------------------------
(in thousands, except share data, unaudited) 2003 2002 2001
---------------------------------------------------------- ---------------- --------------- ---------------
Revenue.............................................. $ 433,648 $ 420,047 $ 468,582
Net income........................................... 10,475 45,914 72,883
Basic earnings per share............................. 0.55 2.29 3.66
PURCHASE PRICE ALLOCATION. The following table summarizes the allocation of the
purchase price in the FES, Yarnell and Tex-Air acquisitions in 2003 and 2002:
For the Year Ended December 31,
-------------------------------
(in thousands) 2003 2002
---------------------------------------------------------- --------------- ---------------
Trade and other receivables ............................. $ 7,568 $ 3,540
Prepaid expenses and other............................... 940 1,747
Equity Investments....................................... (552) -
Property and equipment................................... 3,836 7,659
Goodwill................................................. 367 109
Other assets............................................. 54 385
Accounts payable and accrued liabilities................. (3,707) (2,140)
Debt..................................................... - (6,662)
Deferred income taxes.................................... (550) (888)
Deferred gains and other liabilities..................... - (910)
Minority Interest........................................ (200) -
Common stock............................................. - (1)
Paid in capital.......................................... - (2,726)
--------------- ---------------
Purchase price(a)........................................ $ 7,756 $ 113
=============== ===============
-------------------
(a) The purchase price is net of cash acquired, totaling $261,000 and $302,000
in 2003 and 2002, respectively, and includes acquisition costs, totaling
$92,000 and $190,000 in 2003 and 2002, respectively.
VESSEL CONSTRUCTION. Since January 1, 2001, the Company completed the
construction of 15 crew, 2 anchor handling towing supply, 2 mini-supply, 1
supply and 3 towing supply vessels at an approximate aggregate cost of
$179,649,000.
VESSEL DISPOSITIONS. The table below sets forth, during the fiscal years
indicated, the number of vessels sold by type of service. At December 31, 2003,
35 vessels previously sold pursuant to sale and leaseback transactions remain
chartered-in to the Company.
Type of Vessel 2003 2002 2001
-------------------------------------------------- ------------ ------------ -----------
Anchor handling towing supply.................... 2 4 1
Crew............................................. 16 10 13
Mini-supply...................................... 2 - 3
Standby safety................................... 1 3 6
Supply........................................... 1 2 -
Towing supply.................................... 6 6 5
Utility.......................................... 28 5 7
Project.......................................... - 1 -
------------ ------------ -----------
56 31 35
============ ============ ===========
24
OTHER MAJOR EQUIPMENT ADDITIONS. Since January 1, 2001, the Company has accepted
delivery of 327 newly constructed barges, 4 newly constructed helicopters and 4
pre-owned helicopters for an approximate aggregate cost of $107,596,000.
CHILES DISPOSITION. On August 7, 2002, the stockholders of Chiles Offshore Inc.
("Chiles") approved a merger (the "Chiles Merger") with ENSCO and the merger was
completed. Pursuant to the terms of the merger agreement, Chiles' stockholders
received $5.25 and 0.6575 shares of ENSCO common stock for each share of Chiles'
common stock they owned at the time of the merger. Upon completion of this
merger, the Company received $25,365,000 in cash and 3,176,646 shares of ENSCO's
common stock, valued at $73,444,000 on date of close, and recognized an
after-tax gain of $12,817,000, or $0.61 per diluted share.
Chiles Offshore LLC, the predecessor to Chiles, was formed in 1997 for the
purpose of constructing, owning and operating ultra-premium jackup drilling
rigs. The Company consolidated the reporting of financial information of Chiles
from its inception in 1997 until its initial public offering of common stock in
September 2000 (the "Chiles IPO"). As a consequence of the Chiles IPO, the
Company's ownership interest in Chiles was reduced, and the Company ceased its
consolidation of Chiles and began accounting for its ownership interest in
Chiles using the equity method.
The Company received approximately $2,006,000 and $240,000 in 2002 and 2001,
respectively, for management and legal services provided to Chiles. Chiles also
paid the Company approximately $65,000 for services provided by one of its
offshore marine vessels in 2001.
6. INVESTMENTS, AT EQUITY, AND RECEIVABLES FROM 50% OR LESS OWNED COMPANIES:
Investments, carried at equity, and advances to 50% or less owned companies were
as follows:
(in thousands) December 31,
----------------------------
50% or Less Owned Companies Ownership 2003 2002
------------------------------------------- --------------- ------------- -------------
TMM Joint Venture....................... 40.0% $ 10,284 $ 15,701
Globe Wireless, L.L.C................... 38.0% 16,593 17,793
Pelican Offshore Services Pte Ltd....... 50.0% 8,540 9,832
Ultragas Joint Venture.................. 50.0% 5,908 4,477
Other................................... 29.6%-50.0% 18,523 13,556
------------- -------------
$ 59,848 $ 61,359
============= =============
COMBINED CONDENSED FINANCIALS. Summarized unaudited financial information for
the Company's investments, at equity, is as follows:
December 31,
----------------------------
(in thousands, unaudited) 2003 2002
---------------------------------------------------------------- ------------- --------------
Current assets.................................................. $ 68,496 $ 78,433
Noncurrent assets............................................... 94,334 111,516
Current liabilities............................................. 26,271 28,233
Noncurrent liabilities.......................................... 29,870 38,390
Year ended December 31,
-------------------------------------------
2003 2002 2001
------------- ------------- --------------
Equity Investees, excluding Chiles:
Operating revenues........................... $ 122,388 $ 112,725 $ 103,990
Operating income............................. 10,892 16,601 2,697
Net income................................... 7,110 8,690 3,265
Chiles:
Operating revenues........................... - 58,405 74,184
Operating income............................. - 4,184 29,688
Net income................................... - 7,326 22,546
At December 31, 2003, cumulative net undistributed losses of 50% or less owned
companies accounted for by the equity method included in the Company's
consolidated retained earnings was $2,552,000.
TMM JOINT VENTURE. In 1994, the Company and Grupo TMM, S.A., formerly
Transportacion Maritima Mexicana S.A. de C.V., a Mexican corporation ("TMM"),
organized a joint venture to serve the Mexican offshore market. At December 31,
2003, the joint venture operated 31 vessels, 15 owned and 16 chartered-in,
including 12 vessels provided by the Company and 4 vessels provided by other
vessel owners. Since commencement of operations, the Company has sold 11 of its
vessels to the joint venture.
25
The Company guarantees up to 40% of obligations for nonpayment that may arise
from the bareboat charter-in of three vessels by the TMM joint venture. At
December 31, 2003, the Company's guarantee was limited to approximately
$9,300,000 and terminates upon completion of the charters, expected in 2008 and
2009. A $750,000 promissory note previously issued the Company as partial
payment by the TMM joint venture for the purchase of a vessel from the Company
was repaid in 2003. Revenues earned by the Company from the charter of vessels
and management services provided the TMM joint venture in 2003, 2002 and 2001
totaled $11,264,000, $7,041,000 and $4,890,000, respectively. During 2003, the
joint venture paid the Company an $8,000,000 dividend.
GLOBE WIRELESS L.L.C. Globe Wireless L.L.C. ("Globe Wireless") and its
subsidiaries operate a worldwide network of high frequency radio stations. The
network of stations is a wireless data network initially targeted at the
maritime industry that supports Internet messaging, telex and facsimile
communications. Globe Wireless also provides satellite messaging and voice
communication services to the maritime industry. At December 31, 2003, the
Company owned beneficially approximately 38% of the voting equity of Globe
Wireless.
Since its inception in 1990, Globe Wireless has experienced negative cash flow.
The Company presently expects Globe Wireless can achieve operating cash
break-even without requiring additional capital funding from shareholders. There
can be no assurances that Globe Wireless' future operations will successful.
Should Globe Wireless be unable to meet its funding requirements, SEACOR would
be required to commit additional funding or record an impairment charge with
respect to its investment.
Globe Wireless provides the Company's offshore marine business segment with a
"ship-to-shore" communication network and has provisioned and installed certain
computer hardware, software and electronic equipment aboard its vessels. In
fiscal 2003, 2002 and 2001, the Company paid approximately $1,525,000,
$1,904,000 and $2,126,000, respectively, to Globe Wireless for services and
merchandise provided the Company.
PELICAN OFFSHORE SERVICES PTE LTD. During 2000, the Company entered into a joint
venture owned 50% by each of the Company and Penguin Boat International Limited,
a Singapore corporation, ("Penguin"). The joint venture, Pelican Offshore
Services Pte Ltd, also a Singapore corporation ("Pelican"), owns 7 newly built
Fast Support Vessels (also known as multipurpose crew vessels) that operate in
Asia. At December 31, 2003, the Company had outstanding loans to Pelican
totaling approximately $2,197,000. The Company also presently guarantees up to
$1,500,000 of amounts owed by the Pelican joint venture under its banking
facilities that is expected to mature in 2006.
ULTRAGAS JOINT VENTURE. In 1996, the Company acquired an equity interest in
Ultragas Smit Lloyd Ltda ("Ultragas") and certain other entities affiliated with
Ultragas that own and operate vessels. Since 1996, the Company and Sociedad
Naviera Ultragas Ltda, the Company's joint venture partner in Ultragas and its
affiliated companies, formed additional corporations for purposes of owning and
operating additional vessels. As of December 31, 2003, this joint venture owned
6 vessels that operated in Chile, Argentina and Brazil.
OTHER. The Company's other business ventures include offshore marine businesses
that own 15 and charter-in an additional vessel, environmental services
businesses, an entity that develops and sells software to the ship brokerage and
shipping industry, and a corporation that owns a Handymax Dry-Bulk ship. At
December 31, 2003, loans of $2,995,000 were payable to the Company from certain
of these joint ventures. The Company is guarantor of up to $5,224,000 with
respect to amounts owing pursuant to a vessel charter between a joint venture in
which the Company owns a 50% interest and the vessel owner. The Company's
guarantee declines over the life of the charter and terminates in 2009. During
2003 and 2002, the Company received dividends, totaling $2,520,000 and
$1,889,000, respectively, from its other business ventures.
7. CONSTRUCTION RESERVE FUNDS:
The Company has established, pursuant to Section 511 of the Merchant Marine Act,
1936, as amended, joint depository construction reserve fund accounts with the
Maritime Administration. In accordance with this statute, the Company has been
permitted to deposit proceeds from the sale of certain vessels into the joint
depository construction reserve fund accounts for purposes of acquiring newly
constructed U.S.-flag vessels and qualifying for the Company's temporary
deferral of taxable gains realized from the sale of the vessels. From date of
deposit, withdrawals from the joint depository construction reserve fund
accounts are subject to prior written approval of the Maritime Administration,
and the funds on deposit must be committed for expenditure within three years or
be released for the Company's general use. Construction reserve funds are
classified as non-current assets as the Company has the intent and ability to
maintain the funds for more than one year and/or use the funds to acquire fixed
assets. Income from vessel sales previously deferred would become immediately
taxable upon release to the Company of sale proceeds that were deposited into
joint depository construction reserve funds.
26
8. INCOME TAXES:
Income before income taxes, minority interest and equity in net earnings of 50%
or less owned companies derived from the United States and foreign operations
for the years ended December 31, are as follows:
(in thousands) 2003 2002 2001
----------------------------------------------------- ------------ ----------- -----------
United States................................... $ 5,165 $ 25,629 $ 63,091
Foreign......................................... 16,284 40,513 39,247
------------ ----------- -----------
$ 21,449 $ 66,142 $ 102,338
============ =========== ===========
The Company files a consolidated U.S. federal tax return. Income tax expense
(benefit) consisted of the following components for the years ended December 31:
(in thousands) 2003 2002 2001
----------------------------------------------------- ------------ ----------- -----------
Current:
State........................................... $ 681 $ 991 $ 790
Federal......................................... (6,648) 2,106 7,844
Foreign......................................... 6,585 2,910 5,717
Deferred:
Federal......................................... 9,888 16,996 21,123
Foreign......................................... (110) 31 97
------------ ----------- -----------
$ 10,396 $ 23,034 $ 35,571
============ =========== ===========
The following table reconciles the difference between the statutory federal
income tax rate for the Company to the effective income tax rate:
2003 2002 2001
----------------- ------------------ ------------------
Statutory rate.......................... 35.0 % 35.0 % 35.0 %
Valuation allowance..................... 9.0 % - % - %
Non-deductible expenses................. 2.1 % - % - %
Foreign and state taxes................. 2.1 % 1.4 % 1.0 %
Other................................... 0.3 % (1.6)% (1.2)%
----------------- ------------------ ------------------
48.5 % 34.8 % 34.8 %
================= ================== ==================
The components of the net deferred income tax liabilities for the years ended
December 31 were as follows:
(in thousands) 2003 2002
---------------------------------------------------------------------- ------------ -----------
Deferred tax liabilities:
Property and equipment....................................... $ 154,902 $ 128,753
Unremitted earnings of foreign subsidiaries.................. 34,624 33,244
Marketable securities........................................ 6,955 12,890
Currency translation......................................... 6,998 3,094
Other........................................................ 3,860 3,429
------------ -----------
Total deferred tax liabilities......................... 207,339 181,410
------------ -----------
Deferred tax assets:
Net operating loss carryforwards............................. $ 5,151 $ -
Foreign tax credit carryforwards............................. 6,607 4,478
Alternative minimum tax credit carryforward.................. 927 927
Other........................................................ 1,795 1,086
------------ -----------
Total deferred tax assets.............................. 14,480 6,491
Valuation allowance.................................... (1,937) -
------------ -----------
Net deferred tax assets................................ 12,543 6,491
------------ -----------
Net deferred tax liabilities..................... $ 194,796 $ 174,919
============ ===========
As of December 31, 2003, the Company has not recognized a deferred tax liability
of $9,198,000 on $26,281,000 of undistributed earnings for certain non-U.S.
subsidiaries and business ventures because it considers those earnings to be
indefinitely reinvested abroad. As of December 31, 2003, the Company has net
operating loss carryforwards approximating $14,700,000 that expires in 2023. The
Company's alternative minimum tax credits can be carryforward indefinitely.
As of December 31, 2003, the Company also has foreign tax credit carryforwards
of $6,607,000 that expire from 2004 through 2008. Based on projections completed
during the fourth quarter of 2003, the Company has determined that the foreign
tax credits due to expire in 2004 and 2005 may not be utilized, resulting in a
recorded valuation allowance of $1,937,000. The Company believes it is more
likely than not that the remaining net foreign tax credit carryforwards will be
utilized through the turnaround of existing temporary differences, future
earnings, tax strategies or a combination thereof.
27
For employee stock options that are exercised, the Company receives an income
tax benefit based on the difference between the option exercise price and the
fair market value of the stock at the time the option is exercised. For employee
restricted stock grants, the Company receives an income tax benefit or accrues
additional taxes based on the difference between the fair market value of the
stock at the time of grant and at the time of vesting. The combined benefit,
which is recorded in stockholders' equity, was $478,000 and $1,608,000 in 2003
and 2002, respectively.
9. LONG-TERM DEBT:
Long-term debt balances, maturities and interest rates are as follows as of
December 31:
(in thousands) 2003 2002
------------------------------------------------------------------------------------ ------------- -------------
7.2% Senior Notes due 2009, interest payable semi-annually......................... $ 134,500 $ 134,500
5-7/8% Senior Notes due 2012, interest payable semi-annually....................... 200,000 200,000
5-3/8% Convertible Subordinated Notes due 2006, interest payable semi-annually..... - 35,319
5.467% Subordinated Promissory Notes due SMIT in 2004, interest payable quarterly.. - 23,200
Promissory Notes due the prior shareholders of Putford Enterprises Ltd., bearing
interest at 4%, principal and interest due April 2005............................ - 12,032
Other obligations due various financial institutions, secured by equipment......... 158 1,385
------------- -------------
334,658 406,436
Less - Portion due within one year............................................... (93) (614)
- Debt discount, net........................................................ (2,386) (3,704)
------------- -------------
$ 332,179 $ 402,118
============= =============
Maturities of long-term debt following December 31, 2003 are as follows:
(in thousands) 2004 2005 2006 2007 2008 Thereafter
------------------------------------ ---------- ---------- ---------- ---------- ---------- -----------
Amount......................... $ 93 $ 41 $ 24 $ - $ - $ 334,500
========== ========== ========== ========== ========== ===========
7.2% NOTES. The Company's 7.2% Notes were issued under an indenture (the "1997
Indenture") between the Company and First Trust National Association, as
trustee. Interest on the 7.2% Notes is payable semi-annually on March 15 and
September 15 of each year. The 7.2% Notes may be redeemed at any time at the
option of the Company, in whole or from time to time in part, at a price equal
to 100% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of redemption plus a "make-whole" premium, if any, relating to
the then prevailing Treasury Yield and the remaining life of the 7.2% Notes. The
1997 Indenture contains covenants including, among others, limitations on liens
and sale and leasebacks of certain Principal Properties, as defined in the 1997
Indenture, and certain restrictions on the Company consolidating with or merging
into any other Person, as defined in the 1997 Indenture. During 2002, the
Company purchased $13,000,000 principal amount of its 7.2% Notes in the open
market that resulted in the recognition of a $1,522,000 debt extinguishment
loss.
5-7/8% SENIOR NOTES. During the third quarter of 2002, SEACOR completed the sale
of $200,000,000 aggregate principal amount of its 5-7/8% Senior Notes Due
October 1, 2012 (the "5-7/8% Notes"). The 5-7/8% Notes were issued at a price of
98.839% of principal amount. Interest on the 5 7/8% Notes is payable
semiannually on April 1 and October 1 of each year commencing April 1, 2003. The
5-7/8% Notes may be redeemed at any time, in whole or in part, at a price equal
to 100% of the principal amount, plus accrued and unpaid interest to the date of
redemption, plus a specified "make-whole" premium. The 5-7/8% Notes were issued
under a supplemental indenture dated as of September 27, 2002 to the base
indenture relating to SEACOR's senior debt securities, dated as of January 10,
2001, between SEACOR and U.S. Bank National Association, as trustee. The Company
incurred $842,000 of net underwriting fees associated with this transaction.
5-3/8% CONVERTIBLE NOTES. On February 20, 2003, the Company redeemed all of the
then outstanding principal amount of its 5-3/8% Notes, totaling $35,319,000, in
exchange for $35,949,000 in cash and 45.4544 shares of Common Stock. The
redemption resulted in the Company's recognition of a debt extinguishment loss
of $1,124,000.
In 2002, the Company called for the redemption of $10,000,000 of the 5-3/8%
Notes. The redemption price was $1,023.90 per $1,000 principal amount of notes
plus accrued interest to the applicable redemption date. Holders of 5-3/8% Notes
being called were able to convert any or all of their notes into 22.7272 shares
of Common Stock per $1,000 principal amount of notes. The entire $10,000,000 was
redeemed for cash totaling $10,352,472, including a premium and accrued
interest. Also during 2002, the Company purchased $1,000,000 principal amount of
the 5-3/8% Notes in the open market and $1,000 principal amount of the 5-3/8%
Notes were voluntarily converted into 22.7272 shares of Common Stock. In
connection with the redemptions and purchase of the 5-3/8% Notes during 2002,
the Company recognized a debt extinguishment loss of $554,000.
28
In 2001, the Company called for the redemption of $100,000,000 of the
$181,600,000 aggregate principal amount outstanding of the 5-3/8% Notes. The
redemption price was $1,029.90 per $1,000 principal amount of notes plus accrued
interest to the applicable redemption date. Holders of 5-3/8% Notes being called
were able to convert any or all of their notes into 22.7272 shares of Common
Stock per $1,000 principal amount of notes. The call, together with certain
privately negotiated transactions, resulted in the conversion of $99,166,000
principal amount of the 5-3/8% Notes into 2,285,878 shares of Common Stock and
redemption of $36,114,000 principal amount of the 5-3/8% Notes for approximately
$37,970,000, including accrued interest. The redemption resulted in the
Company's recognition of a debt extinguishment loss of $1,383,000.
5.467% SMIT NOTES. On March 4, 2003, the Company repaid the $23,200,000
aggregate principal amount of its 5.467% five-year subordinated promissory notes
that were issued pursuant to a vessel purchase transaction.
PUTFORD NOTES. On April 7, 2003, the Company repaid the outstanding principal
amount of its Promissory Notes due to the prior shareholders of Putford
Enterprises Ltd, totaling $13,156,000. The redemption resulted in the Company's
recognition of a debt extinguishment loss of $967,000.
REVOLVING CREDIT FACILITY. On February 5, 2002, the Company completed the
syndication of a $200,000,000, five year, non-reducing, unsecured revolving
credit facility. Advances under this revolving credit facility are available for
general corporate purposes. Interest on advances will be charged at a rate per
annum of LIBOR plus an applicable margin of 65 to 150 basis points based upon
the Company's credit rating as determined by Standard and Poor's and Moody's.
Adjustments to the applicable margin are the only consequence of a change in the
Company's credit rating. The Company is not required to maintain a credit rating
under the terms of the facility agreement, and if the Company does not maintain
a credit rating, the applicable margin would be determined by financial ratios.
The revolving credit facility contains various restrictive covenants covering
interest coverage, secured debt to total capitalization, funded debt to total
capitalization ratios, the maintenance of a minimum level of consolidated net
worth, as well as other customary covenants, representations and warranties,
funding conditions and events of default. The revolving credit facility contains
no repayment triggers. As of December 31, 2003 and 2002, the Company had
outstanding letters of credit of $1,275,000 and $175,000, respectively, advanced
under the revolving credit facility. As of December 31, 2003, the Company had
$198,725,000 available for future borrowings under the revolving credit
facility.
During 2002, the Company repaid the then outstanding borrowings, totaling
$30,000,000, and cancelled a letter of credit in connection with the acquisition
of Stirling Shipping. Also during 2002, the Company incurred cancellation fees
associated with its previous credit facility that resulted in the recognition of
a $262,000 debt extinguishment loss.
10. COMMON STOCK:
The Company's Board of Directors has approved a securities repurchase plan,
which allows the Company to acquire its outstanding Common Stock, 5-3/8% Notes,
7.2% Notes and 5-7/8% Notes (collectively, the "SEACOR Securities"). In 2003 and
2002, a total of 1,518,116 and 459,700 shares of Common Stock, respectively,
were acquired for treasury at an aggregate cost of $56,542,000 and $18,508,000,
respectively. Also during 2002, the Company purchased $13,000,000 principal
amount of its 7.2% Notes and $11,000,000 principal amount of its 5-3/8% Notes
for a total of $15,407,940. As of December 31, 2003, the Company had
approximately $58,184,000 available for the repurchase of additional SEACOR
Securities that may be conducted from time to time through open market
purchases, privately negotiated transactions or otherwise, depending on market
conditions.
11. BENEFIT PLANS:
SEACOR SAVINGS PLAN. The Company provides a defined contribution plan to its
employees. The Company's contribution is limited to 50% of the employee's first
6% of wages invested in such defined contribution plan and is subject to annual
review by the Board of Directors. The Company's contributions to the plan were
$1,072,000, $1,106,000 and $1,088,000 for the years ended December 31, 2003,
2002 and 2001, respectively.
EMPLOYEE STOCK INCENTIVE PLANS. On November 22, 1992, April 18, 1996 and May 14,
2003, SEACOR's stockholders adopted the 1992 Non-Qualified Stock Option Plan,
the 1996 Share Incentive Plan, and the 2003 Share Incentive Plan, respectively
(collectively, the "Plans"). The Plans provide for the grant of options to
purchase shares of Common Stock and additionally provides for the grant of stock
appreciation rights, restricted stock awards, performance awards and stock units
to key officers and employees of the Company. The exercise price per share of
options granted cannot be less than 100% of the fair market value of Common
Stock at the date of grant under the current plan. Options granted under the
Plans expire no later than the tenth anniversary of the date of grant. The Plans
are administered by the Stock Option and Executive Compensation Committee of the
Board of Directors (the "Compensation Committee"). A total of 2,500,000 shares
of Common Stock have been reserved for issuance upon adoption of the Plans.
During 2003 and 2002, and 183,955 and 62,360 shares of Common Stock and options
to purchase shares of Common Stock were granted pursuant to the Plans,
respectively. As of December 31, 2003, there were 974,542 shares available for
future grant under the Plans.
29
On February 25, 2004, the Compensation Committee granted to certain officers and
key employees of the Company 36,650 restricted shares of Common Stock with an
aggregate market value of $1,578,000 on the grant date. Also on February 25,
2004, the Compensation Committee granted to certain officers and key employees
of the Company, or conditionally agreed to grant in installments during 2004,
options to purchase an aggregate of 92,150 shares of Common Stock. The exercise
price of the options granted on February 25, 2004 was $43.05 per share of Common
Stock. The options that the Compensation Committee agreed to conditionally grant
in installments during 2004 will have an exercise price of the fair market value
per share of Common Stock on the date of each installment.
EMPLOYEE STOCK PURCHASE PLAN. On May 23, 2000, the stockholders of SEACOR
approved the 2000 Employee Stock Purchase Plan (the "Stock Purchase Plan") that
permits SEACOR to offer Common Stock for purchase by eligible employees at a
price equal to 85% of the lesser of (i) the fair market value of Common Stock on
the first day of the offering period or (ii) the fair market value of Common
Stock on the last day of the offering period. Common Stock will be available for
purchase under the Stock Purchase Plan for six-month offering periods. The Stock
Purchase Plan is intended to comply with Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"), but is not intended to be subject to
Section 401(a) of the Code or the Employee Retirement Income Security Act of
1974. The Board of Directors of SEACOR may amend or terminate the Stock Purchase
Plan at any time; however, no increase in the number of shares of Common Stock
reserved for issuance under the Stock Purchase Plan may be made without
stockholder approval. A total of 300,000 shares of Common Stock have been
reserved for issuance under the Stock Purchase Plan during the ten years
following its adoption. During 2003 and 2002, a total of 21,142 and 19,684
shares, respectively, of Common Stock were issued from treasury pursuant to the
Stock Purchase Plan. As of December 31, 2003, there were 243,251 shares
available for future issuance pursuant to the Stock Purchase Plan.
NON-EMPLOYEE DIRECTOR STOCK INCENTIVE PLANS. On May 14, 2003, the stockholders
of SEACOR approved the 2003 Non-Employee Director Share Incentive Plan
("Non-Employee Share Incentive Plan"). Under the Non-Employee Share Incentive
Plan, each member of the Board of Directors who is not an employee of SEACOR
will be granted automatically a stock option to purchase 3,000 of Common Stock
on the date of each annual meeting of the stockholders of SEACOR commencing with
the 2003 Annual Meeting of Stockholders of SEACOR. The exercise price of the
options granted under the Non-Employee Director Plan will be equal to 100% of
the fair market value per share of Common Stock on the date the options are
granted. Options granted under the Non-Employee Share Incentive Plan will be
exercisable at any time following the earlier of the first anniversary of, or
the first annual meeting of SEACOR's stockholders after, the date of grant, for
a period of up to ten years from date of grant. Subject to the accelerated
vesting of options upon a non-employee Director's death or disability or the
change in control of SEACOR, if a non-employee Director's service as a director
of SEACOR is terminated, his or her options will terminate with respect to the
shares of Common Stock as to which such options are not then exercisable. A
non-employee Director's options that are vested but not exercised may, subject
to certain exceptions, be exercised within three months after the date of
termination of service as a director in the case of termination by reason of
voluntary retirement, failure of SEACOR to nominate such director for
re-election or failure of such director to be re-elected by stockholders after
nomination by SEACOR, or within one year in the case of termination of service
as a director by reason of death or disability. Also on the date of each Annual
Meeting of Stockholders of SEACOR, each Non-Employee Director in office
immediately following such annual meeting shall be granted the right to receive
500 shares of Common Stock with such shares to be delivered to such Non-Employee
Director in four equal installments as follows: 125 shares on the date of such
annual meeting and 125 shares on the dates that are three, six, and nine months
thereafter (each such installment of shares, until the delivery date thereof,
being referred to as an "Unvested Stock Award"); provided, however, if a
Non-Employee Director's service as a director of SEACOR terminates for any
reason, any and all Unvested Stock Awards shall terminate and become null and
void. A total of 150,000 shares of Common Stock have been reserved under the
Non-Employee Share Incentive Plan. During 2003, options were granted for the
purchase of 24,000 shares of Common Stock and 3,000 shares of Common Stock were
issued under the Non-Employee Share Incentive Plan. As of December 31, 2003,
there were 123,000 shares available for future issuance pursuant to the
Non-Employee Share Incentive Plan.
On May 23, 2000, the stockholders of SEACOR approved the 2000 Stock Option Plan
for Non-Employee Directors (the "Non-Employee Director Plan"). The Non-Employee
Director Plan was terminated upon the adoption of the Non-Employee Share
Incentive Plan. Options granted under the Non-Employee Director Plan will be
exercisable at any time following the earlier of the first anniversary of, or
the first annual meeting of SEACOR's stockholders after, the date of grant, for
a period of up to ten years from date of grant. A non-employee Director's
options that are vested but not exercised may, subject to certain exceptions, be
exercised within three months after the date of termination of service as a
director in the case of termination by reason of voluntary retirement, failure
of SEACOR to nominate such director for re-election or failure of such director
to be re-elected by stockholders after nomination by SEACOR, or within one year
in the case of termination of service as a director by reason of death or
disability. During 2002, options were granted for the purchase of 21,000 shares
of Common Stock pursuant to the Non-Employee Director Plan.
30
SHARE AWARD TRANSACTIONS. The following transactions have occurred in connection
with the employee stock incentive plans and the non-employee director stock
incentive plans during the years ended December 31:
2003 2002 2001
----------------------------- ---------------------------- ----------------------------
Wt'ed Avg. Wt'ed Avg. Wt'ed Avg.
Number of Exercise/ Number of Exercise/ Number of Exercise/
Shares Grant Price Shares Grant Price Shares Grant Price
------------- -------------- ------------ -------------- ------------ --------------
Stock Option Activities -
Outstanding, at beginning of year. 657,894 $ 28.27 807,752 $ 25.05 681,212 $ 20.80
Granted........................ 118,300 $ 38.13 21,900 $ 48.69 139,800 $ 44.73
Exercised...................... (66,075) $ 14.16 (150,458) $ 11.66 (11,760) $ 11.20
Canceled....................... (3,500) $ 26.80 (21,300) $ 44.38 (1,500) $ 40.00
------------- ------------ ------------
Outstanding, at end of year....... 706,619 $ 31.25 657,894 $ 28.27 807,752 $ 25.05
============= ============ ============
Options exercisable at year end... 555,226 $ 28.42 530,062 $ 25.01 549,113 $ 18.35
============= ============ ============
Restricted stock awards granted....... 89,655 $ 41.44 61,460 $ 43.53 58,580 $ 50.80
============= ============ ============
Director stock awards granted......... 3,000 $ 38.62 - $ - - $ -
============= ============ ============
Shares available for future grant..... 1,097,542 243,140 302,350
============= ============ ============
The following table summarizes certain information about the options outstanding
at December 31, 2003 grouped into three exercise price ranges:
Exercise Price Range
-------------------------------------------------------------
$6.43 - $16.63 $20.50 - $29.67 $30.71 - $52.25
------------------- ------------------- -------------------
Options outstanding at December 31, 2003...................... 166,842 72,828 466,949
Weighted-average exercise price............................... $ 11.65 $ 28.96 $ 38.61
Weighted-average remaining contractual life (years)........... 1.25 4.27 8.05
Options exercisable at December 31, 2003...................... 166,842 72,828 315,556
Weighted average exercise price of exercisable options........ $ 11.65 $ 28.96 $ 37.16
On date of issue, the market value of restricted shares issued to certain
officers and key employees of the Company is recorded in Stockholders' Equity as
Unamortized Restricted Stock and then amortized to expense over defined vesting
periods. During 2003, 2002 and 2001, compensation cost recognized in connection
with restricted stock awards totaled $2,855,000, $2,309,000 and $2,272,000,
respectively. At December 31, 2003, there were 124,126 shares of unvested
restricted stock outstanding at a weighted average price of $42.75. Of the
unvested shares outstanding, 61,558, 25,969, 13,763, 11,418 and 11,418 shares
will vest in 2004, 2005, 2006, 2007, and 2008, respectively.
12. RELATED PARTY TRANSACTIONS:
The Company manages barge pools as part of its inland river business segment.
Pursuant to the pooling agreements, operating revenues and expenses of
participating barges in a pool are combined and the net results are allocated to
participating barge owners based upon the number of days any one participating
owner's barges bear to the total number of days of all barges participating in a
pool. Mr. Fabrikant, the Chief Executive Officer of SEACOR, companies controlled
by Mr. Fabrikant and trusts for the benefit of Mr. Fabrikant's two children own
barges that participate in the barge pools managed by the Company. In 2003 and
2002, the Company distributed $369,000 and $434,000, respectively, of barge pool
results to Mr. Fabrikant and his affiliates, net of $91,000 and $87,000,
respectively in management fees paid to the Company.
13. COMMITMENTS AND CONTINGENCIES:
Future capital expenditures, based upon the Company's commitments at December
31, 2003, to purchase 9 new vessels, 330 new inland river dry cargo barges, 24
new chemical tank barges, and one new helicopter, will approximate $139,837,000.
Deliveries are expected over the next ten months. Subsequent to December 31,
2003, the Company committed to purchase additional equipment for $6,500,000.
In the normal course of its business, the Company becomes involved in various
litigation matters including, among other things, claims by third parties for
alleged property damages, personal injuries and other matters. While the Company
believes it has meritorious defenses against these claims, management has used
estimates in determining the Company's potential exposure and has recorded
reserves in its financial statements related thereto where appropriate. It is
possible that a change in the Company's estimates of that exposure could occur,
but the Company does not expect such changes in estimated costs will have a
material effect on the Company's financial position or results of its
operations.
31
In connection with an examination of the Company's income tax return for fiscal
year 2001, the Internal Revenue Service (IRS) has indicated that it may assert a
deficiency in the amount of taxes paid based on the manner in which vessel
assets were classified for the purpose of depreciation. If the IRS were able to
sustain its position, the Company would be required to pay currently certain
amounts, which have not yet been determined, that are currently reported as
long-term deferred tax obligations. Other than a potential charge for interest
related to any such deficiencies, the final resolution of this matter should not
have an effect on the Company's results of operations. The Company intends to
vigorously defend its position and to contest any deficiency that may be
asserted.
As of December 31, 2003, the Company leases 36 vessels, resulting primarily from
sale-leaseback transactions, 16 helicopters, 174 barges and certain facilities
and equipment. These leasing agreements have been classified as operating leases
for financial reporting purposes and related rental fees are charged to expense
over the lease term as they become payable. Vessel leases generally contain
purchase and lease renewal options at fair market value or rights of first
refusal with respect to the sale or lease of the vessels and range in duration
from 1 to 7 years. Certain of the gains realized from various sale-leaseback
transactions, totaling $5,201,000, $13,822,000 and $11,447,000 in 2003, 2002 and
2001, respectively, have been deferred in the Consolidated Balance Sheets and
are being credited to income as reductions in rental expense over the lease
terms. The total rental expense for the Company's operating leases in 2003, 2002
and 2001 totaled $24,372,000, $18,783,000 and $12,945,000, respectively. Future
minimum payments under operating leases that have a remaining term in excess of
one year at December 31, 2003:
(in thousands) Minimum
In the Years Ending December 31, Payment
--------------------------------------- -------------
2004............................... $ 28,028
2005............................... 25,012
2006............................... 17,663
2007............................... 12,005
2008............................... 9,828
Years subsequent to 2008........... 12,879
14. MAJOR CUSTOMERS AND SEGMENT DATA:
Accounting standards require public business enterprises to report information
about each of their operating business segments that exceed certain quantitative
thresholds or meet certain other reporting requirements. Operating business
segments have been defined as a component of an enterprise about which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance. The Company's basis of segmentation and its basis of measurement of
segment profit have not changed from previous periods reported, except for a
change in certain vessels' estimated residual values as described in Note 1
herein.
The Company's most significant business segment, offshore marine services, is
primarily engaged in the operation of a diversified fleet of offshore support
vessels serving oil and gas exploration and development activities in the U.S.
Gulf of Mexico, the North Sea, West Africa, Asia, Latin America and Mexico and
other international regions. The Company's vessels deliver cargo and personnel
to offshore installations, handle anchors for drilling rigs and other marine
equipment, support offshore construction and maintenance work, provide standby
safety services, and support the Company's environmental service segment's oil
spill response activities. From time to time, vessels service special projects,
such as well stimulation, seismic data gathering and freight hauling. In
addition to vessel services, the Company's offshore marine services business
offers logistics services, which include shorebase, marine transport and other
supply chain management services also in support of offshore oil and gas
exploration and development operations.
32
The Company's environmental services segment provides contractual oil spill
response and other services, both domestically and internationally, to those who
store, transport, produce or handle petroleum and certain non-petroleum oils, as
required by the Oil Pollution Act of 1990, as amended ("OPA 90"), various state
regulations and the United Nations' MARPOL 73/78 regulations. Services include
training, consulting and supervision for emergency preparedness, response and
crisis management associated with oil or hazardous material spills, fires and
natural disasters and maintaining specialized equipment for immediate deployment
in response to spills and other events. The Company maintains relationships with
numerous environmental sub-contractors to assist with response operations,
equipment maintenance and provide trained personnel for deploying equipment in a
spill response. When oil spills occur, the Company mobilizes specialized oil
spill response equipment, using either its own personnel or personnel under
contract, to provide emergency response services for both land and marine oil
spills. The Company's clients include tank vessel owner/operators, refiners and
terminal operators, exploration and production facility operators, and pipeline
operators. In accordance with Statement of Financial Accounting Standards No.
131, the Company's environmental services segment has been separately reported
in the segment information presented below due to its improvement in operating
results. Certain reclassifications of prior year information have been made to
conform to the current year's reportable segment presentation.
"Other" business segment of the Company includes inland river dry cargo barge
operations, aviation services and equity in earnings of 50% or less owned
companies unrelated to the offshore marine services and environmental services
segments. The Company's aviation services commenced operations on December 31,
2002 with the acquisition of Tex-Air Helicopters, Inc. The Company reported its
equity in the earnings of Chiles, an owner and operator of jackup drilling rigs,
until Chiles' merger with ENSCO on August 7, 2002.
Information about profit and loss and assets by business segment is as follows:
Offshore "Other"
Marine Environmental Business
FOR THE YEAR ENDED DECEMBER 31, 2003 (IN THOUSANDS) Services Services Segment Total
------------------------------------------------------------- ------------- -------------- -------------- ------------
OPERATING REVENUES:
External customers..........................................$ 315,822 $ 44,045 $ 46,342 $ 406,209
Intersegment................................................ 294 - 2,257 2,551
------------- -------------- -------------- ------------
$ 316,116 $ 44,045 $ 48,599 408,760
============= ============== ==============
Eliminations................................................ (2,551)
------------
$ 406,209
============
REPORTABLE SEGMENT PROFIT:
Operating profit (loss).....................................$ 6,378 $ 9,045 $ 2,216 $ 17,639
Income from equipment sales and retirements, net............ 17,866 83 (411) 17,538
Other, net.................................................. 5,055 (7) (2,163) 2,885
Equity in earnings (losses) of 50% or less owned companies.. 2,306 (56) (832) 1,418
------------- -------------- -------------- ------------
$ 31,605 $ 9,065 $ (1,190) 39,480
============= ============== ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES,
MINORITY INTEREST AND EQUITY EARNINGS:
Interest income............................................ 7,531
Interest expense........................................... (19,313)
Debt extinguishment........................................ (2,091)
Gain on derivative transactions, net....................... 2,389
Gain from sale of marketable securities, net............... 6,595
Corporate.................................................. (11,724)
Equity in earnings of 50% or less owned companies.......... (1,418)
------------
$ 21,449
============
ASSETS:
Investments in and Receivables from 50% or less owned
companies.................................................$ 33,891 $ (10) $ 25,967 $ 59,848
Goodwill.................................................... 12,646 14,264 1,798 28,708
Other Segment Assets........................................ 683,193 26,898 147,816 857,907
------------- -------------- -------------- ------------
$ 729,730 $ 41,152 $ 175,581 946,463
============= ============== ==============
Corporate................................................... 456,148
------------
$ 1,402,611
============
CAPITAL EXPENDITURES:
Segment.....................................................$ 93,673 $ 2,139 $ 65,473 161,285
============= ============== ==============
Corporate................................................... 557
------------
$ 161,842
============
DEPRECIATION AND AMORTIZATION:
Segment.....................................................$ 46,425 $ 2,509 $ 6,250 55,184
============= ============== ==============
Corporate................................................... 322
------------
$ 55,506
============
33
Offshore "Other"
Marine Environmental Business
FOR THE YEAR ENDED DECEMBER 31, 2002 (IN THOUSANDS) Services Services Segment Total
------------------------------------------------------------- ------------- -------------- -------------- ------------
OPERATING REVENUES:
External customers..........................................$ 367,914 $ 22,087 $ 13,157 $ 403,158
Intersegment................................................ 55 - 212 267
------------- -------------- -------------- ------------
$ 367,969 $ 22,087 $ 13,369 403,425
============= ============== ==============
Eliminations................................................ (267)
------------
$ 403,158
============
REPORTABLE SEGMENT PROFIT:
Operating profit (loss).....................................$ 49,598 $ 1,016 $ 4,308 $ 54,922
Income from equipment sales and retirements, net............ 8,625 10 - 8,635
Other, net.................................................. 6,307 - 118 6,425
Equity in earnings (losses) of 50% or less owned companies.. 5,353 (37) (1,611) 3,705
------------- -------------- -------------- ------------
$ 69,883 $ 989 $ 2,815 73,687
============= ============== ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES,
MINORITY INTEREST AND EQUITY EARNINGS:
Interest income............................................ 8,833
Interest expense........................................... (17,064)
Debt extinguishment........................................ (2,338)
Gain upon sale of Chiles Offshore Inc...................... 19,719
Loss from derivative transactions, net..................... (5,043)
Gain from sale of marketable securities, net............... 3,218
Corporate.................................................. (11,165)
Equity in earnings of 50% or less owned companies.......... (3,705)
------------
$ 66,142
============
ASSETS:
Investments in and Receivables from 50% or less owned
companies.................................................$ 39,155 $ 83 $ 22,121 $ 61,359
Goodwill.................................................... 12,646 14,172 1,523 28,341
Other Segment Assets........................................ 878,526 12,386 71,281 962,193
------------- -------------- -------------- ------------
$ 930,327 $ 26,641 $ 94,925 1,051,893
============= ============== ==============
Corporate................................................... 435,214
------------
$ 1,487,107
============
CAPITAL EXPENDITURES:
Segment.....................................................$ 94,037 $ 1,284 $ 43,989 139,310
============= ============== ==============
Corporate................................................... 396
------------
$ 139,706
============
DEPRECIATION AND AMORTIZATION:
Segment.....................................................$ 50,846 $ 3,280 $ 1,885 56,011
============= ============== ==============
Corporate................................................... 233
------------
$ 56,244
============
FOR THE YEAR ENDED DECEMBER 31, 2001 (IN THOUSANDS)
-------------------------------------------------------------
OPERATING REVENUES:
External customers..........................................$ 398,557 $ 26,847 $ 9,386 $ 434,790
Intersegment................................................ 566 - 212 778
------------- -------------- -------------- ------------
$ 399,123 $ 26,847 $ 9,598 435,568
============= ============== ==============
Eliminations................................................ (778)
------------
$ 434,790
============
REPORTABLE SEGMENT PROFIT:
Operating profit (loss).....................................$ 96,821 $ 2,037 $ 2,208 $ 101,066
Income from equipment sales and retirements, net............ 9,180 6 (156) 9,030
Other, net.................................................. 1,384 - 8 1,392
Equity in earnings (losses) of 50% or less owned companies.. 3,882 26 398 4,306
------------- -------------- -------------- ------------
$ 111,267 $ 2,069 $ 2,458 115,794
============= ============== ==============
RECONCILIATION TO INCOME BEFORE INCOME TAXES,
MINORITY INTEREST AND EQUITY EARNINGS:
Interest income............................................ 13,546
Interest expense........................................... (21,998)
Debt extinguishment........................................ (1,383)
Gain on derivative transactions, net....................... 4,127
Gain from sale of marketable securities, net............... 5,689
Corporate.................................................. (9,131)
Equity in earnings of 50% or less owned companies.......... (4,306)
------------
$ 102,338
============
ASSETS:
Investments in and Receivables from 50% or less owned
companies.................................................$ 49,618 $ 303 $ 103,906 $ 153,827
Goodwill.................................................... 12,537 14,172 1,523 28,232
Other Segment Assets........................................ 862,611 14,240 30,787 907,638
------------- -------------- -------------- ------------
$ 924,766 $ 28,715 $ 136,216 1,089,697
============= ============== ==============
Corporate................................................... 208,441
------------
$ 1,298,138
============
CAPITAL EXPENDITURES:
Segment.....................................................$ 92,495 $ 3,762 $ 11,141 107,398
============= ============== ==============
Corporate................................................... 47
------------
$ 107,445
============
DEPRECIATION AND AMORTIZATION:
Segment.....................................................$ 52,871 $ 4,288 $ 1,110 58,269
============= ============== ==============
Corporate................................................... 55
------------
$ 58,324
============
34
In 2003 and 2002, the Company did not earn revenues from a single customer that
was greater than or equal to 10% of total revenues. Revenues earned by the
Company's offshore marine and environmental services businesses for services
rendered to divisions or subsidiaries of one customer totaled $42,240,000, or
10%, of revenues in 2001. Revenues attributed to geographic areas were based
upon the country of domicile for offshore marine and drilling service segment
customers and the country in which the Company provided oil spill protection or
other related training and consulting services for environmental service segment
customers. The Company considers long-lived assets to be property and equipment
that has been distributed to geographical areas based upon the assets' physical
location during the applicable period. Certain of the Company's offshore marine
service segment's long-lived vessel assets relocate between its geographical
areas of operation. The costs of long-lived vessel assets that are relocated
have been allocated between geographical areas of operation based upon length of
service in the applicable region. The following table is presented for the years
ending December 31.
(in thousands) 2003 2002 2001
------------------------------------------------ ------------ ------------- ------------
Revenues:
United States of America................. $ 217,677 $ 212,291 $ 267,195
United Kingdom........................... 71,996 83,033 74,477
Nigeria.................................. 26,329 36,130 29,425
Other.................................... 90,207 71,704 63,693
------------ ------------- ------------
$ 406,209 $ 403,158 $ 434,790
============ ============= ============
Property and Equipment:
United States of America................. $ 387,895 $ 365,474 $ 335,648
United Kingdom........................... 131,561 182,741 186,686
Mexico................................... 80,699 15,547 20,900
Nigeria.................................. 46,142 42,121 39,973
Other.................................... 91,919 132,085 151,550
------------ ------------- ------------
$ 738,216 $ 737,968 $ 734,757
============ ============= ============
For the years ended December 31, 2003, 2002 and 2001, approximately 46%, 47%,
and 39%, respectively, of the Company's operating revenues were derived from its
foreign operations. The Company's foreign operations, primarily contained in its
offshore marine service segment, are subject to various risks inherent in
conducting business in foreign nations. These risks include, among others,
political instability, potential vessel seizure, nationalization of assets,
terrorist attacks, currency restrictions and exchange rate fluctuations,
import-export quotas and other forms of public and governmental regulations, all
of which are beyond the control of the Company. Although historically the
Company's operations have not been affected materially by such conditions or
events, it is not possible to predict whether any such conditions or events
might develop in the future. The occurrence of any one or more of such
conditions or events could have a material adverse effect on the Company's
financial condition and results of operations. Oil spill response and related
training and consulting service revenues derived from foreign markets have not
been material and barge and helicopter operations are limited to the U.S.
15. SUPPLEMENTAL INFORMATION FOR STATEMENTS OF CASH FLOWS:
(in thousands) 2003 2002 2001
---------------------------------------------------------------------------------------- --------- --------- ---------
Income taxes paid.................................................................... $ 5,341 $ 15,435 $ 14,244
Income taxes refunded................................................................ 10,000 - -
Interest paid........................................................................ 22,421 16,194 21,262
Schedule of Non-Cash Investing and Financing Activities:
Cancellation of sales-type lease................................................. 1,710 - -
Exchange of assets with affiliate................................................ 170 - -
Property exchanged for investment in and notes receivable from 50% or less owned
company........................................................................ - - 17,688
Conversion of 5 3/8% Notes - Common Stock............................. 2 1 98,824
Acquisition of ERST/O'Brien's Inc. with
- Common Stock............................. - - 1,284
Acquisition of Plaisance with - Common Stock............................. - - 3,163
- assumption of debt....................... - - 700
Acquisition of Rincon vessels with - assumption of debt....................... - - 13,600
Acquisition of Stirling Shipping with - Common Stock............................. - - 12,777
- assumption of debt....................... - - 61,900
- notes, including debt discount........... - - 21,200
Acquisition of Tex-Air with - Common Stock............................. - 2,727 -
- assumption of debt....................... - 6,662 -
35
16. OTHER ASSETS:
Other assets as of December 31 include the following:
(in thousands) 2003 2002
---------------------------------------------------------- ----------- ------------
Goodwill, net of amortization....................... $ 28,708 $ 28,341
Deferred financing costs, net of amortization....... 2,627 3,055
Net sale-type leases................................ - 2,443
Notes receivable.................................... 1,135 15
Common stock investments, carried at cost........... 700 1,190
Refundable deposits................................. 902 2,684
Other............................................... 117 960
----------- ------------
Total other assets.................................. $ 34,189 $ 38,688
=========== ============
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
Selected financial information for interim periods are presented below. Earnings
per share are computed independently for each of the quarters presented;
therefore, the sum of the quarterly earnings per share do not necessarily equal
the total for the year.
Quarter Ended
--------------------------------------------------------------
(in thousands, except share data) Dec. 31, Sept. 30, June 30, March 31,
----------------------------------------------------- ----------- ----------- ----------- -----------
2003:
Revenue......................................... $ 100,956 $ 103,234 $ 105,159 96,860
Operating income (loss)......................... (7,837) 3,883 8,638 1,045
Net income (loss)............................... (1,730) 2,897 6,443 4,344
Basic earnings (loss) per common share.......... $ (0.09) $ 0.16 $ 0.34 $ 0.22
=========== =========== =========== ===========
Diluted earnings (loss) per common share........ $ (0.09) $ 0.15 $ 0.33 $ 0.22
=========== =========== =========== ===========
2002:
Revenue......................................... $ 99,708 $ 102,137 $ 97,670 $ 103,643
Operating income................................ 3,743 10,025 9,738 20,251
Net income...................................... 1,638 21,295 12,248 11,406
Basic earnings per common share................. $ 0.08 $ 1.06 $ 0.61 $ 0.57
=========== =========== =========== ===========
Diluted earnings per common share............... $ 0.08 $ 1.02 $ 0.59 $ 0.55
=========== =========== =========== ===========
36
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE
We have audited the consolidated financial statements of SEACOR SMIT Inc. and
subsidiaries as of December 31, 2003 and 2002 and for the years then ended, and
have issued our report thereon dated March 9, 2004 (included elsewhere in this
Form 10-K). Our audits also included the financial statement schedule listed in
Item 15(a) of this Form 10-K as of and for the years ended December 31, 2003 and
2002. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the 2003 and 2002 financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly in all material respects the information set forth
therein.
/s/ Ernst & Young LLP
New Orleans, Louisiana
March 9, 2004
37
REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENT SCHEDULE
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP ON
FINANCIAL STATEMENT SCHEDULE IN CONNECTION WITH SEACOR SMIT INC.'S FILING ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001. THIS AUDIT REPORT HAS NOT
BEEN REISSUED BY ARTHUR ANDERSEN LLP IN CONNECTION WITH THIS FILING ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 AS THEY HAVE CEASED OPERATIONS.
SEACOR SMIT INC. IS INCLUDING THIS COPY OF ARTHUR ANDERSON LLP'S AUDIT REPORT
PURSUANT TO RULE 2-02(E) OF REGULATION S-X UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.
To SEACOR SMIT Inc.:
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of SEACOR SMIT Inc. and its
subsidiaries and have issued our report thereon dated February 21, 2002. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule on page 76 is the responsibility of
the Company's management and is presented for the purpose of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
New Orleans, Louisiana
February 21, 2002
38
SEACOR SMIT INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS)
Balance Allowances Charges to Balance
Beginning Assumed in Cost and (a) End
Description of Year Acquisitions Expenses Deductions of Year
------------------------------------------- -------------- ------------- ------------- ------------ ------------
Year Ended December 31, 2003
Allowance for doubtful accounts
(deducted from accounts receivable)... $ 1,421 $ 718 $ 829 $ 168 $ 2,800
============== ============= ============= ============ ============
Year Ended December 31, 2002
Allowance for doubtful accounts
(deducted from accounts receivable)... $ 1,635 $ 0 $ 9 $ 223 $ 1,421
============== ============= ============= ============ ============
Year Ended December 31, 2001
Allowance for doubtful accounts
(deducted from accounts receivable)... $ 1,310 $ 0 $ 947 $ 622 $ 1,635
============== ============= ============= ============ ============
(a) Accounts receivable amounts deemed uncollectible and removed from accounts
receivable and allowance for doubtful accounts.
39
EXHIBIT INDEX
-------------
Exhibit
Number Description
------ -----------
23.3 Consent of Ernst & Young LLP.
23.4 Notice Regarding Consent of Arthur Andersen LLP.
31.3 Certification by the Chief Executive Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
31.4 Certification by the Chief Financial Officer Pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act.
32.3 Certification by the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.4 Certification by the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.