GulfMark Offshore, Inc. 2nd Qtr. 10-Q


UNITED STATES 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 June 30, 2006

GULFMARK OFFSHORE, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation)

000-22853
(Commission file number)

76-0526032
(I.R.S. Employer Identification No.)

10111 Richmond Avenue, Suite 340, Houston, Texas
  
77042
(Address of principal executive offices)
  
(Zip Code)

(713) 963-9522
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 90 days.
YES x
  
NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check One):
Large accelerated filer o
  
Accelerated filer x
  
Non-accelerated filer o 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o
  
NO x

Number of shares of Common Stock, $0.01 Par Value, outstanding as of July 31, 2006: 20,639,451.

(Exhibit Index Located on Page 20)


GulfMark Offshore, Inc.
Index

   
Page Number
   
 
3
   
3
   
4
   
5
   
6
 
11
 
18
 
18
 
 
 
19
 
19
   
19
   
20


2

PART 1. FINANICAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

   
June 30, 2006
  
December 31, 2005
  
   
(In thousands)
  
ASSETS
  
CURRENT ASSETS:
          
Cash
  
$
25,467
  
$
24,190
  
Trade accounts receivable, net allowance for doubtful accounts of $446 in 2006 and $57 in 2005
    
43,936
    
38,039
  
Other accounts receivable
    
3,481
    
3,661
  
Prepaids and other
    
4,084
    
3,468
  
Total current assets
    
76,968
    
69,358
  
               
VESSELS AND EQUIPMENT at cost, net of accumulated depreciation of $179,841 in 2006 and $154,457 in 2005
    
513,067
    
485,417
  
CONSTRUCTION IN PROGRESS
    
33,120
    
25,029
  
GOODWILL
    
29,920
    
27,628
  
DEFERRED COSTS AND OTHER ASSETS
    
5,833
    
6,483
  
TOTAL ASSETS
  
$
658,908
  
$
613,915
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
              
Current portion of long-term debt
  
$
—
  
$
2,113
  
Accounts payable
    
17,604
    
16,195
  
Accrued personnel costs
    
8,229
    
7,706
  
Accrued interest expense
    
5,744
    
6,539
  
Other accrued liabilities
    
2,052
    
1,864
  
Total current liabilities
    
33,629
    
34,417
  
               
LONG-TERM DEBT
    
240,919
    
247,685
  
DEFERRED TAX LIABILITIES
    
8,741
    
9,382
  
OTHER LIABILITIES
    
1,640
    
2,335
  
STOCKHOLDERS’ EQUITY:
              
Preferred stock, no par value; 2,000 authorized; no shares issued
    
—
    
—
  
Common stock, $0.01 par value; 30,000 shares authorized; 20,616 and 20,373 shares issued and outstanding, respectively
    
204
    
202
  
Additional paid-in capital
    
126,658
    
125,177
  
Treasury stock
    
(2,672
)
  
(2,017
)
Deferred compensation expense
    
2,672
    
2,017
  
Retained earnings
    
172,301
    
153,004
  
Accumulated other comprehensive income
    
74,816
    
41,713
  
Total stockholders’ equity
    
373,979
    
320,096
  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  
$
658,908
  
$
613,915
  

The accompanying notes are an integral part of these condensed consolidated financial statements.


3

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

   
Three Months Ended June 30,
  
Six Months Ended June 30,
  
   
2006
  
2005
  
2006
  
2005
  
   
(In thousands, except per share amounts)
  
                   
REVENUES
  
$
58,433
  
$
51,340
  
$
106,108
  
$
99,406
  
COSTS AND EXPENSES:
                          
Direct operating expenses
    
22,493
    
21,036
    
44,277
    
40,192
  
Drydock expense
    
3,580
    
3,610
    
6,336
    
5,159
  
Bareboat charter expense
    
—
    
1,382
    
—
    
1,763
  
General and administrative expenses
    
6,228
    
4,987
    
12,129
    
9,703
  
Depreciation expense
    
7,355
    
7,256
    
14,416
    
14,454
  
Total Costs and Expenses
    
39,656
    
38,271
    
77,158
    
71,271
  
OPERATING INCOME
    
18,777
    
13,069
    
28,950
    
28,135
  
                           
OTHER INCOME (EXPENSE):
                          
Interest expense
    
(4,134
)
  
(4,763
)
  
(8,432
)
  
(9,533
)
Interest income
    
265
    
183
    
430
    
231
  
Foreign currency gain (loss) and other
    
(814
)
  
568
    
(303
)
  
(468
)
Total Other Income and Expense
    
(4,683
)
  
(4,012
)
  
(8,305
)
  
(9,770
)
                           
Income before income taxes
   
14,094
    
9,057
    
20,645
    
18,365
  
Income tax provision
    
(1,060
)
  
(803
)
  
(1,348
)
  
(1,184
)
NET INCOME
  
$
13,034
  
$
8,254
  
$
19,297
  
$
17,181
  
                           
EARNINGS PER SHARE:
                          
Basic
 
$
0.64
  
$
0.41
  
$
0.96
  
$
0.86
  
Diluted
 
$
0.63
  
$
0.40
  
$
0.93
  
$
0.83
  
WEIGHTED AVERAGE SHARES OUTSTANDING:
                          
Basic
    
20,224
    
20,041
    
20,184
    
20,019
  
Diluted
    
20,740
    
20,639
    
20,833
    
20,653
  

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
Six Months Ended June 30,
  
   
2006
  
2005
  
   
(In thousands)
  
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
  
$
19,297
  
$
17,181
  
Adjustments to reconcile net income to net cash provided by operating activities:
              
Depreciation expense
    
14,416
    
14,454
  
Gain on disposition of assets
    
(41
)
  
-
  
Amortization of stock based compensation
    
850
    
232
  
Amortization of deferred financing costs on debt
    
528
    
515
  
Provision for doubtful accounts receivable, net of write-offs
    
385
    
405
  
Deferred income tax benefit
    
(599
)
  
(771
)
Foreign currency transaction loss
    
843
    
725
  
Change in operating assets and liabilities:
              
Accounts receivable
    
(3,203
)
  
(6,647
)
Prepaids and other
    
(252
)
  
908
  
Accounts payable
    
(259
)
  
(415
)
Accrued liabilities and other
    
(2,532
)
  
(471
)
Net cash provided by operating activities
    
29,433
    
26,116
  
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Purchases of vessels and equipment
    
(17,951
)
  
(8,323
)
Proceeds from disposition of vessels and equipment
    
269
    
-
  
Net cash used in investing activities
    
(17,682
)
  
(8,323
)
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Proceeds from debt, net of debt financing costs
    
80,541
    
-
  
Repayments of debt
    
(96,025
)
  
(10,247
)
Proceeds from exercise of stock options
    
396
    
1,099
  
Proceeds from issuance of stock
    
167
    
166
  
Net cash used in financing activities
    
(14,921
)
  
(8,982
)
               
Effect of exchange rate changes on cash
    
4,447
    
(207
)
NET INCREASE IN CASH
    
1,277
    
8,604
  
               
CASH AT BEGINNING OF THE PERIOD
  
$
24,190
  
$
17,529
  
CASH AT END OF THE PERIOD
  
$
25,467
  
$
26,133
  
SUPPLEMENTAL CASH FLOW INFORMATION:
              
Interest paid, net of interest capitalized
  
$
8,341
  
$
7,843
  
Income taxes paid
 
$
899
  
$
1,541
  

The accompanying notes are an integral part of these condensed consolidated financial statements.


5

GULFMARK OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) GENERAL INFORMATION

The condensed consolidated financial statements of GulfMark Offshore, Inc. and its subsidiaries included herein have been prepared by us without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. Unless otherwise indicated, references to “we”, “us”, “our” and the “Company” refer to GulfMark Offshore, Inc. and its subsidiaries. Certain information relating to our organization and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted in this Form 10-Q pursuant to such rules and regulations. However, we believe that the disclosures herein are adequate to make the information presented not misleading. The balance sheet at December 31, 2005 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. It is recommended that these financial statements be read in conjunction with our consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2005.

In the opinion of management, all adjustments, which include reclassification and normal recurring adjustments necessary to present fairly the financial statements for the periods indicated have been made.  All significant intercompany accounts have been eliminated. Certain reclassifications of previously reported information may be made to conform with current year presentation.

We provide marine support and transportation services primarily to companies involved in the offshore exploration and production of oil and natural gas. Our fleet of vessels provides various services that support the ongoing operation and construction of offshore oil and natural gas facilities and drilling rigs, including the transportation of materials, supplies and personnel, and the positioning of drilling structures. The majority of our operations are in the North Sea, with the balance offshore Southeast Asia and the Americas. Periodically, we will contract vessels into other regions to meet customers’ requirements.

Basic Earnings Per Share, or EPS, is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is computed using the treasury stock method for common stock equivalents. The details of the EPS calculation are as follows (in thousands except per share data):

   
Three Months Ended June 30, 2006
  
Three Months Ended June 30, 2005
  
   
Income
  
Shares
  
Per Share
Amount
  
Income
  
Shares
  
Per Share
Amount
  
Net income per share, basic
  
$
13,034
    
20,224
  
$
0.64
  
$
8,254
    
20,041
  
$
0.41
  
Dilutive effect of common stock options
         
516
                
598
        
Net income per share, diluted
  
$
13,034
    
20,740
  
$
0.63
  
$
8,254
    
20,639
  
$
0.40
  

   
Six Months Ended June 30, 2006
  
Six Months Ended June 30, 2005
  
   
Income
  
Shares
  
Per Share
Amount
  
Income
  
Shares
  
Per Share
Amount
  
Net income per share, basic
  
$
19,297
    
20,184
  
$
0.96
  
$
17,181
    
20,019
  
$
0.86
  
Dilutive effect of common stock options
         
649
                
634
        
Net income per share, diluted
  
$
19,297
    
20,833
  
$
0.93
  
$
17,181
    
20,653
  
$
0.83
  

6

(2) STOCK BASED COMPENSATION

As more fully described in our Form 10-K for the year ended December 31, 2005, we adopted Statement of Financial Accounting Standards No. 123R (“SFAS No. 123R”), “Share Based Payment”, effective January 1, 2006, using the modified prospective method where compensation cost will be recognized related to new awards modified, repurchased, or cancelled after the required effective date. As of January 1, 2006, all of our currently outstanding stock option awards were fully vested. Under the modified prospective method, vested equity awards outstanding at the effective date create no additional compensation expense. Our employee stock purchase plan, or ESPP, would be considered compensatory under SFAS No. 123R whereby our ESPP allows all of our U.S. employees and participating subsidiaries to acquire shares of common stock at 85% of the fair market value of the common stock under a qualified plan as defined by Section 423 of the Internal Revenue Service. Our ESPP has a look-back option that establishes the purchase price as an amount based on the lesser of the stock’s market price at the grant date or the market price at the exercise date. The total value of the look-back option imbedded in our ESPP is calculated using the component approach whereby each award is computed as the sum of 15% of a share of non-vested stock, a call option on 85% of share of non-vested stock, and a put option on 15% of a share of non-vested stock. Our consolidated financial statements at and for the three and six months ended June 30, 2006, reflect the impact of SFAS No. 123R of $12,000 and $30,000, respectively, net of tax, for the ESPP plan, which had previously not been included in net income, and $305,000 and $561,000, respectively, net of tax, for our restricted stock plan, which had previously been included in net income. In accordance with the modified prospective method, prior periods have not been restated to reflect, and do not include, the impact of SFAS No. 123R. For comparative purpose, the effect on net earnings and earnings per share before and after application of the fair value recognition provision of SFAS No. 123R to stock-based employee compensation for the three and six months ended June 30, 2005 is illustrated below (in thousands except per share data):

   
Three Months Ended
June 30, 2005
  
Six Months Ended
June 30, 2005
  
Net income as reported
  
$
8,254
  
$
17,181
  
Employee stock-based compensation included in net income, net of tax
   
70
    
153
  
Pro forma stock-based employee compensation expenses determined under fair value based method, net of related tax effects
    
(78
)
  
(198
)
Pro forma net income
  
$
8,246
  
$
17,136
  
Per Share Information:
              
Basic, As reported
  
$
0.41
  
$
0.86
  
Basic, Pro forma
  
$
0.41
  
$
0.86
  
Diluted, As reported
 
$
0.40
  
$
0.83
  
Diluted, Pro forma
  
$
0.40
  
$
0.83
  

(3) COMPREHENSIVE INCOME (LOSS)

The components of comprehensive income (loss), net of related tax, for the three and six month periods ended June 30, 2006 and 2005 are as follows:

   
Three Months Ended June 30,
  
Six Months Ended June 30,
  
   
2006
  
2005
  
2006
  
2005
  
   
(In thousands)
  
Net income
 
$
13,034
  
$
8,254
  
$
19,297
  
$
17,181
  
Foreign currency translation adjustments
    
23,504
    
(14,355
)
  
33,103
    
(23,833
)
Comprehensive income (loss)
  
$
36,538
  
$
(6,101
)
$
52,400
  
$
(6,652
)

7

Our only accumulated comprehensive income item relates to our cumulative foreign currency translation adjustment.

(4) VESSEL ACQUISITIONS AND DISPOSITIONS

In continuation of our long-range growth strategy, during 2005, we committed to build six new vessels for a cost of approximately $140 million. Keppel Singmarine Pte. Ltd. will build these vessels to meet the growing demand of our customer base, particularly in Southeast Asia. The first of these vessels is scheduled to be delivered in the fourth quarter of 2007, with the delivery of the final vessel scheduled for the fourth quarter of 2008. Additionally, we are acquiring two vessels already under construction. Delivery of the first of these two vessels, the Sea Guardian, took place in April 2006, while the second, the Sea Sovereign, is being built by Jaya Shipbuilding and Engineering PTE LTD at their Batam, Indonesia yard near Singapore, and is expected to be delivered in the fourth quarter of 2006. We also agreed to participate in a joint venture for the construction of two large platform supply vessels, at an estimated cost of $30 million for each vessel with delivery in 2007. One of our North Sea region affiliates is the majority investor in the option and purchased 100% of the first vessel out of the joint venture at the end of 2005, and is expected to purchase 100% of the second vessel. On September 30, 2005, we entered into a forward contract to minimize our foreign currency exchange risk, which is designated as a fair value hedge and expected to be highly effective as the terms of the forward contract are generally the same as the purchase commitment. As of June 30, 2006, we had a gain of $0.5 million on this contract, compared to a loss of $1.1 million as of December 31, 2005. Any gains or losses resulting from the changes in the fair value would adjust the asset value.

Interest is capitalized in connection with the construction of vessels. During the three month periods ended June 30, 2006 and 2005, $0.6 million and $0.5 million, respectively were capitalized in connection with the construction of vessels. During the six month period ended June 30, 2006 and 2005, $1.0 million and $0.6 million, respectively, were capitalized.
 
       Consistent with our strategy to sell older vessels in the fleet when the appropriate opportunity exists, on June 15, 2006, we signed a memorandum of agreement to sell the North Sea based vessel Sentinel for $7.4 million, with options to cancel if certain conditions are not met. The sale of the vessel becomes effective upon completion of a chartering contract that existed prior to the date the memorandum was signed. As such, there is no effect on the second quarter financial statements relating to this transaction. All risks related to the vessel remain ours until the vessel is delivered to the buyer. We expect the sale to be finalized and delivery of the vessel to the buyer in the fourth quarter of 2006.

In addition, during July 2006, we signed a memorandum of agreement for the sale of one of our older platform supply vessels for $10.8 million. Pending Board of Directors approval, delivery of the vessel to the buyer should occur at the conclusion of its current charter contract, which is expected to be in the third quarter of 2006.

(5) BANK CREDIT FACILITIES

On June 8, 2006, we closed on a new $175 million Secured Reducing Revolving Loan Facility with a group of financial institutions headed by Den Norske Bank, or DnB. The new multi-currency facility is structured as follows: $85 million allocated to GulfMark Offshore, Inc., the parent company, $60 million allocated to Gulf Offshore N.S. Limited, a U.K. wholly owned subsidiary, and $30 million allocated to GulfMark Rederi AS, a Norwegian wholly owned subsidiary. The new facility replaced all our existing debt, which included the $100 million Multi-currency Bank Credit Facility, $50 million Senior Secured Revolving Credit Facility and notes secured by two vessel mortgages. Approximately $80.9 million was refinanced under the new facility, compared to $90.6 million outstanding under the four separate facilities at March 31, 2006, with the balance repaid from cash on hand.

8
       The new facility will mature in 2013 and the maximum availability begins to reduce in increments of $15.2 million every 6 months beginning after 66 months (in late 2011), with a final reduction of $129.5 million in June 2013. Security for the facility is provided by first priority mortgages on certain vessels and a negative pledge over other vessels. The interest rate ranges from LIBOR plus a margin of 0.7% to 0.9% depending on our EBITDA coverage ratio. As of June 30, 2006, we had $80.9 million outstanding on the new credit facility.

(6) INCOME TAXES

We consider earnings of certain foreign subsidiaries to be permanently reinvested, and as such we have not provided for any U.S. federal or state income taxes on these earnings. Our overall tax provision is affected by the mix of our operations within various taxing jurisdictions; accordingly, there is limited correlation between pretax income/loss and the tax provision or benefit. Our North Sea operations based in the U.K. and Norway have a special tax incentive for qualified shipping operations known as a tonnage tax. These tonnage tax regimes provide for a tax based on the net tonnage weight of a qualified vessel, resulting in significantly lower taxes than those that would apply if we were not a qualified shipping company in those jurisdictions. Currently, the U.K. tax authority, HM Revenue & Customs, is conducting an audit of our 2003 U.K. tax return. The outcome of this tax audit is uncertain; however, we do not believe that any final assessment as a result of the tax audit would have a future material adverse impact to our financial statements in excess of what has been provided. In the first half of 2006, our income continued to be concentrated in the lower tax jurisdictions. Our income tax provision for the quarter ended June 30, 2006 was $ 1.1 million.

(7) COMMITMENTS AND CONTINGENCIES

We have contingent liabilities and future claims for which we have made estimates of the amount of the eventual cost to liquidate these liabilities or claims. These liabilities and claims may involve threatened or actual litigation where damages have not been specifically quantified but we have made an assessment of our exposure and recorded a provision in our accounts for the expected loss. Other claims or liabilities, including those related to taxes in foreign jurisdictions, may be estimated based on our experience in these matters and, where appropriate, the advice of outside counsel or other outside experts. Upon the ultimate resolution of the uncertainties surrounding our estimates of contingent liabilities and future claims, our future reported financial results would be impacted by the difference between our estimates and the actual amounts paid to settle the liabilities. In addition to estimates related to litigation and tax liabilities, other examples of liabilities requiring estimates of future exposure include contingencies arising out of acquisitions and divestitures. Our contingent liabilities are based on the most recent information available to us regarding the nature of the exposure. Such exposures change from period to period based upon updated relevant facts and circumstances, which can cause the estimate to change. In the recent past, our estimates for contingent liabilities have been sufficient to cover the actual amount of our exposure.

(8) MULTI-EMPLOYER PENSION OBLIGATION
Certain of our subsidiaries participate in an industry-wide, multi-employer, defined benefit pension fund based in the U.K., known as the Merchant Navy Officers Pension Fund, or MNOPF. During the second half of 2005, we were informed the fund was in a deficit position as calculated by the fund’s actuary based on the most recent actuarial study. In the third and fourth quarters of 2005, we received invoices from the MNOPF totaling approximately $1.8 million, which we recorded as direct operating expense. As of December 31, 2005, we had paid $0.3 million and recorded as a liability approximately $1.5 million representing our estimated share of the fund deficit. In the second quarter of 2006, we paid an additional $0.2 million against the liability. Under the direction of a court order, the deficit is to be remedied through future funding contributions from all participating
 
9

employers. The amount of our ultimate share of the deficit could change; however, depending on future actuarial valuations and fund calculations which are due to occur every three years, the next of which was scheduled for the end of March 2006. We currently have not received the results of this updated valuation. Our share of the fund’s deficit will be dependent on a number of factors including the updated actuarial study, the number of participating employers, and the method used in allocating the required contribution among participating employers.
 
(9)  NEW ACCOUNTING PRONOUNCEMENTS
 
In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (FIN 48), which clarifies the accounting and disclosure for uncertain tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for fiscal years beginning after December 15, 2006. The company is assessing FIN 48 and has not determined yet the impact that the adoption of FIN 48 will have on its result of operations or financial position.

(10) OPERATING SEGMENT INFORMATION

We operate three operating segments: the North Sea, Southeast Asia and the Americas, each of which is considered a reportable segment under SFAS No. 131. In prior years, we reported all operations in a single segment. In 2004, our segment reporting was changed to conform to the manner in which our chief operating decision maker reviews, and we manage, our business.

Management evaluates segment performance primarily based on operating income. Cash and debt are managed centrally. Because the regions do not manage those items, the gains and losses on foreign currency remeasurements associated with these items are excluded from operating income. Management considers segment operating income to be a good indicator of each segment’s operating performance from its continuing operations, as it represents the results of the ownership interest in operations without regard to financing methods or capital structures. Each operating segment’s operating income is summarized in the following table, and detailed discussions follow.

Operating Income (Loss) by Operating Segment

   
North Sea
  
Southeast Asia
  
Americas
  
Other
  
Total
  
   
(In thousands)
  
Quarter Ended June 30, 2006
                      
Revenues
  
$
45,806
  
$
6,100
  
$
6,527
  
$
—
  
$
58,433
  
Operating expenses
    
19,043
    
2,081
    
4,157
    
3,440
    
28,721
  
Drydock expense
    
2,960
    
569
    
51
    
—
    
3,580
  
Depreciation expense
    
5,469
    
763
    
1,035
    
88
    
7,355
  
Operating income (loss)
  
$
18,334
  
$
2,687
  
$
1,284
  
$
(3,528
)
$
18,777
  
                                 
Quarter Ended June 30, 2005
                                
Revenues
  
$
40,469
  
$
4,790
  
$
6,081
  
$
—
  
$
51,340
  
Operating expenses
    
19,406
    
1,710
    
3,562
    
2,727
    
27,405
  
Drydock expense
    
2,632
    
79
    
899
    
—
    
3,610
  
Depreciation expense
    
5,624
    
656
    
936
    
40
    
7,256
  
Operating income (loss)
  
$
12,807
  
$
2,345
  
$
684
  
$
(2,767
)
$
13,069
  


10


   
North Sea
  
Southeast Asia
  
       Americas
  
Other
  
Total
  
   
(In thousands)
  
Six Months Ended June 30, 2006
                      
Revenues
  
$
81,628
  
$
11,077
  
$
13,403
  
$
—
  
$
106,108
  
Operating expenses
    
37,829
    
4,045
    
7,816
    
6,716
    
56,406
  
Drydock expense
    
4,703
    
1,565
    
68
    
—
    
6,336
  
Depreciation expense
    
10,643
    
1,463
    
2,128
    
182
    
14,416
  
Operating income (loss)
  
$
28,453
  
$
4,004
  
$
3,391
  
$
(6,898
)
$
28,950
  
                                 
Six Months Ended June 30, 2005
                                
Revenues
  
$
78,929
  
$
9,247
  
$
11,230
  
$
—
  
$
99,406
  
Operating expenses
    
37,297
    
2,878
    
6,499
    
4,984
    
51,658
  
Drydock expense
    
4,174
    
79
    
906
    
—
    
5,159
  
Depreciation expense
    
11,314
    
1,272
    
1,789
    
79
    
14,454
  
Operating income (loss)
  
$
26,144
  
$
5,018
  
$
2,036
  
$
(5,063
)
$
28,135
  

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We provide marine support and transportation services to companies involved in the offshore exploration and production of oil and natural gas. Our vessels transport drilling materials, supplies and personnel to offshore facilities, as well as move and position drilling structures. The majority of our operations are based in the North Sea with 37 vessels operating in the area. We also have 12 vessels offshore Southeast Asia, four vessels offshore Brazil, two vessels in the Mediterranean Sea, two vessels offshore India, two vessels offshore Mexico and one offshore West Africa. Our fleet has grown in both size and capability from an original 11 vessels acquired in 1990 to our present level of 60 vessels, through strategic acquisitions and the new construction of technologically advanced vessels, partially offset by dispositions of certain older, less profitable vessels. Our fleet includes 49 owned vessels, and 11 managed vessels.

Our results of operations are directly impacted by the level of activity in worldwide offshore oil and natural gas exploration, development and production, which in turn is influenced by trends in oil and natural gas prices. Additionally, oil and natural gas prices are affected by a host of geopolitical and economic forces including the fundamental principles of supply and demand. Recently commodity prices have been at record highs, resulting in the oil and natural gas companies increasing their exploration and development activities, after reduced levels of activities were experienced in 2002 through early 2004.

The operations of our fleet may be subject to seasonal factors. Operations in the North Sea are often at their highest levels during the months from April to August and at their lowest levels from November to February. Operations in our other areas, although they may involve some seasonal factors, tend to remain more consistent throughout the year. As a result of this seasonal decrease in demand, we have historically, to the extent possible, accomplished the majority of our regulatory drydocks during the slower periods to minimize downtime during the traditional peak demand periods. The demands of the market, the expiration of existing contracts, the start of new contracts and the availability allowed by our customers have and will influence the timing of drydocks throughout the year. During the early part of 2006, market conditions were weaker than during the same 2005 period; therefore, we completed more drydocks than were originally contemplated. Overall, we completed 15 drydocks in the first half of 2006 compared to 10 in the same 2005 period. All of the regulatory drydocks will need to be completed by the date mandated by the appropriate regulatory agency.


11

We provide management services to other vessel owners for a fee. We do not include charter revenues and vessel expenses of these vessels in our operating results but rather include management fees in operating revenues. These vessels have been excluded for purposes of calculating fleet rates per day worked and utilization in the applicable periods.

Our operating costs are primarily a function of fleet configuration and utilization levels. The most significant direct operating costs are wages paid to vessel crews, maintenance and repairs, and marine insurance. Generally, fluctuations in vessel utilization have little effect on direct operating costs in the short term. As a result, direct operating costs as a percentage of revenues may vary substantially due to changes in day rates and utilization.

In addition to direct operating costs, we incur fixed charges related to the depreciation of our fleet and costs for routine drydock inspections, which are maintenance and repairs designed to ensure compliance with applicable regulations and certifications for our vessels with the various international classification societies.

Critical Accounting Policies

In the period covered by this report, there have been no changes to the critical accounting policies used in our reporting of results of operations and financial position. For a discussion of our critical accounting policies, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the year ended December 31, 2005.

Results of Operations

The table below sets forth, by region, the average day rates and utilization for our vessels and the average number of vessels owned or chartered during the periods indicated. These vessels generate substantially all of our revenues and operating profit. We use the information that follows to evaluate the performance of our business.

   
Three Months Ended June 30,
  
Six Months Ended June 30,
  
   
2006
  
2005
  
2006
  
2005
  
Revenues by Region (000’s) (a):
                  
North Sea Based Fleet (b)
  
$
45,806
  
$
40,469
  
$
81,628
  
$
78,929
  
Southeast Asia Based Fleet
    
6,100
    
4,790
    
11,077
    
9,247
  
Americas Based Fleet
    
6,527
    
6,081
    
13,403
    
11,230
  
                           
Rates Per Day Worked (a) (c):
                          
North Sea Based Fleet (b)
  
$
17,977
  
$
16,068
  
$
16,354
  
$
16,154
  
Southeast Asia Based Fleet
    
6,260
    
5,679
    
6,206
    
5,709
  
Americas Based Fleet
    
10,964
    
13,382
    
11,101
    
12,530
  
                           
Overall Utilization (a) (c):
                          
North Sea Based Fleet
   
93.7
%
  
90.8
%
  
92.8
%
  
90.4
%
Southeast Asia Based Fleet
   
92.7
%
  
94.4
%
  
88.4
%
  
92.1
%
Americas Based Fleet
   
100.0
%
  
89.3
%
  
99.8
%
  
94.2
%
                           
Average Owned/Chartered Vessels (a) (d):
                          
North Sea Based Fleet
    
30.3
    
31.0
    
30.2
    
30.7
  
Southeast Asia Based Fleet
    
11.7
    
10.0
    
11.3
    
10.0
  
Americas Based Fleet
    
6.7
    
5.7
    
6.8
    
5.3
  
Total
    
48.7
    
46.7
    
48.3
    
46.0
  


12

(a)
Includes all owned or bareboat chartered vessels.

(b)
Revenues for vessels in the North Sea based fleet are primarily earned in Pound Sterling (GBP) and Norwegian Kroner (NOK) and have been converted to U.S. Dollars (US$) at the average exchange rate (GBP/US$ and US$/NOK) for the periods indicated. The average rates for GBP were 1 GBP= $1.83 and $1.86 for the quarters ended June 30, 2006 and 2005, respectively. The average rates for GBP were 1 GBP = $1.79 and $1.87 for the six months ended June 30, 2006 and 2005, respectively. The average rates for NOK were 1 US$=NOK 6.23 and NOK 6.39 for the quarters ended June 30, 2006 and 2005, respectively. The average rates for NOK were 1 US$ = NOK 6.44 and NOK 6.34 for the six months ended June 30, 2006 and 2005, respectively.

(c)
Rates per day worked is defined as total charter revenues divided by number of days worked. Utilization rate is defined as the total days worked divided by total days of availability in the period.

(d)
Adjusted for vessel additions and dispositions occurring during each period.

Comparison of the Three Months Ended June 30, 2006 with the Three Months Ended June 30, 2005

For the quarter ended June 30, 2006, our net income was $13.0 million, or $0.63 per diluted share, on record quarterly revenue of $58.4 million. This compares to a net income during the same period in 2005 of $8.3 million, or $0.40 per diluted share on revenues of $51.3 million.

The increase in revenue of $7.1 million compared to the same quarter a year ago was primarily due to increases in all our regions. We experienced overall improvements in day rates in the North Sea and Southeast Asia and utilization in the North Sea and the Americas, which resulted in increases of $4.1 million and $2.3 million, respectively. The full quarter effect of four of our new build vessels, two in Southeast Asia and two in the Americas, resulted in a further increase of $2.2 million. Partially offsetting these increases was the return of a bareboat chartered vessel at the beginning of 2006, which decreased revenue by approximately $1.5 million.

Revenues in our North Sea region increased by $5.3 million, or 13.2%, from $40.5 million in the second quarter of 2005 to $45.8 million in the second quarter of the current year. This increase was due in part to an increase in day rates of $4.8 million, from $16,068 in 2005 to $17,977 in the current period this year, largely related to our larger anchor handling vessels having experienced the highest day rates since their delivery. Utilization also increased from 90.8% in the second quarter of 2005 to 93.7% in the second quarter this year. This increase contributed $1.7 million in revenue in the region. Also, the return of a vessel into the North Sea from our Americas region during the quarter contributed $0.3 million. Offsetting these increases was the decrease of $1.5 million related to the return of a bareboat chartered vessel to its owner at the beginning of this year. Operating income for the region increased by $5.5 million to $18.3 million, an increase directly related to the increase in revenue.
 
Revenues in our Southeast Asia based fleet increased 27.3%, from $4.8 million last year to $6.1 million in the second quarter of this year. This increase was directly related to the increase in fleet size, from an average of 10.0 vessels in the second quarter of last year to an average of 11.7 this quarter. The effect of the addition of the Sea Intrepid and Sea Guardian contributed $1.1 million to the increase in revenue for the region during 2006. Day rates increased from $5,679 in last year’s quarter to $6,260 this quarter, or $0.1 million; however, utilization decreased from 94.4% last year to 92.7% this year. Operating income increased from $2.3 million to $2.7 million quarter to quarter. An increase in operating expenses of $0.4 million and in depreciation of $0.1 million are mainly due to the increase in fleet size in the region. Increased drydock expense of $0.5 million was related to one drydock being completed in 2006 compared to no drydocks being completed in 2005.


13

Our Americas region revenues increased by $0.4 million, or 7.3%, from $6.1 million in the second quarter of 2005 to $6.5 million in the second quarter of this year. This increase was primarily the result of the start-up of the Mexican operations in the second quarter of 2005, which contributed $1.1 million in additional capacity to the region. Utilization in the region increased from 89.3% in 2005 to 100.0 % in 2006. Offsetting these increases, the Brazil activity was negatively impacted by the conclusion of a contract for a vessel, subsequently mobilized back to the North Sea. Day rates therefore decreased from $13,382 in 2005 to $10,964 in 2006, due to the change in the vessel specification mix. Operating income for the region doubled, from $0.7 million in the 2005 quarter to $1.3 million in the second quarter of 2006. This increase is directly related to the increase in fleet size in the region resulting from the full quarter effect of the inclusion of the Mexican operations in the 2006 results.

Operating income of $18.8 million in the second quarter of 2006 increased $5.7 million from the second quarter of 2005. This increase was mainly due to increased revenue of $7.1 million offset by increased direct operating expenses of $1.5 million, increased general and administrative expenses of $1.2 million due largely to higher expenses as a result of higher salaries and administrative costs. Both depreciation and drydock expense remained somewhat constant, while bareboat charter expense decreased in the second quarter of 2006 by $1.4 million.

Other expenses in the second quarter of 2006 included a decrease of $0.6 million in interest expense over the same quarter in 2005, mainly attributable to decreased borrowings and a lower interest rate resulting from our new credit facility. Other income and expenses included an expense in foreign currency and other of $0.8 million, consisting primarily of the loss related to translation of non-functional currency transactions, as currencies fluctuated significantly during the quarter.

Our income tax provision for the second quarter of 2006 was $1.1 million, for a 7.5% effective tax rate, compared to $0.8 million, or 8.9% effective tax rate, for the second quarter of 2005. The tax rate in the 2006 period reflected increased pre-tax profits in our lower tax rate jurisdictions.

Comparison of the Six Months Ended June 30, 2006 with the Six Months Ended June 30, 2005

For the six months ended June 30, 2006, we had net income of $19.3 million, or $0.93 per diluted share, on revenues of $106.1 million. During the same period in 2005, net income was $17.2 million, or $0.83 per diluted share, on revenues of $99.4 million.

The 2006 increase in revenue of $6.7 million compared to the same period a year ago was mainly due to an increase in day rates which contributed $6.2 million, primarily as a result of improved overall market conditions. Higher capacity contributed $4.2 million resulting from the addition of the Sea Intrepid and Sea Guardian in Southeast Asia and the full quarter effect of the additions of the Coloso and Titan in the Americas region during the second quarter of 2005. Higher utilization in all our regions contributed $1.8 million to the overall revenue increase. Offsetting these increases was the effect of a significant decrease in the U.S. dollar against the British Pound Sterling, amounting to a $3.5 million negative effect on revenue. Also, at the beginning of 2006 we returned a bareboat chartered vessel to its owner, decreasing capacity for 2006 by $2.0 million.

North Sea revenues increased $2.7 million, or 3.4% year-over-year, due mainly to an increase in day rates from $16,154 in the first half of 2005 to $16,354 in the first half of this year, and was largely attributable to record day rates in 2006 for our larger anchor handlers. Higher utilization, from 90.4% to 92.8% year-over-year, added $1.2 million to the revenue increase, while the return to the North Sea of a vessel that had been operating in our Americas region added $0.3 million. These increases were offset by a $3.5 million unfavorable currency effect, and $2.0 million decrease in capacity related to the return of a bareboat chartered vessel. Operating income increased year-over- year by $2.3 million, largely due to the increase in revenue.

14

Revenues for our Southeast Asia based fleet increased 19.8%, from $9.2 million in the first six months of 2005 to $11.1 million in the same 2006 period. The $1.8 million increase was primarily attributable to an increase in fleet size in the region, as the addition of the Sea Intrepid in late 2005 and Sea Guardian in the second quarter of 2006, increased the average number of vessels in the area from 10.0 in the first half of 2005 to 11.3 in 2006. This increase in fleet size amounted to $1.5 million increase in revenue. Day rates increased from $5,709 in 2005 to $6,206 in 2006, adding $0.3 million to revenue; however, utilization decreased from 92.1% in 2005 to 88.4% in 2006 reflecting lower utilization in the first quarter of 2006. Operating income decreased from $5,018 in the first quarter of 2005 to $4,004 in 2006. This decrease is directly related to higher drydock expenses and depreciation having to do with the addition of the two new build vessels in the area.

Our Americas revenues increased 19.3% from $11.2 million in 2005 to $13.4 million in 2006. The increase of $2.2 million was primarily the result of the full year effect of the addition of the two Mexico vessels in the second quarter of 2005. These vessels, the Coloso and Titan, contributed $2.8 million in additional capacity to the increase in revenue. An increase in utilization from 94.2% in the first half of 2005 to 99.8% in the same 2006 period contributed $0.6 million, partially offset by a decrease in day rates from $12,530 in 2005 to $11,101 in 2006, or $0.7 million. Additionally, the mobilization of a vessel out of this region upon completion of its contract decreased revenue by $0.5 million. Operating income increased by $1.4 million, an increase directly related to the increase in revenue.

Operating income increased to $29.0 million in the six month period ended June 30, 2006 from $28.1 million for the same period one year ago. This increase was due to increases in revenue of $6.7 million offset by increased direct operating expenses of $4.1 million, increased drydock expense of $1.1 million, as we drydocked a higher number of vessels in the 2006 period, and increased corporate overhead of $2.4 million. The return of the bareboat chartered vessel decreased bareboat charter expense by $1.8 million, and depreciation remained stable year-over-year.

In the six months ended June 30, 2006, other expenses of $8.3 million included a $1.1 million decrease in interest expense when compared to the same period in 2005. This positive variance was attributable to decreased borrowings this year compared to last year.

Our income tax provision for the first half of 2006 was $1.3 million, for a 6.5% effective tax rate, compared to a provision of $1.2 million for the same 2005 period, or 6.4% effective tax rate. This slight increase is consistent with higher 2006 pretax earnings in low tax jurisdictions.

Liquidity, Capital Resources and Financial Condition

Our ongoing liquidity requirements are generally associated with our need to service debt, fund working capital, acquire or improve equipment and make other investments. Since inception, we have been active in the acquisition of additional vessels through both the resale market and new construction. Bank financing, equity capital and internally generated funds have historically provided funding for these activities.

At June 30, 2006, we had total debt of $240.9 million, consisting of approximately $159.5 million of 7.75% senior notes, $80.9 million related to the new bank credit facility and $0.5 million related to a partnership interest in conjunction with our new build vessel program.


15

Net working capital at June 30, 2006 was $43.3 million, including $25.5 million in cash. Net cash provided by operating activities increased by $3.3 million to $29.4 million for the six months ended June 30, 2006. This increase was mainly due to improved financial performance in the first half of 2006 partially offset by working capital changes.  Net cash used in investing activities was $17.7 million and $8.3 million for the six months ended June 30, 2006 and 2005, respectively. The 2006 period reflects $8.2 million final payment for the new build vessel Sea Guardian, as well as progress payments on our ongoing new build program.

On June 8, 2006, we closed on a new $175 million Secured Reducing Revolving Loan Facility with a group of financial institutions headed by Den Norske Bank, or DnB. The new multi-currency facility replaced all our existing debt, including the $100 million Multi-currency Bank Credit Facility, $50 million Senior Secured Revolving Credit Facility and notes secured by two vessel mortgages. As of June 30, 2006, we have $80.9 million outstanding under the new facility, compared to $90.6 million outstanding under the four separate facilities at March 31, 2006. The weighted average interest rate of the new facility as of June 30, 2006 was 5.3%. We are required, on a consolidated basis, to maintain a minimum equity ratio and a specified EBITDA to interest coverage ratio. We are currently in compliance with those ratios, however, we cannot give assurance that the results of operations will result in compliance in future periods.

Most of our income tax liabilities are for deferred taxes. The tonnage tax regimes in both Norway and the U.K. reduce the cash required for taxes, while accelerated tax depreciation has further mitigated current taxes outside the North Sea region.

We believe that our current level of cash on hand and cash flows from operations will be adequate to repay our debts due and will provide sufficient resources to finance our operating requirements. However, our ability to fund working capital, capital expenditures and debt service in excess of cash on hand will be dependent upon the success of our operations. To the extent that existing sources are insufficient to meet those cash requirements, we would seek other debt or equity financing; however, we can give no assurances that such debt or equity financing would be available on acceptable terms.

In addition, we have signed memorandums of agreement to sell two North Sea based vessels in the second half of 2006 that would result in cash proceeds of approximately $18.2 million.

Currency Fluctuations and Inflation

In areas where currency risks are potentially high, we normally accept only a small percentage of charter hire in local currency. The remainder is paid in U.S. Dollars.

Substantially all of our operations are international; therefore we are exposed to currency fluctuations and exchange rate risks. Charters for vessels in the North Sea fleet are primarily denominated in GBP with a portion denominated in NOK. Operating costs are substantially denominated in the same currency as charter hire in order to reduce the risk of currency fluctuations. For the six months ended June 30, 2006, the average NOK/U.S. Dollar exchange rate was 1 USD = NOK 6.44, while the average GBP/U.S. Dollar exchange rate was 1 GBP = $1.79. The average exchange rates in the comparable 2005 period were 1 USD = 6.34 NOK and 1 GBP=$1.87. Our North Sea based fleet generated $81.6 million in revenues and $28.5 million in operating income for the six months ended June 30, 2006.


16

Reflected in the accompanying balance sheet as of June 30, 2006, is $74.8 million in other comprehensive income, which fluctuates, based on differences primarily in GBP and NOK exchange rates as of each balance sheet date compared to the exchange rates when we invested capital in these markets. Changes in other comprehensive income are non-cash items that are primarily attributable to investments in vessels and dollar based capitalization between our parent company and our foreign subsidiaries.

After evaluating the remaining U.S. Dollar debt, we have determined that it is in our best interest not to use any financial instruments to hedge this exposure under present conditions. Our decision is based on a number of factors, including among others:

·  
the cost of using hedging instruments in relation to the risks of currency fluctuations,
·  
the propensity for adjustments in GBP denominated vessel day rates over time to compensate for changes in the purchasing power of GBP as measured in U.S. Dollars,
·  
the level of U.S. Dollar denominated borrowings available to us, and
·  
the conditions in our U.S. Dollar generating regional markets.

One or more of these factors may change and we, in response, may choose to use financial instruments to hedge risks of currency fluctuations. On September 30, 2005, we engaged in a contract to hedge a specific obligation to make payments in Norwegian Kroner related to a new vessel under construction, effectively fixing our purchase price in U.S. dollars. Upon delivery of the vessel, any exchange rate benefit (cost) will be reflected in the net purchase price of the vessel. As of June 30, 2006, we had a hedge gain of $0.5 million.

To date, general inflationary trends have not had a material effect on our operating revenues or expenses.

Forward-Looking Statements

This Form 10-Q contains certain forward-looking statements and other statements that are not historical facts concerning, among other things, market conditions, the demand for marine and transportation support services and future capital expenditures. These statements are subject to certain risks, uncertainties and assumptions, including, without limitation:

·  
operational risk,
·  
catastrophic or adverse sea or weather conditions,
·  
dependence on the oil and gas industry,
·  
prevailing oil and natural gas prices,
·  
expectations about future prices,
·  
delay or cost over runs on construction projects,
·  
ongoing capital expenditure requirements,
·  
uncertainties surrounding environmental and government regulation,
·  
risk relating to leverage,
·  
risks of foreign operations,
·  
risk of war, sabotage or terrorism,
·  
assumptions concerning competition,
·  
risks of currency fluctuations, and
·  
other matters.


17

See also the risk factors set forth in our Form 10-K for the year ended December 31, 2005. These statements are based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate under the circumstances. Such statements are subject to risks and uncertainties, including the risk factors discussed above, general economic and business conditions, the business opportunities that may be presented to and pursued by GulfMark, changes in law or regulations and other factors, many of which are beyond our control.

We cannot assure you that we have accurately identified and properly weighed all of the factors, which affect market conditions and demand for our vessels, that the information upon which we have relied is accurate or complete, that our analysis of the market and demand for our vessels is correct, or that the strategy based on that analysis will be successful.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity

Our financial instruments that are potentially sensitive to changes in interest rates include our 7.75% Senior Notes. As of July 14, 2006, the fair value of these notes, based on quoted market prices, was approximately $155.2 million compared to a carrying amount of $159.5 million.

Exchange Rate Sensitivity

We operate in a number of international areas and are involved in transactions denominated in currencies other than U.S. Dollars, which exposes us to foreign currency exchange risk. At various times we may utilize forward exchange contracts, local currency borrowings and the payment structure of customer contracts to selectively hedge exposure to exchange rate fluctuations in connection with monetary assets, liabilities and cash flows denominated in certain foreign currency. We do not hold or issue forward exchange contracts or other derivative financial instruments for speculative purposes.

Other information required under Item 3 has been incorporated into Management's Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures.

Based on their evaluation of our disclosure controls and procedures as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures have been designed and are effective for the period covered by the report ensuring that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions’ rules and forms.

(b) Changes in internal controls and procedures.

There were no changes in our internal controls over financial reporting identified in connection with the evaluation of our disclosure controls and procedures by our principal executive officer and principal financial officer that occurred during the second quarter of 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

18


PART II OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS

At the Company's Annual meeting of Stockholders held on May 18, 2006, the stockholders of the Company approved the election of all nominated directors as follows:

Nominee
  
In Favor
  
Withheld
  
David J. Butters
    
11,189,121
    
6,434,305
  
Peter I. Bijur
    
16,867,830
    
755,596
  
Marshall A. Crowe
    
16,867,778
    
755,648
  
Louis S. Gimbel, 3rd
    
17,176,126
    
447,300
  
Sheldon S. Gordon
    
16,852,726
    
770,700
  
Robert B. Millard
    
17,071,392
    
552,034
  
Bruce A. Streeter
    
17,025,692
    
597,734
  


At the Company's Annual meeting of Stockholders held on May 18, 2006, the stockholders of the Company approved the selection of UHY Mann Frankfort Stein & Lipp CPA’s, LLP as the Company's independent auditors for the fiscal year ending December 31, 2006 as follows:

For
Against
Abstained
17,568,525
51,855
3,046

ITEM 6. Exhibits

Exhibits
See Exhibit Index for the list of Exhibits filed herewith.

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.


   
GulfMark Offshore, Inc.
  
   
(Registrant)
  
       
 
By:
/s/ Edward A. Guthrie
  
   
Edward A. Guthrie
  
   
Executive Vice President and
 
   
Chief Financial Officer
  
Date: July 31, 2006
      



19

EXHIBIT INDEX

Exhibit No.
Document Description
    
3.1
Certificate of Incorporation, dated December 4, 1996
  
Incorporated by reference to Exhibit 3.1 to our quarterly report on Form 10-Q for the quarter ended September 30, 2002
3.2
Certificate of Amendment of Certificate of Incorporation, dated March 6, 1997
  
Incorporated by reference to Exhibit 3.2 to our quarterly report on Form 10-Q for the quarter ended September 30, 2002
3.3
Certificate of Amendment of Certificate of Incorporation, dated May 24, 2002
 
Incorporated by reference to Exhibit 3.3 to our quarterly report on Form 10-Q for the quarter ended September 30, 2002
3.4
Bylaws, dated December 6, 1996
 
Incorporated by reference to Exhibit 3.3 to our Registration Statement on Form S-4, Registration No. 333-24141 filed on March 28, 1997
4.1
See Exhibit Nos. 3.1, 3.2 and 3.3 for provisions of the Certificate of Incorporation and Exhibit 3.4 for provisions of the Bylaws defining the rights of the holders of Common Stock
  
Incorporated by reference to Exhibits 3.1, 3.2 and 3.3 to our quarterly report on Form 10-Q for the quarter ended September 30, 2002 and Exhibit 3.3 to our Registration Statement on Form S-4, Registration No. 333-24141 filed on March 28, 1997
4.2
Specimen Certificate for GulfMark Offshore, Inc. Common Stock, $0.01 par value
 
Incorporated by reference to Exhibit 4.2 to our Registration Statement on Form S-1, Registration No. 333-31139 filed on July 11, 1997
4.3
Indenture, dated July 21, 2004, among GulfMark Offshore, Inc., as Issuer, and U.S. Bank National Association, as Trustee, including a form of the Company’s 7.75% Senior Notes due 2014
 
Incorporated by reference to Exhibit 4.4 to our quarterly report on Form 10-Q for the quarter ended September 30, 2004
4.4
Registration Rights Agreement, dated July 21, 2004, among GulfMark Offshore, Inc. and the initial purchasers
 
Incorporated by reference to Exhibit 4.5 to our quarterly report on Form 10-Q for the quarter ended September 30, 2004
4.5
Form of Debt Securities Indenture
  
Incorporated by reference to Exhibit 4.5 to our Registration Statement on Form S-3, Registration No. 333-133563, filed April 20, 2006
10.1
Form of Restricted Stock Award Agreement
  
Incorporated by reference to Exhibit 10.1 to our current report on Form 8-K, filed May 18, 2006
10.2
$85M Secured Reducing Revolving Loan Facility Agreement dated June 8, 2006
  
Incorporated by reference to Exhibit 10.28 to our current report on Form 8-K, filed June 9, 2006
10.3
$60M Secured Reducing Revolving Loan Facility Agreement dated June 8, 2006
  
Incorporated by reference to Exhibit 10.29 to our current report on Form 8-K, filed June 9, 2006
10.4
$30M Secured Reducing Revolving Loan Facility Agreement dated June 8, 2006
  
Incorporated by reference to Exhibit 10.30 to our current report on Form 8-K, filed June 9, 2006
31.1
Section 302 certification for B.A. Streeter
  
Filed herewith
31.2
Section 302 certification for E.A. Guthrie
  
Filed herewith
32.1
Section 906 certification furnished for B.A. Streeter
  
Filed herewith
32.2
Section 906 certification furnished for E.A. Guthrie
  
Filed herewith


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