-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AfwIHRbG9J6fORnRau+UwvdIK+232av+Z9RKETtQ0AfUDBDRAxm7JIUJrkae2OSX 5DHxpIjUwdzxtcguipOjpA== 0000950144-03-006885.txt : 20030515 0000950144-03-006885.hdr.sgml : 20030515 20030515111609 ACCESSION NUMBER: 0000950144-03-006885 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABULK INTERNATIONAL INC CENTRAL INDEX KEY: 0000922341 STANDARD INDUSTRIAL CLASSIFICATION: DEEP SEA FOREIGN TRANSPORTATION OF FREIGHT [4412] IRS NUMBER: 650524593 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-28732 FILM NUMBER: 03701913 BUSINESS ADDRESS: STREET 1: 2200 ELLER DR BLDG 27 STREET 2: PO BOX 13038 CITY: FORT LAUDERDALE STATE: FL ZIP: 33316 BUSINESS PHONE: 954-524-4200 MAIL ADDRESS: STREET 1: 2200 ELLER DR BLDG 27 CITY: FT LAUDERDALE STATE: FL ZIP: 33316 FORMER COMPANY: FORMER CONFORMED NAME: HVIDE MARINE INC DATE OF NAME CHANGE: 19940427 10-Q 1 g82679e10vq.txt SEABULK INTERNATIONAL, INC. FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 Commission File Number: 0-28732 SEABULK INTERNATIONAL, INC. State of Incorporation: Delaware I.R.S. Employer I.D.: 65-0966399 Address and Telephone Number: 2200 Eller Drive P.O. Box 13038 Ft. Lauderdale, Florida 33316 (954) 523-2200 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 twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past ninety days. YES [X] NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES [ ] NO [X] THERE WERE 23,317,735 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OUTSTANDING AT MAY 1, 2003. SEABULK INTERNATIONAL, INC. INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited)................................................1 Condensed Consolidated Balance Sheets at March 31, 2003 and December 31, 2002.....................1 Condensed Consolidated Statements of Operations for the three months ended March 31, 2003 and 2002...........................................................................2 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2003 and 2002...........................................................................3 Notes to Condensed Consolidated Financial Statements..............................................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................10 Item 3. Quantitative and Qualitative Disclosures of Market Risk...............................................20 Item 4. Controls and Procedures ..............................................................................21 PART II. OTHER INFORMATION Item 1. Legal Proceedings.....................................................................................22 Item 2. Changes in Securities ................................................................................22 Item 3. Defaults Upon Senior Securities.......................................................................22 Item 4. Submission of Matters to a Vote of Security Holders...................................................22 Item 5. Other Information.....................................................................................22 Item 6. Exhibits and Reports on Form 8-K......................................................................22 Signature......................................................................................................23 Certifications.................................................................................................24
As used in this Report, the term "Parent" means Seabulk International, Inc., and the term "Company" means the Parent and/or one or more of its consolidated subsidiaries. PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS, EXCEPT PAR VALUE DATA)
MARCH 31, DECEMBER 31, 2003 2002 --------- ------------ ASSETS Current assets: Cash and cash equivalents ....................................................... $ 39,244 $ 37,188 Restricted cash ................................................................. 1,337 1,337 Trade accounts receivable, net of allowance for doubtful accounts of $4,924 and $5,243 in 2003 and 2002, respectively ..................................... 40,424 45,987 Other receivables ............................................................... 14,073 13,485 Marine operating supplies ....................................................... 8,176 8,139 Prepaid expenses and other ...................................................... 2,426 2,702 --------- --------- Total current assets .......................................................... 105,680 108,838 Vessels and equipment, net ......................................................... 551,751 545,169 Deferred costs, net ................................................................ 35,162 38,228 Other .............................................................................. 7,085 10,860 --------- --------- Total assets .................................................................. $ 699,678 $ 703,095 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................................................................ $ 8,862 $ 11,343 Current maturities of long-term debt ............................................ 24,345 24,315 Current obligations under capital leases ........................................ 3,023 3,005 Accrued interest ................................................................ 5,805 1,733 Accrued liabilities and other ................................................... 42,614 42,181 --------- --------- Total current liabilities ..................................................... 84,649 82,577 Long-term debt ..................................................................... 404,511 410,858 Obligations under capital leases ................................................... 28,006 28,748 Other liabilities .................................................................. 3,463 3,489 --------- --------- Total liabilities ............................................................. 520,629 525,672 Commitments and contingencies Minority interest .................................................................. 651 623 Stockholders' equity: Preferred stock, no par value--authorized 5,000; none issued and outstanding .... -- -- Common stock-$.01 par value, authorized 40,000 shares; 23,239 and 23,124 shares issued and outstanding in 2003 and 2002, respectively ............. 232 231 Additional paid-in capital ...................................................... 258,827 258,016 Unearned compensation ........................................................... (899) (99) Accumulated deficit ............................................................. (79,762) (81,348) --------- --------- Total stockholders' equity .................................................... 178,398 176,800 --------- --------- Total liabilities and stockholders' equity .................................. $ 699,678 $ 703,095 ========= =========
See accompanying notes. 1 SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, ----------------------------- 2003 2002 -------- -------- Revenue ..................................................... $ 77,229 $ 83,199 Operating expenses: Crew payroll and benefits ................................ 21,380 22,776 Charter hire ............................................. 1,726 1,797 Repairs and maintenance .................................. 5,733 6,764 Insurance ................................................ 2,204 2,773 Fuel and consumables ..................................... 6,139 7,329 Port charges and other ................................... 4,190 4,302 -------- -------- Total operating expenses ............................... 41,372 45,741 Overhead expenses: Salaries and benefits .................................... 5,867 5,827 Office ................................................... 1,219 1,284 Professional fees ........................................ 910 585 Other .................................................... 1,334 1,236 -------- -------- Total overhead expenses ................................ 9,330 8,932 Depreciation, amortization and drydocking ................... 16,494 16,558 -------- -------- Income from operations ...................................... 10,033 11,968 Other (expense) income: Interest expense ......................................... (8,063) (12,713) Interest income .......................................... 86 62 Minority interest in (gains) losses of subsidiaries ...... (28) 99 Gain (loss) on disposal of assets ........................ 797 (128) Other .................................................... 23 93 -------- -------- Total other expense, net ............................... (7,185) (12,587) -------- -------- Income (loss) before provision for income taxes ............. 2,848 (619) Provision for income taxes .................................. 1,262 1,667 -------- -------- Net income (loss) ...................................... $ 1,586 $ (2,286) ======== ======== Net income (loss) per common share: Net income (loss) per common share - basic ............. $ 0.07 $ (0.22) ======== ======== Net income (loss) per common share - diluted ........... $ 0.07 $ (0.22) ======== ======== Weighted average common shares outstanding - basic ..... 23,102 10,461 ======== ======== Weighted average common shares outstanding - diluted ... 23,435 10,461 ======== ========
See accompanying notes. 2 SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 2003 2002 -------- -------- OPERATING ACTIVITIES: Net income (loss) ............................................................... $ 1,586 $ (2,286) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of vessels and equipment ..................... 10,795 11,231 Amortization of drydocking costs ........................................... 5,699 5,327 (Recovery of) provision for bad debts ...................................... (255) 307 (Gain) loss on disposal of assets .......................................... (797) 128 Amortization of discount on long-term debt and financing costs ............. 373 1,352 Minority interest in gains (losses) of subsidiaries ........................ 28 (99) Senior and notes payable issued for payment of accrued interest and fees ... -- 375 Other non-cash items ....................................................... 39 218 Changes in operating assets and liabilities: Accounts and other receivables ......................................... 4,872 5,787 Other current and long-term assets ..................................... 3,338 2,823 Accounts payable and other liabilities ................................. 1,999 4,603 -------- -------- Net cash provided by operating activities ............................ 27,677 29,766 INVESTING ACTIVITIES: Expenditures for drydocking ..................................................... (2,964) (5,615) Proceeds from disposals of assets ............................................... 2,343 5,104 Purchases of vessels and equipment .............................................. (17,871) (1,306) -------- -------- Net cash used in investing activities ........................................ (18,492) (1,817) FINANCING ACTIVITIES: Net payments of revolving credit facility ....................................... -- (6,700) Payments of New Credit Facility ................................................. (5,000) -- Payments of long-term debt ...................................................... (867) (7,548) Payments of Title XI bonds ...................................................... (450) (450) Payments of deferred financing costs for New Credit Facility .................... (88) -- Payments of obligations under capital leases .................................... (724) (823) -------- -------- Net cash used in financing activities ........................................ (7,129) (15,521) -------- -------- Change in cash and cash equivalents ............................................. 2,056 12,428 Cash and cash equivalents at beginning of period ................................ 37,188 11,631 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ...................................... $ 39,244 $ 24,059 ======== ======== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Senior and notes payable issued for payment of accrued interest and fees ........ $ -- $ 375 ======== ======== Vessels exchanged for drydock expenditures ...................................... $ -- $ 900 ======== ======== Reactivation of two vessels that were classified as assets held for sale ........ $ -- $ 1,682 ======== ========
See accompanying notes. 3 SEABULK INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2003 (UNAUDITED) 1. ORGANIZATION AND BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. All adjustments which, in the opinion of management, are considered necessary for a fair presentation of the results of operations for the periods shown are of a normal recurring nature and have been reflected in the unaudited condensed consolidated financial statements. The results of operations for the periods presented are not necessarily indicative of the results expected for the full fiscal year or for any future period. The information included in these unaudited condensed consolidated financial statements should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2002. Except net income (loss), the Company has no material components of comprehensive income (loss). Certain financial statement reclassifications have been made to conform prior periods' data to the 2003 financial statement presentation. 2. VESSEL PURCHASES In January 2003, the Company took delivery of the Seabulk Africa, a newbuild, state-of-the art, 236-foot, 5,500 horsepower UT-755L platform supply vessel. The vessel has joined the Company's West African fleet. The Seabulk Africa and related improvements were acquired for cash of approximately $17.8 million and financed in April 2003 by means of a sale leaseback arrangement with TransAmerica Capital for a lease term of 10 years, after which the Company will have an option to acquire the vessel. In February 2003, the Company finalized an agreement to purchase a Brazilian flag offshore line handling vessel built in 2002 for delivery by July 2003. The purchase price is $2.6 million and, upon delivery, will enter the Brazilian offshore market. In April 2003, the Company terminated a capital lease with TA Marine Inc. for the Seabulk Arizona and acquired the vessel for $6.9 million. The Seabulk Arizona is a 1998 built, 186-foot, 4,200 horsepower supply vessel. Financing was in the form of a 5-year, $6.5 million term loan provided by Orix Financial Services, Inc. In April 2003, the Company finalized an agreement with a Brazilian shipyard to build a state-of-the-art, 236-foot, 5,460 horsepower UT-755L platform supply vessel for delivery in the Fall of 2004, with an option for a second sister ship. The vessel has a purchase price of $16.7 million and, upon delivery, will enter the Brazilian offshore market. 4 3. JOINT VENTURE AGREEMENTS In March 2003, the Company formed a joint venture company in Nigeria, named Modant Seabulk Nigeria Limited, with CTC International, Inc., a company owned by Nigerian interests. The Company has a 40% interest in Modant Seabulk Nigeria Limited. The Company also sold five of its crewboats operating in Nigeria to joint venture companies related to CTC International in April 2003. As a part of the proceeds of sale, the Company acquired a 20% interest in these joint venture companies. Modant Seabulk Nigeria Limited will operate crewboats in Nigeria. Seabulk Offshore will provide certain management services for the joint venture. 4. INCOME TAXES For the three months ended March 31, 2003 and 2002, a gross deferred tax benefit was computed using an estimated annual effective tax rate of 35%. Management has recorded a valuation allowance at March 31, 2003 and 2002 to reduce the net deferred tax assets to an amount that will more likely than not be realized. After application of the valuation allowance, the net deferred tax assets are zero. The current provision for income taxes for the three-month periods ended March 31, 2003 and 2002 represents taxes withheld on foreign source revenue. 5. NET INCOME (LOSS) PER COMMON SHARE The following table sets forth the computation of basic and diluted net income (loss) per share for the periods indicated:
THREE MONTHS ENDED MARCH 31, --------------------------- 2003 2002 ------- -------- (IN THOUSANDS, EXCEPT FOR PER SHARE DATA) Numerator for basic and diluted net income (loss) per share: Net income (loss) available to common shareholders ............. $ 1,586 $ (2,286) ======= ======== Denominator for basic net income per share-weighted average shares .............................................. 23,102 10,461 Effects of dilutive securities: Stock options .................................................. 123 -- Warrants ....................................................... 210 -- ------- -------- Dilutive potential common shares ............................... 333 -- ------- -------- Denominator for diluted net income per share-adjusted weighted average shares and assumed conversions ............. 23,435 10,461 ======= ======== Net income (loss) per share - basic ............................ $ 0.07 $ (0.22) ======= ======== Net income (loss) per share - diluted .......................... $ 0.07 $ (0.22) ======= ========
The weighted average diluted common shares outstanding for the three months ended March 31, 2003 and 2002 excludes 746,000 and 818,000, respectively. Additionally, 250,000 and 572,000 warrants are excluded from the weighted average diluted common shares outstanding for the three months ended March 31, 2003 and 2002, respectively. These common stock equivalents are excluded because they are antidilutive. 5 6. SEGMENT INFORMATION The Company organizes its business principally into three segments. The Company does not have significant intersegment transactions. These segments and their respective operations are as follows: Offshore Energy Support (Seabulk Offshore) - Offshore energy support includes vessels operating in U.S. and foreign locations used primarily to transport materials, supplies, equipment and personnel to drilling rigs and to support the construction, positioning and ongoing operations of oil and gas production platforms. Marine Transportation Services (Seabulk Tankers) - Marine transportation services includes oceangoing vessels used to transport chemicals, fuel and other petroleum products, primarily from chemical manufacturing plants, refineries and storage facilities along the U.S. Gulf of Mexico coast to industrial users and distribution facilities in and around the Gulf of Mexico, Atlantic and Pacific coast ports. Certain of the vessels also transport crude oil within Alaska and among Alaska, the Pacific coast and Hawaiian ports. Towing (Seabulk Towing) - Harbor and offshore towing services are provided by tugs to vessels utilizing the ports in which the tugs operate, and to vessels at sea to the extent required by offshore commercial contract opportunities and by environmental regulations, casualty or other emergency. The Company evaluates performance by operating segment. Also, within the offshore energy support segment, the Company performs additional performance evaluations of vessels marketed in U.S. and foreign locations. Resources are allocated based on segment profit or loss from operations, before interest and taxes. Revenue by segment and geographic area consists only of services provided to external customers, as reported in the Statements of Operations. Income from operations by geographic area represents net revenue less applicable costs and expenses related to that revenue. Unallocated expenses are primarily comprised of general and administrative expenses of a corporate nature. 6 The following schedules present segment and geographic information about the Company's operations (in thousands):
THREE MONTHS ENDED MARCH 31, ----------------------------- 2003 2002 -------- -------- REVENUE Offshore energy support ................... $ 37,838 $ 43,312 Marine transportation services ............ 30,177 31,924 Towing .................................... 9,289 8,060 Eliminations (1) .......................... (75) (97) -------- -------- TOTAL .................................. $ 77,229 $ 83,199 ======== ======== OPERATING EXPENSES Offshore energy support ................... $ 23,202 $ 23,589 Marine transportation services ............ 13,657 17,767 Towing .................................... 4,588 4,471 Corporate ................................. -- 11 Eliminations (1) .......................... (75) (97) -------- -------- TOTAL .................................. $ 41,372 $ 45,741 ======== ======== DEPRECIATION, AMORTIZATION AND DRYDOCKING Offshore energy support ................... $ 10,689 $ 10,503 Marine transportation services ............ 4,554 4,548 Towing .................................... 826 760 General corporate ......................... 425 747 -------- -------- TOTAL .................................. $ 16,494 $ 16,558 ======== ======== INCOME (LOSS) FROM OPERATIONS Offshore energy support ................... $ (762) $ 5,111 Marine transportation services ............ 11,083 8,157 Towing .................................... 2,653 1,686 General corporate ......................... (2,941) (2,986) -------- -------- TOTAL .................................. $ 10,033 $ 11,968 ======== ======== NET INCOME (LOSS) Offshore energy support ................... $ (4,104) $ (2,471) Marine transportation services ............ 6,671 2,588 Towing .................................... 1,965 383 General Corporate ......................... (2,946) (2,786) -------- -------- TOTAL .................................. $ 1,586 $ (2,286) ======== ======== GEOGRAPHIC REVENUE Domestic .................................. $ 48,227 $ 53,571 Foreign West Africa ............................ 19,964 20,416 Middle East ............................ 5,477 6,058 Southeast Asia ......................... 3,561 3,154 -------- -------- CONSOLIDATED GEOGRAPHIC REVENUE ............. $ 77,229 $ 83,199 ======== ========
(1) Eliminations of intersegment towing revenue and intersegment marine transportation operating expense. 7 7. COMMITMENTS AND CONTINGENCIES Under United States law, "United States persons" are prohibited from business activities and contracts in certain countries, including Sudan and Iran. The Company has filed three reports with and submitted documents to the Office of Foreign Asset Control ("OFAC") of the U.S. Department of Treasury. One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce. The reports and documents related to certain limited charters with third parties involving three of the Company's vessels which called in the Sudan for several months in 1999 and January 2000, and charters with third parties involving several of the Company's vessels which called in Iran in 1998. In March 2003, the Company received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against the Company and/or certain individuals who knowingly participated in such activities. The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its financial position or results of operations. The Company was sued by Maritime Transportation Development Corporation in January 2002 in Florida state court in Broward County alleging broker commissions due since 1998 from charters on two of its vessels, the Seabulk Magnachem and Seabulk Challenger, under an alleged broker commission agreement. The claim allegedly continues to accrue. The amount alleged to be due is over $500,000, but is subject to offset claims and defenses by the Company. The Company is vigorously defending such charges and believes that it has good defenses, but the Company cannot predict the ultimate outcome. Under the Company's mutual protection and indemnity marine insurance policy, the Company could be liable for additional premiums to cover investment losses and reserve shortfalls experienced by its marine insurance club (Steamship). The maximum potential amount of additional premiums that can be assessed by Steamship is substantial. However, additional premiums can only be assessed for open policy years. Steamship usually closes a policy year approximately three years after the policy year has ended. As of May 1, 2003, completed policy years 2000 - 2002 are still open, but there have been no additional premiums assessed for these policy years. The Company will record a liability for any such additional premiums in the period that they are assessed and the amount can be reasonably estimated. From time to time, the Company is also party to personal injury and property damage claims litigation arising in the ordinary course of our business. The Company has significant deductibles and self-insured retentions which will cover Protection and Indemnity marine insurance claims. Claim costs in excess of these significant deductibles and self-insured retentions will be covered by Protection and Indemnity mutual insurance. 8. STOCK-BASED COMPENSATION As permitted by SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), the Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and related interpretations in accounting for its employee stock-based transactions and has complied with the disclosure requirements of SFAS 123. Under APB 25, compensation expense is calculated at the time of option grant based upon the difference between the exercise prices of the option and the fair market value of the Company's common stock at the date of grant recognized over the vesting period. 8 On December 31, 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. SFAS No. 148 amends SFAS 123 to provide alternative methods of transition to the fair value method of accounting for stock-based employee compensation. In addition, this statement amends the disclosure provisions of SFAS 123 to require expanded disclosure of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements. The Company uses the Black-Scholes option valuation model to determine the fair value of options granted under the Company's stock option plans. Had compensation expense for the stock option grants been determined based on the fair value at the grant date for awards consistent with the methods of SFAS No. 123, the Company's net income (loss) would have changed the pro forma amounts presented below:
THREE MONTHS ENDED MARCH 31, -------------------------------- 2003 2002 ---------- ---------- Net income (loss), as reported ............................................ $ 1,586 $ (2,286) Stock-based compensation expense determined under the fair value method ... $ (171) $ (238) ---------- ---------- Pro forma net income (loss) ............................................... $ 1,415 $ (2,524) ========== ========== Net income (loss) per common share: Basic-as reported ................................................ $ 0.07 $ (0.22) ========== ========== Basic-pro forma .................................................. $ 0.06 $ (0.24) ========== ========== Diluted-as reported .............................................. $ 0.07 $ (0.22) ========== ========== Diluted-pro forma ................................................ $ 0.06 $ (0.24) ========== ==========
9. RECENT ACCOUNTING PRONOUNCEMENTS In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 expands on the accounting guidance of Statements No. 5, 57, and 107 and incorporates without change the provisions of FASB Interpretation No. 34, which is being superseded. FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, it must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosure requirements in the Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 is not expected to have a significant impact on the Company. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 14, and Technical Corrections, which eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect, and eliminates an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Subsequent to the January 1, 2003 adoption date of the 9 standard, the Company will be required to reclassify to continuing operations amounts previously reported as extinguishments of debt. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses the financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 is effective for fiscal years beginning after December 31, 2002. The adoption of the standard is not expected to have a significant impact on the Company. In June 2001, the Accounting Executive Committee of the American Institute of Certified Public Accountants issued an exposure draft of a proposed Statement of Position ("SOP") entitled Accounting for Certain Costs and Activities Related to Property, Plant and Equipment. Under the proposed SOP, the Company would expense major maintenance costs as incurred and prohibit the use of the deferral of the entire cost of a planned major maintenance activity. Currently, the costs incurred to drydock the Company's vessels are deferred and amortized on a straight-line basis over the period to the next drydocking, generally 30 to 36 months. Management has determined that this SOP, if issued as proposed, would have a material effect on the consolidated financial statements. In the year of adoption, the Company would write-off the net book value of the deferred drydocking costs and record the write-off as a change in accounting principle ($24.4 million as of March 31, 2003). Additionally, all drydock expenditures incurred after the adoption of the SOP would be expensed as incurred. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the condensed consolidated financial statements and the related notes thereto included elsewhere in this Report and the 2002 Form 10-K. The MD&A contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in the MD&A are forward-looking statements. Although the Company believes that the expectations and beliefs reflected in such forward-looking statements are reasonable, it can give no assurance that they will prove correct. For information regarding the risks and uncertainties that could cause such forward-looking statements to prove incorrect, see "Projections and Other Forward-Looking Information" in Item 1 of the 2002 Form 10-K. CRITICAL ACCOUNTING POLICIES AND ESTIMATES For general information concerning critical accounting policies as well as estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies and Estimates" in the 2002 Form 10-K. In June 2001, the Accounting Executive Committee of the American Institute of Certified Public Accountants issued an exposure draft of a proposed Statement of Position ("SOP") entitled Accounting for Certain Costs and Activities Related to Property, Plant and Equipment. Under the proposed SOP, the Company would expense major maintenance costs as incurred and prohibit the use of the deferral of the entire cost of a planned major maintenance activity. Currently, the costs incurred to drydock the vessels are deferred and amortized on a straight-line basis over the period to the next drydocking, generally 30 to 36 months. Management has determined that this SOP, if issued as proposed, would have a material effect on the consolidated financial statements. In the year of adoption, the Company would write off the net book value of the deferred drydocking costs and record the write-off as a change in accounting principle 10 ($24.4 million as of March 31, 2003). Additionally, all drydock expenditures incurred after the adoption of the SOP would be expensed as incurred. REVENUE OVERVIEW The Company derives its revenue from three main lines of business - Seabulk Offshore, Seabulk Tankers, and Seabulk Towing. Seabulk Offshore, the Company's domestic and international offshore energy support business, accounted for approximately 49% and 52% of Company revenue for the three months ended March 31, 2003 and 2002, respectively. Marine transportation, under the name Seabulk Tankers, consists of the Company's Jones Act tanker business, in which it operates ten petroleum and chemical product carriers in the domestic coastwise trade, and accounted for approximately 39% and 38% of Company revenue for the three months ended March 31, 2003 and 2002, respectively. Seabulk Towing, the Company's domestic harbor and offshore towing business, accounted for approximately 12% and 10% of Company revenue for the three months ended March 31, 2003 and 2002, respectively. SEABULK OFFSHORE Revenue from the Company's offshore energy support operations is primarily a function of the size of the Company's fleet, vessel day rates or charter rates, and fleet utilization. Rates and utilization are primarily a function of offshore exploration, development, and production activities, which are in turn heavily dependent upon the price of crude oil and natural gas. Further, in certain areas where the Company conducts offshore energy support operations (particularly the U.S. Gulf of Mexico), contracts for the utilization of offshore energy support vessels commonly include termination provisions with three to five-day notice requirements and no termination penalty. As a result, companies engaged in offshore energy support operations (including the Company) are particularly sensitive to changes in market demand. As the Company's offshore energy support fleet gets older, the Company's strategy is to look for opportunities to upgrade its offshore fleet to higher-value, newer vessels and to reduce the number of older and smaller crewboats in its fleet. The Company sold six offshore energy support vessels during the first quarter of 2003 for an aggregate total of $2.0 million and a gain of approximately $800,000. The Company sold 17 offshore energy support vessels during 2002 for an aggregate total of $6.8 million and a gain of approximately $55,000. Periods for collection of receivables in certain foreign areas of operation in the offshore business tend to be longer than is usual for the United States. The Company regularly monitors all such receivables accounts and believes that it has accrued adequate reserves where necessary. 11 The following tables set forth, by primary area of operation, average day rates achieved by the offshore energy fleet owned or operated by the Company and average utilization for the periods indicated. Average day rates are calculated by dividing total revenue by the number of days worked. Utilization percentages are based upon the number of working days over a 365/366-day year and the number of vessels in the fleet on the last day of the quarter.
Q1 2003 AHTS/ AHT/ Crew/ Supply Tugs Utility Other ------ ------ ------ ------ DOMESTIC(1) Vessels 21 -- 25 2 Laid-Up -- -- -- 1 Effective Utilization 56% -- 61% -- Day Rate $5,192 -- $2,330 -- WEST AFRICA Vessels 32 4 6 1 Laid-Up -- -- -- -- Effective Utilization 80% 72% 97% -- Day Rate $7,223 $6,131 $3,028 -- MIDDLE EAST Vessels 6 6 7 6 Laid-Up -- -- -- 1 Effective Utilization 90% 56% 86% 52% Day Rate $3,283 $4,457 $1,682 $5,213 SOUTHEAST ASIA Vessels 9 1 -- 1 Laid-Up -- -- -- -- Effective Utilization 59% -- -- -- Day Rate $5,936 -- -- --
- --------------- (1) Domestic consists of vessels operating in the United States, the U.S. Gulf of Mexico and Mexico. 12
Q1 2002 Q2 2002 AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/ Supply Tugs Utility Other Supply Tugs Utility Other ------ ------ ------- ------ ------ ------ ------- ------ DOMESTIC(1) Vessels(2) (3)(4)(8)(9) 24 -- 30 2 21 -- 31 2 Bareboat-out(4) -- -- -- -- -- -- -- -- Laid-Up -- -- -- 1 -- -- -- 1 Effective Utilization(5) 59% -- 65% -- 63% -- 58% -- Day Rate $6,687 -- $2,666 -- $6,005 -- $2,469 -- WEST AFRICA Vessels(2)(3)(6) (7)(8)(12) 29 5 7 1 30 5 6 1 Laid-Up -- 1 -- -- -- 1 -- -- Effective Utilization(5) 84% 86% 89% 97% 85% 97% 84% -- Day Rate $7,368 $6,613 $3,124 -- $8,042 $6,522 $2,722 -- MIDDLE EAST Vessels(2) 6 8 8 5 6 8 8 5 Laid-Up -- 1 1 1 -- 1 1 1 Effective Utilization(5) 83% 75% 81% 77% 79% 62% 85% 66% Day Rate $3,265 $4,571 $1,649 $4,502 $3,250 $5,048 $1,668 $4,475 SOUTHEAST ASIA Vessels(2)(7)(10) 8 -- 5 2 8 -- -- 2 Laid-Up -- -- -- -- -- -- -- -- Effective Utilization(5) 59% -- 53% 44% 68% -- -- -- Day Rate $5,510 -- $1,472 -- $6,320 -- -- -- Q3 2002 Q4 2002 AHTS/ AHT/ Crew/ AHTS/ AHT/ Crew/ Supply Tugs Utility Other Supply Tugs Utility Other ------ ------ ------- ------ ------ ------ ------- ------ DOMESTIC(1)(13) Vessels(2)(8)(9) 21 -- 31 2 21 -- 28 2 Bareboat-out -- -- -- -- -- -- -- -- Laid-Up -- -- -- 1 -- -- -- 1 Effective Utilization(5) 63% -- 62% -- 65% -- 65% -- Day Rate $5,581 -- $2,530 -- $5,252 -- $2,315 -- WEST AFRICA Vessels(2)(12) 30 5 6 1 30 4 6 1 Laid-Up -- 1 -- -- -- -- -- -- Effective Utilization(5) 80% 87% 76% -- 79% 71% 68% -- Day Rate $7,787 $6,234 $2,976 -- $7,316 $5,891 $2,878 -- MIDDLE EAST Vessels(2)(11) 6 8 8 5 6 7 7 5 Laid-Up(11) -- 1 1 1 -- -- -- 1 Effective Utilization(5) 92% 49% 88% 65% 86% 71% 95% 57% Day Rate $3,496 $4,556 $1,646 $4,181 $3,684 $3,991 $1,666 $4,197 SOUTHEAST ASIA Vessels(2) 8 -- -- 2 8 -- -- 2 Laid-Up -- -- -- -- -- -- -- -- Effective Utilization(5) 66% -- -- -- 61% -- -- -- Day Rate $5,584 -- -- -- $6,484 -- -- --
- --------------- (1) Domestic consists of vessels operating in the United States, the U.S. Gulf of Mexico and Mexico. (2) Held-for-sale and bareboat-out vessels are excluded from the vessel count. (3) During Q1 2002, two Anchor Handling Tug Supply Vessels were transferred from Domestic to West Africa. (4) During Q1 2002, a bareboat contract for one Geophysical Vessel in the Domestic operating region expired and the vessel was returned to the Company. (5) Effective utilization excludes laid-up vessels. (6) During Q1 2002, the Company reactivated one AHT from "held-for-sale" status. This vessel was placed into service in West Africa. (7) During Q1 2002, the Company reactivated one Anchor Handling Tug Supply Vessel from "held-for-sale" status and placed the vessel into service in Southeast Asia. Additionally during Q1 2002, the Company transferred one utility boat from Southeast Asia to West Africa. (8) During Q2 2002, two Anchor Handling Tug Supply Vessels were sold. Additionally during Q2 2002, the Company transferred one supply vessel to West Africa. (9) During Q2 2002, one Crewboat was returned to Domestic from Trinidad. (10) During Q2 2002, five Crewboats in Southeast Asia were sold. (11) During Q4 2002, two Anchor Handling Tugs and one Crewboat in the Middle East were sold. (12) During Q4 2002, one Anchor Handling Tug in West Africa was sold. (13) During Q4 2002, three Crewboats were moved to held-for-sale. They were subsequently sold in January 2003. 13 Domestic revenue for the three months ended March 31, 2003 was adversely affected by the continued slowdown in natural gas and crude oil drilling activity in the U.S. Gulf of Mexico. Despite relatively high natural gas prices and dwindling inventories, exploration and production companies in the U.S. Gulf of Mexico were unwilling to invest in new projects until there was clear evidence of the sustainability of commodity prices and an increase in energy demand. Although there is still uncertainty in the market, the rise in both crude oil and natural gas prices that began in the fourth quarter of 2002, driven by concern over a potential Middle East conflict, the temporary shutoff of Iraqi and Venezuelan imports, dwindling inventories of both crude oil and natural gas as the winter of 2002/2003 turned out to be much colder than expected, and other factors, should eventually aid a recovery in the Gulf of Mexico offshore vessel market. In the meantime, the Company is exploring charter opportunities in Mexico, which remains a healthy market. The recent increase in worldwide crude oil inventories and subsequent decline in crude oil prices following the conclusion of the war phase in Iraq complicates the outlook, however. International offshore revenues for the first quarter of 2003 were slightly lower than the same period in the prior year. In West Africa, the demand for vessels, and hence utilization, remained strong as this is an oil-driven market with longer time horizons and increasing exploration and production budgets primarily from oil company majors. The Company redeployed one vessel and added one newbuild vessel to its West African operations during the first quarter of 2003. The recent unrest in Nigeria did not have a significant impact on the Company's operations. International vessel demand is primarily driven by crude oil production. During the first quarter of 2003, crude oil prices and demand remained firm. The Company expects international exploration and production spending to continue to increase in West Africa, which should strengthen vessel demand in that area. Revenue decreased from the prior year for the Company's Middle East operations as both vessel count and utilization decreased. In Southeast Asia, revenue increased over the year-earlier period as day rates were higher and two new vessels were added to the fleet. Average day rates and utilization for the Company's anchor handling tug supply vessels and supply boats at May 1, 2003 for Domestic, West Africa, the Middle East and Southeast Asia were approximately $5,200/57%, $6,600/91%, $5,600/75% and $3,300/83%, respectively. The Company had two offshore vessels in "held-for-sale" status as of March 31, 2003. SEABULK TANKERS Revenue from the Company's marine transportation services is derived from the operations of ten tankers carrying crude oil, petroleum products and chemical products in the U.S. Jones Act trade. The Company's tanker fleet operates on either long-term time charters, bareboat charters, or pursuant to contracts of affreightment. The Company currently has six tankers operating under long-term time charters, three on contracts of affreightment and one under a bareboat charter. 14 The following table sets forth the number of vessels and revenue for the Company's petroleum and chemical product carriers:
THREE MONTHS ENDED MARCH 31, -------------------------- 2003 2002 ------- ------- Number of vessels owned at end of period ... 10 10 Revenue (in thousands) ..................... $30,177 $28,688
Tanker revenue increased by 5.2% in the first quarter of 2003 as a result of improved rates and higher utilization. Petroleum Tankers. Demand for crude oil and petroleum product transportation services is dependent both on production and refining levels as well as on consumer and commercial consumption of petroleum products and chemicals. The Company owned eight petroleum product tankers at March 31, 2003. Five of these are double-hull, state-of-the-art vessels, of which two have chemical-carrying capability. Since January 2002, a major oil company charterer has exclusive possession and control of one of the petroleum product tankers and is responsible for all operating and drydocking expenses of the vessel. In the third quarter of 2002, a vessel previously trading under a voyage charter entered into a three-year time charter with a major oil company, and two of our existing time charters were extended through July 10, 2010. Under a time charter, fuel and port charges are borne by the charterer customer and are therefore not reflected in the charter rates. Consequently, both the revenue and cost side of time charter vessels are reduced by the amount of the fuel and port charges. Our Jones Act fleet is benefiting from a tightening domestic tanker market, which should see a further strengthening as OPA 90 forces out older, single-hull vessels. None of our single-hull vessels is scheduled for retirement under OPA 90 before 2007. Chemical Tankers. Demand for industrial chemical transportation services generally coincides with overall economic activity. The Company operated two chemical tankers and one of the five double-hull vessels in the chemical trade as of March 31, 2003. The two chemical tankers are double-bottom ships. The higher day rate environment for petroleum tankers is carrying over into the chemical tanker market as charterers look for quality tonnage to replace older single-hull vessels. SEABULK TOWING Revenue derived from the Company's tug operations is primarily a function of the number of tugs available to provide services, the rates charged for their services, the volume of vessel traffic requiring docking and other ship-assist services and competition. Vessel traffic, in turn, is largely a function of the general trade activity in the region served by the port. The following table summarizes certain operating information for the Company's tugs:
THREE MONTHS ENDED MARCH 31, ------------------------ 2003 2002 ------ ------ Number of tugs at end of period ... 30 31 Revenue (in thousands) ............ $9,289 $8,060
Towing revenue increased 15.2% due to increased vessel traffic in certain of the Company's ports, and other factors. 15 The Company has been the sole provider of docking services in Port Canaveral, the smallest of its harbor towing markets. As a result of a recent proceeding before the Federal Maritime Commission, the Company is expected to have a competitor in Port Canaveral. Port Canaveral Towing intends to continue its operations at Port Canaveral. OVERVIEW OF OPERATING EXPENSES AND CAPITAL EXPENDITURES The Company's operating expenses are primarily a function of fleet size and utilization. The most significant expense categories are crew payroll and benefits, maintenance and repairs, fuel, insurance and charter hire. For general information concerning these categories of operating expenses as well as capital expenditures, see "Management's Discussion and Analysis of Financial Condition and Results of Operations, Overview of Operating Expenses and Capital Expenditures" in the 2002 Form 10-K. 16 RESULTS OF OPERATIONS The following table sets forth certain selected financial data and percentages of revenue for the periods indicated:
THREE MONTHS ENDED MARCH 31, ------------------------------------------------------- 2003 2002 -------------------- ---------------------- (in millions) Revenue ..................................... $77.2 100% $83.2 100% Operating expenses .......................... 41.4 54 45.7 55 Overhead expenses ........................... 9.3 12 8.9 11 Depreciation, amortization and drydocking ... 16.5 21 16.6 20 ----- --- ----- --- Income from operations ...................... $10.0 13% $12.0 14% ===== === ===== ==== Interest expense, net ....................... $ 8.0 10% $12.7 15% ===== === ===== ==== Other income, net ........................... $ 0.8 0.1% $ 0.1 0.2% ===== === ===== ==== Net income (loss) ........................... $ 1.6 2% $(2.3) (3)% ===== === ===== ====
THREE MONTHS ENDED MARCH 31, 2003 COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2002 Revenue. Revenue decreased 7.2% to $77.2 million for the three months ended March 31, 2003 from $83.2 million for the three months ended March 31, 2002. Offshore energy support revenue decreased 12.6% to $37.8 million for the three months ended March 31, 2003 from $43.3 million for the same period in 2002, primarily due to reduced revenue from the U.S. Gulf of Mexico. The decrease in the U.S. Gulf of Mexico was primarily due to reduced exploration and production activity in response to uncertain economic conditions and reduced demand for energy. Marine transportation revenue decreased 5.5% to $30.2 million for the three months ended March 31, 2003 from $31.9 million for the three months ended March 31, 2002. This decrease is primarily due to the decrease in revenue for the Company's Sun State Marine Services subsidiary as a result of discontinuing operations in March 2002. This was partially offset by an increase in tanker revenue due to an increase in rates and higher utilization. Towing revenue increased by 15.2% for the three months ended March 31, 2003 compared to the same period in the prior year. The increase in revenue is due to increased vessel traffic in certain of the Company's ports, and other factors. Operating Expenses. Operating expenses decreased 9.6% to $41.4 million for the three months ended March 31, 2003 from $45.7 million for the same period in 2002, primarily due to the decrease in operating expenses for the Company's Sun State Marine Services subsidiary as a result of discontinuing operations in March 2002 and, to a lesser extent, from the reduction in crewing payroll in the struggling U.S. Gulf of Mexico market. Additionally, repairs and maintenance expenses decreased in the tanker segment as major repairs were done in the first quarter of 2002. As a percentage of revenue, operating expenses decreased to 54% for the three months ended March 31, 2003 from 55% for the 2002 period. 17 Overhead Expenses. Overhead expenses increased 4.4% to $9.3 million for the three months ended March 31, 2003 from $8.9 million for the same period in 2002, primarily due to an increase in accounting and legal fees. As a percentage of revenue, overhead expenses increased to 12% for the three months ended March 31, 2003 compared to 11% for the same period in 2002. Depreciation, Amortization and Drydocking. Depreciation, amortization and drydocking remained substantially the same at $16.5 million versus $16.6 million for the same period in the prior year. Net Interest Expense. Net interest expense decreased 36.9% to $8.0 million or 10% of revenue for the three months ended March 31, 2003 from $12.7 million or 15% of revenue for the same period in 2002. The decrease is primarily due to a lower debt balance and lower interest rates as a result of the recapitalization in September 2002. Other Income, Net. Other income, net increased to $0.8 million for the three months ended March 31, 2003 from $0.1 million for the same period in 2002, primarily due to a gain on asset sales in 2003 compared to a loss on asset sales in the 2002 period. LIQUIDITY AND CAPITAL RESOURCES Cash Flows. Net cash provided by operating activities totaled $27.7 million for the three months ended March 31, 2003 compared to $29.8 million for the same period in 2002. The decrease in cash provided by operating activities is primarily a result of a reduction in the insurance reimbursements from our insurance club for settlement of outstanding insurance claims in the first quarter of 2003 versus the same period in the prior year. This was partially offset by an increase in net income before non-cash charges. Net cash used in investing activities was $18.5 million for the three months ended March 31, 2003 compared to $1.8 million for the same period in 2002. The increase in cash used in investing activities is due to the cash purchase of the Seabulk Africa in January 2003 (See Note 2). Net cash used in financing activities for the three months ended March 31, 2003 was $7.1 million compared to $15.5 million for the same period in 2002. The decrease in cash used in financing activities is attributable to larger payments on our previous term loans and revolving credit facility in the first quarter of 2002. Recent Expenditures and Future Cash Requirements. During the first three months of 2003, the Company incurred $20.8 million in capital expenditures for fleet improvements and drydocking costs. For the remainder of 2003, these capital expenditures are expected to aggregate approximately $25 million. The Company received net proceeds of approximately $13.3 million from the sale-leaseback of the Seabulk Africa in the second quarter of 2003. Total 2003 expenditures of approximately $46 million will substantially cover all of the Company's drydocking requirements for 64 vessels during 2003. 18 Long-term debt consisted of the following at March 31, 2003:
OUTSTANDING BALANCE 2003 AS OF INTEREST RATE AS OF FACILITY PAYMENTS MARCH 31, 2003 MATURITY MAY 1, 2003 -------- -------- ------------------- -------- ------------------- Fortis Tranche A revolver $5.0 million $93.7 million 2007 5.30% Fortis Tranche B term loan $0.0 million $80.0 million 2007 5.80% Title XI Financing Bonds $0.5 million $234.0 million 2005 to 2024 5.86% to 10.10% Other notes payable $0.9 million $21.2 million 2003 to 2011 8.09% to 8.50%
In addition to the revolver balance of $93.7 million, there are $1.3 million in outstanding letters of credit as of March 31, 2003. The Company is required to make semi-annual principal repayments of the revolver commencing six months after September 2002 with the final payment due in September 2007. The Company is also required to make semi-annual principal repayments on the term loan commencing 36 months after September 2002 with the final payment due 54 months after September 2002. The Company's capital requirements arise primarily from its need to service debt, fund working capital and maintain and improve its vessels. The Company's expected 2003 capital requirements for debt service, vessel maintenance and fleet improvements total approximately $98 million. The Company expects that cash flow from operations will continue to be a significant source of funds for our working capital and capital requirements. Management continues implementation of certain initiatives in an effort to improve profitability and liquidity. These initiatives include (1) selective acquisitions and charters of additional vessels, (2) repositioning certain vessels to take advantage of higher day rates, (3) selling unprofitable vessels, and (4) eliminating non-essential operating and overhead expenses. Management recognizes that unforeseen events or business conditions, including deterioration in its markets, could prevent the Company from meeting targeted operating results. If unforeseen events or business conditions prevent the Company from meeting targeted operating results, the Company has alternative means including additional asset sales, additional reductions in operating expenses and deferral of capital expenditures, which should enable it to satisfy essential capital requirements. While the Company believes it could successfully complete alternative plans if necessary, there can be no assurance that such alternatives would be available or that the Company would be successful in their implementation. EFFECTS OF INFLATION The rate of inflation has not had a material impact on our operations. Moreover, if inflation remains at its recent levels, it is not expected to have a material impact on our operations for the foreseeable future. 19 RECENT ACCOUNTING PRONOUNCEMENTS In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 expands on the accounting guidance of Statements No. 5, 57, and 107 and incorporates without change the provisions of FASB Interpretation No. 34, which is being superseded. FIN 45 elaborates on the existing disclosure requirements for most guarantees, including loan guarantees such as standby letters of credit. It also clarifies that at the time a company issues a guarantee, it must recognize an initial liability for the fair value, or market value, of the obligations it assumes under that guarantee and must disclose that information in its interim and annual financial statements. The initial recognition and initial measurement provisions apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year-end. The disclosure requirements in the Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The adoption of FIN 45 is not expected to have a significant impact on the Company. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 14, and Technical Corrections, which eliminates the requirement that gains and losses from the extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of the related income tax effect, and eliminates an inconsistency between the accounting for sale-leaseback transactions and certain lease modifications that have economic effects that are similar to sale-leaseback transactions. Subsequent to the January 1, 2003 adoption date of the standard, the Company will be required to reclassify to continuing operations amounts previously reported as extinguishments of debt. In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, which addresses the financial accounting and reporting for costs associated with exit or disposal activities. SFAS No. 146 is effective for fiscal years beginning after December 31, 2002. The adoption of the standard is not expected to have a significant impact on the Company. In June 2001, the Accounting Executive Committee of the American Institute of Certified Public Accountants issued an exposure draft of a proposed Statement of Position ("SOP") entitled Accounting for Certain Costs and Activities Related to Property, Plant and Equipment. Under the proposed SOP, the Company would expense major maintenance costs as incurred and prohibit the use of the deferral of the entire cost of a planned major maintenance activity. Currently, the costs incurred to drydock the Company's vessels are deferred and amortized on a straight-line basis over the period to the next drydocking, generally 30 to 36 months. Management has determined that this SOP, if issued as proposed, would have a material effect on the consolidated financial statements. In the year of adoption, the Company would write-off the net book value of the deferred drydocking costs and record the write off as a change in accounting principle ($24.4 million as of March 31, 2003). Additionally, all drydock expenditures incurred after the adoption of the SOP would be expensed as incurred. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK The Company is exposed to market risk from changes in interest rates, which may adversely affect its results of operations and financial condition. The Company's policy is not to use financial instruments for trading or other speculative purposes, and the Company is not a party to any leveraged financial instruments. The Company manages market risk by restricting the use of derivative financial instruments to infrequent purchases of forward contracts for the purchase of fuel oil for its carrier fleet. These contracts have been terminated as of December 31, 2001. 20 The Jones Act restricts the U.S. coastwise trade to vessels owned, operated and crewed substantially by U.S. citizens. The Jones Act continues to be in effect and supported by Congress and the Administration. However, it is possible that the Company's advantage as a U.S. citizen operator of Jones Act vessels could be somewhat eroded over time as there continue to be periodic efforts and attempts by foreign interests to circumvent certain aspects of the Jones Act. Exposure To Short-Term Interest Rates. Short-term variable rate debt, primarily borrowings under the New Credit Facility, comprised approximately $173.7 million of the Company's total debt at March 31, 2003. The Company's variable rate debt had an average interest rate of 5.5% at March 31, 2003. A hypothetical 2.0% increase in interest rates on $173.7 million of debt would cause the Company's interest expense to increase on average approximately $2.5 million per year over the term of the loans, with a corresponding decrease in income before taxes. ITEM 4. CONTROLS AND PROCEDURES EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Company maintains systems of disclosure controls and procedures designed to provide reasonable assurance that the Company is able to record, process, summarize and report the information required in the Company's annual and quarterly reports under the Securities Exchange Act of 1934. Management of the Company has evaluated the effectiveness of these disclosure controls and procedures within 90 days prior to the filing date of this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to accomplish their purpose. No significant changes were made to these internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation, nor were any corrective actions with respect to significant deficiencies and material weaknesses necessary subsequent to that date. Appearing immediately following the signatures section of this quarterly report are certifications by our Chief Executive Officer and Chief Financial Officer, which are required by Section 302 of the Sarbanes-Oxley Act of 2002. The information set forth in this Item 4 should be read in conjunction with these Section 302 certifications. 21 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS For information concerning certain legal proceedings see Note 7 of the financial statements. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION Accompanying the filing of this Form 10-Q for the quarterly period ended March 31, 2003, we have provided to the Securities and Exchange Commission the Certifications of the Chief Executive Officer and the Chief Financial Officer required pursuant to 18 U.S.C. Section 1359, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.18 Severance Agreement and Release between the Company and Andrew W. Brauninger. 10.19 Seabulk International, Inc. Executive Deferred Compensation Plan 10.20 Summary Provisions of the Seabulk International, Inc. Management Annual Incentive Compensation Plan 99.1 Certification of Principal Executive Officer 99.2 Certification of Principal Financial Officer
(b) Reports on Form 8-K The following reports on Form 8-K were filed during the quarter ended March 31, 2003: 1. The Company filed a Current Report on Form 8-K dated February 25, 2003. Item 5 was reported and no financial statements were filed. 2. The Company filed a Current Report on Form 8-K dated March 10, 2003. Item 5 was reported and no financial statements were filed. 3. The Company filed a Current Report on Form 8-K dated March 31, 2003. Item 5 was reported and no financial statements were filed. 22 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SEABULK INTERNATIONAL, INC. /s/ MICHAEL J. PELLICCI - ------------------------------------- Michael J. Pellicci VP - Finance and Corporate Controller (Principal Accounting Officer) Date: May 14, 2003 23 CERTIFICATION OF GERHARD E. KURZ, PRINCIPAL EXECUTIVE OFFICER OF SEABULK INTERNATIONAL, INC. PURSUANT TO 18 U.S.C. SS.. 1350 1. I, Gerhard E. Kurz, certify that I have reviewed this quarterly report on Form 10-Q of Seabulk International, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 24 /s/ Gerhard E. Kurz ----------------------------------------- Name: Gerhard E. Kurz Title: Chairman, President and Chief Executive Officer 25 CERTIFICATION OF VINCENT J. DESOSTOA, PRINCIPAL FINANCIAL OFFICER OF SEABULK INTERNATIONAL, INC. PURSUANT TO 18 U.S.C. SS.. 1350 1. I, Vincent J. deSostoa, certify that I have reviewed this quarterly report on Form 10-Q of Seabulk International, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 14, 2003 26 /s/ Vincent J. deSostoa ----------------------------------------- Name: Vincent J. deSostoa Title: Senior Vice President and Chief Financial Officer 27 EX-10.18 3 g82679exv10w18.txt SEVERANCE AGREEMENT & RELEASE EXHIBIT 10.18 SEVERANCE AGREEMENT AND GENERAL RELEASE This Severance Agreement and General Release (hereafter, the "Agreement") is made by SEABULK INTERNATIONAL INC, its affiliated companies, and each of its officers, directors, managers, employees, agents, and successors (hereafter referred to collectively as "SEABULK") and Andy Brauninger and all of his agents, heirs, and successors (hereafter referred to as "EMPLOYEE"). On the occasion of EMPLOYEE's separation from employment with SEABULK, March 31, 2003, (Effective Date) the parties to this Agreement desire to resolve all matters and potential differences between them arising out of the EMPLOYEE's employment with SEABULK, and the termination of that employment. Therefore, in order to achieve this result, SEABULK and the EMPLOYEE agree to the following: 1. Severance: Following the eighth calendar day after the Effective Date SEABULK will pay to the EMPLOYEE a severance payment in the gross amount of $145,384. This payment is based on three weeks of compensation for each year of service (14 yrs.). The EMPLOYEE understands and agrees that the gross amount written above will be reduced by amounts withheld for taxes as required by law. The EMPLOYEE acknowledges and further agrees that he is not already entitled to this severance payment. 2. Vacation & Medical Insurance: SEABULK will also pay all eligible unused vacation days pro-rated for the present year. SEABULK will provide medical insurance for the EMPLOYEE and his wife through COBRA insurance at a monthly cost to EMPLOYEE of $150.00 for a period of six months or until you go to work for another employer. Following the initial six month period, COBRA insurance will be provided at the 2003 prevailing rate ($1,226.72/month). You will be notified of the 2004 rates in December 2003. 3. Vehicle: SEABULK agrees to transfer to the EMPLOYEE title to and ownership of the Employer-owned 1997 Chevrolet Suburban he is now using at no cost to the Employee. 4. Stock Options: SEABULK agrees to vest your stock options upon the Effective Date and the exercise period will be extended to one year from the Effective Date if you obtain other employment and three years if you retire. 5. Ongoing Cooperation and Consulting Services. a. During the initial six month period immediately following the Effective Date, you will remain available to the Company to provide general advice, cooperation, assistance, as the Company may request from time to time, regarding projects you were involved in prior to your retirement. b. To the extent that the Company requests that you perform work on any projects, conduct any study, or prepare a written report in connection with such matters, the Company will retain you as an independent contractor/consultant at a daily rate of $700. The Company also will reimburse you for reasonable out-of-pocket expenses, including any travel expenses that you may incur in connection with consulting services that you may provide to the Company. c. You will cooperate with the Company in providing information in connection with any investigation by the board of directors or governmental authorities concerning the operations and activities of the Company during the period of your employment. 6. Return of Property. You agree to return to the Company on or before the Effective Date, property of the Company such as credit cards, keys, computer disks, computer programs, files, and any documents in any format prepared or received by you or the Company that you have in your possession or control relating in any way to the Company's business operations. Any other property of the Company currently in your possession shall be returned to the Company or purchased by you at its depreciated value in accordance with Company policy. 7. Confidentiality/Non-Competition/Non-Solicitation. a. Confidentiality. You will keep confidential the fact of and the terms of this Agreement, as well as any confidential or proprietary information that you acquired during your employment by the Company. This is intended to cover any information of a nature not normally disclosed by the Company to the general public, including, but not limited to, financial information, business plans, strategic plans, marketing strategies, and other information about the present or proposed operations of the Company. You shall not disclose any such information to any person or entity outside the Company at any time in the future, and you shall not use any such information for the benefit of anyone other than the Company. This provision shall not be deemed to limit your disclosure of the terms of this Agreement to legal or financial advisors that have a reasonable need to know of such terms in connection with providing professional advise to you. b. Non-Competition. During the six month period immediately following the Effective Date, you acknowledge and agree that you will not, without the prior written consent of the Company, directly or indirectly participate in any capacity in the ownership, management, operation, financing or control of, or permit your name to be used in connection with, any business or enterprise that competes with the Company. Notwithstanding the foregoing, you will not be prohibited from owning not more than 2% of any class of outstanding securities of any such publicly held enterprise. If these restrictions should ever be adjudicated to exceed the time, geographic, product, services, or other limitations permitted by applicable law in any jurisdiction, then such provisions will be deemed reformed in such jurisdiction to such limitations permitted by law. c. Non-Solicitation. During the period that you receive severance payments from the Company, you acknowledge and agree that you will not solicit, urge or induce any employee of the Company to terminate his or her employment with the Company or otherwise interfere with or disrupt the Company's relationships with its employees. In addition, you acknowledge and agree that you will not solicit, urge or induce any client of the Company not to do business with, or otherwise contract with, another person or entity for the types of products or services that are offered by the Company, or otherwise solicit, urge or induce any such client to terminate or adversely modify any business relationship with the Company. 8. Non-Disparagement. In any announcements or public statements concerning your departure, you and the Company will state only that you decided to take early retirement. You agree that you will not communicate to anyone any adverse, disparaging or derogatory statements or information concerning the Company or any current or former director, officer or employee of the Company. In return, the Company will not make any adverse, disparaging or derogatory statements about you. In response to any request for information about you from any prospective employer, the Company will confirm the dates of your employment and the position that you held. Nothing in this Agreement shall restrict you or the Company from making truthful disclosures as required by law. 9. Release. In exchange for the severance payment referred to in Paragraph 1, the EMPLOYEE hereby releases and forever discharges SEABULK from any and all claims, actions, demands, and causes of action in law or in equity which EMPLOYEE may have had, or may now have, which are based on or in any way related to his employment with SEABULK or the termination of that employment. The EMPLOYEE's release of claims and actions includes, but is not limited to, claims of age discrimination arising under the Age Discrimination in Employment Act, as amended, claims under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Consolidated Omnibus Budget Reconciliation Act, the Family and Medical Leave Act, the Florida Civil Rights Act of 1992, as amended, claims under Florida Statutes Chapter 448.101 et seq., commonly known as the Florida Private Whistleblower Act, and related or similar Texas statutes, and any and all actions EMPLOYEE may have in tort, contract or under statutory or the common law. 10. Binding Agreement. The obligations of the Company under this letter Agreement shall be binding on the Company and its successors and assigns. 11. Offer Period/Revocation. Please read this Agreement carefully and feel free to consult with your own legal advisors if you so desire. Pursuant to the Older Workers' Benefit Protection Act, you may have up to 21 days to consider this Agreement before signing it. In addition, once you sign this Agreement, you will have seven days within which to revoke this Agreement. Any revocation must be in writing and delivered to the Company's Chairman of the Board, President, and Chief Executive Officer within seven days after you sign this Agreement. This Agreement will not become effective until the seven-day revocation period has expired, and you therefore will not receive any consideration under this Agreement until after the revocation period has expired. Of course, if you revoke this Agreement, you will not receive any of the severance benefits or any other special consideration provided for under this Agreement. If the foregoing terms are acceptable to you, please confirm your Agreement by signing your name below. Your signature below will indicate that you are entering into this Agreement freely and with a full understanding of its terms and effect. No changes to this Agreement will be valid unless in writing and signed by both you and the Company's Chief Executive Officer. 12. The EMPLOYEE understands and agrees that by accepting the severance payment and signing this Agreement, he is giving up the right to sue SEABULK for any claims arising out of his employment with SEABULK, and the termination of that employment. 13. The EMPLOYEE further promises and agrees not to file, cause to be filed, or join in the filing in any federal, state or local court or agency, of any grievance, charge, claim or action, as an individual or as a member of a class, relating to his employment or the termination of his employment with SEABULK, and he waives any right to legal or equitable relief which might be claimed on his behalf by any class representative or government agency with respect to his employment with SEABULK. 14. The EMPLOYEE understands and agrees that this Agreement is confidential. EMPLOYEE agrees not to disclose the terms of this Agreement or the fact of its execution to any person, including but not limited to, current employees, the media, prospective employers, private or public entities, or other individuals or entities without the advanced written consent of SEABULK. This confidentiality provision does not apply to the EMPLOYEE's immediate family, attorney or tax advisor, so long as these excepted individuals are notified of this provision and agree to not further disclose the terms of the Agreement in accordance with the terms of this provision. This Agreement does not apply to Seabulk to the extent that in its reasonable judgement it is required to disclose the contents of this Agreement under SEC public Company requirements. 15. The EMPLOYEE acknowledges that SEABULK has made no representations regarding the tax consequences of this Agreement. The EMPLOYEE understands that SEABULK will deduct from the payment referenced in Paragraph 1 applicable federal income tax withholding and ordinary employment taxes, and will report the payment referenced in Paragraph 1 to the Internal Revenue Service on Form W-2. 16. In the event that any party to this Agreement is forced to institute legal proceedings for breach of the terms of this Agreement, it is agreed that any trial shall be without a jury, venue shall be in Broward County, Florida, this Agreement shall be interpreted in accordance with the laws of the State of Florida, and the prevailing party in any such action shall be entitled to its costs, including reasonable attorney's fees. 17. EMPLOYEE acknowledges that he has been advised to consult with an attorney of his own choice prior to and in connection with the execution of this Agreement. 18. This Agreement shall not be construed as or deemed to be evidence of an admission of any liability whatsoever on the part of SEABULK or any of its officers, directors, employees or agents. 19. This Agreement contains the entire Agreement and complete understanding of the parties, and no other statements, promises or understandings of any party may alter the plain meaning of the terms of this Agreement. Intending to be legally bound, the parties execute this Severance Agreement and General Release by their signatures below. /s/ ANDREW W. BRAUNINGER ______________ 3/20/03 _________________ EMPLOYEE Andrew W. Brauninger DATE /s/ AIMEE DUBUISSON ____________________ 3/20/03 _________________ WITNESS DATE SEABULK INTERNATIONAL, INC. By: /s/ GERHARD E. KURZ__________________ 3/21/03 _________________ DATE EX-10.19 4 g82679exv10w19.txt EXECUTIVE DEFERRED COMPENSATION PLAN EXHIBIT 10.19 PLAN DOCUMENT SEABULK INTERNATIONAL, INC. EXECUTIVE DEFERRED COMPENSATION PLAN SEABULK INTERNATIONAL, INC., A DELAWARE corporation (the "Company"), hereby establishes the Executive Deferred Compensation Plan (the "Plan"), effective JANUARY 1, 2003, to enable Participants covered under the Plan to enhance their retirement security by permitting them to enter into agreements with the Company to defer compensation and receive benefits at retirement, death, separation from service, and as otherwise provided under the Plan. ARTICLE 1 - DEFINITIONS 1.1 ANNUAL DEFERRAL: shall mean the amount of Compensation, which the Participant elects to defer under the Deferral Commitment pursuant to Article 3 of the Plan. 1.2 BENEFICIARY: shall mean the person or persons or entity designated as such in accordance with Article 11 of the Plan. 1.3 COMPANY: shall mean SEABULK INTERNATIONAL, INC., its subsidiaries and divisions, and any successor(s) in interest. 1.4 COMPENSATION: shall mean a Participant's salary, commissions, bonuses and restricted stock before reductions for deferral. 1.5 CREDITING RATE: shall mean certain investment alternatives designated by the Deferred Compensation Committee from time to time for determining adjustments of amounts credited to the Deferral Accounts of participants. The Deferred Compensation Committee, in its sole discretion, will establish administrative rules for applying the Crediting Rate. 1.6 DEFERRAL ACCOUNT: shall mean the bookkeeping device used by the Company to measure and determine the amounts to be paid to a Participant under the Plan. One Deferral Account will be established for amounts deferred by a Participant under the Plan. 1.7 DEFERRAL CONTRIBUTION PERIOD: shall mean the period of one (1) Plan Year, or such other period as the Deferred Compensation Committee may permit in its discretion, over which the Participant has elected to defer Compensation pursuant to Article 3 of the Plan. 1.8 DEFERRAL COMMITMENT OR DEFERRAL UNIT: shall mean a commitment made by a Participant to defer compensation pursuant to Articles 2 and 3 of the Plan for which a Deferral Election Form has been submitted by the Participant. 1.9 DEFERRED COMPENSATION COMMITTEE: shall mean Management's Benefits and Deferred Compensation Committee, appointed by the Company to administer the Plan pursuant to Article 11 of the Plan. 1.10 DEFERRAL ELECTION FORM: shall mean a written agreement between the Company and the Participant, entered into pursuant to paragraph 2.1 of the Plan, by which the Participant elects to participate in the Plan and make a Deferral Commitment. 1.11 DISABILITY: shall mean a physical or mental condition that prevents a Participant from performing his or her normal duties of employment. If a Participant makes application for or is otherwise eligible for disability benefits under a long-term disability program sponsored by his Employer and qualifies for such benefits, the Participant shall be presumed to qualify as disabled under the Plan. In the event that a Participant is not covered by an Employer-sponsored long-term disability program, a Participant shall be presumed to be disabled if the Deferred Compensation Committee so determines upon review of one or more medical opinions acceptable to the Deferred Compensation Committee. 1.12 EARLY RETIREMENT: shall mean the date of the cessation of the Participant's employment with the Company for any reason whatsoever, whether voluntary or involuntary, other than as a result of the Participant's death, after the Participant attains age 55, or such other date as the Deferred Compensation Committee may determine in its discretion. 1.13 ELIGIBLE EMPLOYEE: shall mean an officer or member of the senior management of the Company as designated by the Compensation Committee of the Board of Directors to be eligible to participate in the Plan and Non-Employee Directors. New employees within this group are eligible to participate the first of the month following one month of service. 1.14 EMPLOYER: shall mean the Company or any of its subsidiaries or divisions. 1.15 ERISA: shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.16 FINANCIAL HARDSHIP: shall mean a Participant's unexpected need for cash arising from an illness, casualty loss, sudden financial reversal, or other such unforeseeable occurrence as determined by the Deferred Compensation Committee. Cash needs arising from foreseeable events such as, for example, the purchase of a residence or education expenses for children shall not, alone, be considered a Financial Hardship. 1.17 PARTICIPANT: shall mean an Eligible Employee who is participating in the Plan as provided in Article 2, or a former Eligible Employee for whom a Deferral Account is being maintained under the Plan. 1.18 PLAN: shall mean this Executive Deferred Compensation Plan as set forth in this document and as the same may be amended, supplemented and/or restated from time to time and any successor plan. 1.19 PLAN YEAR: shall mean the 12-month period from January 1 through December 31. 1.20 RETIREMENT: shall mean the date of the cessation of the Participant's employment with the Company for any reason whatsoever, whether voluntary or involuntary, other than as a result of the Participant's death, after the Participant attains age 65, or such other date as the Deferred Compensation Committee may determine in its discretion. 1.21 TERMINATION OF EMPLOYMENT: shall mean the date of the cessation of the Participant's employment with the Company for any reason whatsoever, whether voluntary or involuntary, other than as a result of the Participant's Retirement, death, or, to the extent provided in Article 8 of the Plan, Disability. 1.22 VALUATION DATE: shall mean the last day of each Plan Year calendar quarter, or such other dates as the Deferred Compensation Committee may determine in its discretion, which must be at least annually, for the valuation of a Participant's Deferral Account. 1.23 VESTING DATE: your account balance created by your deferrals is always 100% vested. Your account balance created by any company contributions will vest as follows:
Full Years of Percentage Vesting Service Vested --------------- ---------- 1 33% 2 66% 3 100%
You will be credited for a full year of vesting service for each year from your date of hire and each anniversary thereof in which you complete at least 1,000 hours of service. Vesting service start date is date of hire. ARTICLE 2 - PARTICIPATION 2.1 DEFERRAL ELECTION FORM. Any Eligible Employee may elect to participate in the Plan and to make a Deferral Commitment by submitting a Deferral Election Form to the Deferred Compensation Committee prior to the beginning of the Deferral Contribution Period. Except as otherwise provided in this Plan, the Participant's Deferral Commitment shall be irrevocable. 2.2 CONTINUATION OF PARTICIPATION. A Participant who has elected to participate in the Plan by making a Deferral Commitment shall continue as a Participant in the Plan for purposes of such Deferral Commitment even though in any Plan Year after such Deferral Commitment such Participant elects not to make a new Deferral Commitment or ceases to be an Eligible Employee. A Participant shall not be eligible to make a new Deferral Commitment unless the Participant is an Eligible Employee with respect to the Plan Year for which the election is made. ARTICLE 3 - FORM OF DEFERRAL COMMITMENTS 3.1 DEFERRAL COMMITMENT. Subject to paragraphs 3.2 and 3.3, a Participant may elect in the Deferral Election Form to defer an amount equal to a specified dollar amount or a percentage of Compensation so long as the amount of Compensation net of the amount deferred does not fall below any applicable thresholds determined by the Deferred Compensation Committee in its sole discretion. For any Plan Year, the total amount of a Participant's applicable Compensation, net of all Deferral Commitments, must not fall below the old age, survivor and disability insurance wage base under Social Security. The Deferred Compensation Committee, in its sole discretion, will determine other rules regarding the deferral of Compensation, as necessary. 3.2 MINIMUM DEFERRAL COMMITMENT. A participant may not elect to defer less than $5,000 in any one Plan Year. 3.3 MAXIMUM DEFERRAL COMMITMENT. The Deferred Compensation Committee, in its sole discretion, may establish maximum Deferral Commitment limits for the purpose of controlling the Company's financial obligations under the Plan or for any other reason deemed necessary. 3.4 INCOMPLETE DEFERRAL COMMITMENT. Notwithstanding anything contained herein to the contrary, if the Participant has not or will not actually defer the amount specified in such Participant's Deferral Election Form during the Deferral Contribution Period, the Participant shall, nevertheless, be permitted to continue participation in the Plan. The Company will accept no new Deferral Units until the Participant fulfills the previously Incomplete Deferral Unit. 3.5 WITHHOLDING. The Deferred Compensation Committee, in its sole discretion, will make arrangements for satisfying any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to deferral of compensation under the Plan. ARTICLE 4 - DEFERRAL OF RESTRICTED STOCK 4.1 For purposes of this Article 4, the following terms shall be defined as follows: (a) Common Stock. "Common Stock" shall mean the common stock of Seabulk International, Inc., $0.10 par value per share. (b) Restricted Stock/Restricted Stock Award. "Restricted Stock" or "Restricted Stock Award" shall mean a share of restricted Common Stock that was granted to an Employee under a Stock Plan. (c) Restricted Stock Deferral Agreement. "Restricted Stock Deferral Agreement" shall mean the form established from time to time by the Deferred Compensation Committee that an Employee completes, executes and returns to the Deferred Compensation Committee to defer the receipt of shares of Common Stock upon the lapse of restrictions on Restricted Stock Awards. (d) Restricted Stock Unit/RSU. "Restricted Stock Unit" or "RSU" shall mean units of deemed investment in shares of Common Stock in accordance with Article 4 of the Plan. (e) Restricted Stock Unit Account/RSU Account. "Restricted Stock Unit Account" or "RSU Account" shall mean the record of a Participant's interest in this Plan represented by the number of RSUs related to shares of Restricted Stock deferred hereunder, adjusted for distributions, withdrawals and other similar activities as provided in the Plan. (f) Stock Plan. "Stock Plan" shall mean collectively the equity incentive plans adopted by the company from time to time or under which the Company has Restricted Stock Awards outstanding, and individually, such equity incentive plan governing any particular Restricted Stock Award. 4.2 The provisions of this Article 4 shall apply to all deferral elections made in compliance with this Article 4. All participants who have received Restricted Stock Awards under a Stock Plan of the Company, some or all of the restrictions on which have not lapsed as of December 31, 2002, and all persons who receive a Restricted Stock Award under a Stock Plan of the Company after the effective date of this Plan whose Agreement provides that the recipient may elect to defer the receipt of such Restricted Stock Award are permitted to make deferral elections with respect to such Restricted Stock Awards under this Plan by following the provisions of this Article 4. 4.3 Eligible employees who elect to defer Restricted Stock Awards must enter into an irrevocable Restricted Stock Deferral Agreement, in the form approved by the Deferred Compensation Committee, which provides for the exchange of shares of Restricted Stock for Restricted Stock Units. A Restricted Stock Deferral Agreement may be filed at any time with respect to any number of Restricted Shares with respect to which the restrictions have not and are not due to lapse for at least six (6) months. 4.4 Each Restricted Stock Deferral Agreement shall set forth: (i) the number of shares of Restricted Stock to be deferred; (ii) the date of grant of such shares of Restricted Stock; (iii) the date or dates on which the restrictions imposed on such shares of Restricted Stock lapse; (iv) the date on which the Restricted Stock Units credited to the Participant's Restricted Stock Unit Account shall become payable; and (v) whether distribution of the Restricted Stock Units shall be in installments or in a lump sum; and (vi) any other item determined to be appropriate by the Deferred Compensation Committee. Participants agree to execute any form that may be required by the Company's stock transfer agent with respect to book-entry or certificated shares. If the shares are not held in book-entry format by the Company's stock transfer agent, eligible Employees deferring Restricted Stock Awards must also tender the certificates for the shares of Restricted Stock with respect to which the Restricted Stock Deferral Agreement is being entered into at the time the Restricted Stock Deferral Agreement is tendered. 4.5 The effective date of the deferral of Restricted Stock hereunder is the close of business on the business day on which the Deferred Compensation Committee, or its designee, receives the Restricted Stock Deferral Agreement, and if the shares of Restricted Stock are not held in book-entry format, the certificates for the shares of Restricted Stock, along with any properly completed and executed stock powers that may be requested by the Deferred Compensation Committee. 4.6 Until the date specified in the Participant's Restricted Stock Deferral Agreement as the date on which restrictions on the shares of Restricted Stock will lapse, RSU's credited to such Participant's Restricted Stock Unit Account upon the deferral of such shares of Restricted Stock shall remain subject to forfeiture under the provisions of the Stock Plan and any related Restricted Stock Award agreement in the same manner as the shares of Restricted Stock deferred hereunder. The RSU's will be subject to restrictions identical to the restrictions on the shares of Restricted Stock deferred hereunder, and the restrictions on the RSU's shall lapse, if at all, at the same time and in the same manner that the restrictions on the shares of Restricted Stock would have lapsed had the participant not made a deferral election. 4.7 For each Participant electing to defer Restricted Stock, upon the effective date of the deferral, a RSU Account will be established by the Company, reflecting one RSU for each Restricted Stock share deferred hereunder. A subaccount representing cash equal to the earnings credited to the RSU Account with respect to dividend equivalents and interest thereon as calculated pursuant to Section 5.1 hereof, will also be established, unless the Participant has elected to receive earnings attributable to RSU's currently, and not on a deferred basis. Earnings will be credited to the Participant's cash subaccount as follows: on each date on which the Company pays a dividend on its Common Stock, an amount equal to such dividend will be credited to the Participant's Account with respect to each RSU. Then, an additional amount will be credited to the Participant's cash subaccount to reflect earnings pursuant to Section 5.1. hereof to reflect earnings on the dividend equivalents from the time they were credited to the cash subaccount hereunder. 4.8 In the event of a stock dividend, split-up or combination of the Common Stock, merger, consolidation, reorganization or recapitalization affecting the Common Stock, such that an adjustment is determined by the Deferred Compensation Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Article 4, then the Deferred Compensation Committee may make appropriate adjustments to the number of Share Units credited to any RSU Account. The determination of the Deferred Compensation Committee as to such adjustments, if any, shall be binding and conclusive. 4.9 Restricted Stock Units shall be distributed in the form of Common Stock. Distributions from a Participant's RSU Account and related RSU cash subaccount pursuant to Article 4 hereof will be computed as follows: with respect to the Participant's RSU Account, one share of Common Stock will be distributed for each RSU credited to such RSU Account; and with respect to the Participant's RSU cash subaccount, cash in the amount credited to such subaccount will be paid to the Participant. 4.10 A Participant may elect to receive earnings attributable to the Participant's RSU cash subaccount currently, and not on a deferred basis, by indicating such an election on the Participant's Restricted Stock Deferral Agreement. If such an election is made, the Participant will receive in cash on each date on which the Company pays a dividend on its shares of Common Stock an amount equal to such dividend with respect to each RSU in the Participant's RSU Account. Such payment shall be made in lieu of crediting any amount to the Participant's RSU cash subaccount, and such Participant's RSU cash subaccount will be deemed to be "zero" for all purposes under the Plan. ARTICLE 5 - DEFERRAL ACCOUNTS 5.1 DEFERRAL ACCOUNTS. A Deferral Account shall be established for each Participant. The Deferral Account shall be credited with the applicable portion of the Annual Deferral as of the approximate date such amounts would otherwise have been paid to the Participant. Deferral Accounts shall, except as otherwise provided in the Plan, be credited with interest based on the investment selections of the participant, in effect for each Plan Year, from the approximate date such Deferrals would have been paid through the earlier of the Participant's date of death or the following Valuation Date. Notwithstanding anything in this paragraph to the contrary, the Deferred Compensation Committee may, in its sole discretion, establish administrative rules for the purpose of crediting Deferral Accounts. 5.2 STATEMENTS OF ACCOUNT. The Deferred Compensation Committee shall provide periodically (but no less frequently than annually) to each Participant a statement setting forth the balance of the Deferral Account maintained for such Participant. 5.3 VESTING OF DEFERRAL ACCOUNTS. Each Participant shall be one hundred percent (100%) vested at all times in the amount of Annual Deferrals and interest actually credited to such Participant's Deferral Account. The Participant shall be zero percent (0%) vested in any contributions or interest credited to such Participant's Deferral Account for Company contributions until the Participant's Vesting Date is reached. If the Participant is still employed by the Company and continues to be eligible to participate in the Plan on the Vesting Date, the Participant shall immediately become one hundred percent (100%) vested in all interest credited to Company contributions in his/her Deferral Account. In the event the Participant dies prior to reaching the Vesting Date, the Benefits calculated under Article 7 of the Plan shall assume that the Participant became one hundred percent (100%) vested in any interest credited to his Deferral Account as of the day prior to his date of death. ARTICLE 6 - COMPANY CONTRIBUTIONS 6.1 The Company may from time to time, in its discretion, credit the Deferral Account of each Participant who is an Eligible Employee with a matching contribution. The amount of the matching contribution, if any, shall be equal to a percentage of Compensation deferred by the Participant under Section 5, as determined by the Company in its sole discretion. 6.2 Company Contributions held in the Deferral Account shall be distributed to a Participant only to the extent such amounts are vested. A Participant shall become vested in Company Contributions made on his or her behalf, and all earnings allocable thereunder, in accordance with the Vesting Date. The balance, if any, of such Company Contributions shall be forfeited upon termination of the Participant's employment to the extent not vested. ARTICLE 7 - PAYMENT OF BENEFITS 7.1 RETIREMENT BENEFITS. Upon Retirement or Early Retirement, the Company shall pay to the Participant a benefit in the form provided in paragraph 7.2 of the Plan, based on the balance of the Participant's Deferral Account. 7.2 FORM OF BENEFITS. The retirement benefit attributable to a Deferral Account shall be paid in accordance with the Participant's direction as found on a Deferral Election Form prescribed by the Deferred Compensation Committee for designation of form of payment; such payment election shall be made at the time the Deferral Commitment election is made. The available forms of payment after Retirement are as follows: (a) Lump Sum. A lump sum payment equal to the balance of the applicable Deferral Account as of the Valuation Date following Retirement or Early Retirement. Payment is to commence no earlier than the first day of the calendar year quarter following his severance and no later than January 30 of the calendar year following his/her 70th birthday (b) Installment Payments. Annual installment payments in substantially equal amounts over a period of 5, 10, or 15 years. Installment payments shall be made by the 30th day of the calendar year quarter of each year following Retirement. Payments must commence no later than the quarter following his/her 70th birthday. Interest will be credited to the unpaid balance in the Deferral Account at a rate in effect for each Plan Year. The Deferred Compensation Committee, in its sole discretion, may establish rules for making payments and crediting interest to the unpaid Deferral Account balance. The participant may change this retirement benefit election to an allowable alternative payout period by submitting a new Deferral Election Form to the Deferred Compensation Committee, provided that any such Deferral Election Form is submitted at least one (1) year prior to the Participant's Retirement. Subject to the foregoing, the Election Form most recently accepted by the Deferred Compensation Committee shall govern the payout of the retirement benefit. If no election is submitted, payment will be made in 15 annual installment payments. 7.3 TERMINATION OF EMPLOYMENT BENEFITS. Upon Termination of Employment, the Company shall pay the Participant a benefit in the form of a lump sum payment equal to the balance of the applicable Deferral Account as of the Valuation Date following the termination of employment. Such payment shall be made within ninety (90) days of said Valuation Date. 7.4 IN-SERVICE DISTRIBUTIONS. A Participant can elect to receive a lump sum payment of benefits created and generated by the contribution for a Deferral Contribution Period without terminating employment. The benefit payment will be received by January 31st of a chosen year at least five (5) years after the end of the Deferral Contribution Period which the contribution(s) was made. 7.5 SMALL BENEFIT EXCEPTION. Notwithstanding any of the foregoing, in the event the sum of all benefits payable to the Participant is less than or equal to ten thousand dollars ($10,000), the Company may, in its sole discretion, elect to pay such benefits in a single lump sum payment on the date such benefits first become payable. ARTICLE 8 - SURVIVOR BENEFITS 8.1 PRE-RETIREMENT SURVIVOR BENEFIT. If a Participant dies prior to Retirement or Termination of Employment the Company shall pay to the Participant's Beneficiary a lump sum benefit equal to the balance of the Participant's Deferral Account as of the Valuation Date following the death of the Participant. 8.2 POST-RETIREMENT SURVIVOR BENEFIT. If a Participant dies during Retirement the Company shall pay to the Participant's Beneficiary the remaining schedule of benefit payments. 8.3 SMALL BENEFIT EXCEPTION. Notwithstanding any of the foregoing, in the event the sum of all benefits payable to the Beneficiary is less than or equal to ten thousand dollars ($10,000), the Company may, in its sole discretion, elect to pay such benefits in a single lump sum payment on the date such benefits first become payable. ARTICLE 9 - DISABILITY If a Participant is determined to have a Disability, the Participant shall, effective as of the date such Participant is no longer paid his Compensation by the Company, cease deferrals under the Plan except for any Deferral Commitment regarding any Compensation which is earned or payable subsequent to the Disability. The Participant's Deferral Account shall continue to be credited with interest at the Crediting Rate until such time as the Participant's benefits under the Plan are distributed in accordance with the Participant's election or as provided for in paragraph 10.2 of the Plan. ARTICLE 10 - CONDITIONS RELATED TO BENEFITS 10.1 NONASSIGNABILITY. The benefits provided under the Plan may not be alienated, assigned, transferred, pledged or hypothecated by or to any person or entity, at any time or in any manner whatsoever. These benefits shall be exempt from the claims of creditors or other claimants of any Participant and from all orders, decrees, levies, garnishment or executions against any Participant to the fullest extent allowed by law. 10.2 FINANCIAL HARDSHIP DISTRIBUTION. Upon finding that the Participant or the Beneficiary has suffered a Financial Hardship, the Deferred Compensation Committee may, in its sole discretion and upon written petition by the Participant or Beneficiary, accelerate distributions of benefits under the Plan in the amount reasonably necessary to alleviate such Financial Hardship or as requested by the Participant or the Beneficiary. If a distribution is to be made to a Participant on account of Financial Hardship, the Participant may not make subsequent Deferral Commitments under the Plan until the second Plan Year following the Plan Year in which a distribution based on Financial Hardship was made. Any Deferral Commitment in effect at the time such distribution is made under this section shall be canceled. 10.3 NO RIGHT TO COMPANY ASSETS. The benefits paid under the Plan shall be paid from the general funds of the Company, and the Participant and any Beneficiary shall be no more than unsecured general creditors of the Company with no special or prior right to any assets of the Company for payment of any obligations hereunder. 10.4 PROTECTIVE PROVISIONS. The Participant shall cooperate with the Company by furnishing any and all information requested by the Deferred Compensation Committee in order to facilitate the payment of benefits hereunder, taking such physical examinations as the Deferred Compensation Committee may deem necessary, and taking such other actions as may be requested by the Deferred Compensation Committee. If the Participant refuses to cooperate or makes any material misstatement or nondisclosure of information, then no benefits will be payable hereunder to such Participant or his Beneficiary. 10.5 WITHHOLDING. The Participant or the Beneficiary shall make appropriate arrangements with the Company for satisfaction of any federal, state or local income tax withholding requirements and Social Security or other employee tax requirements applicable to the payment of benefits under the Plan. If no such arrangements are made, the Company may provide, at its discretion, for such withholding and tax payments as may be required. ARTICLE 11 - ADMINISTRATION OF THE PLAN The Deferred Compensation Committee shall administer the Plan and interpret, construe and apply its provisions in accordance with its terms. The Compensation Committee of the Board of Directors shall determine in its sole discretion those who are eligible to participate in the Plan and shall have the right to set guidelines for participation under the Plan including, but not limited to, the type, manner and level of Deferral Commitments. The Deferred Compensation Committee shall further establish, adopt or revise such other rules and regulations as it may deem necessary or advisable for the administration of the Plan. All decisions of the Deferred Compensation Committee shall be final and binding. The individuals serving on the Deferred Compensation shall, except as prohibited by law, be indemnified and held harmless by the Company from any and all liabilities, costs, and expenses (including legal fees), to the extent not covered by liability insurance, arising out of any action taken by any member of the Deferred Compensation Committee with respect to the Plan, unless such liability arises from the individual's own gross negligence or willful misconduct. ARTICLE 12 - BENEFICIARY DESIGNATION 12.1 BENEFICIARY DESIGNATION. The Participant shall have the right, at any time, to designate any person or persons as a Beneficiary (both primary and contingent) to whom payment under the Plan shall be made in the event of the Participant's death. The Beneficiary designation shall be effective when it is submitted in writing and delivered to the Deferred Compensation Committee during the Participant's lifetime on a form prescribed by the Deferred Compensation Committee. If, however, the Participant is married, his spouse shall be required to join any such designation, or change or revocation thereof, to name a Beneficiary other than the spouse. 12.2 NEW BENEFICIARY DESIGNATION. The Participant shall have the right to change or revoke any such designation from time to time by filing a new designation or notice of revocation with the Company, and no notice to any Beneficiary nor consent by any Beneficiary shall be required to effect any such change or revocation. If, however, the Participant is married, his spouse shall be required to join in any such designation, or change or revocation thereof, to name a Beneficiary other than the spouse. 12.3 FAILURE TO DESIGNATE BENEFICIARY. If a Participant fails to designate a Beneficiary before his death, or if no designated Beneficiary survives the Participant, the Deferred Compensation Committee shall direct the Company to pay the balance of the Participant's Account in a lump sum to the executor or administrator for his estate; provided, however, if no executor or administrator shall have been appointed, and actual notice of the death was given to the Deferred Compensation Committee within sixty (60) days after the Participant's death, and if his Account balance does not exceed ten thousand dollars ($10,000), the Deferred Compensation Committee may direct the Company to pay the Account balance to such person or persons as the Deferred Compensation Committee determines may be entitled to it, and the Deferred Compensation Committee may require such proof of right and/or identity of such person or persons as the Deferred Compensation Committee may deem appropriate and necessary. ARTICLE 13 - AMENDMENT AND TERMINATION OF THE PLAN 13.1 AMENDMENT OF THE PLAN. The Company may at any time amend the Plan in whole or in part, provided however, that such amendment (i) shall not decrease the vested balance of the Participant's Deferral Account at the time of such amendment and (ii) shall not retroactively decrease the applicable crediting rates of the Plan prior to the time of such amendment. The Company or Deferred Compensation Committee may amend the crediting rates of the Plan prospectively. If the Company and/or the Deferred Compensation Committee change the formula for determining the Crediting Rate under the Plan, the Company or the Deferred Compensation Committee shall notify the Participant of such amendment in writing within thirty (30) days of such amendment. Within thirty (30) days of receipt of the notice of an amendment to the formula for determining the applicable Crediting Rate, the Participant may elect by written notice to the Deferred Compensation Committee to terminate an incomplete Deferral Commitment. 13.2 TERMINATION OF THE PLAN. The Company may at any time terminate the Plan as to all or any group of Participants. If the Company terminates the Plan as to all or any group of Participants, the date of such termination shall be treated as the date of Retirement for the purpose of calculating Plan benefits. The Company shall pay to the Participant the benefits the Participant is entitled to receive under the Plan in annual installments over a three (3) year period or such shorter period of time as the Company may determine in its sole discretion. Interest at the Crediting Rate will be credited to the Participant's Deferral Account until distribution under this paragraph is completed, in accordance with the rules established under paragraph 7.2(b). 13.3 CONSTRUCTIVE RECEIPT TERMINATION. In the event the Deferred Compensation Committee determines that amounts deferred under the Plan have been constructively received by Participants and must be recognized as income for federal income tax purposes, the Plan shall terminate and distributions shall be made to Participants in accordance with the provisions of paragraph 13.2. The determination of the Deferred Compensation Committee under this paragraph 13.3 shall be binding and conclusive. ARTICLE 14 - MISCELLANEOUS 14.1 SUCCESSORS OF THE COMPANY. The rights and obligations of the Company under the Plan shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company. 14.2 ERISA PLAN. The Plan is intended to be an unfunded plan maintained primarily to provide deferred compensation benefits for "a select group of management or highly compensated employees" within the meaning of Sections 201, 301, and 401 of ERISA and therefore to be exempt from Parts 2, 3, and 4 of Title I of ERISA. Notwithstanding any provisions of this Plan to the contrary, if any Participant is determined not to be a "management or highly compensated employee" within the meaning of ERISA or applicable regulations thereunder at the time a Deferral Commitment is elected, such Participant will not be eligible to complete such Deferral Commitment and shall receive an immediate lump sum payment equal to the unpaid balance of the Deferral Account as of the most recent Valuation Date. Upon such payment, no survivor benefit or other benefit shall thereafter be payable under this Plan either to the Participant or any Beneficiary of the Participant, with respect to said Deferral Account. 14.3 EMPLOYMENT NOT GUARANTEED. Nothing contained in the Plan nor any action taken hereunder shall be construed as a contract of employment or as giving any Participant any right to continued employment with the Company. 14.4 GENDER, SINGULAR AND PLURAL. All pronouns and variations thereof shall be deemed to refer to the masculine or feminine, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular. 14.5 CAPTIONS. The captions of the articles and paragraphs of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 14.6 VALIDITY. In the event any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan. 14.7 WAIVER OF BREACH. The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant. 14.8 APPLICABLE LAW. The Plan shall be governed and construed in accordance with the laws of the State of DE except where the laws of the State of DE are preempted by ERISA. 14.9 NOTICE. Any notice or filing required or permitted to be given to the Company under the Plan shall be sufficient if in writing or hand-delivered, or sent by registered or certified mail, return receipt requested, to the principal office of the Company, directed to the attention of the Deferred Compensation Committee. Such notice shall be deemed given as of the date of delivery, or if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. 14.10 ARBITRATION. Any claim, dispute or other matter in question of any kind relating to this Plan shall be settled by arbitration in accordance with the Rules of the American Arbitration Association. Notice of demand for arbitration shall be made in writing to the opposing party and to the American Arbitration Association within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall a demand for arbitration be made after the date when the applicable statute of limitations would bar the institution of a legal or equitable proceeding based on such claim, dispute or other matter in question. The decision of the arbitrators shall be final and may be enforced in any court of competent jurisdiction. IN WITNESS WHEREOF, the Company has caused this Plan to be executed and effective as of the 4th day of February, 2003. SEABULK INTERNATIONAL, INC. By: /s/ GERHARD E. KURZ Title: President and Chief Executive Officers By: /s/ ALAN R. TWAITS Title: Senior Vice President, General Counsel & Secretary EX-10.20 5 g82679exv10w20.txt SUMMARY PROVISIONS EXHIBIT 10.20 SUMMARY PROVISIONS OF THE SEABULK INTERNATIONAL, INC. MANAGEMENT ANNUAL INCENTIVE COMPENSATION PLAN (MAICP) I. PLAN OBJECTIVE The primary objective of the Management Annual Incentive Compensation Plan (MAICP) is to assist in achieving specific business and financial goals by providing incentives to key employees. The MAICP prioritizes and focuses efforts on the accomplishment of financial and operational goals established each year through the annual planning and budgeting process. II. BASIC PLAN CONCEPT The plan emphasizes corporate and individual performance against predetermined goals within three separate areas of responsibility: o Administrative/Corporate Management o Operations o Marketing Overall corporate performance is considered each year along with segment/area and individual performance measures. Regardless of corporate performance, however, the Compensation Committee of the Board of Directors at its discretion may award up to 50% of the target amounts to recognize outstanding individual performance even if the Company does not achieve threshold performance measures. III. ELIGIBILITY CRITERIA Eligibility for participation in the MAICP encompasses senior executives as well as lower level managers and professionals whose contributions directly impact the Company's financial performance. The maximum bonus for the two latter categories is limited to 10% of salary. IV. AWARD OPPORTUNITIES Prior to the beginning of each fiscal year, Seabulk will (1) specify target incentive awards for each eligible position; and (2) determine the total pool target, threshold and maximum incentive award amounts. These amounts are determined from each 1 eligible participant's base salary times the target percent associated with the participant's position within the Company. The actual target percent is based upon the employee's corporate job rating. Threshold, target and maximum percents by position are set forth in Exhibit 1. V. PERFORMANCE MEASURES AND STANDARDS Prior to the start of each fiscal year, (1) specific corporate and division measurements, and (2) appropriate weighting of each measurement will be established. COMPANY PERFORMANCE MEASURES A. Except as may be provided in Section II, before any individual incentive amount can be awarded, the Company must first achieve minimum (threshold) performance in at least one of three Company performance measures. For fiscal year 2003, Company performance measures are: 1. EBITDA vs. Budget: This test measures actual EBITDA (Earnings before Interest Expenses, Taxes, Depreciation and Amortization) against budgeted EBITDA. Note: The Company's EBITDA must be at least 90% of the budgeted EBITDA in order for the minimum (threshold) awards to be paid. FOR FISCAL YEAR 2003, THIS PERFORMANCE MEASUREMENT WILL CARRY A WEIGHT OF 60%. 2. Cash Flow vs. Budget: Cash Flow = Revenue less Operating Costs, Interest and Taxes. Note: The Company's cash flow must be at least 90% of the budgeted cash flow in order for the minimum (threshold) awards to be paid. FOR FISCAL YEAR 2003, THIS PERFORMANCE MEASUREMENT WILL CARRY A WEIGHT OF 40% STANDARDS FOR EACH DIVISION B. Although overall Company performance determines the maximum funding of the pool, each participant within each division will have specific standards/goals established for his/her measurement of performance. The performance criteria will be established annually, prior to the beginning of each fiscal year, and will be used to determine the amount of the incentive award that each participant will be eligible to receive. The amount of bonus actually awarded to the participant depends upon achievement of the 2 Company's as well as the individual's performance goals. For Fiscal Year 2003, the performance measures for each division are as follows: 1. Administrative/Corporate Management a. EBITDA - This test will carry a weight of 40% of the individual's total award. b. Cash Flow - This test will carry a weight of 20% of the individual's total award. c. Individual Performance - This measurement is determined on a subjective basis and will carry a weight of 25% of the individual's total award. d. Safety Performance - This will measure actual safety results against corporate goals, and carries a weight of 15%. Note: For Director of Quality and Environmental Affairs, additional weight may be given to the Safety component. 2. Operations a. Safety Performance - This test will be considered in three parts and will carry a weight of 33.33%. 1) First, each segment and area (tanker, towing and offshore by region) will be given a specific goal with respect to Lost Time Accidents. A key determinant will be the number and dollar amount of personal injury claims incurred during the year. 2) The second measure involves property damage resulting from accidents, lack of maintenance or operational negligence. Number and extent of downtime for repairs is also a determinant. 3) The third criteria is pollution. Pollution incidents will be measured against the goal of zero spills. See Exhibit 2. Note: The foregoing three categories will be weighted 75%, 15%, and 10% respectively. The weighting for these categories may be adjusted for each area depending upon safety issues particularly pertinent to that area. 3 b. Operating Income Test - This test measures operating income (revenue less operating and drydock costs) against budget for each segment. In the offshore division, it may be an operating area specific test. This measure will carry a weight of 33.33%. c. Individual Performance - This test is based on the supervisor's assessment of the individual's contributions in terms of specific achievements/efforts toward the Company's goals. This measurement will carry a weight of 33.34%. 3. Marketing a. Revenue Test - This test compares budgeted revenues against actual results by segment and operating area. This will carry a weight of 40% b. EBITDA Test - This test compares budgeted EBITDA against actual results by segment and operating area. This will carry a weight of 20%. c. Individual Performance - This test is based on the supervisor's assessment of the individual's contributions in terms of specific achievements/efforts toward the Company's goals. This measurement will carry a weight of 40%. Note: Segment presidents will be measured on the basis of 60% Operations and 40% Marketing tests. VI. BUDGET CALCULATION The incentive pool amount to be budgeted is determined by multiplying the salary of each participant by his/her applicable target percentage. VII. AWARD CALCULATIONS A. Development of Incentive Funding Pool The actual amount of the incentive pool to be established depends upon the attainment of the specified Company performance measures in Section V-A. Each corporate measurement will operate independently in creating the funding pool for annual incentive awards. The Company could achieve above threshold on one performance measure and below threshold on the other performance measures and still have funds available in the annual incentive pool. Exhibit 3 provides the matrix of how the size of the incentive funding pool will be calculated at different levels of corporate performance for 2003. As 4 indicated, the bonus pool will increase by 1% for every 1% increase in EBITDA or cash flow and decrease by 2% for every 1% decrease in EBITDA or cash flow versus the target amount. B. Basis for Individual Awards Individual awards are based on the performance measures set forth in Section V-B, which are adjusted up or down. Consistent with the pool adjustments of Exhibit 3, the applicable bonus percentage for each individual (as shown in Exhibit 1) increases by 1 over the target percentage for every 1% increase in revenue, cash flow or EBITDA as appropriate, and decreases by 2 for every 1% decrease in revenue, cash flow or EBITDA as appropriate, with adjustments for personal performance measured on a scale of 1 to 10. Personal performance is based on a performance target of 6 for all participants. To be eligible for the personal performance bonus, an individual must receive a minimum rating of 4 or higher. Each division (Administrative/Corporate Management, Operations and Marketing) will be looked at independently. Thus, it is possible for a participant to receive an award amount that exceeds the Company benchmark levels. However, at least one of the three Company performance measures must be positive before consideration of any incentive awards, subject to Section II. VIII. AWARD PAYMENTS Awards will be payable in cash, as soon as possible after the Company auditors have issued their audit report on the Company's financial statements for the fiscal year. IX. RETIREMENTS AND TERMINATIONS To receive an award under the MAICP, the participant must be actively employed on the last day of the performance cycle. At the discretion of the Chief Executive Officer and with the approval of the Compensation Committee, a participant who separates from service prior to the end of the performance cycle may be granted an award. The amount of the award, if any, will be based in part upon the length of time employed during the performance cycle. X. PLAN ADMINISTRATION, MODIFICATION, AND ADJUSTMENT The MAICP will be administered by Seabulk's Chief Executive Officer, who may delegate certain elements of program administration. Actual performance goals, standards and award determinations for the President and CEO, his direct reports, and other key members of management, will be approved by the Compensation Committee. 5 EX-99.1 6 g82679exv99w1.txt CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER EXHIBIT 99.1 CERTIFICATION OF GERHARD E. KURZ, PRINCIPAL EXECUTIVE OFFICER OF SEABULK INTERNATIONAL, INC. PURSUANT TO 18 U.S.C. ss. 1350 The undersigned, being the Principal Executive Officer of Seabulk International, Inc. (the "Company"), does hereby certify that the Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement has been provided to Seabulk International, Inc. and will be retained by Seabulk International, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. /s/ GERHARD E. KURZ -------------------------------------- Name: Gerhard E. Kurz Date: May 14, 2003 EX-99.2 7 g82679exv99w2.txt CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER EXHIBIT 99.2 CERTIFICATION OF VINCENT J. deSOSTOA, PRINCIPAL FINANCIAL OFFICER OF SEABULK INTERNATIONAL, INC. PURSUANT TO 18 U.S.C. ss. 1350 The undersigned, being the Principal Financial Officer of Seabulk International, Inc. (the "Company"), does hereby certify that the Quarterly Report on Form 10-Q for the quarter ended March 31, 2003 (the "Form 10-Q") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement has been provided to Seabulk International, Inc. and will be retained by Seabulk International, Inc. and furnished to the Securities and Exchange Commission or it staff upon request. /s/ VINCENT J. deSOSTOA -------------------------------- Name: Vincent J. deSostoa Date: May 14, 2003 -----END PRIVACY-ENHANCED MESSAGE-----