FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of November, 2005
ULTRAPETROL (BAHAMAS) LIMITED
(Translation of registrant's name into English)
H & J Corporate Services Ltd.
Shirlaw House
87 Shirley Street
Nassau, The Bahamas
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to
the commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes [_] No [X]
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Set forth herein is a copy of the Company's report for the nine months
ended September 30, 2005, containing certain unaudited financial information and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
ULTRAPETROL (BAHAMAS) LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004
The following discussion and analysis should be read in conjunction with
the unaudited condensed consolidated financial statements of Ultrapetrol
(Bahamas) Limited ("the Company") and its subsidiaries for the nine months ended
September 30, 2005 and the nine months ended September 30, 2004 included
elsewhere in this report.
General
We are a diversified ocean and river transportation company involved in
the carriage of dry and liquid bulk cargoes as well as passengers. In our Ocean
Business, we are an owner and operator of oceangoing vessels that transport
petroleum products, dry cargo and passengers around the world. Our Ocean
Business fleet dedicated to the carriage of cargo has a capacity of
approximately 634,000 dwt, and our three versatile Suezmax/OBO vessels are
capable of carrying either dry bulk or liquid cargoes. Our passenger fleet is
comprised of two vessels with a total carrying capacity of approximately 1,550
passengers. Our River Business is the largest owner and operator of river barges
and push boats in the Hidrovia Region of South America, a fertile agricultural
region of navigable waters on the Parana, Paraguay and Uruguay Rivers and part
of the River Plate, which flow through Brazil, Bolivia, Uruguay, Paraguay and
Argentina. In addition, in November, 2002, we entered into a joint venture to
form UP Offshore (Bahamas) Ltd. ("UP Offshore"), a company in which we own a
27.78% interest and which provides transportation services to offshore petroleum
exploration and production companies. The two initial platform supply vessels
"PSV" UP Esmeralda and UP Safira " are temporarily operated by our subsidiary
Corporacion Naviera Mundial S.A. under six month bareboat charters.
Our business strategy focuses on maintaining an efficient and flexible
fleet, which allows us to provide an array of transportation services to
customers in several different industries. We believe that the flexibility of
our fleet and the diversity of industries that we service reduce our dependency
on any particular sector of the transportation industry.
Currently, we own nine oceangoing vessels (one of which is currently
used as a transfer station in our River Business and two are passenger vessels
with approximately 1,550 passenger capacity) that operate in South America, the
Caribbean, the United States, Europe and the Far East. The Company's Suezmax
OBO's (Princess Katherine, Princess Nadia and Princess Susana), are designed to
carry oil as well as ore and other dry bulk commodities. These vessels are
currently employed in the carriage of bulk dry cargoes.
During the first nine months ended September 30, 2005, we employed a
significant part of our ocean fleet on time charter for different customers.
During the first half of 2005, the international freight market maintained
average rates above those experienced in 2004. In the third quarter average
freight rates generally decreased below the average levels experienced in 2004.
On January 7, 2005 International Finance Corporation ("IFC") and
Kreditanstalt Fur Wiederaufbau "KfW" disbursed the remaining $7.5 million of the
$30 million loan granted to UABL Limited ("UABL") in 2002. These funds were used
to finance the purchase and transportation from the United States to the River
Plate of 35 dry barges. The Company used existing funds to purchase two
pushboats and other auxiliary equipment.
We entered into a contract on March 4, 2005 to sell our vessel, Cape
Pampas, for approximately $39.9 million. The vessel was delivered to the new
owners on May 6, 2005.
We also entered into a contract on March 4, 2005 to buy the cruise
vessel, New Flamenco, for a price of $13.5 million. This transaction was
consummated on March 24, 2005. The New Flamenco is managed by Ravenscroft
Shipping Inc. ("Ravenscroft"), an affiliate of ours, and we have agreed to
continue her employment agreement with a large European tour operator.
On April 6, 2005 we purchased the cruise vessel, World Renaissance
renamed Grand Victoria, at auction for a price of $3.4 million. This vessel was
delivered and fully paid for on April 19, 2005. This vessel will have to pass
her drydock and surveys before she enters into service.
On April 28, 2005 we agreed to purchase the product tanker, mt Sun
Chemist, renamed Miranda I, for a total price of $10.3 million which was
delivered and fully paid on July 7, 2005.
On July 25, 2005 the Company's option to repurchase 25,212 of its
shares from Inversiones Los Avellanos S.A. for a total price of $0.9 million
expired and was extended till July 25, 2006.
Contractual Methods of Earning Revenues and Allotting Expenses
Ocean revenues of our cargo vessels can be contracted either on a time
charter basis or on a contract of affreightment, or COA, basis. Under the terms
of a time charter, the charterer pays the ship owner a daily rate for the use of
the vessel and, in addition, the charterer pays directly for all voyage expenses
(including fuel and port charges). In contrast, under the terms of a COA, the
charterer pays the ship owner a rate based on tonnage shipped (expressed in
dollars per metric ton of cargo), but the ship owner pays all voyage expenses.
Accordingly, the charterer pays a higher overall sum under a COA than under a
time charter to compensate the ship owner for having to pay the voyage expenses.
Consequently, time charters result in lower revenues and lower expenses for the
ship owner than COAs, while COAs result in higher revenues and higher expenses
for the shipowner than time charters. Both time charters and COAs at comparable
price levels result in approximately the same operating income. However, the
margin as a percentage of revenues may differ significantly. The differences
between time charters and COAs are summarized below:
o Time Charter:
o Revenue is derived from a daily rate paid for the use of the
vessel
o Charterer pays for all voyage expenses
o COA:
o Revenue is derived from a rate based on tonnage shipped
expressed in dollars per metric ton of cargo
o Vessel owner pays for all voyage expenses
Our passenger vessels can either be employed on time charter, or by the
sale of the individual cabins or mixed formulas that provide a minimum
guaranteed income for the Shipowner.
Revenues
Time charter revenues accounted for 56% of our total revenues (ocean,
passenger and river) for the nine months ended September 30, 2005. COA revenues
accounted for 44% of our total revenues for the nine months ended September 30,
2005. With respect to COAs entered into in connection with our Ocean and River
Business, of the total revenues obtained from COAs during the first nine months
of 2005, 84% were in respect of repetitive voyages for our regular customers and
16% in respect of single voyages for occasional customers.
In our Passenger Business, demand for our services is driven by the
global movements of tourists. Our primary market is Europe.
In our River Business, demand for our services is driven by
agricultural, mining and forestry activities in the Hidrovia Region. Products
move from the inland areas of the Hidrovia Region out to the Atlantic Ocean via
the Parana and Paraguay Rivers. Conversely, our tanker barges carry petroleum
products from the Atlantic Ocean to inland regions of South America via the
Parana and Paraguay Rivers. Substantially all of the push boats and barges in
our River Business are employed on a COA basis whereby we enter into contracts
with our customers to carry set volumes of dry or liquid cargo, typically for
periods of one year or more.
Expenses
In our Ocean and Passenger Business, our vessel operating expenses, or
running costs, are generally paid through Ravenscroft, a related party, which
provides ship management services for our oceangoing vessels. Operating expenses
include the cost of all ship management, crewing, spares and stores, insurance,
lubricants, repairs and maintenance. The most significant of these expenses are
maintenance and repairs, wages paid to marine personnel, catering and marine
insurance costs.
Our other primary operating expenses include general and administrative
expenses as well as ship management and administration fees paid to Ravenscroft
and Oceanmarine, another related party, who provide certain administrative
services. We pay Oceanmarine a monthly fee of $10,000 per oceangoing cargo
vessel for administrative services including general administration and
accounting (financial reporting and preparation of tax returns), use of office
premises, a computer network, secretarial assistance and other general duties.
We pay Ravenscroft a monthly technical ship management fee of $12,500 per
oceangoing vessel and (euro)20,000 per passenger vessel for services including
technical management, crewing, provisioning, superintendence and related
accounting functions. We pay Ravenscroft (euro)25,000 administrative and
operational fee per month per passenger vessel for all operational functions as
well as administering the subcontractors, concessions and credit card/collection
system onboard. We do not expect to pay fees to any related party other than
those described here for management and administration functions.
In our River Business, prior to our acquisition of the remaining 50%
equity interest in UABL, our subsidiaries that owned push boats and barges
contracted with Lonehort, Inc., a subsidiary of UABL, for ship management
services and generally paid our operating expenses through Lonehort. Our
operating expenses include the cost of all ship management, crewing, spares and
stores, insurance, lubricants, repairs and maintenance. Following the
acquisition of the remaining 50% equity interest in UABL, all ship management
services are performed, and all operating expenses are paid, in-house. UABL
employs the services of Tecnical Services S.A. to provide crew recruitment
services in Argentina and Paraguay. We pay Tecnical Services S.A. $144,000 per
year, plus an additional $50 for each active crew member. We do not expect to
pay fees to any related entity other than those described here for management
and administration functions.
In the Offshore Business, we expect operating expenses to include the
cost of all ship management, crewing, spares and stores, insurance, lubricants,
repairs and maintenance.
Through UABL, we own a drydock and a repair facility for our river
fleet at Pueblo Esther, Argentina, land for the construction of two terminals in
Argentina and 50% joint venture participations in two grain loading terminals in
Paraguay. UABL also rents offices in Asuncion, Paraguay and Buenos Aires,
Argentina. We do not own any other buildings and do not pay any other rental
expense other than as a portion of the administration fees paid to Oceanmarine.
Also, through Ultracape Delaware LLC, we own land for expansion of a maritime
oil products terminal in Mexico.
Foreign Currency Transactions
Substantially all of our revenues are denominated in U.S. dollars.
However, for the nine months ended September 30, 2005, 11% of our total revenues
were denominated in U.S. dollars but collected in Argentine Pesos and Paraguayan
Guaranies at the equivalent amount of U.S. dollars at the payment date, and 20%
of our total out of pocket operating expenses were paid in Argentine Pesos and
Paraguayan Guaranies. Also, for the first nine months of 2005, 13% of our
revenues were denominated and collected in Euros, 3% of our revenues were
denominated and collected in British pounds and 4% of our operating expenses
were paid in Euros.
Our operating results, which are reported in U.S. dollars, may be
affected by fluctuations in the exchange rate between the U.S. dollar and the
local currencies. For accounting purposes, revenue and expense accounts are
translated into U.S. dollars at the exchange rate prevailing on the date of each
transaction.
Inflation
We do not believe that inflation has had a material impact on our
operations, although certain of our operating expenses (e.g., crewing, insurance
and drydocking costs) are subject to fluctuations as a result of market forces.
Inflationary pressures on bunker costs are not expected to have a material
effect on our future operations in the case of our ocean vessels which are
mostly time chartered to third parties since it is the charterers who pay for
fuel. If our ocean vessels are employed under COA's, freight rates for voyage
charters are generally sensitive to the price of a ship's fuel. A sharp rise in
bunker prices may have a temporary negative effect on results since freights
generally adjust after prices settle at a higher level. In our river business,
we have some of our freight agreements adjusted by bunker prices automatically,
we have partial hedges against increases in bunker prices for a minor part of
our consumption and finally in other cases we have periodic renegotiations which
adjust for fuel prices. In the majority of cases, we adjust the fuel component
of our cost into the freights on a seasonal or yearly basis and therefore we are
affected during that particular period by variation in bunker prices.
Legal proceedings
1) Bahia Blanca Customs Dispute
Our subsidiary, Ultrapetrol S.A., is involved in a customs dispute with
the Customs Authority of Bahia Blanca in Argentina over the alleged unauthorized
operation of the Princess Pia in Argentina during 2001. As a result, the Customs
Authority of Bahia Blanca issued a resolution claiming the sum of Argentine
pesos 4,689,695 (approximately U.S. $1,610,000) as import taxes and the sum of
Argentine pesos 4,689,695 (approximately U.S. $1,610,000) as fines. In response
to said resolution, on March 16, 2004, Ultrapetrol S.A. submitted an appeal with
the Argentine Tax Court arguing that it did not breach any applicable customs
laws since the Princess Pia operated within Argentine territory only during the
periods in which it was expressly authorized by the competent authorities. Said
appeal is pending resolution by the Argentine Tax Court. Based upon the facts
and circumstances of the case, the existing regulations and our insurance
coverage, we do not believe that the outcome of this matter should have a
material impact on our financial position or results of operations.
2) Brazilian Customs Dispute
Our subsidiary, Ultrapetrol S.A., is involved in a customs dispute with
the Brazilian Customs tax authorities over the alleged infringement of customs
regulations by the Alianza G3 and Alianza Campana (collectively, the "Vessel")
in Brazil during 2004. As a result, the Brazilian Customs tax authorities
commenced an administrative proceeding and applied the penalty of apprehension
of the Vessel which required the Vessel to remain in port or within a maximum of
five nautical miles from the Brazilian maritime coast. The maximum customs
penalty that could be imposed would be confiscation of the Vessel, which is
estimated by the Brazilian Customs tax authorities to be valued at U.S.
$4,560,000. On February 22, 2005, we were notified of the decision that grounds
on which the tax assessment was based were ratified. In response to this
decision, on February 28, 2005, we presented a specific request for
clarification of the decision. We simultaneously presented a petition to the
Secretary of the Brazilian Internal Revenue Service requesting the replacement
of the confiscation penalty applied to the Vessel by a penalty corresponding to
1% (one percent) of the value of the Vessel. Both of our requests made on
February 28, 2005 are still pending judgment.
On the same day that Ultrapetrol S.A. presented its defense to the
above mentioned administrative proceeding, a writ of injunction was filed on
behalf of Ultrapetrol S.A. seeking a judicial authorization allowing the return
of the Vessel to Boias de Xareu, which is located almost 20 nautical miles from
the Brazilian maritime coast, so the Vessel could resume its prior services. The
preliminary injunction was granted by the court in favor of Ultrapetrol S.A. on
September 17, 2004, conditioned on the weekly presentation of shipping letters
describing the location of the Vessel and the Vessel is now back in service at
Boias de Xareu. The tax authorities filed an interlocutory appeal against the
preliminary injunction that was granted in our favor. Currently, our lawsuit and
the interlocutory appeal by the tax authorities are pending judgment.
We note that in case we are not successful on the merits, under our
insurance coverage, we could request from The Standard Club, the Vessel's P&I
insurer, an indemnity corresponding to the value of the Vessel. Based upon the
facts and circumstances of the case, including the fact that the Vessel was
operating under a specific written authorization officially granted by the
Brazilian government, the existing regulations and our insurance coverage, we do
not believe that the outcome of this matter should have a material impact on our
financial position or results of operations. Various other legal proceedings
involving us may arise from time to time in the ordinary course of business.
However, we are not presently involved in any legal proceedings that, if
adversely determined, would have a material adverse effect on us.
Results of Operations
Nine months ended September 30, 2005 compared to the nine months ended September
30, 2004.
The following table sets forth certain historical income statement data for the
periods indicated derived from the Company's statements of operations expressed
in thousands of dollars.
=================================== ================================
2005 2004
=================================== ================================
--------------- ----------------- --------------- ------------------
Third Accumulative Third Accumulative
Quarter 30-Sep-05 Quarter 30-Sep-04
--------------- ----------------- --------------- ------------------
Revenues
Attributable to ocean fleet 11,299 43,038 11,063 39,862
Attributable to passenger fleet 6,145 12,772 -.-
Attributable to river fleet 14,476 44,083 13,085 31,672
--------------- ----------------- --------------- ------------------
Total 31,920 99,893 24,148 71,534
--------------- ----------------- --------------- ------------------
Voyage expenses
Attributable to ocean fleet (2,216) (2,224) (41) (500)
Attributable to passenger fleet (1,374) (1,985) -.-
Attributable to river fleet (7,047) (19,621) (4,659) (9,545)
--------------- ----------------- --------------- ------------------
Total (10,637) (23,830) (4,700) (10,045)
--------------- ----------------- --------------- ------------------
Running cost
Attributable to ocean fleet (3,327) (9,565) (2,924) (9,621)
Attributable to passenger fleet (2,091) (5,575) -.-
Attributable to river fleet (5,005) (13,448) (3,497) (9,249)
--------------- ----------------- --------------- ------------------
Total (10,423) (28,588) (6,421) (18,870)
--------------- ----------------- --------------- ------------------
Amortization of drydock expense (1,729) (5,244) (1,470) (3,597)
Depreciation of property and equipment (3,589) (10,761) (3,176) (9,783)
Management fees and administrative expenses (2,579) (6,843) (1,892) (5,852)
Other operative income 3 21,870 -.- 112
--------------- ----------------- --------------- ------------------
Operating profit 2,966 46,497 6,489 23,499
--------------- ----------------- --------------- ------------------
Financial expense (4,854) (14,171) (4,344) (12,340)
Financial gain on extinguishments of debts -.- -.- -.- 1,344
Revenues. Total revenues from our ocean fleet, net of commissions,
increased from $39.9 million in the first nine months 2004 to $43.0 million in
2005, or an increase of 8%. This increase is primarily attributable to the time
charter revenues of the new UP Offshore PSV vessels UP Esmeralda and UP Safira
operated temporarily by our subsidiary Corporacion Naviera Mundial S.A. during
the third quarter 2005 and the higher time charter rates of our Princess Nadia
and Princess Katherine during the first nine months of 2005. These increases
were partially offset by the decrease of revenues due to the sale of each our
vessels Princess Eva and Cape Pampas.
Total revenues from our passenger fleet, net of commissions, increased
from $0 million in the first nine months of 2004 to $12.8 million in 2005. This
increase is attributable to the effect of the revenues of the vessel New
Flamenco acquired during the period.
Total revenues from our river fleet, net of commissions, increased by
39% from $31.7 million in the first nine months of 2004 to $44.1 million in the
same period of 2005. This increase is primarily attributable to the
consolidation of UABL revenues since the second quarter of 2004, while in the
first quarter of 2004 river revenues only included the net proceeds for those of
our vessels which were chartered by UABL.
Voyage expenses. In the first nine months of 2005, voyage expenses of
our ocean fleet were $2.2 million, as compared to $0.5 million for the same
period of 2004. The increase is primarily attributable to the bare boat time
charter paid for the new PSV vessels UP Esmeralda and UP Safira to UP Offshore,
our related company, incurred during the third quarter of 2005. This increase
was partially offset by the decrease of voyages expenses attributable to the
sale of the Princess Eva.
Voyage expenses of our passenger fleet were $2.0 in the first nine
months of 2005. This increase is attributable to the effect of the voyages
expenses of the new vessel New Flamenco.
In the first nine months of 2005, voyage expenses of our river fleet
were $19.6 million, as compared to $9.5 million for the same period of 2004, an
increase of $10.1 million. The increase is attributable to the effect of the
consolidation of UABL, as our subsidiary since the second quarter of 2004 and an
increase in the bunkers cost in the third quarter 2005 .
Running costs. Running costs of our ocean fleet were $9.6 million in
the first nine months of 2005 as compared to $9.6 million in the same of 2004 or
an increase of 0%. This null variance is mainly attributable to our new vessel
Miranda I and the running cost incurred with the new PSV vessels UP Esmeralda
and UP Safira owned by UP Offshore and temporarily operated by Corporacion
Naviera Mundial S.A. under a bareboat charter during the third quarter 2005.
This increase was partially offset by the decrease of running cost expenses
attributable to the sale of our vessels Princess Eva and Cape Pampas.
Running costs of our passenger fleet were $5.6 in the first nine months
of 2005. This increase is attributable to the effect of the running cost of the
new vessel New Flamenco.
In the first nine months of 2005, running expenses of our river fleet
were $13.4 million, as compared to $9.2 million for the same period of 2004, an
increase of $4.2 million. The increase is attributable to the effect of the
consolidation of UABL, as our subsidiary since the second quarter of 2004.
Amortization of drydock expense. Amortization of dry docking and
special survey costs increased by $1.6 million, or 44%, to $5.2 million in the
first nine months of 2005 as compared to $3.6 million in 2004. The increase is
primarily attributable to the amortization expenses of Alianza G-3, Princess
Katherine, Princess Susana and our larger river fleet.
Depreciation of property and equipment. Depreciation increased by $1.0
million, or 10%, to $10.8 million in the first nine months of 2005 as compared
to $9.8 million in the same period of 2004. This increase is primarily due to
the purchase of a new tugs and river barges and the additional passenger vessel
New Flamenco as well as the depreciation of the UABL fleet attributable to the
effect of the consolidation of UABL as our subsidiary which was partially offset
by the sale of our vessels Princess Eva and Cape Pampas.
Management fees and administrative expenses. Management fees and
administrative expenses were $6.8 million in the first nine months of 2005 as
compared to $5.9 million in the same period in 2004. This increase of $0.9
million is attributable mainly to an increase in the overhead expenses produced
by the consolidation of UABL and the management fees attributable to the new
passenger vessel.
Other operating income (expenses). This account shows a total of $21.9
million in the first nine months of 2005 as compared to $0.1 million in 2004.
The increase of $21.8 million is attributable to the effect of Cape Pampas sale.
Operating profit. Operating profit for the first nine months of 2005
was $46.5 million, an increase of $23.0 million from the same period in 2004. In
comparing these figures, the difference is mainly attributable to the result of
the sale of the Cape Pampas and higher results obtained from our vessels,
Princess Nadia and Princess Katherine, the sale of Princess Marisol and Princess
Laura, as well as the results attributable to our passenger fleet.
Interest expense. Interest expenses increased by about $1.9 million or
15%, to $14.2 million in the first nine months of 2005 as compared to $12.3
million in the equivalent 2004 period. This variation is mainly attributable to
the higher level of financial debt on our vessels.
Financial gain (loss) on extinguishments of debt. During the first nine
months of 2004 we recognized a gain of $1.3 million for the repurchase of our
Senior Notes due 2008.
Liquidity and Capital Resources
We operate in a capital-intensive industry requiring substantial
ongoing investments in revenue producing assets. Our subsidiaries have
historically funded their vessel acquisitions through a combination of bank
indebtedness, shareholder loans, cash flow from operations and equity
contributions.
As of September 30, 2005, we had total indebtedness of $216.8 million,
consisting of $180.0 million from our Senior Notes due 2014. Also as of
September 30, 2005, UABL, as our subsidiary, had the following indebtedness:
$18.4 million in a senior loan facility with IFC; $9.0 million with KfW; $1.4
million with Citibank NA; $0.4 million with Touax LPG SA and $1.3 million with
Transamerica Leasing Inc. There was an also accrued interest expense for these
loans of $6.3 million.
At September 30, 2005, we had cash and cash equivalents on hand of
$24.2 million. In addition, we had $3.6 million in restricted cash and $0.2
million in short term investments. We also had $5.7 million in non-current
restricted cash.
Operating Activities
In the first nine months of 2005, we generated $25.0 million in cash
flow from operations compared to $19.6 million for the same period in 2004. Net
income for the nine months ended September 30, 2005 was $22.4 million which is
$10.2 million more than the net income in the same period of 2004.
Net cash provided by operating activities consists of our net income
increased by non-cash expenses, such as depreciation and amortization of
deferred charges, and adjusted by changes in working capital and expenditures in
dry dock.
Investing Activities
During the first nine months ended September 30, 2005, we disbursed
$11.1 million in the purchase of push boats, river barges and additional
equipments and $20.8 million in the purchase of the passenger vessels and $10.3
in the purchase of Miranda I which we paid partially with funds available in
restricted cash. Also we received a net of $37.9 million from the process of the
Cape Pampas sale.
Financing Activities
Net cash provided by financing activities was $1.9 million during the
first nine months of 2005, compared to a net cash process of $34.4 million in
financing activities during the comparable period in 2004. The decrease in cash
provided by financing activities in this period is mainly attributable to the
repayments of principal and interest on its financial debt made during 2005 the
repayments of minority interest in our subsidiary Ultracape (Holdings) Ltd
partially offset with the application $24.5 million of restricted cash to the
purchase of the two passenger vessels and one product tanker and $7.5 million
disbursed from IFC and KfW of the remaining of the $30.0 million loan granted to
UABL in 2002.
Recent Developments
On October 7, 2005 the Company's financed $2.9 million of 90% of an
acquisition of 11 barges from our subsidiary UABL International SA with funds
available in restricted cash
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS PERIODS ENDED SEPTEMBER 30, 2005 AND 2004
(Unaudited)
Contents Page
o Financial Statements
- Condensed Consolidated Balance Sheets as of September 30, 2005
and 2004 - F-1 -
- Condensed Consolidated Statements of Income for the nine
month periods ended September 30, 2005 and 2004 - F-2 -
- Condensed Consolidated Statements of Changes in Stockholders'
Equity for the nine month periods ended September 30, 2005
and 2004 - F-3 -
- Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 2005 and 2004 - F-4 -
- Notes To Condensed Consolidated Financial Statements as of
September 30, 2005 and 2004 - F-5 -
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Stated in thousands of U.S. dollars, except par value and share amounts)
September 30, December 31,
2005 2004
----------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,178 11,602
Restricted cash 3,591 2,975
Investments 212 217
Accounts receivable, net of allowance for doubtful accounts of 1,055 and 739
in 2005 and 2004, respectively 10,413 6,385
Receivables from related parties 14,439 3,933
Marine and river operating supplies 3,369 2,194
Prepaid expenses 5,376 4,101
Other receivables 5,406 5,724
----------------- -----------------
Total current assets 66,984 37,131
----------------- -----------------
NONCURRENT ASSETS
Dry dock 9,321 11,716
Other receivables 5,676 7,944
Receivables from related parties 1,995 2,540
Property and equipment, net 176,869 160,535
Restricted cash 5,737 30,010
Investment in affiliates 15,698 15,607
Other assets 7,812 8,165
----------------- -----------------
Total noncurrent assets 223,108 236,517
----------------- -----------------
Total assets $ 290,092 $ 273,648
================= =================
LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 13,763 $ 11,487
Payable to related parties 18 768
Other financial debt 12,985 10,108
Current portion of capital lease obligations 357 695
Other payables 441 632
----------------- -----------------
Total current liabilities 27,564 23,690
----------------- -----------------
NONCURRENT LIABILITIES
Long-term debt 180,000 180,000
Other financial debt, net of current portion 23,397 29,430
Capital lease obligations, less current portion - 180
Account payable and accrued expenses 419 219
----------------- -----------------
Total noncurrent liabilities 203,816 209,829
----------------- -----------------
Total liabilities $ 231,380 $ 233,519
----------------- -----------------
MINORITY INTEREST $ 2,450 $ 6,468
----------------- -----------------
MINORITY INTEREST SUBJECT TO PUT RIGHTS $ 4,984 $ 4,751
----------------- -----------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value: authorized shares 2,134,452, issued
and outstanding 2,109,240 21 21
Treasury stock (20,332) (20,332)
Additional paid-in capital 68,884 68,884
Accumulated earnings (deficit) 2,506 (19,863)
Accumulated other comprehensive income 199 200
----------------- -----------------
Total shareholders' equity $ 51,278 $ 28,910
----------------- -----------------
Total liabilities, minority interests and shareholders' equity $ 290,092 $ 273,648
================= =================
See accompanying notes.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Stated in thousands of U.S. dollars)
Nine-month periods ended
September 30,
------------------------------
2005 2004
------------------------------
REVENUES
Revenues from third parties $ 98,043 $ 66,947
Revenues from related parties 1,850 4,587
------------------------------
Total revenues 99,893 71,534
------------------------------
OPERATING EXPENSES
Voyage expenses (23,830) (10,044)
Running costs (28,588) (18,871)
Amortization of dry dock (5,244) (3,597)
Depreciation of property and equipment (10,761) (9,783)
Management fees to related parties (1,503) (1,174)
Administrative expenses (5,340) (4,678)
Gain on disposal of vessels 21,867 85
------------------------------
(53,399) (48,062)
------------------------------
Operating profit 46,494 23,472
------------------------------
OTHER INCOME (EXPENSES)
Financial expense (14,171) (12,340)
Financial gain on extinguishment of debt - 1,344
Financial income 514 232
Investment in affiliates (462) 233
Other income 47 27
------------------------------
Total other expenses (14,072) (10,504)
------------------------------
Income before income taxes and minority interest 32,422 12,968
Income taxes (259) (178)
Minority interest (9,794) (568)
------------------------------
Net income for the period $ 22,369 $ 12,222
==============================
See accompanying notes.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(Stated in thousands of U.S. dollars)
Additional Accumulated other Accumulated
Common paid-in Treasury comprehensive earnings
Balance Stock capital stock income (deficit) Total
------- ----- ------- ----- ------ --------- -----
December 31, 2003 $ 21 $ 68,884 $ (20,332) $ 222 $ (25,002) $ 23,793
Comprehensive income:
- Change in value of
derivatives - - - (84) - (84)
- Net income for the period - - - - 12,222 12,222
-------------
-------------
Total comprehensive income 12,054
----------------------------- --------------- ---------------------------------- -------------
September 30, 2004 $ 21 $ 68,884 $ (20,332) $ 138 $ (12,780) $ 35,931
============================= =============== ================================== =============
December 31, 2004 $ 21 $ 68,884 $ (20,332) $ 200 $ (19,863) $ 28,910
Comprehensive income:
- Change in value of
derivatives - - - (1) - (1)
- Net income for the period - - - - 22,369 22,369
-------------
Total comprehensive income 22,368
----------------------------- --------------- ---------------------------------- -------------
September 30, 2005 $ 21 $ 68,884 $ (20,332) $ 199 $ 2,506 $ 51,278
============================= =============== ================================== =============
See accompanying notes.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Stated in thousands of U.S. dollars)
Nine-month periods ended
September 30,
----------------------------------
2005 2004
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period $ 22,369 $ 12,222
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation of property and equipment 10,761 9,783
Amortization of dry dock 5,244 3,597
Expenditure for dry dock (3,420) (7,646)
Note issuance expenses amortization 663 407
Minority interest in equity of subsidiaries 9,794 568
Financial gain on extinguishment of debt - (1,344)
(Gain) on disposal of vessels (21,867) (85)
Net gain (loss) from investment in affiliates 462 (233)
Allowance for doubtful account 78 438
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivables (4,106) 1,048
Receivable from related parties (784) 8,159
Marine and river operating supplies (1,175) 555
Prepaid expenses (1,275) (658)
Other receivables 2,821 (11)
Other (3) (205)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 2,276 (731)
Payable to related parties (750) (9,523)
Other 3,904 3,235
----------------------------------
Net cash provided by operating activities 24,992 19,576
----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (42,516) (49,110)
Proceeds from disposals of vessels 37,880 6,501
Decrease (Increase) in loan to affiliates (9,722) -
Purchase of UABL Limited and UABL Terminals companies, net of cash
acquired - (1,713)
Decrease (increase) in time deposit 5 (2,889)
----------------------------------
Net cash provided by (used in) investing activities (14,353) (47,211)
----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in restricted cash 23,657 17,100
Payments of long-term financial debt (15,641) (14,739)
Redemption on minority interest (13,400) -
Proceeds from long-term financial debt 7,500 18,100
Minority interest in equity of subsidiaries - 18,417
Funds used in reacquisition of Notes - (4,261)
Other (179) (179)
----------------------------------
Net cash (used in) provided by financing activities 1,937 34,438
----------------------------------
Net increase (decrease) in cash and cash equivalents 12,576 6,803
Cash and cash equivalents at the beginning of year $ 11,602 $ 8,248
----------------------------------
Cash and cash equivalents at the end of period $ 24,178 $ 15,051
----------------------------------
See accompanying notes.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Stated in thousands of U.S. dollars, except otherwise indicated)
(Information to the nine-month periods ended September 30, 2005
and 2004 is unaudited)
1. CORPORATE ORGANIZATION AND CONSOLIDATED COMPANIES
Organization
Ultrapetrol (Bahamas) Limited ("Ultrapetrol Bahamas" or "the Company",
"us" or "we") is a company organized and registered as a Bahamas
Corporation since December 1997.
The Company is a diversified ocean and river transportation company
involved in the carriage of dry and liquid cargoes as well as passengers.
In its Ocean Business, it is an owner and operator of oceangoing vessels
that transport petroleum products and dry cargo. In its Cruise Business,
is an owner of cruise vessels that transport passengers around the world.
In its River Business is operator of river barges and push boats in the
Hidrovia Region of South America, a region of navigable waters on the
Parana, Paraguay and Uruguay Rivers and part of the River Plate, which
flow through Brazil, Bolivia, Uruguay, Paraguay and Argentina. In
addition, we made an investment in an offshore services transportation
company, which has commence operations in the third quarter half of 2005.
On June 28, 2001, the Company issued 138,443 new shares for $5,295 which
were totally subscribed by Inversiones Los Avellanos S.A., one of the
Company's original shareholders and was paid $3,297 in 2001 and $1,104 in
2002 and the balance will be payable in July 2006. As of September 30,
2005 the outstanding payment was $894 and was shown as a reduction of
shareholders' equity. The Company has an option to repurchase 25,212 of
its shares for a total price of $894 from Inversiones Los Avellanos S.A.
until July, 2006.
As of September 30, 2005, the shareholders of Ultrapetrol Bahamas are
Solimar Holdings Ltd., Inversiones Los Avellanos S.A. and Avemar Holdings
(Bahamas) Ltd., a wholly owned subsidiary of the Company, in the
proportion of 46.7%, 28.2% and 25.1%, respectively. Since Avemar Holdings
(Bahamas) Ltd. granted an irrevocable proxy to Inversiones Los Avellanos
S.A. in full for all of its voting powers related to its interest in the
Company, as of September 30, 2005, Inversiones Los Avellanos S.A. held
53.3% of the Company's voting rights.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and principles of consolidation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles ("US GAAP") for interim financial information. The consolidated
balance sheet at December 31, 2004 has been derived from the audited
financial statement at that date. The unaudited condensed consolidated
financial statements and the consolidated balance sheet do not include all
of the information and footnotes required by US GAAP for complete
financial statements. All adjustments which, in the opinion of 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.
ULTRAPETROL (BAHAMAS) LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries, both majority and wholly owned.
Significant intercompany accounts and transactions have been eliminated in
this consolidation. Investments in 50% or less owned affiliates, in which
the Company exercises significant influence, are accounted for by the
equity method.
The condensed statements of operations and cash flows for 2004 have been
reclassified to conform with the 2005 presentation of certain items.
3. PROPERTY AND EQUIPMENT, NET
The capitalized cost of the property and equipment, and the related
accumulated depreciation as of September 30, 2005, and December 31, 2004
is as follows:
September 30, 2005 December 31, 2004
------------------ -----------------
Original book value
------------------------------------
Ocean-going vessels $ 126,528 $ 134,825
River barges and pushboats 117,622 105,426
Passenger vessel 20,804 -
Furniture and equipment 4,871 4,672
Land and operating base 4,876 4,758
Prepayment to supplies - 1,242
----------------- -----------------
Total original book value 274,701 250,923
Accumulated depreciation (97,832) (90,388)
----------------- -----------------
Net book value $ 176,869 $ 160,535
================= =================
As of September 30, 2005, the net book value of the assets pledged as a
guarantee of the debt was approximately $164 million.
- Cape Pampas sale
In March 2005, the Company entered into an agreement to sell its
vessel, Cape Pampas for a total price of approximately $37,880, net of
the related expenses. The vessel was delivered to the new owners on
May 6, 2005, at which time a gain on sale of approximately $22 million
was recognized.
The Company used part of the proceeds from the sale mentioned above to
cancel our financial obligations related with the purchase of this
vessel.
- New Flamenco acquisition
In March 2005, the Company entered into a contract with Cruise Elysia
Inc. to purchase a passenger vessel, named New Flamenco for a total
purchase price of $13.5 million. The purchase price was funded by a
combination of funds deposited in the Escrow Account and available
cash.
- World Renaissance acquisition
On April 6, 2005, the Company purchased at auction for a price of $3.4
million the cruise vessel World Renaissance, renamed Grand Victoria,
which was delivered and fully paid for on April 19, 2005. The purchase
price was funded by a combination of funds deposited in the Escrow
Account and available cash.
- Mt Sun Chemist acquisition
On April 28, 2005 the Company agreed to purchase the product tanker Mt
Sun Chemist, renamed Miranda I, for a total price of $10.3 million.
The vessel was delivered and fully paid for on July 7, 2005. The
purchase price was funded by a combination of funds deposited in the
Escrow Account and available cash.
- Dry barges acquisition
In January 2005 the Company purchased 35 dry barges for our river
business funded to $7.5 million of the $30 million loan granted to our
river subsidiaries in 2002.
4. LONG-TERM DEBT AND OTHER FINANCIAL DEBT
Financial institution / Nominal value Accrued
-----------------------
Other Due-year Current Noncurrent interest Total Average rate
----------------------------------------------------------------------------------------------------
Ultrapetrol Bahamas Notes 2014 $ - $ 180,000 $ 5,670 $ 185,670 9.00 %
UABL Barges IFC through 2011 2,143 11,785 316 14,244 Libor + 3.75%
UABL Barges IFC through 2009 1,000 3,500 104 4,604 Libor + 3.50%
UABL Barges KfW through 2009 2,000 7,000 192 9,192 Libor + 3.50%
UABL Paraguay Citibank NA through 2010 247 1,112 - 1,359 Libor + 2.75%
UABL Limited Transamerica Leasing Inc through 2006 1,299 - 14 1,313 7.94%
-----------------------------------------------
September 30, 2005 $6,689 $ 203,397 $ 6,296 $ 216,382
===============================================
December 31, 2004 $8,337 $ 209,430 $ 1,771 $ 219,538
===============================================
5. COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings, claims and contingencies
arising in the ordinary course of business. When such amounts can be
estimated and the contingency is probable, management accrues the
corresponding liability. While the ultimate outcome of lawsuits or other
proceedings against the Company cannot be predicted with certainty,
management does not believe the costs of such actions will have a material
effect on the Company's consolidated financial position or results of
operations.
Bahia Blanca Customs Dispute
Ultrapetrol S.A., one of the Company's subsidiaries, is involved in a
customs dispute with the Customs Authority of Bahia Blanca in Argentina
over the alleged unauthorized operation of the Princess Pia in Argentina
during 2001. As a result, the Customs Authority of Bahia Blanca issued a
resolution claiming the equivalent to $1,610 as import taxes and the
equivalent to $1,610 as fines. In response to said resolution, on March
16, 2004, Ultrapetrol S.A. submitted an appeal with the Argentine Tax
Court arguing that it did not breach any applicable customs laws since the
Princess Pia operated within Argentine territory only during the periods
in which it was expressly authorized by the competent authorities. Said
appeal is pending resolution by the Argentine Tax Court. Based upon the
facts and circumstances of the case, the existing regulations and
applicable insurance coverage, the Company does not believe that the
outcome of this matter should have a material impact on its financial
position or results of operations.
Brazilian Customs Dispute
Ultrapetrol S.A. is involved in a customs dispute with the Brazilian
Customs tax authorities over the alleged infringement of customs
regulations by the Alianza G3 and Alianza Campana (collectively, the
"Vessel") in Brazil during 2004. As a result, the Brazilian Customs tax
authorities commenced an administrative proceeding and applied the penalty
of apprehension of the Vessel which required the Vessel to remain in port
or within a maximum of five nautical miles from the Brazilian maritime
coast. The maximum custom penalty that could be imposed would be
confiscation of the Vessel, which is estimated by the Brazilian Customs tax
authorities to be valued at $4,560. On the same day that Ultrapetrol S.A.
presented its defense to this administrative proceeding, a writ of
injunction was filed on behalf of Ultrapetrol S.A. seeking a judicial
authorization allowing the return of the Vessel to Boias de Xareu, which is
located almost 20 nautical miles from the Brazilian maritime coast, so the
Vessel could resume its prior services. The preliminary injunction was
granted by the court in favor of Ultrapetrol S.A. on September 17, 2004,
conditioned on the weekly presentation of shipping letters describing the
location of the Vessel.
On February 22, 2005, the Company was notified of the decision that
grounds on which the tax assessment was based were ratified. In response
to this decision, on February 28, 2005, the Company presented a specific
request for clarification of the decision. The Company simultaneously
presented a petition to the Secretary of the Brazilian Internal Revenue
Service requesting the replacement of the confiscation penalty applied to
the vessel by a penalty corresponding to 1% (one percent) of the value of
the vessel. Both of the Company request made on February 28, 2005 are
still pending judgment.
In case the Company is not successful on the merits, under applicable
insurance coverage, it could request from The Standard Club, the Vessel's
P&I insurer, an indemnity corresponding to the value of the Vessel. Based
upon the facts and circumstances of the case, including the fact that the
Vessel was operating under a specific written authorization officially
granted by the Brazilian government, the existing regulations and
applicable insurance coverage, the Company does not believe that the
outcome of this matter should have a material impact on its financial
position or results of operations.
6. INCOME TAXES
The Company operates through its subsidiaries, which are subject to several
tax jurisdictions, as follows:
a) Panama
The earnings from shipping operations were derived from sources outside
Panama and such earnings were not subject to Panamanian taxes.
b) Paraguay
Two of our ocean businesses subsidiaries, Parfina S.A. and Oceanpar S.A.
and four of our river subsidiaries, UABL Paraguay, Parabal S.A., Yataiti
and Riverpar are subject to Paraguayan corporate income taxes.
c) Argentina
Ultrapetrol S.A., one of our ocean business and two of our river
subsidiaries, are subject to Argentine corporate income taxes.
In Argentina, the tax on minimum presumed income ("TOMPI"), supplements
income tax since it applies a minimum tax on the potential income from
certain income generating-assets at a 1% tax rate. The Company's tax
obligation in any given year will be the higher of these two tax amounts.
However, if in any given tax year tax on minimum presumed income exceeds
income tax, such excess may be computed as payment on account of any excess
of income tax over TOMPI that may arise in any of the ten following years.
d) Chile
Corporacion de Navegacion Mundial S.A. is subject to Chilean corporate
income taxes.
e) The United States
Certain entities, defined as "Qualified Foreign Corporations", are exempt
from United States of America ("U.S.") corporate income tax on U.S. source
income from their international shipping operations ("shipping income"),
pursuant to Section 883 of the US tax code. A corporation will be
considered a Qualified Foreign Corporation if (i) its country of
incorporation is a "Qualified Foreign Country" which, as defined, is a
foreign country that exempts US corporations from income tax on its
shipping income (the "Incorporation Test"), (ii) it meets the "Ultimate
Owner Test", and (iii) it files a US Federal income tax return (Form 1120F)
to claim the Section 883 exemption. A corporation meets the Ultimate Owner
Test if (a) more than 50% of the value of its stocks is ultimately owned by
"Qualified Shareholders" which, as defined, includes individuals who are
tax residents of one or more Qualified Foreign Countries that exempt U.S.
persons from tax on shipping earnings, (b) the scope of the exemption
provided by such jurisdictions is broad enough to cover the type of
shipping income (e.g. freight income, time charter hire or bareboat charter
hire) earned by the foreign corporation and (c) the corporation obtains
ownership statements, signed under penalties of perjury, from its
beneficial owners and all intermediate owners, that enable the corporation
to evidence that more than 50% of the value of its stock is ultimately
owned by individuals who are tax residents of one or more foreign countries
that exempt U.S. persons from tax on shipping earnings. For the six months
period ended September 30, 2005 and 2004 Princely International Finance
Corp. ("Princely") and Ultracape (Holdings) Ltd. ("Ultracape") satisfied
the Incorporation Test because they are incorporated in Panama and Bahamas,
respectively, which provide the required exemption to U.S. corporations as
confirmed by Revenue Ruling 2001-48. In addition, we believe that each of
Princely and Ultracape have obtained ownership statements from their
ultimate individual owners and all intermediate owners to evidence that
more than 50% of the value of their outstanding shares are ultimately owned
by Qualified Shareholders. Consistent with the prior years, Princely and
Ultracape will file IRS Form 1120F for the year 2005 to claim the Section
883 exemption.
Based on the foregoing, the Company expects all of its income to be exempt
from U.S. income taxes for the year ended December 31, 2005.
Ultrapetrol Bahamas accounts for income taxes under the liability method in
accordance with SFAS No. 109 Accounting for Income Taxes.
Under this method, deferred tax assets and liabilities are established for
temporary differences between the financial reporting basis and the tax
basis of the Company's assets and liabilities at each period end. Deferred
tax assets are recognized for all temporary items and an offsetting
valuation allowance is recorded to the extent that it is not more likely
than not that the asset will be realized.
7. RELATED PARTY TRANSACTIONS
As of September 30, 2005 and December 31, 2004, the balances of receivable
from related parties were as follows:
September 30, 2005 December 31, 2004
------------------ ------------------
Current:
Receivable from related parties
- Ravenscroft Shipping Inc. $ 2,025 $ 2,533
- UP Offshore Bahamas Ltd. and its subsidiaries 8,548 76
- Maritima Sipsa S.A. 729 754
- Oceanmarine S.A. 371 204
- Comintra Enterprise, Ltd. 1,500 250
- OTS S.A. 940 -
- Puertos del Sur S.A. 326 -
- Other - 116
----------------- ------------------
$ 14,439 $ 3,933
================== ==================
September 30, 2005 December 31, 2004
------------------ ------------------
Noncurrent:
Loans receivable from related parties
- OTS S.A. (1) $ - $ 260
- Puerto del Sur S.A. (2) 1,995 2,280
------------------ ------------------
$ 1,995 $ 2,540
================== ==================
(1) This loan accrues no interest and has no maturity date.
(2) This loan accrues interest at a nominal interest rate of 3% per year,
payable semiannually. The principal will be repaid in 8 equal
semiannual installments, beginning on June 30, 2006. The current
portion is included in current receivables from related parties.
As of September 30, 2005 and December 31, 2004 the balance of payable to
related parties were as follows:
September 30,2005 December 31, 2004
------------------ ------------------
Payable to related parties
- Ravencroft Shipping Inc $ - $ 587
- OTS S.A. - 146
- Other 18 35
------------------ ------------------
$ 18 $ 768
================== ==================
For the nine-month periods ended September 30, 2005 and 2004, the revenues
derived from related parties were as follows:
For the nine-month periods
ended September 30
2005 2004
---- ----
- Maritima Sipsa S.A. $ 1,850 $ 1,850
- UABL and its subsidiaries $ - $ 2,737
Total $ 1,850 $ 4,587
Management fee and other services
The Company through certain of its subsidiaries has contracted with
Oceanmarine, a company under the same common control as Ultrapetrol, for
certain administrative services. This agreement stipulates a fee of $10
per month and per oceangoing cargo vessel. Pursuant to the individual ship
management agreement between Ravenscroft Ship Management Ltd., a Bahamas
Corporation ("Ravenscroft Bahamas") under the same common control as
Ultrapetrol, and the Company's relevant vessel-owning subsidiaries,
Ravenscroft Bahamas has agreed to provide certain ship management services
for all of the Company's vessels. Ravenscroft Bahamas has subcontracted
the provision of these services to Ravenscroft Shipping Inc., a
Miami-based related party of the Company. This agreement stipulates a fee
of $12.5 per month and per oceangoing cargo vessel.
Under these contracts, these related parties are to provide all services
necessary for such companies to operate, including but not limited to
crewing, insurance, accounting and other required services. Additionally,
commissions and agency fees are paid to those related parties.
In addition, the Company pays Ravenscroft a monthly technical ship
management fee of (euro)20,000 per passenger vessel for services including
technical management, crewing, provisioning, superintendence and related
accounting functions. The Company pays Ravenscroft for each passenger
vessel (euro)25,000 administrative and operational fee per month for all
operational functions as well as administering the subcontractors,
concessions and credit card/collection system onboard. The Company does
not expect to pay fees to any related party other than those described
here for management and administration functions.
For the nine-month periods ended September 30, 2005 and 2004, management
fees expensed to these related parties for such services amounted to:
2005 2004
------------------ ------------------
Oceanmarine $ 430 $ 486
Ravenscroft Shipping Inc. 1,073 688
------------------ ------------------
Total $ 1,503 $ 1,174
================== ==================
For the nine-month periods ended September 30, 2005 and 2004, Ravenscroft
Shipping Inc. has provided certain other services to the Company in the
amount of $1,017 and $534, respectively.
For the nine-month period ended September 30, 2005 UP Offshore (Panama)
has provided bare boat charters to the Company in the amount of $1,575.
For the nine-month period ended September 30, 2004, ship management fees
expensed for Lonehort S.A., a shipping agent wholly owned by UABL, for
vessel administration services amounted to $1,736.
Our river subsidiaries employ the services of Technical Services S.A., a
company under the same common control as Ultrapetrol. to provide crew
recruitment services in Argentina and Paraguay. We paid Technical Services
S.A. $108 for the nine months period ended September 30, 2005.
The expense recovery from UABL totaled $131 for the nine-month period
ended September 30, 2004 and the administrative services fees to UABL
totaled $87 during same period in 2004.
Sale and repurchase of vessel Princess Marina
In 2003 the Company entered into certain transactions to sell, and
repurchase in 2006, to and from Maritima Sipsa S.A., a 49% owned company,
the vessel Princess Marina.
The combined effect of the sale at $15,100, repurchase at $7,700 and a
loan granted to Maritima Sipsa S.A. for $7,400 resulted in no cash flow on
consolidated basis at the time of execution. The loan is repaid to the
Company on a quarterly basis over a six-year period ending in June 2006,
when the vessel will be delivered to the Company.
The transaction was recognized in the Company's statements of operations
as a lease, reflecting quarterly payments as charter revenues for $1,850
in the nine-month periods ended September 30, 2005 and 2004, while the
vessel remains presented in the accompanying balance sheets as an asset.
Administration agreement with UP Offshore
On June 25, 2003 the Company signed an administration agreement with UP
Offshore.
Under this agreement Ultrapetrol agrees to assist UP Offshore by providing
management services required by the latter, including providing the
services of the Chief Executive Officer and to provide ongoing management
and commercial advisory services up to the year 2013.
The parties agreed that Ultrapetrol professional fees under this agreement
shall be the 2% of UP Offshore annual EBITDA. None of such fees have been
recognized in nine-month periods ended September 30, 2005 and 2004,
because UP Offshore's EBITDA was negative.
8. BUSINESS AND GEOGRAPHIC SEGMENT INFORMATION
Since the UABL Equity Acquisition in 2004 and the acquisition of cruise
vessels in 2005, the Company organizes its business and started to
evaluate performance by its new four operating segments, ocean, river,
cruise and offshore business. Prior to such acquisitions the Company
operated with no segments. The accounting policies of the reportable
segments are the same as those for the condensed consolidated financial
statement. The Company does not have significant intersegment
transactions. These segments and their respective operations are as
follows:
Ocean business: consists of international and inland transportation of
petroleum and dry-cargo products by oceangoing vessels owned by our
subsidiaries.
River business: consists of river transportation of refined petroleum and
dry-cargo products by barges owned by our subsidiaries.
Cruise business: consists of transportation of passengers. The vessels can
either be employed on time charter, or sell the individual cabins or mixed
formulas that provide a minimum guaranteed income for the shipowner.
Offshore business: consists of platform supply vessels to provide
transportation services to the offshore petroleum exploration and
production companies.
Ultrapetrol's oceangoing vessels operate on a worldwide basis and are not
restricted to specific locations. Also, Ultrapetrol's river barges operate
a river transportation business on the Parana, Paraguay and Uruguay rivers
and part of River Plate in Argentina, Bolivia, Brazil, Paraguay and
Uruguay. In our Cruise business, demand for our services is driven by the
global movements of tourists. Our primary market is Europe. Accordingly,
it is not possible to allocate the assets of these operations to specific
countries. In addition, the Company does not manage its operating profit
on a geographic basis.
For the nine-month periods
ended September 30,
-----------------------------------
2005 2004
------------------ ----------------
Revenues (1)
- South America $ 45,457 $ 29,468
- Europe 43,376 22,627
- Asia 9,683 16,153
- Central America 1,377 3,286
------------------- -----------------
$ 99,893 $ 71,534
=================== =================
(1) Classified by country of domicile of charterers.
The following schedule presents segment information about the Company's
operations for the nine-month period ended September 30, 2005:
Ocean River Cruise Offshore
business business business business Total
---------------- ----------------- ---------------- ----------------- -----------------
Revenues $ 43,038 $ 44,083 $ 12,772 $ - $ 99,893
Running and voyage expenses 11,789 33,069 7,560 - 52,418
Depreciation and amortization 9,986 5,246 773 - 16,005
Gain on disposal of vessels 21,867 - - - 21,867
Segment operating profit 39,272 3,181 4,041 - 46,494
Financial income 514 - - - 514
Financial expenses 12,262 1,909 - - 14,171
Income tax provision (50) (209) - - (259)
Segment assets 122,886 129,759 24,006 13,441 290,092
Investments in affiliates - 2,257 - 13,441 15,698
Loss from investment in
affiliates (200) (54) - (208) (462)
Additions to long-lived assets $ 10,430 $ 11,282 $ 20,804 $ - $ 42,516
The following schedule presents segment information about the Company's
operations for the nine-month period ended September 30, 2004:
Ocean River Offshore
business business business Total
---------------- ----------------- ---------------- -----------------
Revenues $ 39,862 $ 31,672 $ - $ 71,534
Running and voyage expenses 10,121 18,794 - 28,915
Depreciation and amortization 9,973 3,407 - 13,380
Gain on disposal of vessels 85 - - 85
Segment operating profit 15,931 7,541 - 23,472
Financial income 232 - - 232
Financial expenses 11,246 1,094 - 12,340
Income tax (provision) benefit (178) - - (178)
Net gain (loss) from
investments in afiliate 133 100 - 233
Additions to long-lived assets $ 2,011 $ 22,472 $ 24,627 $ 49,110
9. SUPPLEMENTAL GUARANTOR INFORMATION
On November 24, 2004, the Company issued $180 million 9% First Preferred
Ship Mortgage Notes due 2014.
The 2014 Senior Notes are fully and unconditionally guaranteed on a joint
and several senior basis by the majority of the Company's subsidiaries
directly involved in our ocean business.
The Indenture provides that the 2014 Senior Notes and each of the
guarantees granted by Subsidiaries, other than the Mortgages, are governed
by, and construed in accordance with, the laws of the state of New York.
Each of the mortgaged vessels is registered under either the Panamanian
flag, or another jurisdiction with similar procedures. All of the
Subsidiary Guarantors are outside of the United States.
Supplemental condensed combining financial information for the Guarantor
Subsidiaries for the 2014 Senior Notes is presented below. This
information is prepared in accordance with the Company's accounting
policies. This supplemental financial disclosure should be read in
conjunction with the condensed consolidated financial statements.
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF SEPTEMBER 30, 2005 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined
Combined non- Total
subsidiary subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Current assets
Receivables from related parties $ 134,523 $ 8,017 $ 11,324 $ (139,425) $ 14,439
Other current assets 15,935 15,200 21,410 - 52,545
----------------- ---------------------------------- ----------------- ----------------
Total current assets 150,458 23,217 32,734 (139,425) 66,984
----------------- ---------------------------------- ----------------- ----------------
Noncurrent assets
Property and equipment, net - 126,385 52,762 (2,278) 176,869
Investment in affiliates 77,568 - 15,698 (77,568) 15,698
Other noncurrent assets 12,105 11,590 6,846 - 30,541
----------------- ---------------------------------- ----------------- ----------------
Total noncurrent assets 89,673 137,975 75,306 (79,846) 223,108
----------------- ---------------------------------- ----------------- ----------------
Total assets $ 240,131 $ 161,192 $ 108,040 $ (219,271) $ 290,092
================= ================================== ================= ================
Current liabilities
Payables to related parties $ 3,000 $ 117,332 $ 19,111 $ (139,425) $ 18
Other financial debt 5,670 - 7,672 - 13,342
Other current liabilities 183 7,046 6,975 - 14,204
----------------- ---------------------------------- ----------------- ----------------
Total current liabilities 8,853 124,378 33,758 (139,425) 27,564
----------------- ---------------------------------- ----------------- ----------------
Noncurrent liabilities
Long-term debt 180,000 - - - 180,000
Other financial debt, net of current
portion - - 23,397 - 23,397
Other noncurrent liabilities - - 419 - 419
----------------- ---------------------------------- ----------------- ----------------
Total noncurrent liabilities 180,000 - 23,816 - 203,816
----------------- ---------------------------------- ----------------- ----------------
Total liabilities 188,853 124,378 57,574 (139,425) 231,380
Minority interests 2,450 2,450
Minority interests subject to put right 4,984 4,984
Shareholders' equity $ 51,278 $ 36,814 $ 50,466 $ (87.280)$ 51,278
----------------- ---------------------------------- ----------------- ----------------
Total liabilities, minority interests
and shareholders' equity $ 240,131 $ 161,192 $ 108,040 $ (219,271) $ 290,092
================= ================================== ================= ================
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEETS
AS OF DECEMBER 31, 2004
(stated in thousands of U.S. dollars)
Combined
Combined non- Total
subsidiary subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Current assets
Receivables from related parties $ 101,870 $ 3,332 $ 2,862 $ (104,131) $ 3,933
Other current assets 627 11,440 21,131 - 33,198
----------------- ---------------------------------- ----------------- ----------------
Total current assets 102,497 14,772 23,993 (104,131) 37,131
----------------- ---------------------------------- ----------------- ----------------
Noncurrent assets
Property and equipment, net - 95,353 65,182 - 160,535
Investment in affiliates 71,646 - 15,607 (71,646) 15,607
Other noncurrent assets 36,588 15,305 8,482 - 60,375
----------------- ---------------------------------- ----------------- ----------------
Total noncurrent assets 108,234 110,658 89,271 (71,646) 236,517
----------------- ---------------------------------- ----------------- ----------------
Total assets $ 210,731 $ 125,430 $ 113,264 $ (175,777) $ 273,648
================= ================================== ================= ================
Current liabilities
Payables to related parties $ - $ 97,184 $ 7,715 $ (104,131) $ 768
Other financial debt 1,620 - 9,183 - 10,803
Other current liabilities 201 4,854 7,064 - 12,119
----------------- ---------------------------------- ----------------- ----------------
Total current liabilities 1,821 102,038 23,962 (104,131) 23,690
----------------- ---------------------------------- ----------------- ----------------
Noncurrent liabilities
Long-term debt 180,000 - - - 180,000
Other financial debt, net of current
portion - - 29,610 - 29,610
Other noncurrent liabilities - - 219 - 219
----------------- ---------------------------------- ----------------- ----------------
Total noncurrent liabilities 180,000 - 29,829 - 209,829
----------------- ---------------------------------- ----------------- ----------------
Total liabilities 181,821 102,038 53,791 (104,131) 233,519
Minority interests - - - 6,468 6,468
Minority interests subject to put right - - - 4,751 4,751
Shareholders' equity $ 28,910 $ 23,392 $ 59,473 $ (82,865) $ 28,910
----------------- ---------------------------------- ----------------- ----------------
Total liabilities, minority interests
and shareholders' equity $ 210,731 $ 125,430 $ 113,264 $ (175,777) $ 273,648
================= ================================== ================= ================
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined
Combined non- Total
subsidiary subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Revenues $ - $ 56,991 $ 47,908 $ (5,006) $ 99,893
Operating expenses (1,117) (31,841) (23,169) 2,728 (53,399)
--------------- ----------------- ---------------------------------- -----------------
Operating profit (loss) (1,117) 25,150 24,739 (2,278) 46,494
Other income (expenses) 23,486 (11,678) (595) (25,285) (14,072)
--------------- ----------------- ---------------------------------- -----------------
Income before income tax and 22,369 13,472 24,144 (27,563) 32,422
minority interest
Income taxes - (50) (209) - (259)
Minority interest - - - (9,794) (9,794)
--------------- ----------------- ---------------------------------- -----------------
Net income $ 22,369 $ 13,422 $ 23,935 $ (37,357) $ 22,369
----------
=============== ================= ================================== =================
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2004 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Revenues $ 162 $ 48,538 $ 43,043 $ (20,209) $ 71,534
Operating expenses (1,245) (29,671) (37,355) 20,209 (48,062)
---------------- ----------------- ---------------------------------- -----------------
Operating profit (loss) (1,083) 18,867 5,688 - 23,472
Other income (expenses) 13,305 (9,304) (948) (13,557) (10,504)
---------------- ----------------- ---------------------------------- -----------------
Income before income tax and 12,222 9,563 4,740 (13,557) 12,968
minority interest
Income taxes - (9) (169) - (178)
Minority interest - - - (568) (568)
---------------- ----------------- ---------------------------------- -----------------
Net income $ 12,222 $ 9,554 $ 4,571 $ (14,125) $ 12,222
================ ================= ================================== =================
SUPPLEMENTAL CONDENSED COMBINING STATEMENTS OF CASH FLOW
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2005 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Net income $ 22,369 $ 13,422 $ 23,935 $ (37,357) $ 22,369
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities (24,769) 13,117 (23,082) 37,357 2,623
---------------- ----------------- ---------------------------------- -----------------
Net cash used in provided by
operating activities (2,400) 26,539 853 - 24,992
Net cash provided by (used in)
investing activities (9,057) (39,707) 32,066 2,345 (14,353)
Net cash provided by (used in)
financing activities 27,090 13,170 (35,978) (2,345) 1,937
---------------- ----------------- ---------------------------------- -----------------
Net increase (decrease) in cash and
cash equivalents $ 15,633 $ 2 $ (3,059) $ - $ 12,576
================ ================= ================================== =================
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOW
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2004 (UNAUDITED)
(stated in thousands of U.S. dollars)
Combined Combined Total
subsidiary non-subsidiary Consolidating consolidated
Parent guarantors guarantors adjustments amounts
------ ---------- ---------- ----------- -------
Net income $ 12,222 $ 9,554 $ 4,571 $(14,125) $ 12,222
Adjustments to reconcile net income
to net cash (used in) provided
by operating activities (20,632) 7,416 6,445 14,125 7,354
---------------- ----------------- ---------------------------------- -----------------
Net cash (used in) provided by
operating activities (8,410) 16,970 11,016 - 19,576
Net cash (used in) provided by
investing activities (1,846) (13,878) (31,487) - (47,211)
Net cash provided by financing
activities 16,461 (3,119) 21,096 - 34,438
---------------- ----------------- ---------------------------------- -----------------
Net (decrease) increase in cash and
cash equivalents $ 6,205 $ (27) $ 625 $ - $ 6,803
================ ================= ================================== =================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ULTRAPETROL (BAHAMAS) LIMITED
(registrant)
Dated: November 16, 2005 By: /s/ Felipe Menedez Ross
-----------------------
Name: Felipe Menendez Ross
Title: President
02351-0008 #618715