SECURITIES AND EXCHANGE COMMISSION
                                 Washington, D.C.  20549

                                        FORM 10-K
                    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                           THE SECURITIES EXCHANGE ACT OF 1934

                       For the fiscal year ended December 31, 1998

                             Commission File Number 0-28732

                                HVIDE MARINE INCORPORATED
                 (Exact  name of registrant as specified in its charter)

                    Florida                                  65-0524593
          (State or other jurisdiction of                  (I.R.S. Employer
          incorporation or organization)                 Identification Number)

          2200 Eller Drive, P.O. Box 13038
          Ft. Lauderdale, Florida                                33316
          (Address of principal executive offices)             (Zip Code)

           Registrant's telephone number, including area code:  (954) 523-2200

          Securities registered pursuant to Section 12(b) of the Act:  None

          Securities registered pursuant to Section 12(g) of the Act:  Class A 
Common Stock, $.001 par value

         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 and (2) has been  subject to such  filing
requirements for the past 90 days. YES X NO __

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

         The  aggregate  market value of the  registrant's  Common Stock held by
non-affiliates  of the  registrant at March 29, 1999 (based on the closing price
of such stock on the Nasdaq National Market) was $53,359,600.

     At March 19, 1999, there were 12,879,509 shares of the registrant's Class A
Common  Stock  outstanding  and  2,547,064  shares of its  Class B Common  Stock
outstanding.

                          DOCUMENTS INCORPORATED BY REFERENCE

         DOCUMENT                                          WHERE INCORPORATED

  Proxy Statement for Annual Meeting
  to be held June 7, 1999 (specified portions)                  Part III




<PAGE>






                            HVIDE MARINE INCORPORATED

                                 1998 FORM 10-K


                                Table of Contents
<TABLE>
<CAPTION>

Item                                                                                                           Page


                                                       Part I
<S>      <C>                                                                                                <C>
1        Business...........................................................................................   1
2        Properties.........................................................................................
3        Legal Proceedings..................................................................................
4        Submission of Matters to a Vote of Security Holders................................................
4A       Executive Officers of the Registrant...............................................................

                                                       Part II

5        Market for Registrant's Common Equity and Related Stockholder Matters..............................
6        Selected Financial Data............................................................................
7        Management's Discussion and Analysis of Financial Condition and Results of
         Operations.........................................................................................
7A       Quantitative and Qualitative Disclosures About Market Risk.......................................
8        Financial Statements and Supplementary Data........................................................
9        Changes in and Disagreements With Accountants on Accounting and Financial
         Disclosure.........................................................................................

                                                      Part III

10       Directors and Executive Officers of the Registrant.................................................
11       Executive Compensation.............................................................................
12       Security Ownership of Certain Beneficial Owners and Management.....................................
13       Certain Relationships and Related Transactions.....................................................

                                                       Part IV

14       Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................................



</TABLE>


<PAGE>




                                   PART I

Item 1.  Business

General

         Hvide Marine Incorporated, directly and through subsidiaries, is one of
the world's  leading  providers of marine support and  transportation  services,
primarily  serving the energy and chemical  industries.  The Company has been an
active consolidator in each of the markets in which it operates,  increasing its
fleet from 23 vessels in 1993 to 284 vessels at March 15, 1999. As a result, the
Company is the third largest  operator of offshore energy support vessels in the
U.S. Gulf of Mexico,  the largest  operator of such vessels in the Arabian Gulf,
and a leading operator of such vessels offshore West Africa,  Southeast Asia and
Mexico. In addition, the Company is the sole provider of commercial tug services
at Port Everglades and Port  Canaveral,  Florida,  the primary  provider of such
services in Tampa,  Florida and a leading  provider of such  services in Mobile,
Alabama, Lake Charles,  Louisiana, and Port Arthur, Texas, as well as in the Bay
of Campeche in Mexico. The Company also provides marine transportation services,
principally for specialty  chemicals and petroleum products in the U.S. domestic
trade, a market largely insulated from international competition under the Jones
Act.

          Through  early 1998,  the Company  completed a number of  acquisitions
that substantially  expanded its offshore energy support operations into several
new international markets, increased its deepwater energy support capability and
increased  its  domestic  offshore  and  harbor  towing  and  petroleum  product
transportation  operations.   These  acquisitions  included  the  February  1998
acquisition of 37 offshore energy support vessels operating  primarily  offshore
West Africa and Southeast Asia, and the March 1998  acquisition of two petroleum
product carriers and seven harbor tugs operating in Port Arthur,  Texas and Lake
Charles, Louisiana. The Company's fleet grew modestly during the balance of 1998
and early 1999 through the delivery of 13 vessels (consisting of four tugs, four
supply  boats,  two crew boats,  two ship docking  modules or SDMs(TM),  and one
barge).  In  addition,  an  affiliate  of the  Company  took  delivery  of three
double-hull  petroleum  product  tankers  in 1998 and one  double-hull  chemical
product carrier in early 1999.

         As a result  of  declines  in the  Company's  offshore  energy  support
business in the second half of 1998 and early 1999,  the Company does not expect
to be in compliance,  as of March 31, 1999, with one or more covenants contained
in the agreements governing its bank borrowings. Such noncompliance would result
in a default under such agreements. Such a default would enable the bank lenders
to accelerate the payment of all bank borrowings,  which would, in turn,  result
in a default under certain other indebtedness under cross-default provisions. In
the event of such defaults, all bank borrowings and such other indebtedness,  as
well as all interest accrued on such borrowings and  indebtedness,  could become
immediately due and payable. In order to avoid these defaults,  the Company will
be required  either to enter into an amendment of the  agreement  governing  its
bank  borrowings or to obtain a waiver with respect to such  noncompliance.  The
Company has developed a plan to improve liquidity,  including the disposition of
assets in order to raise significant amounts of cash; discussing amended and new
financing  arrangements  with its  banks  and other  lenders;  reducing  capital
expenditures and operating and overhead expenses;  and improving working capital
management.


<PAGE>

See "Management's  Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for additional information.

         As  used in  this  Report,  the  term  "HMI"  refers  to  Hvide  Marine
Incorporated, a Florida corporation, and the term "Company" refers to HMI and/or
one or  more  of its  subsidiaries  and,  in  certain  cases,  their  respective
predecessors.  The  Company's  principal  executive  offices are located at 2200
Eller Drive, P.O. Box 13038,  Fort Lauderdale,  Florida 33316, and its telephone
number is (954) 523-2200.

Projections and Other Forward-Looking Information

         This  Report  contains,  and other  communications  by the  Company may
contain,  projections or other  "forward-looking"  information.  Forward-looking
information  includes all statements  regarding the Company's expected financial
position, results of operations, cash flows, financing plans, business strategy,
budgets,   capital  and  other  expenditures,   competitive   position,   growth
opportunities  for existing or new products and services,  management  plans and
objectives,  and  markets  for stock.  Like any other  business,  the Company is
subject to risks and other  uncertainties that could cause its actual results to
differ materially from any projections or that could cause other forward-looking
information to prove incorrect.  In addition to general  economic,  business and
market conditions, these risks and uncertainties include the following:

o        declines in oil and/or gas prices,  which tend to cause  reductions  in
         exploration,  development  and  production  activities  and,  in  turn,
         reductions in the use of the offshore energy support services  provided
         by the Company  (although these  reductions may be partially  offset by
         reductions  in operating  costs and by increased  use of the  Company's
         marine transportation and towing services);

o        increased offshore energy support vessel construction  activity,  which
         can cause  oversupply in the industry and consequent  reductions in the
         utilization rates of the Company's  offshore energy support vessels and
         the amounts  charged by the Company for the use of its offshore  energy
         support vessels;

o        international  political  instability,  which can lead to reductions in
         exploration,  development  and production  activities,  particularly in
         less developed regions (although such instability can lead to increased
         oil prices);

o        fluctuations  in  weather,   which  can  lead  to  declines  in  energy
         consumption and resulting  declines in oil and/or gas prices  (although
         extreme  weather  conditions  can lead to  increases  in the use of the
         petroleum transportation services provided by the Company);

o        changes  in laws  and  regulations  affecting  the  maritime  industry,
         including any possible  weakening of the Jones Act,  which could result
         in increased competition from non-U.S.  companies in the Company's U.S.
         offshore  energy  support,  offshore  and  harbor  towing,  and  marine
         transportation businesses;

o        changes in environmental  laws and regulations,  including any possible
         weakening of the U.S. Oil  Pollution Act of 1990 ("OPA 90") and similar
         statutes, which could result in increased competition for the petroleum
         product  transportation  services  provided  by  the  Company's  modern
         double-hull fleet; and


<PAGE>


o        uncertainties involving the so-called "Millennium Bug," which may cause
         the closing of various ports and other  facilities  used by the Company
         and/or other disruptions in the Company's businesses at year-end 1999.

         Additional  information regarding the above and other factors affecting
the Company's business appears elsewhere in this Report.


                                    The Company's Industries and Operations

Fleet Overview

         The following  table lists the vessels owned or operated by the Company
at March 15, 1999:
<TABLE>
<CAPTION>

                                                                                                     Number of
                                                                                                      Vessels 
<S>                                                                                                <C>
Marine Support Services
   Offshore Energy Support
     Crew/Utility Boats...........................................................................        78
     Anchor Handling Tug/Supply Boats.............................................................        47
     Supply Boats.................................................................................        38
     Anchor Handling Tugs.........................................................................        28
     Geophysical Boats............................................................................         7
       Specialty Units............................................................................         6 
                                                                                                    --------
       Total Offshore Energy Support..............................................................       204
   Offshore and Harbor Towing Tugs................................................................        41
                                                                                                    --------
       Total Marine Support Services..............................................................       245
                                                                                                    --------
Marine Transportation Services
   Chemical/Petroleum Product Carriers............................................................        12
   Fuel Barges....................................................................................        17
   Towboats.......................................................................................        10
                                                                                                    --------
       Total Marine Transportation Services.......................................................        39
                                                                                                    --------
          Total Vessels...........................................................................       284
                                                                                                    ========
</TABLE>

         The above table  includes  vessels  owned and  operated by the Company,
vessels owned by the Company and operated by others, and vessels owned by others
but operated by the Company, under various financing and operating arrangements.

  Marine Support Services

         Offshore  Energy  Support.  Offshore  energy  support  vessels are used
primarily to transport materials,  supplies, equipment and personnel to drilling
rigs and to support the  construction,  positioning and ongoing operation of oil
and gas production  platforms.  Offshore energy support vessels are hired by oil
companies and others engaged in offshore exploration and production activities.



<PAGE>


         The market for offshore energy support services is fundamentally driven
by the offshore  exploration,  development and production  activities of oil and
gas companies  worldwide.  The level of exploration,  development and production
activities  depends  primarily  on  the  capital  expenditures  of oil  and  gas
producers, which is largely a function of current and anticipated energy prices.
Oil and gas prices are influenced by a variety of factors,  including  worldwide
demand,  production  levels,  governmental  policies  regarding  exploration and
development of reserves, and political factors in producing countries.

         The  following  are the types of  vessels  primarily  used in  offshore
energy support activities:

o             Supply  boats (also called  workboats)  are  generally  steel-hull
              vessels of at least 150 feet in length. They serve exploration and
              production   facilities  and  support  offshore  construction  and
              maintenance  activities and are  differentiated  from other vessel
              types  by  cargo   flexibility   and  capacity.   In  addition  to
              transporting  deck cargo,  such as drill pipe and heavy equipment,
              supply boats  transport  liquid mud,  potable and drilling  water,
              diesel  fuel,  dry bulk  cement,  and dry  bulk  mud.  With  their
              relatively large liquid mud and dry bulk cement capacity and large
              areas of open deck space,  they are  generally  in greater  demand
              than other types of support  vessels for  exploration and workover
              drilling activities.

o             Crew boats (also called  crew/supply boats) are faster and smaller
              than supply boats and are used primarily to transport light cargo,
              including food and supplies, and personnel to and among production
              platforms,  rigs and  other  offshore  installations.  They can be
              chartered  together  with  supply  boats to  support  drilling  or
              construction  operations  or,  separately,  to serve  the  various
              requirements  of  offshore  production  platforms.  Crew boats are
              typically constructed of aluminum and generally have longer useful
              lives than  steel-hull  supply  boats.  Crew boats also  provide a
              cost-effective  alternative to helicopter  transportation services
              and  can  operate  reliably  in all but the  most  severe  weather
              conditions.

o             Anchor handling vessels,  which include anchor handling tug/supply
              boats and some tugs,  are more  powerful than supply boats and are
              used to tow and position drilling rigs,  production facilities and
              construction barges. Some are specially equipped to assist tankers
              while they are loading from single-point buoy mooring systems, and
              some are used in place of supply boats when not performing  towing
              and positioning functions.

         The Company has provided  services to the oil and gas drilling industry
since 1989,  when it acquired its first eight offshore supply boats. In a series
of  acquisitions  and new buildings,  the Company  expanded its offshore  energy
support fleet to 204 vessels at March 15, 1999,  consisting  of 78  crew/utility
boats, 47 anchor handling  tug/supply boats, 38 supply boats, 28 anchor handling
tugs, seven  geophysical  boats and six specialty  units.  From March 15 through
December 1999, the Company  expects to take delivery of a total of five offshore
energy support vessels, consisting of one 279-foot  construction/anchor handling
tug/supply boat, one 205-foot platform supply vessel and three crew boats.

        Until mid-1997,  the Company primarily served exploration and production
operations in the U.S. Gulf of Mexico,  operating from  facilities in Lafayette,
Louisiana.  At that time,  the Company  began the  substantial  expansion of its
international  offshore  energy  support  fleet.  In  addition,  in  response to
deteriorating  market conditions in the U.S. Gulf of Mexico in 1998, the Company
redeployed  certain of its


<PAGE>

vessels  from the  Gulf to  international  markets.  The  primary  international
markets currently served by the Company are the Arabian Gulf and adjacent areas,
West  Africa,  Southeast  Asia and Mexico;  the Company also  operates  offshore
energy  support  vessels  in other  regions,  including  the North Sea and South
America.  The Company's  operations  in the Arabian Gulf and adjacent  areas are
directed from its facilities in Dubai, United Arab Emirates; operations offshore
West Africa,  and certain  other  international  areas,  are  directed  from the
Company's facilities in Lausanne, Switzerland;  operations in Southeast Asia are
directed from its facilities in Singapore; and operations in Mexico are directed
from the Company's offices in Lafayette, Louisiana. In addition, the Company has
sales offices and/or  maintenance and other  facilities in many of the countries
where its offshore energy support vessels operate.  At March 15, 1999, 88 of the
Company's  offshore  energy support vessels were located in the Arabian Gulf and
adjacent  areas,  59 in the  U.S.  Gulf  of  Mexico,  27 in West  Africa,  17 in
Southeast Asia, eight in Mexico and five in other areas of the world.

         Offshore and Harbor  Towing.  Offshore and harbor  towing  services are
provided  by tugs to vessels  using the ports in which the tugs  operate  and to
vessels at sea to the extent required by environmental regulations,  casualty or
other emergency. In addition, the Company's anchor handling tug/supply boats and
offshore  towing-equipped  tugs tow a wide  variety  of  barges  carrying  heavy
equipment,  refinery  modules and petroleum  products for the energy industry in
the U.S. Gulf of Mexico,  the Atlantic Ocean and the Mediterranean  Sea. Charges
for docking  services  are based on a fixed rate per job, and charges for towing
services are based on hourly or daily rates.

          In most U.S. ports,  competition is unregulated.  However, a few ports
grant  non-exclusive  franchises  to harbor tug  operators;  these  include Port
Canaveral  and  Port  Everglades,   Florida,  where  the  Company  is  the  sole
franchisee,  and Tampa and Port Manatee (near Tampa),  Florida where the Company
is the primary provider of commercial tug services. Rates are unregulated in the
franchised ports served by the Company. Each port is generally a distinct market
for harbor tugs, even though harbor tugs can be moved from port to port.

         Demand for towing services depends on vessel traffic,  which is in turn
generally dependent on local and national economic conditions.  OPA 90 and state
legislation  require  oil tankers to be  escorted  in and around  certain  ports
located in Alaska and the U.S. Pacific coast.

         The harbor tugs owned or operated by the Company serve Port Everglades,
Tampa, Port Manatee, and Port Canaveral,  Florida, Mobile, Alabama, Port Arthur,
Texas,  and  Lake  Charles,  Louisiana,  where  they  primarily  assist  product
carriers,  barges, other cargo vessels and cruise ships in docking and undocking
and in proceeding in confined waters.  The Company also operates eight tugs with
offshore towing  capabilities that conduct a variety of offshore towing services
in the U.S.  Gulf of Mexico,  the Bay of  Campeche  in Mexico  and the  Atlantic
Ocean. In addition, the Company has completed the construction of three SDMs(TM)
and has  contracted  for the  construction  of  three  additional  SDMs(TM)  for
delivery in 1999 and 2000 to augment the Company's harbor towing operations. The
Company also charters two of its tugs to third-party operators in California.

         Port  Everglades.  Port  Everglades  has the second  largest  petroleum
non-refining  storage and  distribution  center in the United States,  providing
substantially all of the petroleum products for south Florida.  Since 1958, when
the Company's tug operations  commenced,  the Company has enjoyed a franchise as
the sole  provider of docking  services in the Port.  The  franchise  specifies,
among  other  things,  that three tugs  serving the Port be less than 90 feet in
length,  because  of the  narrowness  of slips in the  Port,  and that tugs have
firefighting capability. The franchise is not exclusive;  consequently,  


<PAGE>

another  operator  could  be  granted  an  additional   franchise.   Although  a
significantly  larger  potential  competitor  sought a  franchise  in 1992,  the
Company won  unanimous  endorsement  from the Port  Authority  to  continue  its
sole-franchise  relationship  with the Port when that competitor  failed to make
the  requisite  showing of public  need and  necessity.  The  current  franchise
expires in 2007, and there can be no assurance that it will be renewed. At March
15, 1999,  the Company  operated five tugs in Port  Everglades and is the Port's
sole provider of harbor towing services.

         Tampa.  The  Company  expanded  its harbor  towing  services  to Tampa,
Florida with an October 1997 acquisition. Tampa is the tenth largest port in the
continental United States in terms of tonnage.  Because the port is comprised of
three  "sub-ports"  (including Port Manatee) and a distant  sea-buoy,  a greater
number of tugs is required to be a  competitive  operator in Tampa than in other
ports of  similar  size.  At March  15,  1999,  the  Company  operated  12 tugs,
including four tractor tugs, in the port (including Port Manatee) and is Tampa's
primary provider of harbor towing  services.

         Port Canaveral. In Port Canaveral,  Florida, like Port Everglades,  the
Company has the sole  franchise  to provide  harbor  docking  services.  At Port
Canaveral,  the smallest of the  Company's  harbor tug  operations,  the Company
provides  docking and undocking  services for commercial  cargo vessels  serving
central  Florida and for cruise ships  visiting the Disney  World/Kennedy  Space
Center attractions. The Company's franchise is a month-to-month arrangement and,
although  there can be no assurance  that the Company will be able to retain its
franchise in Port Canaveral,  there has been no challenge to the franchise since
1984. At March 15, 1999,  the Company  operated three tugs in Port Canaveral and
is the Port's sole provider of harbor towing services.

         Mobile.  At this port,  the  Company  provides  docking  and  undocking
services, primarily for commercial cargo vessels, including vessels transporting
coal and other bulk exports.  The Company  believes that it provides from 40% to
50% of the harbor tug  business  in this port.  At March 15,  1999,  the Company
operated four tugs in Mobile.

         Port Arthur and Lake Charles.  In March 1998, the Company completed the
acquisition  of seven  harbor  tugs.  Currently,  four of these  tugs serve Port
Arthur, Texas, two serve Lake Charles,  Louisiana,  and one serves both harbors.
Each of these ports has a competing provider of harbor tug services.

     Mexico.  The Company also owns two tugs that operate in the Bay of Campeche
in Mexico under an arrangement with a Mexican company.

         Other. In addition, the Company charters two of its tugs to third-party
operators in  California,  and eight tugs with offshore  towing  capability  are
performing  such services in the U.S.  Gulf of Mexico and in the Atlantic  Ocean
off the east coast of the United States.

         SDMs(TM).  The  Company  accepted  delivery  of its  first  SDM(TM)  in
November 1997; two additional  SDMs(TM) were delivered in 1998, two are expected
to be delivered in 1999 and one in 2000.  SDMs(TM) are  innovative  ship docking
vessels that are designed to be more maneuverable,  efficient, and flexible than
harbor  tugs.  In  addition,  they have lower  operating  costs than harbor tugs
because  they  require  fewer  crewmembers.   Company   personnel,   working  in
conjunction  with  consulting  marine  engineers  and  architects,  prepared the
conceptual design and detailed  specifications for the SDM(TM).  The Company has
been awarded a patent on the design.



<PAGE>

Marine Transportation Services

         The Company provides marine  transportation  services,  principally for
specialty chemicals and petroleum products, in the U.S. domestic trade, a market
largely insulated from international competition under the Jones Act.

         Chemical  Transportation.  In the U.S. domestic chemical transportation
trade, vessels carry chemicals, primarily from chemical manufacturing plants and
storage tank facilities along the coast of the U.S. Gulf of Mexico to industrial
users in and around Atlantic and Pacific coast ports. The chemicals  transported
consist primarily of caustic soda, alcohol,  chlorinated  solvents,  paraxylene,
alkylates,  toluene,  methyl  tertiary butyl ether (MTBE),  phosphoric  acid and
lubricating  oils.  Coastwise  chemical  tonnage  demand has increased in recent
years as a result of the general  expansion of the U.S.  economy and as gasoline
additives  have begun to move  coastwise.  Certain of the chemicals  transported
must be carried in vessels with specially coated or stainless steel cargo tanks;
further, many of these chemicals are very sensitive to contamination and require
special cargo-handling equipment.

         At March 15, 1999,  chemical  carriers  operated by the Company were as
follows:

                                                            Tonnage (in
 Name of Vessel             Capacity (in barrels)    dead weight tons or "dwt")
 --------------             ---------------------    --------------------------

 Seabulk Magnachem                 298,000                   39,300
 Seabulk America                   297,000                   46,300
 HMI Petrochem                     360,000                   49,900
 HMI Dynachem                      360,000                   49,900
 HMI Astrachem                     260,000                   37,100
 HMI Ambrose Channel               341,000                   45,000

         The Company operates the Seabulk  Magnachem under a long-term  bareboat
charter  expiring in February 2002. The Company owns a 67% economic  interest in
the Seabulk  America;  the  remaining  33%  interest  is owned by Stolt  Tankers
(U.S.A.), Inc.

         The Seabulk  Magnachem,  the Seabulk America,  the HMI Dynachem and the
HMI Petrochem have full double bottoms (as distinct from double hulls),  and the
HMI Astrachem has a partial double  bottom.  Double  bottoms  provide  increased
protection over single-hull vessels in the event of a spill.  Delivered in 1977,
the Seabulk Magnachem is a CATUG (or catamaran tug) integrated tug and barge, or
"ITB", which requires fewer personnel to operate than a conventional  carrier of
equivalent size and has a higher level of dependability,  propulsion  efficiency
and performance  than an ordinary tug and barge.  Delivered in 1990, the Seabulk
America is the only vessel in the U.S.  domestic trade capable of carrying large
cargoes  of acid,  as a result of its large  high-grade  alloy  stainless  steel
tanks,  and the only such vessel  strengthened to carry relatively heavy cargoes
such as phosphoric and other acids. The Seabulk America's  stainless steel tanks
were constructed without internal structure, which greatly reduces cargo residue
from  transportation  and  results in less cargo  degradation.  Stainless  steel
tanks, unlike epoxy-coated tanks, also do not require periodic  sandblasting and
recoating.  The Seabulk  America was one of the first  U.S.-flag  carriers to be
equipped with state-of-the-art-integrated  navigation, cargo control monitoring,
and  automated  engine room  equipment.  The HMI  Ambrose  Channel is one of the
double-


<PAGE>


hull carriers  described  below under "New  Carriers".  A second new double-hull
chemical carrier is expected to be delivered in mid-1999.

         All of  the  Company's  chemical  carriers  have  from  13 to 24  cargo
segregations  which are configured,  strengthened,  and coated to handle various
sized parcels of a wide variety of industrial  chemical and petroleum  products,
giving  them  the  ability  to  handle  a  broader   range  of  chemicals   than
chemical-capable  product  carriers.  Many of the chemicals  transported  by the
Company are hazardous substances. Voyages are currently generally conducted from
the Houston and Corpus Christi, Texas, and Lake Charles, Louisiana areas to such
ports  as  New  York,  Philadelphia,   Baltimore,  Wilmington,  North  Carolina,
Charleston,  South Carolina, Los Angeles, San Francisco, and Kalama, Washington.
The  Company's  chemical  carriers  are also  suitable  for  transporting  other
cargoes, including grain.

         Pursuant  to OPA 90, the Seabulk  America,  the HMI  Dynachem,  the HMI
Petrochem and the Seabulk  Magnachem,  which were built with full double bottoms
but not  double  sides,  cannot be used to  transport  petroleum  and  petroleum
products in U.S.  commerce after 2015, 2011, 2011, and 2007,  respectively.  The
HMI Astrachem,  which has a partial double bottom, cannot be so used after 2000,
and the Company intends to retire this vessel in mid-1999. The other vessels may
be permitted to continue to carry certain chemicals in U.S.  commerce.  Further,
it is possible that these vessels could be  redocumented  in another country and
thereafter be used to transport  chemicals in non-U.S.  trades,  and/or that the
ITB design of the Seabulk  Magnachem would allow the Company to replace only the
cargo-carrying portion of the vessel with a double-hull barge, which the Company
anticipates would be substantially  less expensive than constructing an entirely
new double-hull  conventional tank vessel.  However,  the Company has no present
plans to take  any of these  actions,  and no  assurance  can be given as to the
feasibility or economic liability of doing so.

         The Company  markets its  chemical  carriers  through its wholly  owned
subsidiary,  Ocean Specialty Tankers Corporation ("OSTC").  The Company believes
that the total  capacity of these carriers  represents a substantial  portion of
the capacity of the domestic  specialty  chemical  carrier fleet, and that these
chemical   carriers   (other  than  the  HMI   Astrachem)  are  among  the  last
independently owned carriers scheduled to be retired under OPA 90.

         OSTC  books  cargoes  either on a spot  (movement-by-movement)  or time
basis.  Approximately  75% of  contracts  for  cargo are  committed  on a 12- to
30-month  basis,  with minimum and maximum  cargo  tonnages  specified  over the
period at fixed or escalating  rates per ton. The HMI Astrachem and HMI Dynachem
are  currently  chartered to major oil companies  under  charters that expire in
July 1999 and August 1999, respectively. Upon the expiration of its charter, the
Company intends to enter into a new contract of affreightment or time charter to
market the HMI Dynachem;  as noted above,  the Company intends to retire the HMI
Astrachem in mid-1999,  following the expiration of its current charter. OSTC is
often  able to  generate  additional  revenues  by  chartering  cargo  space  on
competitors'  vessels and by expanding the carriers'  backhaul  (return  voyage)
opportunities.

         Petroleum Product Transportation. In the domestic energy transportation
trade, oceangoing and inland-waterway vessels transport fuel and other petroleum
products,  primarily from refineries and storage  facilities  along the coast of
the U.S. Gulf of Mexico,  to utilities,  waterfront  industrial  facilities  and
distribution  facilities along the U.S. Gulf of Mexico, the Atlantic and Pacific
coasts and inland rivers. The inventory of U.S.-flag oceangoing vessels eligible
to participate in the U.S.  domestic trade and capable of  transporting  fuel or
petroleum  products has steadily  decreased  since 1980, as vessels have 


<PAGE>


reached the end of their useful lives and the cost of  constructing  a vessel in
the United States (a  requirement  for U.S.  domestic trade  participation)  has
substantially increased.

         The Company's  320,000-barrel,  39,300 dwt CATUG ITB Seabulk Challenger
is engaged  in the  transportation  of fuel and other  petroleum  products  from
refineries on the U.S. Gulf Coast to tank farms and industrial sites on the U.S.
East Coast. Delivered in 1975, the Seabulk Challenger has six cargo segregations
and was  the  first  CATUG  ITB  constructed  in the  world.  Like  the  Seabulk
Magnachem, it enjoys certain manning and other advantages over conventional tank
vessels.  From the time it entered service in 1975 to November 1998, the Seabulk
Challenger  derived all of its revenue from successive  voyage and time charters
to Shell Oil Company.  The charter was terminated in November 1998, resulting in
the payment of a $750,000  penalty to the Company.  The Seabulk  Challenger  has
since been operating under short-term  arrangements,  and the Company intends to
redeliver it to its leaseholder in the fourth quarter of 1999.

         In March 1998,  the Company  completed the  acquisition of a 36,600 dwt
petroleum  product carrier (the HMI Defender) and a 32,200 dwt petroleum product
carrier (the HMI Trader). Both vessels operate under a contract of affreightment
with an oil  company  expiring  in  December  1999.  Pursuant to OPA 90, the HMI
Trader and the HMI Defender cannot be used to transport  petroleum and petroleum
products  in U.S.  commerce  after  2000 and 2008,  respectively.  Although  the
Company  has the  ability  to apply  to the  U.S.  Coast  Guard  to  extend  the
retirement date of the HMI Trader by reducing its gross  registered  tonnage and
cargo  capacity,  the  Company  has not  determined  whether it will pursue that
application.

        The Company also has a 50.8% equity interest in three petroleum  product
carriers  delivered in the fourth quarter of 1998. See "New Carriers"  below for
additional information.

         All of the Company's  petroleum  product  carriers are marketed through
OSTC.

         New Carriers. The Company currently has a 50.8% equity interest in five
double-hull  carriers  intended  to serve the market  now served by  single-hull
carriers  whose  retirement  is  mandated  by OPA 90.  Three  petroleum  product
carriers (the HMI Lookout Shoals,  the HMI Nantucket  Shoals and the HMI Diamond
Shoals) were delivered in the fourth quarter of 1998; one chemical  carrier (the
HMI  Ambrose  Channel)  was  delivered  in the  first  quarter  of 1999;  and an
additional  chemical  carrier (the HMI Brenton Reef) is expected to be delivered
in  mid-1999.  Each of the  carriers is  approximately  46,000 dwt and can carry
approximately  340,000 barrels of cargo. The carriers' operations are managed by
the Company (through OSTC). One of the carriers is currently on charter,  making
weekly transits  between  Louisiana and Port  Everglades,  Florida;  the charter
expires in October  2000.  The other  carriers  delivered to date are  currently
operating under short-term arrangements in the U.S. domestic trade.

         The aggregate  cost of the carriers is estimated at $270.0  million,  a
substantial   portion  of  which  is  being   financed   with  the  proceeds  of
government-guaranteed Title XI ship financing bonds.

         The  Company  has an option,  exercisable  through  year-end  1999,  to
acquire  up to an  additional  25%  interest  in  these  carriers  at a cost  of
approximately  $7.5 million.  If the Company exercises this option, it will have
an  additional  option,  exercisable  through  year-end  2000,  to  acquire  the
remaining  24.2%  interest  in the  carriers  at a cost  of  approximately  $9.0
million.  From year-end 2000 to year-end  2003, the Company has a right of first
refusal to purchase the remaining 24.2% interest for approximately 

<PAGE>


$9.0 million plus interest  accrued from year-end  2000. The Company has not yet
determined  whether or to what  extent it will  exercise  either  option or such
right; however, the Company plans to dispose of a portion of its interest in the
carriers so as to reduce its  aggregate  interest to less than 50%. No assurance
can be given as to whether or when the Company will consummate such  disposition
or as to the terms of such disposition.

     Sun State.  The Company  acquired Sun State  Marine  Services,  Inc.  ("Sun
State") in 1994.  At March 15,  1999,  Sun State  owned and  operated  an energy
transportation fleet of 10 towboats and 17 fuel barges, all of which are engaged
in fuel  transportation  along the  Atlantic  intracoastal  waterway and the St.
Johns River in Florida.

         A majority of Sun State's revenue through the third quarter of 1998 was
derived from a fuel  transportation  contract with Florida Power & Light Company
("FPL").  The  remainder  of its revenue was  derived  from fuel  transportation
contracts  with  other  customers  and  its  marine  maintenance,   repair,  and
drydocking  facility.  Under its contract  with FPL,  which expired in September
1998, Sun State  transported  fuel oil from Port Canaveral and  Jacksonville  to
certain  FPL  electric  power  generating   facilities  at  specified  rates  (a
combination of per diem and variable rates based upon barrels transported), with
an escalation  provision;  the contract also had a specified  guaranteed minimum
utilization  provision.  Subsequent to the expiration of the principal  contract
with FPL, Sun State has entered into a new contract to provide similar  services
to FPL in the future.  The new contract expires in September 2002, subject to an
optional one-year  extension,  and provides for rates  substantially the same as
under the prior  contract;  however,  the extent of the  services to be provided
under the new contract is expected to be substantially less than under the prior
contract.

         OPA 90 requires all  single-hull  barges,  including those owned by Sun
State, to discontinue  transporting  fuel and other petroleum  products in 2015.
The Company has recently  constructed two  double-hull  barges at a cost of $1.0
million each and previously purchased four additional  double-hull barges for an
aggregate  of  $2.4  million  (exclusive  of  refurbishment   costs  aggregating
approximately $2.6 million).

Other Services

         Through Sun State, the Company owns a small marine maintenance, repair,
and  drydocking  facility  in Green  Cove  Springs,  Florida,  which is  engaged
principally in the maintenance of tugs and barges,  offshore support vessels and
other small vessels.  The lease for the facility,  including  optional renewals,
expires in 2005.  This facility is capable of drydocking  vessels up to 300 feet
in length for repair and can make dockside  repairs on vessels up to 320 feet in
length.  Since  1994,  the Green Cove  Springs  facility  has been  utilized  to
overhaul or rebuild a number of the  Company's  harbor tugs and offshore  energy
support  vessels.  The facility  (originally a U.S.  government naval repair and
operations  station) has covered  steel  fabrication  facilities,  workshops and
office spaces adjacent to a 1,840-foot finger pier and mooring basins, where the
facility's three floating drydocks are located. The drydocks are 60, 80, and 108
feet in length, and are capable of lifting 350, 200, and 500 tons, respectively.
The 60- and 108-foot drydocks are capable of being joined together for lifting a
vessel or barge  with a nominal  capacity  of 1,175  long  tons.  Sun State also
maintains  another  yard,  primarily  for use in new  construction  projects and
vessels requiring  long-term  repairs.  The yard has a marine railway capable of
lifting and launching  vessels  weighing up to 600 tons,  and a 600-foot  finger
pier with adjacent covered steel  fabrication  facilities,  workshops and office
space.


<PAGE>



         The Company  also owns a 40-acre  facility in Port  Arthur,  Texas that
serves as a storage and supply base and a facility  for  topside  repairs.  This
facility  has 1200  feet of dock  space and is  suitable  for  development  as a
shipyard.

Customers and Charter Terms

         The Company offers its offshore  energy support  services  primarily to
oil companies and large drilling  companies.  Consistent with industry practice,
the Company's  U.S.  Gulf of Mexico  operations  are conducted  primarily in the
"term" market pursuant to short-term  (less than six months) charters at varying
day rates.  Generally,  such short-term charters can be terminated by either the
Company  or its  customer  upon  notice  of five days or less.  Charters  in the
international  markets  served by the Company have terms ranging from a few days
to several years.

         The Company  offers its offshore and harbor  towing  services to vessel
owners and  operators and their  agents.  The Company's  rates for harbor towing
services are set forth in the Company's published tariffs and may be modified by
the Company at any time, subject to competitive factors. The Company also grants
volume discounts to major users of harbor services. Offshore towing services are
priced based upon the service required on an ad hoc basis.

         The primary purchasers of chemical transportation services are chemical
and oil companies.  The primary  purchasers of petroleum product  transportation
services are utilities,  oil companies,  and large industrial  consumers of fuel
with waterfront  facilities.  Both services are generally  contracted for on the
basis of short- or  long-term  time  charters,  voyage  charters,  contracts  of
affreightment,  or other  transportation  agreements  tailored to the  shipper's
requirements.  CITGO is currently the Company's largest single customer,  with a
contract of  affreightment  for both the HMI  Defender  and the HMI  Trader.  In
addition,  Chevron  Corporation is a purchaser of the Company's  offshore energy
support  and  chemical  transportation  services,  FPL  is a  purchaser  of  the
Company's  petroleum  product  transportation  services  and  each  of  Phillips
Petroleum Company and Amoco Corporation  currently charters one of the Company's
chemical carriers.

Competition

         The Company  operates in a highly  competitive  environment  in all its
operations.  The principal  competitive  factors in each of the markets in which
the Company operates are suitability of equipment, personnel, price, service and
reputation.  Competitive  factors in the offshore  energy  support  segment also
include  operating  conditions and intended  vessel use (both of which determine
the  suitability  of vessel  type),  the  complexity of  maintaining  logistical
support, and the cost of transferring  equipment from one market to another. The
Company's vessels that provide marine transportation  services compete with both
other vessel operators and, in some areas and markets, with alternative modes of
transportation,  such as pipelines,  rail tank cars, and tank trucks.  Moreover,
the users of such  services  are  placing  increased  emphasis  on  safety,  the
environment and quality,  partly due to heightened liability for the cargo owner
in addition to the vessel  owner/operator  under OPA 90. With  respect to towing
services,  the Company's  vessels  compete not only with other  providers of tug
services,  but with the providers of tug services in nearby  ports.  Many of the
companies with which the Company competes have  substantially  greater financial
and other  resources  than the  Company.  Additional  competitors  may enter the
Company's  markets  in the  future.  Moreover,  should  U.S.  coastwise  laws be
repealed,  


<PAGE>


foreign-built,  foreign-manned,  and foreign-owned  vessels could be eligible to
compete with the Company's vessels.

Environmental and Other Regulation

         The Company's operations are subject to significant federal,  state and
local regulation, the principal provisions of which are described below.

         Clean Water Regulations. OPA 90 established an extensive regulatory and
liability regime for the protection of the environment  from oil spills.  OPA 90
affects owners and operators of facilities  operating near navigable  waters and
owners and operators of vessels operating in United States waters, which include
the navigable  waters of the United States and the 200-mile  exclusive  economic
zone of the United  States.  Although it applies in general to all vessels,  for
purposes   of   its   liability   limits   and    financial-responsibility   and
response-planning  requirements,  OPA 90  differentiates  between  tank  vessels
(which include the Company's  chemical and petroleum  products carriers and fuel
barges) and "other  vessels"  (which  include the  Company's  tugs and  offshore
energy service vessels).

         Under  OPA  90,  owners  and  operators  of  facilities,   and  owners,
operators,  and certain charterers of vessels, are "responsible parties" and are
jointly,  severally,  and strictly  liable for removal costs and damages arising
from oil spills  relating  to their  facilities  and  vessels,  unless the spill
results  solely from the act or omission of a third party,  an act of God, or an
act of war. Damages are defined broadly to include (i) natural resources damages
and the costs of  assessment  thereof;  (ii)  damages for injury to, or economic
losses resulting from the destruction of, real and personal property;  (iii) the
net loss of taxes, royalties,  rents, fees and profits by the U.S. government, a
state,  or political  subdivision  thereof;  (iv) lost profits or  impairment of
earning capacity due to property or natural resources damage;  (v) the net costs
of providing  increased or additional  public  services  necessitated by a spill
response,  such as protection from fire,  safety or other hazards;  and (vi) the
loss of subsistence use of natural resources.

         For  facilities,  the  statutory  liability of  responsible  parties is
limited  to  $350  million.   For  tank  vessels,  the  statutory  liability  of
responsible  parties is  limited  to the  greater of $1,200 per gross ton or $10
million ($2  million  for a vessel of 3,000 gross tons or less) per vessel;  for
any "other  vessel," such  liability is limited to the greater of $600 per gross
ton or $500,000 per vessel.  Such liability limits do not apply,  however, to an
incident  proximately  caused by violation of federal safety,  construction,  or
operating  regulations or by the responsible party's gross negligence or willful
misconduct,  or if the responsible party fails to report the incident or provide
reasonable  cooperation and assistance as required by a responsible  official in
connection with oil removal activities. Although the Company currently maintains
pollution liability insurance, a catastrophic spill could result in liability in
excess of available insurance  coverage,  resulting in a material adverse effect
on the Company.

         Under OPA 90,  with  certain  limited  exceptions,  all newly  built or
converted  oil  tankers  operating  in United  States  waters must be built with
double hulls, and existing  single-hull,  double-side or  double-bottom  vessels
must be phased out at some point,  depending  upon their size,  age and place of
discharge,  between 1995 and 2015 unless  retrofitted  with double  hulls.  As a
result of this  phase-out  requirement,  as interpreted by the U.S. Coast Guard,
the  Company's  single-hull  chemical and  petroleum  product  carriers  will be
required to cease  transporting  petroleum  products over the next 15 years, and
its "single-skinned" fuel barges will cease transporting fuel in 2015.


<PAGE>


         OPA 90 expanded pre-existing financial responsibility  requirements and
requires  vessel  owners and operators to establish and maintain with the United
States Coast Guard evidence of insurance or  qualification  as a self-insurer or
other evidence of financial  responsibility  sufficient to meet their  potential
liabilities under OPA 90. Coast Guard regulations  require evidence of financial
responsibility  demonstrated  by  insurance,  surety  bond,  self-insurance,  or
guaranty.   The   regulations   also  implement  the  financial   responsibility
requirements  of the  Comprehensive  Environmental  Response,  Compensation  and
Liability  Act of 1980  ("CERCLA"),  which imposes  liability for  discharges of
hazardous  substances  such as  chemicals,  in an amount equal to $300 per gross
ton, thus increasing the overall amount of financial  responsibility from $1,200
to $1,500 per gross ton.  The Company has  obtained  "Certificates  of Financial
Responsibility"  pursuant  to the Coast  Guard  regulations  for its product and
chemical  carriers  through  self-insurance  and  commercial  insurance  and  as
guarantor for the fuel barges.

         OPA 90 also amended the Federal Water Pollution  Control Act to require
the owner or operator of certain  facilities  or the owner or operator of a tank
vessel to prepare  facility or vessel  response  plans and to contract  with oil
spill  removal  organizations  to remove to the  maximum  extent  practicable  a
worst-case  discharge.  The Company has complied with these requirements.  As is
customary,  the Company's oil spill  response  contracts are executory in nature
and are not activated unless required.  Once activated,  the Company's pollution
liability insurance covers the cost of spill removal subject to overall coverage
limitations and deductibles.

         OPA 90 does not  prevent  individual  states  from  imposing  their own
liability regimes with respect to oil pollution incidents occurring within their
boundaries,  and many states have enacted  legislation  providing  for unlimited
liability  for oil spills.  Some states  have  issued  implementing  regulations
addressing oil spill liability, financial responsibility and vessel and facility
response  planning  requirements.  The  Company  does not  anticipate  that such
legislation or regulations will have any material impact on its operations.

         The Company manages its exposure to losses from potential discharges of
pollutants  through  the use of  well-maintained  and  well-managed  facilities,
well-maintained and well-equipped  vessels,  safety and environmental  programs,
and its  insurance  program,  and believes  that it will be able to  accommodate
reasonably  foreseeable  environmental  regulatory  changes.  There  can  be  no
assurance, however, that any new regulations or requirements or any discharge of
pollutants by the Company will not have an adverse effect on the Company.

         Clean Air Regulations. The federal Clean Air Act of 1970, as amended by
the Clean Air Act Amendments of 1990, requires the U.S. Environmental Protection
Agency  ("EPA") to promulgate  standards  applicable to the emission of volatile
organic  compounds  and other air  pollutants.  These  standards are designed to
reduce  hydrocarbon  emissions released in the atmosphere and are implemented by
the  states  through  State  Implementation  Plans  for  areas  that  are not in
compliance  with those  standards.  The  Company's  vessels are subject to vapor
control and recovery requirements when loading, unloading, ballasting, cleaning,
and conducting  other  operations in certain ports.  The Company's  chemical and
petroleum  product carriers are equipped with vapor control systems that satisfy
these states'  requirements.  The fuel barges are not equipped with, and are not
operated in areas that require,  such systems.  In addition,  it is  anticipated
that  the EPA  will  issue  regulations  addressing  air  emission  requirements
applicable to marine diesel  engines.  Adoption of such standards  could require
modifications to existing marine diesel engines in some cases.


<PAGE>

         Coastwise  Laws. A substantial  portion of the Company's  operations is
conducted in the U.S. domestic trade, which is governed by the coastwise laws of
the United  States  (principally,  the Jones Act).  The  coastwise  laws reserve
marine  transportation  (including  harbor tug services)  between  points in the
United  States  (including  drilling  rigs fixed to the ocean  floor on the U.S.
outer  continental  shelf) to vessels built in and documented  under the laws of
the United States (U.S. flag) and owned and manned by U.S. citizens.  Generally,
a  corporation  is deemed a  citizen  for  these  purposes  so long as (i) it is
organized  under the laws of the U.S. or a state,  (ii) each of its president or
other chief  executive  officer and the  chairman of its board of directors is a
citizen,  (iii) no more than a minority of the number of its directors necessary
to constitute a quorum for the  transaction  of business are  non-citizens,  and
(iv)  75% of the  interest  and  voting  power  in the  corporation  are held by
citizens.  Because the Company would lose its privilege of operating its vessels
in the U.S.  domestic trade if non-citizens  were to own or control in excess of
25% of the  Company's  outstanding  capital  stock,  the  Company's  Articles of
Incorporation  contain  restrictions  concerning foreign ownership of its stock.
There have been repeated  efforts aimed at repeal or  significant  change of the
Jones Act.  Although the Company believes that it is unlikely that the Jones Act
will be  substantially  modified or  repealed,  there can be no  assurance  that
Congress  will not  substantially  modify or repeal the Jones Act.  Such changes
could have a material  adverse effect on the Company's  operations and financial
condition.

         Occupational Health Regulations.  The Company's  facilities are subject
to occupational  safety and health regulations  issued by the U.S.  Occupational
Safety and Health Administration ("OSHA") and/or comparable state programs. Such
regulations  currently  require  the  Company to  maintain a  workplace  free of
recognized hazards, observe safety and health regulations, maintain records, and
keep employees informed of safety and health practices and duties. The Company's
vessel operations are also subject to occupational safety and health regulations
issued by the U.S.  Coast  Guard and,  to and  extent,  OSHA.  Such  regulations
currently require the Company to perform monitoring,  medical testing and record
keeping  with respect to seamen  engaged in the handling of the various  cargoes
transported by the Company's chemical and petroleum products carriers.

         Vessel  Condition.   The  Company's  chemical  and  petroleum  products
carriers,  offshore  energy support  vessels,  certain of its tugs, and its fuel
barges are subject to periodic  inspection  and survey by, and  dry-docking  and
maintenance  requirements  of, the Coast  Guard  and/or the  American  Bureau of
Shipping   and/or  other  marine   classification   societies   whose   periodic
certification  as to the  construction  and  maintenance  of certain  vessels is
required in order to maintain insurance  coverage.  All of the Company's vessels
requiring certification to maintain insurance coverage are certified.

         Oil Tanker  Escort  Requirements.  Implementation  of oil tanker escort
requirements  of OPA 90 and pending state  legislation are expected to introduce
certain  performance or  engineering  standards on tugs to be employed as tanker
escorts.  The Company  believes its tractor tugs will be able to comply with any
existing or currently anticipated requirements for escort tugs. Adoption of such
new standards  could  require  modification  or refitting of the tugs  currently
operated by the Company to the extent such tugs are employed as tanker  escorts.
The  Company  does  not  anticipate  OPA 90 or  state  requirements  to  require
modification of tugs, such as the Company's, involved in harbor tug operations.

         The Company believes that it is currently in compliance in all material
respects with the environmental  and other laws and regulations,  including OSHA
requirements,  to which its operations are subject and is unaware of any pending
or  threatened  litigation or other  judicial,  administrative,  or  

<PAGE>


arbitration proceedings against it occasioned by any alleged non-compliance with
such laws or  regulations.  The risks of  substantial  costs,  liabilities,  and
penalties  are,  however,  inherent  in marine  operations,  and there can be no
assurance that significant costs, liabilities, or penalties will not be incurred
by or imposed on the Company in the future.

         International Laws and Regulations.  The Company's vessels that operate
internationally  are  subject to various  international  conventions,  including
certain  safety,  environmental,  and  construction  standards.  Among  the more
significant   of  the   conventions   applicable  to  the  fleet  are:  (i)  the
International  Convention for the Prevention of Pollution from Ships, 1973, 1978
Protocol,  (ii) the International  Convention on the Safety of Life at Sea, 1978
Protocol,  including the International Management Code for the Safe Operation of
Ships and for Pollution  Prevention,  which went into effect for tank vessels on
July 1, 1998, and (iii) the  International  Convention on Standards of Training,
Certification  and Watchkeeping  for Seafarers,  1978, as amended in 1995. These
regulations  govern oil spills and other  matters of  environmental  protection,
worker  health,  and safety and the  manning,  construction,  and  operation  of
vessels.  The Company believes that it presently is in material  compliance with
the  international  environmental  laws and  regulations  to which the Company's
operations are subject.  In addition,  the countries under which the vessels are
flagged  require  certain   periodic   inspections  and  drydock   examinations.
Generally,  surveys and inspections are performed by internationally  recognized
classification   societies.   The  vessels  that  operate   internationally  are
principally  flagged in the Marshall  Islands,  Panama,  and St. Vincent and The
Grenadines.  The Company is not a party to any pending environmental  litigation
or  proceeding,  and is unaware of any  threatened  environmental  litigation or
proceeding which, if adversely determined,  would have a material adverse effect
on the financial condition or results of operations of the Company. However, the
risks of incurring  substantial  compliance  costs and liabilities and penalties
for noncompliance are inherent in offshore energy support operations.  There can
be no assurance that significant costs,  liabilities,  and penalties will not be
incurred by or imposed on the Company in the future.

Insurance

         The Company's marine transportation  services operations are subject to
the normal hazards  associated with operating  vessels carrying large volumes of
cargo and rendering services in a marine environment.  These hazards include the
risk of loss of or damage to the Company's vessels, damage to third parties as a
result  of  collision,  loss,  or  contamination  of cargo,  personal  injury of
employees,  and pollution and other environmental damages. The Company maintains
insurance  coverage  against  these  hazards.  Risk of loss of or  damage to the
Company's  vessels is insured  through hull  insurance  policies in amounts that
approximate fair market value. Vessel operating liabilities,  such as collision,
cargo,  environmental,  and personal injury,  are insured  primarily through the
Company's  participation  in  the  Steamship  Mutual  Underwriting   Association
(Bermuda Limited), a mutual insurance  association.  Because it maintains mutual
insurance,   the  Company  is  subject  to  funding  requirements  and  coverage
shortfalls in the event claims exceed  available  funds and  reinsurance  and to
premium increases based on prior loss experience.

Employees

         As of March 15, 1999, the Company had  approximately  3,100  employees.
Management  considers  relations with employees to be satisfactory.  The Seabulk
America,  Seabulk Challenger,  and Seabulk Magnachem are manned by approximately
105 officers and crew who are subject to two 


<PAGE>

collective bargaining arrangements that expire on December 31, 1999 and 2001. In
addition,  the HMI Dynachem,  HMI Petrochem,  HMI Astrachem,  HMI Defender,  and
seven harbor tugs are manned by approximately  198 members of national  maritime
labor  unions  pursuant to an  agreement  between the Company and a  third-party
employer that expires May 31, 2001.

Item 2.  Properties

         The  Company's  principal  offices  are  located  in  Fort  Lauderdale,
Florida, where the Company leases approximately 36,000 square feet of office and
shop space under a lease  expiring in 2009.  The Company also leases  office and
other facilities in Lafayette,  Louisiana;  the United Arab Emirates;  Lausanne,
Switzerland; and Singapore. In addition, the Company leases sales offices and/or
maintenance  and other  facilities  in many of the  locations  where its vessels
operate.  The Company  believes that its facilities  are generally  adequate for
current and anticipated  future use,  although the Company may from time to time
lease additional facilities as operations require.

Item 3.  Legal Proceedings

         The  Seabulk  America  was  completed  in 1990 by  combining  the stern
portion of the wrecked oil tanker Fuji with the forebody of the  chemical  barge
portion of the former  integrated  tug/barge Oxy  Producer/Oxy  4102. In Norfolk
Shipbuilding and Dry Dock Corporation v. Seabulk Transmarine Partnership,  Ltd.,
brought in the U.S.  District Court for the Eastern District of Louisiana (Civil
Action No.  93-1312),  one of the  shipyards  that  contracted  to complete  the
Seabulk America for the Company sought to recover from the Company approximately
$6.1  million for alleged  additions  and changes to the  contract  work and the
costs of alleged delay and  disruption,  in addition to $2.4 million of the $5.9
million  contract  price that the  Company  previously  withheld,  plus fees and
expenses.  This  lawsuit  was settled in the fourth  quarter of 1998.  Under the
terms of the settlement,  the lawsuit and related  counterclaims  were dismissed
with prejudice in consideration  of the Company's  agreement to pay the shipyard
$4.75  million in  installments  from  December 1998 to May 1999. As part of the
settlement,  a $5.6 million bond previously provided by the Company was released
and a related letter of credit was terminated.

         In March 1999, a proceeding was brought against HMI in the Swiss courts
(ABC  Maritime  A.G. v. Hvide  Marine  Incorporated,  Cour Civile du Tribunal du
Canton de Vaud,  Switzerland)  claiming that HMI owes approximately $2.9 million
in commissions  (plus interest and costs) in connection with a 1998 acquisition.
In connection with this proceeding, one of the Company's offshore energy support
vessels was  arrested in the Republic of South  Africa.  Although the outcome of
these proceedings  cannot be predicted at this time, HMI believes that the Swiss
proceeding is without merit and is seeking to effect the release of the vessel.

         From time to time the Company is also a party to litigation  arising in
the ordinary course of its business, most of which is covered by insurance.

Item 4.  Submission of Matters to a Vote of Security Holders.

         Not applicable.


<PAGE>



Item 4a.  Executive Officers

         The executive officers of the Company are:
<TABLE>
<CAPTION>

Name                                     Age                              Current Positions
<S>                                     <C>     <C>
J. Erik Hvide.......................     50      Chairman, President and Chief Executive Officer
John H. Blankley....................     51      Executive Vice President and Chief Financial Officer
Eugene F. Sweeney...................     56      Executive Vice President and Chief Operating Officer
Andrew W. Brauninger................     52      Senior    Vice    President--Offshore    Division    and
                                                 President--Seabulk Offshore, Ltd
Robert B. Lamm......................     51      Senior Vice President, General Counsel and Secretary
Walter S. Zorkers...................     52      Senior Vice President--Corporate Development
Leo T. Carey........................     47      Vice President--Ship Management
Arthur T. Denning...................     44      Vice President--Engineering
James S. Kimbrell..................      60      Vice President and President of Hvide Marine Towing, Inc.
William R. Ludt.....................     51      Vice President, President--Sun State Marine Services, Inc. and
                                                 Managing Director of Seabulk Offshore, Ltd.
John J. O'Connell, Jr...............     55      Vice President--Corporate Communications
Christopher D. Strong...............     40      Vice President--Finance, Treasurer and Assistant Secretary
L. Stephen Willrich.................     46      Vice President and President--Ocean Specialty Tankers Corporation
</TABLE>

         Mr. Hvide has been  Chairman  since  September  1994 and  President and
Chief Executive  Officer since 1991. He has been a director of the Company since
1973. From 1981 until 1991, Mr. Hvide was President and Chief Operating Officer.
He has been employed by the Company in various  capacities since 1970 and became
Vice  President  in  1973.  He is a  past  director  of the  American  Waterways
Operators,  a  participant  on the  Transportation  Committee  of  the  American
Petroleum  Institute,  a member  of the  American  Bureau  of  Shipping,  a past
Chairman of the Board of the American  Institute of Merchant Shipping and a past
appointee to the U.S. Coast Guard's Towing Safety Advisory  Committee.  In 1998,
he was inducted  into the  International  Maritime Hall of Fame. He is immediate
past president of the Port  Everglades  Association  and former  director of the
United  Way of  Broward  County.  Mr.  Hvide  is a  director  of  Seal  Holdings
Corporation,  a publicly traded company,  and serves on the vestry of St. Paul's
Church.  He was  formerly  chairman of the Board of  Trustees of Saint  Andrew's
School. Mr. Hvide is the son of Hans J. Hvide, the founder of the Company.

         Mr.  Blankley  has  been a  director  of the  Company  since  1991  and
Executive  Vice  President--Chief  Financial  Officer since  September  1995. He
served as a director and Chief Financial  Officer of Harris Chemical Group Inc.,
a chemical  manufacturing  company, from April 1993 to August 1994. He served as
Executive Vice  President--Finance and Chief Financial Officer of Stolt-Nielsen,
Inc., a publicly traded  international  operator of specialty  chemical tankers,
from 1985 to 1991.  From 1983 until 1985,  Mr.  Blankley was a director,  Senior
Vice President and Chief Financial Officer of BP North America Inc. Mr. Blankley
is also a director of MC  Shipping,  a publicly  traded  operator  of  petroleum
product and gas carriers and multi-purpose container feeder vessels.



<PAGE>



         Mr.  Sweeney  has  been  Chief  Operating  Officer  since  April  1998,
Executive Vice President  since September 1994 and a director since 1984. He was
Senior Vice President--Operations of the Company from 1991 to September 1994. He
joined the Company in 1981 as Vice President--Ship Management.  Prior to joining
the Company,  Mr.  Sweeney was employed for 17 years by Texaco,  Inc.,  where he
served in seagoing and shore management positions,  including operations manager
of Texaco's U.S.  tanker fleet.  Mr. Sweeney is on the board of directors of the
Chamber  of  Shipping  of  America  and is a member  of the  American  Bureau of
Shipping.

         Mr. Brauninger has been Senior Vice President--Offshore  Division since
August 1997. He was Vice President--Offshore  Division from 1990 until July 1997
and has been President of Seabulk Offshore,  Ltd., the Company's offshore energy
support  services  subsidiary,  since  September  1994. He was Vice President of
Offshore Operations from 1990 to September 1994 and Vice  President--Development
from 1989 to 1990.  From  1987 to 1989,  Mr.  Brauninger  was  President  of OMI
Offshore Services, Inc., an operator of offshore service vessels. Previously, he
was  employed  by Sabine  Towing  and  Transportation  Company,  where he held a
variety of posts including Vice President--Harbor Division.

         Mr. Lamm has been Senior Vice President,  General Counsel and Secretary
since July 1998. He was formerly  Vice  President and Secretary of W. R. Grace &
Co.,  where he was employed for more than 18 years.  Prior to that, he served as
Assistant Secretary of  Studebaker-Worthington,  Inc. and was earlier associated
with the New York law firm of Wofsey,  Certilman,  Haft, Snow & Becker.  He is a
member of the American and New York Bar Associations, an affiliate member of the
Florida Bar and a member of the American  Society of Corporate  Secretaries  and
the Society's Securities Law and Finance Committees. Mr. Lamm is President and a
director of the  Alzheimer's  Association  Greater Palm Beach Area Chapter and a
director of the Association of Public Corporations (Miami).

         Mr. Zorkers has been Senior Vice President--Corporate Development since
April 1997.  Prior to joining the  Company,  Mr.  Zorkers was the  principal  of
Commonwealth  Management Group, a management  consulting firm. From 1993 to 1995
he served as  Executive  Vice  President  of Boston  Pacific  Medical,  Inc.,  a
manufacturer  of  disposable  medical  products,  and from 1991 to 1993 he was a
Senior Vice President of Metcalf & Eddy, Inc., an environmental  engineering and
consulting firm.

         Mr. Carey has been Vice President--Ship Management since November 1996.
He  previously  served as  Director of  Operations  for the  Company's  fleet of
chemical  and  petroleum  product  carriers.  He joined  the  Company in 1981 as
Superintendent  Engineer.  Prior to that, he served with El Paso Marine Co. as a
deck officer and maintenance manager.

         Mr. Denning has been Vice President--Engineering  since August 1997. He
previously  served as Director of  Engineering of the Company from November 1994
to July 1997, and as  Superintendent  Engineering from September 1986 to October
1994.

     Mr.  Kimbrell  has been a Vice  President  of the Company and  President of
Hvide Marine  Towing,  Inc.  since August 1998. He was formerly  Executive  Vice
President, Chief Financial Officer and a director of Bay Transportation Company,
Inc. of Tampa, Florida, which the Company acquired in October of 1997. He joined
the former St. Philip  Towing in 1965. He is a member of the American  Waterways
Operators,  the Tampa Club, the University Club (Tampa) and the Harvard Business
School Club of the West Coast of Florida.


<PAGE>


         Mr.  Ludt has  been  Vice  President--Inland  Services  Division  since
January 1995 and the President of Sun State Marine Services, Inc., the Company's
energy tug and barge  subsidiary,  since September 1994. He was  Director--Fleet
Operations of the Company from 1982 to September 1994. Since joining the Company
in 1979,  he has also served as Fleet  Manager and Port  Engineer.  He served as
President of the Chemical Carriers Association from 1989 to 1990 and as its Vice
President from 1990 to 1992. Mr. Ludt has also served on various  working groups
within  the  U.S.  Coast  Guard's  Chemical  Transportation  Advisory  Committee
concerning  issues  such as vapor  control  and marine  occupational  safety and
health.  Mr.  Ludt  holds a dual  license  as a Third  Mate and Third  Assistant
Engineer, Steam and Motor Vessels.

     Mr.  O'Connell  has been  Vice  President--Corporate  Communications  since
August 1996,  when he joined the Company.  From September 1995 to August 1996 he
was an independent consultant.  Previously, he served in a variety of management
positions  with W. R. Grace & Co. for 20 years,  most  recently  as  Director of
Public Affairs.  Mr.  O'Connell was a member of the  President's  Private Sector
Survey on Cost Control in the Federal Government from 1982 to 1984.

         Mr. Strong has been  Assistant  Secretary of the Company since February
1998, Vice  President--Finance  since August 1997, Treasurer since November 1996
and Director of Finance since joining the Company in December 1994. From January
1990 to December 1994, he was Treasurer of the Port Everglades  Authority.  From
1986 to 1989, he served in several  management  positions  with Kislak  Mortgage
Corporation  and Kislak  National Bank,  including Vice  President--Finance  and
Investment Officer. Mr. Strong previously served as an officer in the U.S. Navy.

         Mr.  Willrich has been a Vice President of the Company and President of
OSTC since March 1998. He was Senior Vice President of OSTC from August 1996. He
served as Vice  President  of  Chartering  of OSTC from January  1988.  Prior to
joining the Company,  Mr.  Willrich was  employed by Diamond  Shamrock  Chemical
Company from 1975 to 1988, where he rose to Division  General Manager.  Prior to
his service with Diamond Shamrock, he worked for Gulf Oil Corporation as a Third
Assistant  Engineer  on  various  company  tankers.  He has more than 24 year of
experience in the management of Jones Act product tankers.













<PAGE>



                                PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

          HMI's  Class A Common  Stock is traded on the Nasdaq  National  Market
under  the  symbol  "HMAR."  The  following  table  sets  forth the high and low
(closing)  sale  prices per share of Class A Common  Stock,  as  reported by the
Nasdaq National Market, for the periods shown.

<TABLE>
<CAPTION>

                                                                                      High           Low  
<S>                                                                                <C>            <C>
         1997
            First Quarter.......................................................      28 3/4        18 1/4
            Second Quarter......................................................      25 3/4        14 7/8
            Third Quarter.......................................................      36 1/2        22
            Fourth Quarter......................................................      36 3/4        20 3/4
         1998
            First Quarter ......................................................      25 3/4        16 5/8
            Second Quarter......................................................      18 1/4        12
            Third Quarter.......................................................      13 5/8         6 3/4
            Fourth Quarter......................................................       8 3/8         4 1/2
         1999
            First Quarter (through March 19)....................................       6 1/8         4 1/4

</TABLE>


         HMI has not paid any cash  dividends  on its  Common  Stock  since  its
formation.  It presently  intends to retain its earnings for use in its business
and therefore does not anticipate  paying any cash dividends in the  foreseeable
future.  The payment of any future  dividends will be determined by the Board of
Directors  in  light  of  conditions  then  existing,  including  the  Company's
earnings,  financial condition and requirements,  business conditions, and other
factors. In addition,  the ability to pay dividends or make distributions to its
stockholders is restricted by the terms of the Company's  financing  agreements.
As of March 19,  1999,  there were 331 holders of record of Class A Common Stock
and 6 holders of record of Class B Common Stock.

Item 6.  Selected Financial Data

          The selected  consolidated  financial data  presented  below should be
read in conjunction with the consolidated financial statements and notes thereto
and "Management's  Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Report.



<PAGE>

<TABLE>
<CAPTION>



                                                                           Year Ended December 31,               
                                                            1994       1995       1996        1997        1998   
                                                                    (In thousands, except per share data)
<S>                                                       <C>        <C>        <C>       <C>          <C>
Consolidated Statement of Operations Data:
   Revenue.............................................   $ 49,792   $ 70,562   $109,356  $  210,257   $  401,906
   Operating expenses..................................     29,873     40,664     63,777     110,283      222,889
   Overhead expenses...................................      9,581     12,518     14,979      24,791       42,305
   Depreciation and amortization.......................      4,500      6,308      9,830      19,850       51,757
                                                          --------   --------   --------  ----------   ----------
   Income from operations..............................      5,838     11,072     20,770      55,333       84,955
   Interest expense, net...............................      5,302     11,460     11,631       7,024       42,442
   Other (expense) income..............................         11         26        437     (3,704)      (6,542)
                                                          --------   --------   --------  ---------    ----------
   Income (loss) before provision for (benefit
     from) income taxes, extraordinary item............        547      (362)      9,576      44,605       35,971
   Provision for (benefit from) income
     taxes.............................................        189        (2)      3,543      16,950       13,489
                                                          --------   -------    --------  ----------   ----------
   Income (loss) before extraordinary item.............        358      (360)      6,033      27,655       22,482
   Loss on extinguishment of debt, net(1)..............         --         --      8,108       2,132          734
                                                          --------   --------   --------  ----------   ----------
   Net income (loss)...................................   $    358   $  (360)   $(2,075)  $   25,523   $   21,748
                                                          ========   =======    =======   ==========   ==========
   Earnings (loss) per common share:
     Income (loss) before extraordinary
       item............................................   $   0.03   $ (0.14)   $   1.05  $     1.87   $     1.47
     Net income (loss).................................   $   0.03   $ (0.14)   $ (0.36)  $     1.73   $     1.42
                                                          ========   =======    =======   ==========   ==========
     Weighted average number of common
       shares and common share equivalents
       outstanding.....................................      5,302      2,535      5,763      14,785       15,324
                                                          ========   ========   ========  ==========   ==========
   Earnings (loss) per common share--assuming
     dilution:
     Income (loss) before extraordinary item
       and cumulative effect of change in
       accounting principle............................   $   0.03   $ (0.14)   $   0.99  $     1.75   $     1.39
     Net income (loss).................................   $   0.03   $ (0.14)   $ (0.24)  $     1.63   $     1.35
                                                          ========   =======    =======   ==========   ==========
     Weighted average number of shares
       and common share equivalents
       outstanding(2)..................................      5,302      2,535      6,590      17,120       19,451
                                                          ========   ========   ========  ==========   ==========
   Other Financial Data:
     EBITDA(3).........................................   $ 10,338   $ 17,380   $ 30,600  $   75,183   $  136,712
                                                          ========   ========   ========  ==========   ==========

</TABLE>



<PAGE>


<TABLE>
<CAPTION>

                                                                           Year Ended December 31,               
                                                              1994       1995       1996        1997       1998  
                                                                               (In thousands)
<S>                                                        <C>        <C>        <C>       <C>        <C>
Consolidated Statements of Cash Flows Data:
   Net cash provided by (used in):
     Operating activities.................................  $   2,858  $  3,948   $ 22,584   $ 40,042  $    64,536
     Investing activities.................................   (39,815)   (8,066)   (84,354)    (261,343)  (498,806)
     Financing activities.................................     41,249       805     68,337    226,636      428,495

</TABLE>

<TABLE>
<CAPTION>

                                                                               At December 31,                   
                                                            -----------------------------------------------------
                                                              1994       1995       1996        1997       1998  
                                                            ---------  --------   --------   --------   ---------
                                                                               (In thousands)
<S>                                                         <C>        <C>        <C>        <C>      <C>
Balance Sheet Data:
   Working capital (deficit).............................   $   7,793  $  4,315   $(8,704)   $ 25,790  $  (205,026)
   Total assets..........................................     135,471   143,683    273,473    604,561    1,108,825
   Total long-term obligations...........................      98,981   100,766    124,454    217,217      408,819
   Total debt............................................     104,281   109,051    141,464    197,547      635,503
   Convertible preferred securities of a subsidiary
     trust...............................................          --        --         --    115,000      115,000
   Stockholders' and minority partners'
     equity..............................................      14,903    13,999    101,989    227,282      258,648
</TABLE>

(1)Reflects  losses on the  extinguishment  of debt,  net of  applicable  income
   taxes of  $1,474,000,  $1,252,000  and  $413,000  for  1996,  1997 and  1998,
   respectively.
(2)For 1994,  the  weighted  average  number of common  shares and common  share
   equivalents  assume the conversion of the Class B Preferred Stock into shares
   of Common  Stock.  The Class B Preferred  Stock was redeemed on September 30,
   1994.  Also, for 1994,  shares  outstanding  assuming  dilution  reflects the
   assumed conversion of a portion of certain notes into shares of Common Stock.
   Such notes were issued in September  1994 and converted into shares of Common
   Stock in September 1996.
(3)EBITDA  (net income  from  continuing  operations  before  interest  expense,
   income tax expense,  depreciation  expense,  amortization  expense,  minority
   interests,  and other non-operating  income) is frequently used by securities
   analysts and is presented here to provide  additional  information  about the
   Company's  operations.   EBITDA  is  not  recognized  by  generally  accepted
   accounting  principles,  should not be  considered as an  alternative  to net
   income  as an  indicator  of the  Company's  operating  performance  or as an
   alternative to cash flows from operations as a measure of liquidity, and does
   not represent funds available for management's  use.  Further,  the Company's
   EBITDA may not be comparable to similarly  titled measures  reported by other
   companies.

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

         This discussion and analysis of the Company's  financial  condition and
historical  results  of  operations  should  be read  in  conjunction  with  the
Company's  consolidated  historical  financial  statements and the related notes
thereto included elsewhere in this Report.

Operations Overview

         The financial information presented below represents historical results
for each of the Company's business segments.


<PAGE>





<TABLE>
<CAPTION>

                                                                                     Year ended December 31,      
                                                                                  1996        1997         1998   
                                                                                --------    --------    ----------
                                                                                         (In thousands)
<S>                                                                             <C>         <C>          <C>
Revenue:
Marine support services:
    Offshore energy support..................................................   $ 43,715    $111,385     $ 242,656
    Offshore and harbor towing...............................................     13,950      20,424        46,368
                                                                                --------    --------     ---------
                                                                                  57,665     131,809       289,024

Marine transportation services...............................................     51,691      78,448       112,882
                                                                                --------    --------     ---------
      Total revenue..........................................................    109,356     210,257       401,906
                                                                                --------    --------     ---------

Operating expenses:
Marine support services:
    Offshore energy support..................................................     22,525      45,322       120,207
    Offshore and harbor towing...............................................      7,480      12,296        22,556
                                                                                --------    --------     ---------
                                                                                  30,005      57,618       142,763

Marine transportation services...............................................     33,772      52,665        80,126
                                                                                --------    --------     ---------
      Total operating expenses...............................................     63,777     110,283       222,889
                                                                                --------    --------     ---------
Direct overhead expenses:
Marine support services:
    Offshore energy support..................................................      2,558       5,866        14,707
    Offshore and harbor towing...............................................      1,364       2,361         5,528
                                                                                --------    --------     ---------
                                                                                   3,922       8,227        20,235
Marine transportation services...............................................      3,494       5,739         6,845
                                                                                --------    --------     ---------
      Total direct overhead..................................................      7,416      13,966        27,080
                                                                                --------    --------     ---------
Fleet EBITDA(1):
Marine support services:
    Offshore energy support..................................................     18,632      60,197       107,742
    Offshore and harbor towing...............................................      5,106       5,767        18,284
                                                                                --------    --------     ---------
                                                                                  23,738      65,964       126,026

Marine transportation services...............................................     14,425      20,044        25,911
                                                                                --------    --------     ---------
      Total fleet EBITDA(1)..................................................     38,163      86,008       151,937
Corporate overhead expenses..................................................      7,563      10,825        15,225
                                                                                --------    --------     ---------
EBITDA(1)....................................................................     30,600      75,183       136,712
Depreciation and amortization expenses.......................................      9,830      19,850        51,757
                                                                                --------    --------     ---------
Income from operations.......................................................   $ 20,770    $ 55,333     $  84,955
                                                                                ========    ========     =========
</TABLE>

(1)      EBITDA (net income from continuing  operations before interest expense,
         income  tax  expense,   depreciation  expense,   amortization  expense,
         minority interest and other non-operating income) is frequently used by
         securities  analysts  and  is  presented  here  to  provide  additional
         information  about the  Company's  operations.  Fleet  EBITDA is EBITDA
         before  corporate  overhead  expenses.  EBITDA and fleet EBITDA are not
         recognized by generally accepted accounting  principles,  should not be
         considered as alternatives to net income as indicators of the Company's
         operating performance, or as alternatives to cash flows from operations
         as a measure of  liquidity,  and do not represent  funds  available for
         management's use.  Further,  the Company's EBITDA may not be comparable
         to similarly titled measures reported by other companies.




<PAGE>


Revenue Overview

  Marine Support Services

         Revenue from marine support  services is  attributable to the Company's
offshore   energy  support   operations  and  its  offshore  and  harbor  towing
operations.

         Offshore  Energy  Support.  Revenue from the Company's  offshore energy
support  operations is primarily a function of the size of the Company's  fleet,
vessel day rates or charter rates, and fleet utilization.  Rates and utilization
are primarily a function of offshore  exploration,  development  and  production
activities,  which are in turn  heavily  dependent  upon the price of crude oil.
Beginning in the first half of 1998 and  continuing  [throughout]  [for most of]
the year,  crude oil  prices  declined  substantially,  with  resultant  adverse
effects on exploration,  development and production activities and, in turn, the
Company's offshore energy support  operations.  Further,  in certain areas where
the Company conducts offshore energy support  operations  (particularly the U.S.
Gulf of  Mexico),  contracts  for the  utilization  of offshore  energy  support
vessels commonly include  termination  provisions with three- to five-day notice
requirements  and no  termination  penalty.  As a result,  companies  engaged in
offshore  energy support  operations  (including  the Company) are  particularly
sensitive to changes in market demand.

         The  following  table  sets forth  average  day rates  achieved  by the
offshore  supply  boats and crew boats  owned or  operated by the Company in the
U.S. Gulf of Mexico and their average utilization for the periods indicated.

<TABLE>
<CAPTION>

                                                    1996                         1997                              1998
                                         Q1      Q2      Q3      Q4      Q1     Q2      Q3      Q4      Q1      Q2      Q3      Q4
<S>                                   <C>     <C>     <C>     <C>     <C>    <C>     <C>     <C>     <C>     <C>     <C>     <C>
Number of supply boats at
    end of period(1)................    10       11      16      18      19     21      25      26      28      29      27      24
Average supply boat day rates(2)....  $3,468  $4,095  $5,034  $5,776  $6,478  $7,176  $7,636  $8,032  $8,475  $8,211  $6,505  $5,191
Average supply boat utilization(3)..    92%     100%     97%    90%     87%     90%     91%     93%     86%     80%     55%     72%

Number of crew boats at 
    end of period(4)................    35       35      36      36      39     39      39      39      39      39      38      37
Average crew boat day rates(2)(4)...  $1,469  $1,466  $1,528  $1,531  $1,777  $1,940  $2,119  $2,294  $2,419  $2,502  $2,375  $2,383
Average crew boat utilization(3)(4).    89%      93%     96%    96%     95%     93%     95%     93%     89%     91%     77%     83%

</TABLE>


(1)  The decline in the number of supply boats in the third and fourth  quarters
     of 1998 primarily  reflects  bareboat  chartering and the  redeployment  of
     boats to other global  regions in response to declines in  utilization  and
     day rates in the U.S. Gulf of Mexico.

(2)  Average day rates are calculated based on vessels operating domestically by
     dividing  total  vessel  revenue  by the  total  number  of days of  vessel
     utilization.

(3)  Utilization is based on vessels  operating  domestically  and determined on
     the basis of a 365-day year. Vessels are considered  utilized when they are
     generating charter revenue.

(4)  Excludes  utility  boats.  The  decline  in the number of crew boats in the
     third and fourth  quarters of 1998 primarily  reflects the  redeployment of
     boats to other global  regions in response to declines in  utilization  and
     day rates in the U.S. Gulf of Mexico.

         As indicated in the above table, average supply boat day rates began to
decline in the second  quarter of 1998 and  continued to decline for the balance
of the year.  By  year-end  1998,  day rates had  fallen to levels  that had not
prevailed since the second half of 1996. Supply boat utilization also started to
decline  in  the  second  quarter  of  1998.  The  fourth  quarter  reflects  an
improvement in utilization due to the redeployment of idle vessels from the U.S.
Gulf of Mexico to  international  markets;  however,  

<PAGE>


utilization had fallen to recent  historical  lows during the third quarter.  In
early March 1999,  these rates improved  slightly due to the startup of the 1999
drilling season; at March 15, 1999, supply boat day rates averaged approximately
$5,000 per day.  The  current  low level of supply boat day rates is expected to
continue until oil prices improve.

         In addition, average crew boat day rates and utilization rates declined
in the second  half of 1998  (although  the decline was not as severe as that of
supply boat rates,  due  primarily  to fewer actual and  anticipated  new vessel
deliveries).  At March 15,  1999,  crew boat day  rates  averaged  approximately
$2,300  per  day.  As is  the  case  with  supply  boat  rates,  no  substantial
improvement in crew boat rates is anticipated until crude oil prices improve.

         The following table shows rate and utilization  information for foreign
operations (which commenced in the 1997 second quarter):

<TABLE>
<CAPTION>

                                                        1997                               1998                
                                       -----------------------------------    ------------------------------------
                                         Q1        Q2         Q3        Q4        Q1        Q2       Q3       Q4
<S>                                    <C>     <C>       <C>        <C>       <C>      <C>       <C>       <C>
Number of anchor handling
 tug/supply boats....................      --       9         23        23        66        67         66        69
Average anchor/handling tug/
 supply boat day rates(1)............  $   --   $ 2,900   $ 3,162   $ 3,357   $ 5,505   $ 6,008   $ 5,914   $ 5,727
Average anchor handling tug/
 supply boat utilization(1)(2).......      --       66%       80%       75%       75%       77%       77%        77%

Number of crew/utility boats.........      --        8         8         8        32        33        31         36
Average crew/utility boat
 day rates(2)........................  $   --   $ 1,330   $ 1,365   $ 1,344   $ 1,549   $ 1,544   $ 1,588   $ 1,616
Average crew/utility boat 
 utilization(3)......................      --      100%       93%       90%       75%       76%       72%       67%
</TABLE>

(1)Includes anchor handling tug boats.
(2)Average day rates are calculated based on vessels  operating  internationally
   by  dividing  total  vessel  revenue  by the  total  number of days of vessel
   utilization.
(3)Utilization is based on vessels operating  internationally  and determined on
   the basis of a 365-day year.  Vessels are  considered  utilized when they are
   generating charter revenue.

         As indicated in the above table,  foreign anchor  handling  tugs/supply
boats experienced stable utilization rates during 1998, but moderate declines in
day rates  during  the  second  half of the  year.  Foreign  crew/utility  boats
experienced a slight  increase in day rates over the full year, with declines in
utilization  rates during the second half. In general,  both types of operations
remained steady as compared to declines in the comparable U.S. markets. However,
foreign  rates  continued  to decline in January and February  1999,  rebounding
slightly in early  March 1999 in  response  to the startup of the 1999  drilling
season. At March 15, 1999, day rates averaged  approximately  $5,600 per day for
foreign anchor handling  tugs/supply boats and approximately  $1,600 for foreign
crew/utility boats.

         Offshore and Harbor  Towing.  Revenue  derived from the  Company's  tug
operations  is  primarily a function of the number of tugs  available to provide
services, the rates charged for their services, and the volume of vessel traffic
requiring docking and other ship-assist  services.  Vessel traffic,  in turn, is
largely a function of the  general  trade  activity in the region  served by the
port.



<PAGE>


         The following table summarizes  certain  operating  information for the
Company's tugs.
<TABLE>
<CAPTION>

                                                                                     Year Ended December 31,    
                                                                                  1996        1997        1998
<S>                                                                             <C>         <C>         <C>
Number of tugs at end of period..............................................         16          30          41
Total offshore and harbor towing revenue (in thousands)......................   $ 13,950    $ 20,424    $ 46,368
</TABLE>


         In 1998, the Company acquired a fleet of seven harbor tugs operating in
Port Arthur,  Texas and Lake Charles,  Louisiana.  This acquisition coupled with
the delivery of four tractor tugs and two SDMs(TM) attributed to the increase in
revenue.  By increasing  the number of harbor tugs, the Company was able to take
advantage of the offshore  towing  market.  This  diversification  helps to keep
offshore and harbor towing revenue stable.

Marine Transportation Services

         Chemical  Transportation.  Generally,  demand for  industrial  chemical
transportation  services  coincides  with  overall  economic  activity.  Revenue
derived from chemical transportation  operations is entirely attributable to the
operations  of OSTC, a wholly owned  subsidiary  of the Company that markets the
Company's chemical carriers. OSTC was owned equally by OMI Corp. ("OMI") and the
Company prior to August 1996, at which time, the Company acquired OMI's interest
in OSTC along  with  three  chemical  carriers  owned by OMI (the "OMI  Chemical
Carriers").

         Petroleum  Product  Transportation.  From 1975 to  November  1998,  the
product  carrier Seabulk  Challenger  derived all of its revenue from successive
voyage and time charters to Shell.  The charter was terminated in November 1998,
resulting  in the  payment of a $750,000  penalty to the  Company.  The  Seabulk
Challenger  has since been  operating  under  short-term  arrangements,  and the
Company  expects to redeliver  it to its  leaseholder  in the fourth  quarter of
1999.

         In March 1998,  the Company  acquired  the HMI Defender and HMI Trader.
Both  vessels  operate  under a contract of  affreightment  expiring in December
1999.

         Revenue  from the  Company's  towboats and fuel barges has been derived
primarily from  contracts of  affreightment  with FPL and Steuart  Petroleum Co.
that  require the Company to  transport  fuel as needed by those two  customers,
with the FPL contract  having a guaranteed  minimum  utilization.  The principal
contract with FPL expired in September  1998. The Company has since entered into
a new contract,  expiring in September 2002, to provide similar  services to FPL
at similar rates.  However,  the extent of the services to be provided under the
new contract is expected to be substantially less than under the prior contract.

         The following table sets forth the average time charter equivalents for
the Company's chemical and product carriers as if such vessels were owned by the
Company during the entire periods presented.
<TABLE>
<CAPTION>


                                                                                     Year Ended December 31,    
                                                                                  1996        1997        1998
<S>                                                                             <C>         <C>           <C>
Number of vessels............................................................          6           6             8
Time charter equivalents(1)..................................................   $ 25,276    $ 25,334      $ 24,225
</TABLE>

(1)  Time charter  equivalents are calculated by deducting total voyage expenses
     from total  voyage  revenue and  dividing  the result by the total days per
     voyage.


<PAGE>


Overview of Operating Expenses and Capital Expenditures

         The Company's operating expenses are primarily a function of fleet size
and utilization.  The most significant  expense  categories are crew payroll and
benefits, depreciation and amortization,  maintenance and repairs, charter hire,
insurance and fuel.

         The crews of Company-manned chemical and product carriers are paid on a
time-for-time  basis under which they receive paid leave in  proportion  to time
served aboard a vessel. The crews of offshore energy support vessels and certain
tugs and towboats are paid only for days worked.

         In addition to variable expenses associated with vessel operations, the
Company  incurs  fixed  charges to  depreciate  its marine  assets.  The Company
calculates  depreciation  based on useful lives ranging from 12 to 25 years from
acquisition for its steel-hull  offshore energy support vessels,  12 to 30 years
from acquisition for aluminum-hull  vessels,  the lesser of any applicable lease
term or the OPA 90 life for its product  and  chemical  carriers,  10 years from
acquisition  for its fuel  barges,  and 40 years  from  the date  built  for its
towboats and tugs.

         The Company capitalizes  expenditures  exceeding $5,000 for product and
chemical tankers and $3,000 for all other vessels, where the item acquired has a
useful life of three years or greater.  Vessel  improvements  are capitalized if
they  extend the useful life of the vessel or  increase  its value.  The Company
overhauls  main  engines  and  key  auxiliary  equipment  in  accordance  with a
continuous  planned  maintenance  program.  Under  applicable  regulations,  the
Company's  chemical and product  carriers and offshore  service  vessels and its
four largest tugs are required to be drydocked  twice in each  five-year  period
for  inspection  and routine  maintenance  and repairs.  These  vessels are also
required to undergo  special  surveys every five years  involving  comprehensive
inspection  and  corrective  measures to insure their  structural  integrity and
proper functioning of their cargo and ballast piping systems, critical machinery
and  equipment,  and  coatings.  The  Company's  fuel  barges,  because they are
operated  in fresh  water,  are  required  to be  drydocked  only  twice in each
ten-year  period.  The  Company's  harbor tugs and  towboats  generally  are not
required to be drydocked on a specific schedule. During the years ended December
31,  1996,  1997,  and 1998,  the  Company  drydocked  25, 42,  and 90  vessels,
respectively,  at an aggregate cost (exclusive of lost revenue) of $1.6 million,
$4.5 million,  and $13.7  million,  respectively.  The Company  accounts for its
drydocking costs under the deferral method,  under which capitalized  drydocking
costs are expensed over the period preceding the next scheduled drydocking.  See
Note 1 to the Company's consolidated financial statements.

         Charter hire  consists  primarily of payments  made with respect to the
bareboat charters of the Seabulk  Challenger and Seabulk  Magnachem,  which were
acquired pursuant to leveraged lease transactions,  and operating lease payments
on the tractor tug Broward.  The Company also pays charter hire when it charters
harbor tugs to meet requirements in excess of its own tugs' availability.

         Insurance  costs consist  primarily of premiums paid for (i) protection
and indemnity  insurance for the Company's  marine  liability  risks,  which are
insured by a mutual  insurance  association of which the Company is a member and
through the commercial insurance markets;  (ii) hull and machinery insurance and
other  maritime-related  insurance,  which are provided  through the  commercial
marine  insurance  markets;  and (iii) general  liability and other  traditional
insurance, which is provided through the commercial insurance markets. Insurance
costs,  particularly costs of marine insurance,  are directly related to overall
insurance market conditions and industry and individual loss records, which vary
from year to year.

<PAGE>


Results of Operations

  1998 Compared with 1997

         Revenue.  Revenue  increased 91% to $401.9 million for 1998 from $210.3
million for 1997, primarily due to increased revenue from the Company's offshore
energy support and chemical transportation operations.

         Revenue from offshore energy support operations increased 118% for 1998
over 1997, primarily due to acquisitions,  offset by a decrease in day rates and
utilization  rates.  Utilization of supply boats  decreased to 73% for 1998 from
93% in 1997 and domestic rates for crew boats decreased to 83% for 1998 from 93%
in  1997.  As  indicated   above  under  "Revenue   Overview  -  Marine  Support
Services-Domestic  Operations",  average  supply boat day rates and  utilization
rates in the U.S. Gulf of Mexico  declined in the 1998 second,  third and fourth
quarters. This decline began in June 1998 due to the protracted decline in crude
oil prices and is expected to continue until oil prices improve.  In early March
1999,  supply boat day rates improved  slightly compared to rates in January and
February 1999 due to the startup of the 1999 drilling season. At March 15, 1999,
U.S. supply boat day rates averaged $5,000 per day.

         In addition, average crew boat day rates and utilization rates declined
in the 1998  second  half  (although  the  decline  was not as severe as that of
supply boat rates,  due  primarily  to fewer actual and  anticipated  new vessel
deliveries).  At March 15, 1999,  U.S. crew boat day rates  averaged  $2,300 per
day. As is the case with supply boat rates,  no substantial  improvement in crew
boat rates is anticipated until crude oil prices improve.

         Marine transportation  services revenue increased 44% to $112.9 million
for 1998 from $78.4  million  for 1997,  primarily  due to  additional  revenues
earned by OSTC for marketing  vessels owned by third parties and the acquisition
of two product carriers in March 1998.

         Revenue from offshore and harbor towing  operations  increased  127% to
$46.4  million for 1998 from $20.4  million for 1997,  primarily  as a result of
acquisitions  and the  redeployment  of certain  vessels  from harbor  towing to
offshore towing.

         Operating Expenses. Operating expenses increased 102% to $222.9 million
for 1998 from  $110.3  million  for 1997,  primarily  due to  increases  in crew
payroll and  benefits,  maintenance  and repair,  and supplies  and  consumables
resulting  from  acquisitions.  As a percentage of revenue,  operating  expenses
increased to 55% for 1998 from 52% for 1997, primarily due to the aforementioned
declines of day rates and utilization and an increase in consumable expenses due
to the acquisition of two tankers,  offset in part by reduced insurance premiums
brought about by larger fleet discounts.

         Overhead Expenses. Overhead expenses increased 71% to $42.3 million for
1998  from  $24.8  million  for  1997,   primarily  due  to  increased  staffing
requirements due to acquisitions.  As a percentage of revenue, overhead expenses
were 11% and 12% for both 1998 and 1997, respectively.

         Depreciation  and Amortization  Expense.  Depreciation and amortization
expense  increased 161% to $51.8 million for 1998 as compared with $19.9 million
for 1997 as a result of an increase in fleet size due to acquisitions.


<PAGE>


         Income from Operations.  Income from operations  increased 54% to $85.0
million, or 21% of revenue,  for 1998 from $55.3 million, or 26% of revenue, for
1997 as a result of the factors noted above.

         Net Interest  Expense.  Net interest  expense  increased  506% to $42.4
million, or 11% of revenue,  for 1998 from $7.0 million,  or 3% of revenue,  for
1997,  primarily as a result of the February  1998  offering of Senior Notes and
debt incurred in connection with acquisitions.

         Other Income  (Expense).  Other  expenses were $6.5 million for 1998 as
compared to $3.7 million for 1997,  primarily due to dividend  payments relating
to  the  Trust  Convertible  Preferred  Securities  issued  in  July  1997  (see
"Liquidity and Capital Resources").

     Net Income (Loss).  The Company had net income of $21.7 million for 1998 as
compared to $25.5 million for 1997 as a result of the factors noted above.

   1997 Compared with 1996

         Revenue.  Revenue  increased 92% to $210.3 million for 1997 from $109.4
million for 1996, primarily due to increased revenue from the Company's offshore
energy support and chemical transportation operations.

         Revenue from offshore energy support operations increased 155% for 1997
over 1996,  primarily due to  acquisitions  and higher day rates  resulting from
increased offshore  exploration and production  activity.  Utilization of supply
boats  decreased to 91% for 1997 from 94% for 1996 due to a program of regularly
scheduled drydocking, and utilization of crew boats remained constant at 94% for
1997 and 1996.  During 1997,  average day rates for supply boats  increased  54%
from 1996, and average day rates for crew boats increased 36% from 1996.

         Marine  transportation  services revenue increased 52% to $78.4 million
for 1997 from $51.7,  primarily  due to the August 1996  acquisition  of the OMI
Chemical Carriers and the remaining 50% interest in OSTC, offset slightly by the
reduced charter rate on the Seabulk Challenger.

         Revenue from  offshore and harbor  towing  operations  increased 46% to
$20.4  million for 1997 from $14.0  million for 1996,  primarily  as a result of
acquisitions  and the  redeployment  of certain  vessels in the offshore  towing
sector.

         Operating Expenses.  Operating expenses increased 73% to $110.3 million
for 1997 from $63.8 million for 1996, primarily due to increases in crew payroll
and benefits,  maintenance and repair,  and supplies and  consumables  resulting
from acquisitions and increased business  activity.  As a percentage of revenue,
operating  expenses  decreased to 52% for 1997 from 58% for 1996,  mainly due to
significant increases in day rates resulting from increased offshore exploration
and production activities.

         Overhead Expenses. Overhead expenses increased 66% to $24.8 million for
1997  from  $15.0  million  for  1996,   primarily  due  to  increased  staffing
requirements due to acquisitions.  As a percentage of revenue, overhead expenses
decreased to 12% for 1997 from 14% for 1996.

         Depreciation  and Amortization  Expense.  Depreciation and amortization
expense  increased  102% to $19.9 million for 1997 as compared with $9.8 million
for 1996 as a result of fleet growth due to acquisitions.

<PAGE>


         Income from Operations.  Income from operations increased 166% to $55.3
million, or 26% of revenue,  for 1997 from $20.8 million, or 19% of revenue, for
1996, as a result of the factors noted above.

         Net  Interest  Expense.  Net  interest  expense  decreased  40% to $7.0
million, or 3% of revenue,  for 1997 from $11.6 million, or 11% of revenue,  for
1996, primarily as a result of debt retirement.

         Other Income  (Expense).  Other  expenses were $3.7 million for 1997 as
compared to other  income of $0.4  million for 1996,  primarily  due to dividend
payments relating to the Trust Convertible Preferred Securities.

         Net Income (Loss). The Company had net income of $25.5 million for 1997
as compared to a net loss of $2.1 million for 1996, primarily as a result of the
factors noted above.

Seasonality

         The Company has experienced some slight  seasonality in its operations.
The first half of the year is generally  not as strong as the second half due to
lower  activity  in offshore  energy  support  activity  and  petroleum  product
transportation during the months of February, March, and April.

Liquidity and Capital Resources

         Background. The Company's capital requirements have historically arisen
primarily from its working capital needs,  acquisitions  of and  improvements to
vessels, and debt service requirements.  The Company's principal sources of cash
have been bank borrowings, cash provided by operations, and proceeds from public
offerings of securities,  consisting of the initial  public  offering of Class A
Common  Stock in  August  1996,  a second  offering  of Class A Common  Stock in
February 1997, an offering of 6 1/2% Trust Convertible Preferred Securities (the
"Preferred  Securities")  in 1997,  and an offering of 8-3/8%  Senior Notes (the
"Senior  Notes") in February  1998. The offering of the Senior Notes yielded net
proceeds of $292.5  million,  of which $268.0  million was used to repay certain
indebtedness  and $24.5  million was used for  general  corporate  purposes.  In
addition,  the Company has financed  various  vessel  acquisitions  through U.S.
government-guaranteed   Title  XI  ship   financing   bonds  and  capital  lease
obligations.

         During 1998,  the Company  generated  $64.5  million in cash flows from
operations,  primarily  reflecting  net  income  adjusted  by  normal  recurring
non-cash items and changes in working capital. Cash used in investing activities
was  approximately  $498.8  million,  primarily  reflecting the  acquisition and
construction of and capital improvements to vessels.  Cash provided by financing
activities was  approximately  $428.5  million,  consisting of proceeds from the
offering of the Senior Notes and borrowings under bank credit facilities, offset
in part by principal payments on debt and capital lease obligations.

         Recent  Expenditures  and Future  Cash  Requirements.  During  1998 and
through  February 1999, 61 vessels were delivered to or acquired by the Company,
at a total cost of $405.4 million.  These vessels included more than 45 offshore
energy support vessels and two petroleum  product tankers.  During the remainder
of 1999 and  2000,  the  Company  is  scheduled  to take  delivery  of eight new
vessels,  costing a total of approximately $54.5 million, of which $23.5 million
has previously been paid, $25.9 million is due in 1999 and $5.1 million in 2000.



<PAGE>

         In  addition  to vessel  acquisitions  and  deliveries,  the  Company's
capital needs relate  primarily to debt service and maintenance and improvements
of its fleet. The Company's  principal and interest payment obligations for 1999
are estimated to be approximately $87.4 million, and operating lease obligations
for 1999 are estimated to be approximately  $6.1 million.  Capital  requirements
for fleet maintenance and improvements were approximately $72.8 million for 1998
and  are  currently  expected  to  aggregate  $27.7  million  during  1999;  the
anticipated  reduction for 1999  reflects the  substantial  amounts  expended in
1998, which resulted  primarily from planned  refurbishments of vessels acquired
in 1997 and early 1998. However,  the Company intends to defer certain scheduled
drydockings  and to reduce or defer other  expenses.  See "Recent  Developments"
below for additional information.

         The  above  amounts  do not  include  capital  and  other  expenditures
relating to five 45,300 dwt  double-hull  product  carriers in which the Company
currently  holds  a  50.8%  equity  interest  (see  Note 4 to  the  consolidated
financial  statements).  The Company paid $18.5 million in June 1998 to increase
its  equity  interest  in these  carriers  from  0.8% to  50.8%.  Three of these
carriers were delivered in the fourth quarter of 1998, a fourth was delivered in
early  1999,  and the fifth and final  carrier is expected  to be  delivered  in
mid-1999.  The  aggregate  cost of the five  carriers is  estimated to be $270.0
million,  a substantial  portion of which is being financed with the proceeds of
U.S.  government-guaranteed  Title XI ship financing  bonds.  At the time of the
increase in its equity interest,  the Company intended, and it still intends, to
reduce its equity interest to less than 50%.  Accordingly,  the Company accounts
for this temporary investment under the equity method. No assurance can be given
as to whether or when the Company will consummate such  disposition or as to the
terms  of  such  disposition.   However,  the  Company  has  exclusive  options,
exercisable  through 2000,  to purchase all or a portion of the remaining  49.2%
equity  interest in the  carriers at an  estimated  cost of $16.5  million.  The
Company has not yet  determined  whether or to what extent it will  exercise the
options.

         During 1999,  an  estimated  $19.3  million of  principal  and interest
payments are due on the Title XI ship financing  bonds referred to above. In the
event that the  operations  of the carriers do not generate  sufficient  cash to
fund those payments,  the Company has the right to require the current holder of
the other 49.2%  interest to fund up to $6.0 million of the operating  shortfall
for a period of up to 18 months.

         In view of 1998  declines in average day rates and  utilization  rates,
particularly  in the U.S. Gulf of Mexico,  and the  possibility  that rates will
remain at low levels or will  deteriorate  further,  the Company has  previously
curtailed or deferred  certain capital and other  expenditures and is taking the
additional actions discussed below under "Recent Developments".

         Bank and Other  Borrowings.  In  addition to the  securities  offerings
described in "Background" above, the Company has established various bank credit
facilities  from time to time. The Company  entered into an Amended and Restated
Revolving Credit and Term Loan Agreement (the "Agreement") with a group of banks
in February  1998.  The Agreement  provided for (i) a $175.0  million  revolving
credit  facility  maturing in 2003, and (ii) a $150.0 million term loan maturing
in 2005,  payable in equal  quarterly  installments  beginning in June 1998. The
Agreement  required  the  Company  to  maintain  specified  ratios  relating  to
leverage, debt service and indebtedness; limited the Company's ability to create
or  incur  certain  liens;  limited  the  incurrence  of  certain  indebtedness;
restricted  the Company's  ability to make certain  investments;  and restricted
certain payments, including dividends on the Company's capital stock.

         As a result of the declines in rates and utilization  discussed  above,
the Company  entered into an amendment of the Agreement  (the  Agreement,  as so
amended,  the "Amendment"),  effective September 30, 1998. In the absence of the
Amendment,  the Company would not have been in  compliance  with the covenant in
the  Agreement  that it maintain a maximum  "Leverage  Ratio" (as defined in the
Agreement) of 4.0:1.00.  The Amendment  modified that and other covenants in the
Agreement,   generally   imposing   

<PAGE>


restraints on future capital and other expenditures.  In addition, the Amendment
(i) reduced the  revolving  credit  facility to $150.0  million,  increasing  to
$166.0 million subsequent to March 1, 1999, subject to repayment of a portion of
the term loan with  proceeds  from a sale and  leaseback  transaction,  and then
increasing to $175.0 million,  subject to compliance  with a specified  leverage
ratio;  (ii) provided  that  borrowings  thereunder be secured by  Company-owned
vessels   having  an  appraised   value  of  at  least  $600.0  million  and  by
substantially  all other assets of the Company;  and (iii) increased the rate of
interest on borrowings and fees payable under the Agreement.

         The Company's  outstanding  indebtedness under the Amendment was $253.0
million at December 31, 1998 and $265.9 million at March 15, 1999.

         The Company has also engaged in other financing  arrangements from time
to time, including mortgage and lease financing of various vessels.

         Recent  Developments.  The Company's  financial results for January and
February 1999, and its expectations as to results for March 1999,  indicate that
the  Company's  offshore  energy  support  business  continues  to be  adversely
affected by low average day rates and  utilization  rates in the United  States.
Further, although 1998 rates in foreign markets remained steady or declined only
slightly as compared to those in the U.S.  markets,  foreign rates  continued to
decline in January and February  1999,  rebounding  only slightly in early March
1999 in  response  to the startup of the 1999  drilling  season.  As a result of
these declines, the Company does not expect to be in compliance, as of March 31,
1999, with one or more covenants contained in the Amendment.  Such noncompliance
would  result in a default  under the  Amendment,  which would  entitle the bank
lenders to accelerate  the payment of all borrowings  under the  Amendment.  The
acceleration  of payment  would result in a default under the Senior Notes under
their  cross-default   provisions.   (There  are  no  comparable   cross-default
provisions  with respect to the Title XI ship  financing  bonds or the Preferred
Securities.  However,  acceleration of the borrowings  under the Amendment would
require the Company,  under the terms of the Title XI ship financing  bonds,  to
obtain consents for certain transactions and other matters).  In the event that,
following such  defaults,  the holders of the Senior Notes exercise their rights
to  accelerate  payment,  all  borrowings  under the Amendment and the principal
amount of the Senior Notes,  as well as all interest  accrued on such borrowings
and the Senior Notes, will become immediately due and payable. In order to avoid
these  defaults,  the Company  will be  required  either to enter into a further
amendment  of  the  Agreement  or to  obtain  a  waiver  with  respect  to  such
noncompliance.

         The  Company  has  developed  a plan to  improve  liquidity.  The  plan
contemplates the following actions:

Asset  Dispositions.  The Company is  developing  a detailed  plan to dispose of
certain assets in order to raise significant amounts of cash.

New and Amended  Financing  Arrangements.  The Company is in discussion with its
bank lenders, as well as the holders of certain other debt obligations,  seeking
to amend or obtain waivers of the covenants  contained in and other terms of its
existing borrowing arrangements. In addition, the Company is seeking alternative
means of financing.

Reductions  in Capital  Expenditures.  The Company is  curtailing  or  deferring
certain  capital  expenditures.  In  particular,  the  Company  intends to defer
certain scheduled drydockings of vessels, consistent with safety and operational
considerations.



<PAGE>


Reductions in Operating and Overhead Expenses. The Company has reduced operating
and overhead expenses throughout its operations,  and additional  reductions are
expected to be implemented  in the future.  These  reductions  have been and are
expected to be effected  through  salary  reductions,  a freeze on the hiring of
additional  employees,  and headcount  reductions  through  selected  layoffs at
certain  locations,  as well  as  through  attrition.  Reductions  in  operating
expenses are also  expected to be achieved by reducing  crew costs and deferring
other expenses, consistent with safety and operational considerations.

         In addition,  in March 1999,  the Company  exercised its right to defer
the April 1, 1999  payment of  interest on the 6 1/2%  Convertible  Subordinated
Debentures (the "Debentures") issued by HMI to Hvide Capital Trust (the "Trust")
in 1997. Under its governing instruments,  the Trust is required to use interest
payments  on the  Debentures  to pay  dividends  on  the  Preferred  Securities.
Therefore,  the deferral of the  interest  payment on the  Debentures  will also
result in the  deferral  of the  payment  of the April 1, 1999  dividend  on the
Preferred Securities.  The Company has the right to defer such interest payments
and, indirectly, such dividend payments, for periods of up to five years.

Improvements  in Working  Capital  Management.  The Company plans to improve its
working capital  position by, among other things,  strengthening  its efforts to
collect receivables.

         There can be no  assurance  as to  whether  or the  extent to which the
Company will be able to achieve any or all of the above  objectives or as to the
terms  on which  any or all of the  above  objectives  might  be  achieved.  The
achievement  of many of the above  objectives  is subject to factors  beyond the
Company's control,  including general economic  conditions and conditions in the
industries the Company serves.  Further, the achievement of certain of the above
objectives will require the agreement or cooperation of third parties.

Effects of Inflation

          The Company does not consider inflation a significant business risk in
the current and foreseeable  future,  although the Company has experienced  some
cost  increases,  some of which  have been  offset by  charter  hire  escalation
clauses.

Prospective Accounting Changes

          In September  1998, the Financial  Accounting  Standards  Board issued
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities,
which is required to be adopted in years  beginning  after  September  15, 1999.
Because  of the  Company's  minimal  use of  derivatives,  management  does  not
anticipate that the adoption of the new Statement will have a significant effect
on the Company's earnings or financial position.

Impact of the "Year 2000 Issue"

         The "Year  2000  Issue" is the  result of the use by  certain  computer
software of a  two-digit  dating  convention  rather  than a  four-digit  dating
convention  (i.e.,  "00"  rather  than  "2000"),  causing a computer  or similar
technology  to recognize a date using "00" as the year 1900 rather than the year
2000.  This could result in a system failure or in other errors that could cause
disruptions of normal business activities.

         The Company  has  implemented  a program  designed to assess the likely
impact  of the Year 2000  Issue on the  Company  and to  develop  and  implement
measures  designed to  minimize  its  impact.  The  

<PAGE>


program covers not only the Company's  computer  equipment and software systems,
but also other systems containing so-called "embedded" technology, such as alarm
systems, elevators and fax machines.

         The Company's Year 2000 program has focused on the two major components
of the Company's operations - land-based systems and vessel-based systems - with
separate   teams  for  computer   operations/information   systems,   facilities
management, and vessel operations.  Each team is implementing the program in the
following four phases:

o        Assessment, including taking physical inventories of all computer-based
         equipment and software,  as well as digital and analog control systems;
         establishing  testing procedures for checking Year 2000 readiness;  and
         carrying   out  those   testing   procedures.   This   phase  has  been
         substantially  completed for both land-based and vessel-based  systems,
         except to the extent that the Company is seeking to determine, based on
         communications with third-party suppliers and customers, whether and to
         what extent the Company  may face  disruptions  in supplies or services
         (such as ports and  utilities)  provided by  suppliers  or cessation of
         operations by customers.  The Company estimates that such determination
         has been made with  respect to  approximately  70% of such  third-party
         suppliers and customers and that such determination should be completed
         by April 1999.

o        Remediation of all land-based and vessel-based issues identified in the
         assessment  phase.  Except as  discussed  above  with  respect to third
         parties,  land-based  remediation  activities  have been  completed and
         vessel-based  remediation efforts have been approximately 70% completed
         and are expected to be completed  during the first half of 1999.  Based
         on the  information  obtained to date from  third-party  suppliers  and
         customers,  the Company does not anticipate  any material  obstacles to
         completing  any  remaining  remediation  activities  during  the  third
         quarter of 1999.

o        Compliance   certification,   including   re-testing   to  assure  that
         remediation  efforts have been successful  compliance  certification is
         expected to be completed  shortly after the  completion of  remediation
         efforts in the 1999 third quarter.

o        Maintenance,  including ongoing testing and remediation.  This phase is
         expected  to  commence  at the end of the  first  half  of 1999  and is
         expected to continue until early 2000.

         The  Company  expects  each of the  above  phases  to be  completed  or
substantially  completed  by the times  indicated  above.  However,  the Company
cannot  predict  whether or to what extent the completion of these phases may be
delayed for various  reasons.  In particular,  as indicated  above,  the Company
continues to contact third-party suppliers and customers with regard to the Year
2000 Issue. As indicated above,  based on the information  obtained to date from
third-party  suppliers  and  customers,  the  Company  does not  anticipate  any
material  obstacles to completing  any  remaining  land-based  and  vessel-based
remediation  activities  during the third  quarter of 1999.  However,  it is not
possible to predict  whether or to what  extent the  information  obtained  from
suppliers and customers may require  additional  assessment,  remediation and/or
other  activities.  Further,  the  completion of the Company's Year 2000 program
could be adversely affected by the unavailability of replacement  components and
equipment.

         The Company estimates that its total cost for new systems and equipment
and related services will approximate $6.5 million,  of which approximately $5.6
million had been expended through 1998. However, these amounts include the costs
of new  systems  and  equipment  that,  while  "Year 2000  

<PAGE>

compliant," were not acquired in connection with or as a result of the Year 2000
Issue.  Further,  these amounts do not include the Company's  internal  costs in
connection with the Year 2000 Issue  (consisting  primarily of payroll costs for
employees  working on the Company's Year 2000 program),  as the Company does not
separately track such costs.  Consequently,  it is not possible to determine the
precise amount expended by the Company directly in connection with the Year 2000
Issue.  These  expenditures are not expected to affect other expenditures by the
Company relating to information technology and systems.

         The Company faces numerous  potential risks in connection with the Year
2000 Issue.  For the  Company's  land-based  systems,  these  risks  include the
possible loss of network integrity; failures with regard to accounting,  finance
and  other  functions;  potential  damage to  equipment;  and  possible  loss of
communications. In addition, systems containing embedded technology could result
in the loss of building  management  control systems (including  elevators,  air
conditioning and generators);  failure of fire and emergency and safety systems;
potential  damage  to  equipment;   and  loss  of  power.  In  its  vessel-based
operations,  the Year 2000 Issue  could  result in vessel  delays or  stoppages;
damage to  vessels  and other  equipment;  risk of  injury to crew  members  and
others;  failure  of  navigation  and/or  communications  equipment;  and  cargo
handling failures. It is not possible to determine whether or to what extent any
or all of these  risks are  likely to occur or the  costs  involved  in any such
occurrence. However, such costs could be material.

         The Company has developed a number of contingency  plans to address the
Year 2000  Issue.  Some of these  plans will be  implemented  regardless  of the
Company's  expectations  as to the likely  impact of the Year 2000 Issue,  while
others will be implemented  only if the Company believes that it is likely to be
seriously  affected  by the Year 2000 Issue.  These  contingency  plans  include
maintaining  backup  systems  with  pre-2000  dates  (including  backups  of all
critical systems); advance testing of critical systems; printing paper copies of
all  critical  data;   establishing   emergency  response  teams;  and  manually
overriding all mechanical  systems.  In addition,  the Company may suspend cargo
operations;  instruct  vessels at sea to be in open sea, well away from shore or
shallows; instruct vessels in port to remain alongside or at anchor; insure that
all ships are fully provisioned with stores and fuel; and restrict crew changes.
In addition,  as 2000 approaches,  the Company will conduct safety drills, cargo
handling drills, and backup vessel handling drills.

         The above  discussion of the Year 2000 Issue is a "Year 2000  Readiness
Disclosure"  within  the  meaning  of the Year 2000  Information  and  Readiness
Disclosure  Act.  However,  such  Act  does  not  protect  the  Company  against
proceedings under the federal securities laws, including enforcement proceedings
by the Securities and Exchange Commission arising out of material  misstatements
in and omissions from the above discussion.

 Euro Conversion Issues

         On January 1, 1999, certain member nations of the European Economic and
Monetary Union ("EMU") adopted a common  currency,  the "Euro." For a three-year
transition period,  both the Euro and individual  participants'  currencies will
remain in  circulation;  after January 1, 2002,  the Euro will be the sole legal
tender for EMU countries.  The adoption of the Euro affects  numerous  financial
systems and business applications.

          While the Company does  business in many  countries  around the world,
substantially all of such business is U.S.  dollar-denominated.  Thus, while the
Company  is  reviewing  the  impact of the  introduction  of the Euro on various
aspects of its business (including  information systems,  currency 


<PAGE>

exchange rate risk, taxation, contracts, competitive position and pricing), such
introduction is not expected to have a material impact on the Company.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         The  company is exposed to market risk from  changes in interest  rates
which may adversely  affect its results of operations  and financial  condition.
The Company's  policy is not to use financial  instruments  for trading or other
speculative  purposes and the Company is not a party to any leveraged  financial
instruments.  The  Company  manages  market  risk  by  restricting  the  use  of
derivative  financial  instruments to infrequent  purchases of forward contracts
for the  purchase of fuel oil for its carrier  fleet.  The Company does nto have
any open  contracts at December 31, 1998. A discussion of the  Company's  credit
risk and the fair value of financial  instruments is included in Notes 15 and 17
of the Company's consolidated financial statements.

         Exposure To Short-Term  Interest Rates.  Short-term variable rate debt,
primarily  borrowings  under  the  Amendment,   comprised  approximately  $252.9
million, or 34% of the Company's total debt and Preferred Securities at December
31, 1998. The Company's variable rate debt had an interest rate of approximately
7.4% during 1998 and a hypothetical 2% increase in the rates under the Amendment
during 1998 would have  increased the Company's  interest  expense and decreased
income  before  taxes  by $3.9  million.  Since  a  significant  portion  of the
Company's  borrowing  are based on  short-term  interest  rates,  the  Company's
borrowing costs could increase due to fluctuations in short-term  interest rates
as well as the interest rate spread charged by the Company's lenders.

Item 8.  Financial Statements

          The Company's  Consolidated  Financial  Statements  are listed in Item
14(a)(1), included at the end of this Report on Form 10-K beginning on page F-1,
and incorporated herein by reference.

Item 9.  Changes in and Disagreements with Accountants on Accounting and 
         Financial Disclosure.

          None


<PAGE>



                             Part III

Item 10.  Directors and Executive Officers of the Registrant.

          The  information  required by Item 10 is  contained  in the  Company's
Proxy Statement for the 1999 Annual Meeting of  Shareholders  under the captions
"Directors  and Nominees" and  "Compliance  with Section 16(a) of the Securities
Exchange  Act of  1934,"  and in Item 4a of this  Report  on Form  10-K,  and is
incorporated herein by reference.

Item 11.  Executive Compensation.

          The  information  required by Item 11 is  contained  in the  Company's
Proxy  Statement for the 1999 Annual Meeting of  Shareholders  under the caption
"Executive Compensation," and is incorporated herein by reference.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

          The  information  required by Item 12 is  contained  in the  Company's
Proxy  Statement for the 1999 Annual Meeting of  Shareholders  under the caption
"Common Stock Ownership of Certain  Beneficial  Owners and  Management,"  and is
incorporated herein by reference.

Item 13.  Certain Relationships and Related Transactions.

          The  information  required by Item 13 is  contained  in the  Company's
Proxy  Statement for the 1999 Annual Meeting of  Shareholders  under the caption
"Compensation   Committee  Interlocks  and  Insider  Participation  and  Certain
Transactions," and is incorporated herein by reference.



<PAGE>



                                Part IV

Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.

         (a) (1) List of Financial  Statements.  The  following is a list of the
financial  statements  included at the end of this Report of Form 10-K beginning
on page F-1:

         Report of Independent Certified Public Accountants
         Consolidated Balance Sheets as of December 31, 1997 and 1998
         Consolidated Statements of Operations for the Years Ended
              December 31, 1996, 1997 and 1998
         Consolidated Statements of Stockholders' Equity for the 
              Years Ended December 31, 1996, 1997 and 1998
         Consolidated Statements of Cash Flows for the Years Ended 
              December 31, 1996, 1997 and 1998
         Notes to Consolidated Financial Statements

         (2) List of Financial  Statement  Schedules.  All  schedules  have been
omitted  because  they  are not  applicable  or not  required,  or the  required
information  is  provided  in the  consolidated  financial  statements  or notes
thereto.

         (b)  Reports on Form 8-K.

         No reports on Form 8-K were filed during the last quarter of the fiscal
year covered by this Report on Form 10-K.

         (c) List of Exhibits.  The  following is a list of exhibits  furnished.
Copies of exhibits will be furnished upon written  request of any stockholder at
a charge of $.25 per page plus postage.

Exhibit
Number                                                 Exhibit

3.1        Amended  and  Restated  Articles  of  Incorporation.(1) 
3.2        Bylaws of the Company, as amended.(1) 
4.1        Form of Class A Common Stock Certificate (Domestic).(1)  
4.2        Form of Class A Common Stock  Certificate (Foreign).(1)
4.3        Certificate of Trust of Hvide Capital Trust.(2)



<PAGE>

4.4        Amended and Restated Declaration of Trust, dated as of June 27, 1997,
           among Hvide Marine Incorporated as Depositor, The Bank of New York as
           Property  Trustee,  The  Bank  of New  York  (Delaware)  as  Delaware
           Trustee,  and J. Erik Hvide,  John H.  Blankley  and Gene  Douglas as
           Administrative Trustees.(2)
4.5        Indenture for the 6 2% Convertible Subordinated Debentures,  dated as
           of June 27, 1997, among Hvide Marine Incorporated and The Bank of New
           York, as Indenture Trustee.(2)
4.6        Form of 6 2% Preferred Securities.(2)
4.7        Form of 6 2% Convertible Debentures.(2)
4.8        Preferred Securities  Guarantee Agreement, dated as of June 27, 1997,
           between Hvide Marine Incorporated, as Guarantor, and The Bank of New
           York, as Guarantee Trustee.(2)
4.9        Indenture,  dated February 19, 1998, among Hvide Marine Incorporated,
           the Subsidiary  Guarantors  named therein and the Bank of New York as
           Trustee.(3)
4.10       Registration  Rights Agreement,  dated as of February 19, 1998, among
           Hvide Marine  Incorporated,  the Subsidiary  Guarantors named therein
           and Donaldson, Lufkin & Jenrette Securities Corporation and the other
           Initial Purchasers.(3)
10.1       Non-Compete Agreement, between the Company and Hans J. Hvide, dated
           September 28, 1994.(4)
10.2       Equity Ownership Plan.(5)
10.3       Stock Option Plan for Directors.(5)
10.4.1     1996 Employee Stock Purchase Plan.(5)
10.4.2     Retirement Plan and Trust. (6)
10.5       Security  Agreement,  dated December 14, 1973,  relating to United 
           States Government Ship Financing Bonds, between The  Provident  Bank
           and The United States of America, with respect to Seabulk Challenger/
           S.T.L. 3901.(7)
10.6*      Bareboat  Charter,  dated as of December 14, 1973, by and between The
           Provident  Bank and Seabulk  Tankers,  Ltd.,  with respect to Seabulk
           Challenger/S.T.L. 3901.(7)
10.7*      Time Charter Party,  dated as of December 20, 1989,  between  Seabulk
           Tankers,  Ltd.,  and  Shell  Oil  Company  with  respect  to  Seabulk
           Challenger/S.T.L. 3901, as amended.(7)
10.8       Security  Agreement,  dated  August  20,  1975,  by  and  among  Port
           Everglades  Towing,  Inc., Central National Bank of Cleveland and The
           United   States   of   America,   with   respect   to   the   Seabulk
           Magnachem/S.C.C. 3902, as amended.(7)
10.9*      Bareboat  Charter,  dated  February 24, 1977, by and between  Central
           National Bank of Cleveland and Seabulk Chemical Carriers,  Inc., with
           respect to Seabulk Magnachem/S.C.C. 3902, as amended.(7)
10.10      Sub-Bareboat  Charter,  dated  January 16,  1988,  between  Seabulk  
           Chemical Carriers, Inc., and Hvide Shipping, Incorporated, with
           respect to Seabulk Magnachem/S.C.C. 3902, as amended.(7)
10.12*     Tanker Time Charter Party,  dated December 15, 1989,  between Seabulk
           Ocean Systems  Corporation and Ocean Specialty  Tankers  Corporation,
           with respect with to Seabulk Magnachem/S.C.C. 3902, as amended.(7)

<PAGE>

10.13*     Tanker Time Charter Party, dated December 15, 1989,  between Seabulk 
           Transmarine Partnership, Ltd., and Ocean Specialty Tankers 
           Corporation, with respect to Seabulk America.(7)
10.14      Franchise  Agreement,  dated as of January 8, 1975,  by and  between 
           Canaveral  Port  Authority  and Port Everglades Towing, Inc.(7)
10.15      Non-Exclusive Franchise Agreement,  dated as of March 7, 1991, by and
           between   Port    Everglades    Authority    and   Hvide    Shipping,
           Incorporated.(7)
10.16*     Contract for Fuel  Transportation,  dated as of February 18, 1993, by
           and  between  Florida  Power & Light  Company  and Sun State  Marine,
           Incorporated.(7)
10.17      Post-Retirement  Benefits Agreement between the Company and Hans J. 
           Hvide, dated  September  28,  1994.(4)  10.18 Letter of Credit  
           Agreement,  dated as of September 29, 1994, between Hvide Shipping, 
           Inc. and Bank of Boston.(4)
10.19      Amended and Restated  Credit  Agreement dated as of June 21, 1996, by
           and  among  Hvide  Marine  Incorporated,  Citibank,  N.A.,  The First
           National Bank of Boston, BNY Financial Corporation, Hibernia National
           Bank, and Amsouth Bank of Florida.(1)
10.20      Amended and Restated Credit Agreement dated as of February 3, 
           1997.(8)
10.21      Amendment No. 2 to Charter of Seabulk Magnachem.(4)
10.22      Form of Recapitalization  Agreement among Hvide Corp., Hvide Marine
           Incorporated,  the Junior Subordinated Noteholders, the Senior
           Subordinated Noteholders, J. Erik Hvide, and certain trusts.(1)
10.23      Form  of  Registration   Rights   Agreement  by  and  between  Hvide 
           Marine   Incorporated   and  certain shareholders.(1)
10.24      Form of Agreement Among Shareholders among certain shareholders.(1)
10.25      Form of Amended and Restated  Contingent  Share Issuance  Agreement
           among Hvide Marine  Incorporated  and certain purchasers.(1)
10.26      Registration  Rights  Agreement,  dated June 27, 1997,  between Hvide
           Capital   Trust  and   Donaldson,   Lufkin  &   Jenrette   Securities
           Corporation,  Howard, Weil,  Labouisse,  Friedrichs  Incorporated and
           Raymond James & Associates, Inc., as Purchasers.(2)
10.27      Asset Sale Agreement between Hvide Marine Incorporated and Wellington
           Capital Limited.(9)
10.28      Revolving  Credit  Agreement  dated September 30, 1997 by and among
           Hvide Marine  Incorporated,  Citibank, N.A., as Administrative Agent,
           BankBoston,  N.A., as Syndicate Agent, with Citicorp Securities, Inc.
           and BankBoston Securities, Inc., having acted as Arrangers.(10)
<PAGE>

10.29      Purchase Agreement between Hvide Marine Incorporated and Care 
           Offshore, Inc.(11)
10.30      Amended and Restated Revolving Credit and Term Loan Agreement,  dated
           as of February 12, 1998 among Hvide Marine Incorporated, as Borrower,
           the Subsidiary  Guarantors  named therein,  the lending  institutions
           which  are  or  may  become  parties  thereto,   CitiBank,  N.A.,  as
           Administrative  Agent,  BankBoston,  N.A., as Documentation Agent and
           BancBoston Securities, Inc., as Syndication Agent.(3)
10.31      Hvide Marine Incorporated Amended and Restated Equity Ownership 
           Plan.(12)
10.32      Amendment  No. 1, dated as of September 30, 1998, to the Amended and
           Restated  Revolving  Credit  and Term  Loan  Agreement,  dated as of
           February  12,  1998,  by and among Hvide  Marine  Incorporated,  the
           Guarantors party thereto,  Citibank, N.A., BankBoston,  N.A. and the
           lending institutions named therein.(13)
10.33      Indemnification  Agreement,  dated as of October 22, 1998, between 
           Hvide Marine Incorporated and J. Erik Hvide.(13)
10.34      Indemnification  Agreement,  dated as of October 30, 1998, between
           Hvide Marine Incorporated and Hans J. Hvide.(13)
10.35      Consulting Agreement between Gene Fitzgerald and Hvide Marine
           Incorporated, dated January 15, 1999.
21         List of Subsidiaries.
23.1       Consent of Ernst & Young LLP.
27         Financial Data Schedule.

  *    Confidential  treatment  requested.  The  materials  omitted  from  these
       documents  have been marked with an asterisk (*). The  materials  omitted
       have  been  separately   filed  with  the  Commission   pursuant  to  the
       confidential treatment request.

(1)  Incorporated  herein  by  reference  to  Amendment  No.  4 to  Registration
     Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
     on August 5, 1996.

(2)  Incorporated  herein by reference to Form S-3  (Registration No. 333-34941)
     filed with the Commission on September 4, 1997.

(3)  Incorporated  herein by reference to Form S-4  (Registration No. 333-42039)
     filed with the Commission on March 18, 1998.

<PAGE>


(4)  Incorporated  herein  by  reference  to  Amendment  No.  1 to  Registration
     Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
     on May 3, 1996.

(5)  Incorporated  herein by reference to Form S-8  (Registration No. 333-17621)
     filed with the Commission on December 11, 1996.

(6)  Incorporated  herein by reference to Form S-8  (Registration No. 333-19543)
     filed with the Commission on January 10, 1997.

(7)  Incorporated  herein by  reference  to  Registration  Statement on Form S-1
     (Registration No. 33-78166) filed with the Commission on April 26, 1994.

(8)  Incorporated  herein by reference to Form 10-K filed with the Commission on
     March 31, 1997.

(9)  Incorporated  herein by reference to Form 8-K filed with the  Commission on
     June 9, 1997.

(10) Incorporated  herein by reference to Form 10-Q filed with the Commission on
     November 7, 1997.

(11) Incorporated  herein by reference to Form 8-K filed with the  Commission on
     February 25, 1998.

(12) Incorporated  herein by reference to Form S-8  (Registration No. 333-58119)
     filed with the Commission on June 30, 1998.

(13) Incorporated  herein by reference to Form 10-Q filed with the Commission on
     November 16, 1998.


<PAGE>



                                    SIGNATURES

       Pursuant  to the  requirements  of Section 13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                  HVIDE MARINE INCORPORATED

                                 By:      /s/ J. ERIK HVIDE            
                                            J. Erik Hvide
                                  President and Chief Executive Officer

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the  following  persons in the  capacities  and on the
dates indicated.
<TABLE>
<CAPTION>

              Signature                              Title                                 Date
<S>                                     <C>                                         <C>
          /s/ J. ERIK HVIDE              Chairman of the Board,                       March 30, 1999
--------------------------------------
            J. Erik Hvide                 President, Chief Executive
                                         Officer and Director
                                         (principal executive officer)

        /s/ JOHN H. BLANKLEY             Executive Vice President,                    March 30, 1999
--------------------------------------
          John H. Blankley               Chief Financial Officer
                                         and Director
                                         (principal financial officer)

        /s/ EUGENE F. SWEENEY            Executive Vice President,                    March 31, 1999
--------------------------------------
          Eugene F. Sweeney              Chief Operating Officer,
                                         and Director

       /s/ JOHN J. KRUMENACKER           Controller (principal accounting             March 31, 1999
--------------------------------------
         John J. Krumenacker             officer)

     /s/ ROBERT B. CALHOUN, JR.          Director                                     March 31, 1999
---------------------------------------
       Robert B. Calhoun, Jr.

          /s/ GERALD FARMER              Director                                     March 31, 1999
---------------------------------------
            Gerald Farmer

         /s/ JEAN FITZGERALD             Director                                     March 31, 1999
---------------------------------------
           Jean Fitzgerald

         /s/ JOHN J. LEE                 Director                                     March 31, 1999
--------------------------------------
             John J. Lee

        /s/ JOSIAH O. LOW III            Director                                     March 31, 1999
--------------------------------------
          Josiah O. Low III

         /s/ WALTER C. MINK              Director                                     March 31, 1999
--------------------------------------
           Walter C. Mink

           /s/ ROBERT RICE               Director                                     March 31, 1999
---------------------------------------
             Robert Rice
</TABLE>



<PAGE>

<TABLE>
<CAPTION>

<S>                                    <C>                                         <C> 
         /s/RAYMOND B. VICKERS           Director                                     March 30, 1999
--------------------------------------
         Raymond B. Vickers

</TABLE>



<PAGE>


                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
Hvide Marine Incorporated

         We have audited the accompanying  consolidated  balance sheets of Hvide
Marine  Incorporated  and subsidiaries as of December 31, 1997 and 1998, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for each of the three years in the period ended  December 31, 1998.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects,  the consolidated  financial position of Hvide
Marine  Incorporated  and  subsidiaries  at December 31, 1997 and 1998,  and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity  with generally
accepted accounting principles.

         The accompanying  financial statements have been prepared assuming that
Hvide  Marine  Incorporated  will  continue  as a going  concern.  As more fully
described  in Note 2, the Company has  experienced  a reduction  in revenues and
believes  that it will not be in  compliance  with  certain  covenants of a loan
agreement as of March 31, 1999. These conditions raise  substantial  doubt about
the  Company's  ability to continue as a going  concern.  Management's  plans in
regard to these matters are also  described in Note 2. The financial  statements
do not include any  adjustments  to reflect the possible  future  effects on the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from the outcome of this uncertainty.


                                                /s/ ERNST & YOUNG LLP



Miami, Florida
  February 5, 1999, except for 
  Note 21, as to which the
  date is March 17, 1999, and
  Note 2, as to which the date
  is March 31, 1999



                                      F-1


<PAGE>



                 HVIDE MARINE INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                                  December 31,   
                                                                                               1997       1998  
                                                                                            (in thousands, except
                                                                                                 share amounts)
<S>                                                                                          <C>        <C>
                                 ASSETS
Current assets:
   Cash and cash equivalents..............................................................   $ 14,952   $  9,177
   Accounts receivable:
     Trade, net of allowances for doubtful accounts of $1,093 and $2,169..................     36,903     67,961
     Insurance claims and other...........................................................      2,456     11,915
   Inventory, spare parts and supplies....................................................      8,162     17,455
   Prepaid expenses.......................................................................      3,085      4,342
   Deferred costs, net....................................................................      4,516     10,482
                                                                                             --------   --------
     Total current assets.................................................................     70,074    121,332
Property:
   Construction in progress...............................................................     42,010     39,455
   Vessels and improvements...............................................................    492,070    889,903
     Less accumulated depreciation........................................................   (45,463)   (91,309)
   Furniture and equipment................................................................      7,366     17,297
     Less accumulated depreciation........................................................    (1,625)    (3,540)
                                                                                             -------    --------
     Net property.........................................................................    494,358    851,806
Other assets:
   Deferred costs, net....................................................................      9,580     20,978
   Investment in affiliates...............................................................      1,627     23,421
   Goodwill, net..........................................................................     25,361     86,955
   Other..................................................................................      2,783      4,333
                                                                                             --------   --------
     Total other assets...................................................................     39,351    135,687
                                                                                             --------   --------
     Total................................................................................   $603,783  $1,108,825
                                                                                             ========  ==========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable.......................................................................   $  17,187  $  25,822
   Current maturities of long-term debt...................................................       7,534      9,011
   Current obligations under capital leases...............................................       1,714      2,991
   Debt subject to acceleration...........................................................          --    252,954
   Accrued interest.......................................................................       1,007      9,864
   Charter hire and other liabilities.....................................................      16,842     25,716
                                                                                             ---------  ---------
     Total current liabilities............................................................      44,284    326,358
Long-term liabilities:
   Long-term debt.........................................................................     177,573     33,564
   Obligations under capital leases.......................................................      10,726     36,983
   Senior Notes...........................................................................          --    300,000
   Deferred income taxes..................................................................      25,649     32,721
   Other..................................................................................       3,269      5,551
                                                                                             ---------  ---------
     Total long-term liabilities..........................................................     217,217    408,819
                                                                                             ---------  ---------
     Total liabilities....................................................................     261,501    735,177
Company-obligated mandatorily redeemable preferred securities of a subsidiary trust
   holding solely debentures issued by the Company........................................     115,000    115,000
Minority partners' equity in subsidiaries.................................................       2,295     10,613
Commitments and contingencies
Stockholders' equity:
   Preferred Stock, $1.00 par value--authorized 10,000,000 shares;
     issued and outstanding, none.........................................................          --         --
   Class A Common Stock--$.001 par value, authorized 100,000,000
     shares; issued and outstanding, 12,382,435 and 12,872,629............................          12         13
   Class B Common Stock--$.001 par value, authorized 5,000,000 shares;
     issued and outstanding, 2,906,465 and 2,547,064......................................           3          2
   Additional paid-in capital.............................................................     195,522    196,822
   Retained earnings......................................................................      29,450     51,198
                                                                                             ---------  ---------
       Total stockholders' equity.........................................................     224,987    248,035
                                                                                             ---------  ---------
       Total minority partners' equity in subsidiaries and stockholders' equity...........     227,282    258,648
                                                                                             ---------  ---------
       Total..............................................................................   $ 603,783 $1,108,825
                                                                                             ========= ==========
</TABLE>


                   See notes to consolidated financial statements

                                    F-2
<PAGE>







                        HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                           CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                                                     Year Ended December 31,     
                                                                                  1996        1997        1998   
                                                                                ---------  ----------  ----------
                                                                                        (In thousands, except
                                                                                           per share data)
<S>                                                                             <C>        <C>         <C>

Revenues.....................................................................   $ 109,356   $210,257   $ 401,906
Operating expenses:
   Crew payroll and benefits.................................................      29,756     48,732      91,357
   Charter hire and bond guarantee fee.......................................       4,667     10,548      19,679
   Repairs and maintenance...................................................       8,984     15,512      31,129
   Insurance.................................................................       7,633      8,867      12,668
   Consumables...............................................................       6,643     13,654      39,222
   Other.....................................................................       6,094     12,970      28,834
                                                                                ---------   --------   ---------
     Total operating expenses................................................      63,777    110,283     222,889
Selling, general and administrative expenses:
   Salaries and benefits.....................................................       7,936     12,052      21,062
   Office expenses...........................................................       1,394      2,248       5,804
   Professional fees.........................................................       2,947      4,683       6,259
   Other.....................................................................       2,702      5,808       9,180
                                                                                ---------   --------   ---------
     Total overhead expenses.................................................      14,979     24,791      42,305
Depreciation and amortization................................................       9,830     19,850      51,757
                                                                                ---------   --------   ---------
Income from operations.......................................................      20,770     55,333      84,955
Interest:
   Interest expense..........................................................      11,908      8,341      43,077
   Interest income...........................................................       (277)    (1,317)       (635)
                                                                                --------    -------    ---------
     Net interest............................................................      11,631      7,024      42,442
Other income (expense):
   Minority interest and equity in earnings of subsidiaries..................         894    (3,527)     (6,698)
   Other.....................................................................       (457)      (177)         156
                                                                                --------    -------    ---------
     Total other income (expense)............................................         437    (3,704)     (6,542)
Income before provision for income
   taxes and extraordinary item..............................................       9,576     44,605      35,971
Provision for income taxes...................................................       3,543     16,950      13,489
                                                                                ---------   --------   ---------
Income before extraordinary item.............................................       6,033     27,655      22,482
Loss on early extinguishment of debt, net of applicable
   income taxes of $1,474, $1,252 and $413 in 1996, 1997 and 1998............       8,108      2,132         734
                                                                                ---------   --------   ---------
     Net income (loss).......................................................   $ (2,075)   $ 25,523   $  21,748
                                                                                ========    ========   =========

Earnings per common share:
  Income before extraordinary item...........................................   $    1.05   $   1.87   $    1.47
  Loss on early extinguishment of debt.......................................      (1.41)     (0.14)      (0.05)
                                                                                --------    -------    ---------
     Net income (loss) per common share......................................   $  (0.36)   $   1.73   $    1.42
                                                                                ========    ========   =========

Earnings per common share--assuming dilution:
  Income before extraordinary item...........................................   $    0.99   $   1.75   $    1.39
  Loss on early extinguishment of debt........................................      (1.23)     (0.12)      (0.04)
                                                                                --------    -------    ---------
     Net income (loss) per common share--assuming dilution....................  $  (0.24)   $   1.63   $    1.35
                                                                                ========    ========   =========

Weighted average common shares outstanding...................................       5,763     14,785      15,324
                                                                                =========   ========   =========

Weighted average common and common equivalent
   shares outstanding--assuming dilution......................................      6,590     17,120      19,451
                                                                                =========   ========   =========
</TABLE>





                   See notes to consolidated financial statements

                                    F-3
<PAGE>



                  HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                              Class A                Class B       Class C
                                           Common Stock           Common Stock   Common Stock    Additional
                                                                                                   Paid-In    Retained
                                         Shares    Amount    Shares    Amount   Shares    Amount   Capital    Earnings     Total 
                                                             (In thousands, except share amounts)
<S>                                    <C>        <C>      <C>         <C>     <C>         <C>    <C>       <C>          <C>
Balance at December 31,
  1995 ..............................         --     $--    1,558,210    $ 1     976,630    $ 1    $  6,341   $  6,002    $  12,345
Common Stock
  issued, net
  of issuance
  costs .............................    7,647,791     8    1,861,367      2    (976,630)    (1)     90,812       --         90,821
Net loss ............................         --      --         --       --        --       --        --       (2,075)      (2,075)
                                        ----------   ---   ----------    ---    --------    ---    --------   --------    ---------
Balance at
 December 31,
  1996 ..............................    7,647,791     8    3,419,577      3        --       --      97,153      3,927      101,091
Common Stock
 issued (retired)
 in public
 offering, net of
 issuance costs .....................    4,000,000     4         --       --        --       --      93,516       --         93,520
Conversion of Class B
 Common Stock to Class
  A Common Stock ....................      513,112    --     (513,112)    --        --       --        --         --           --
Common Stock issued in
  connection with
  acquisition .......................      141,760    --         --       --        --       --       3,650       --          3,650
Common Stock issued
  upon exercise of
  stock options .....................       53,425    --         --       --        --       --         641       --            641
Common Stock issued
  pursuant to employee
  stock purchase plan ...............       21,639    --         --       --        --       --         467       --            467
Common Stock issued to
  directors .........................        4,708    --         --       --        --       --          95       --             95
Net income ..........................         --      --         --       --        --       --        --       25,523       25,523
                                        ----------   ---   ----------    ---    --------    ---    --------   --------    ---------
Balance at December 31,
  1997 ..............................   12,382,435    12    2,906,465      3        --       --     195,522     29,450      224,987
Conversion of Common
  Stock .............................      359,401     1     (359,401)    (1)       --       --        --         --           --
Common Stock
 issued upon
 exercise of
 stock options ......................          100    --         --       --        --       --           1       --              1
Common Stock issued
  pursuant to employee
  stock purchase plan ...............      112,319    --         --       --        --       --         889       --
                                                                                                                                889
Common Stock issued to
  directors .........................       18,374    --         --       --        --       --         216       --            216
Stock Compensation
 pursuant to key employee
 stock plan .........................         --      --         --       --        --       --         194       --            194
Net income ..........................         --      --         --       --        --       --        --       21,748       21,748
                                        ----------   ---   ----------    ---    --------    ---    --------   --------    ---------
Balance at
December 31,
   1998                                 12,872,629   $13    2,547,064    $ 2        --      $--    $196,822   $ 51,198    $ 248,035
                                        ==========  ====   ==========    ===    =======    ====    ========   ========   ==========
</TABLE>




          See notes to consolidated financial statements.





<PAGE>



                   HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                               1996       1997       1998  
                                                                                            ---------   --------   --------
                                                                                                     (In thousands)
<S>                                                                                         <C>        <C>        <C>
Operating activities:
               Net income (loss).........................................................   $(2,075)   $ 25,523   $  21,748
               Adjustments to reconcile net income (loss) to net cash provided by
                    operating activities:
                 Loss on early extinguishment of debt, net...............................      8,108      2,132         734
                 Depreciation and amortization of property...............................      8,291     19,093      48,487
                 Amortization of drydocking costs........................................      3,057      5,350      11,354
                 Amortization of intangible assets.......................................        505        757       3,270
                 Amortization of discount on long-term debt and financing costs..........      1,196        680       1,274
                 Provision for bad debts.................................................        125      1,029       1,087
                 Loss (gain) on disposals of property....................................       (13)        524        (26)
                 Provision for deferred taxes............................................      3,543     13,147      10,189
                 Minority partners' equity in (losses) income of subsidiaries, net.......      (756)      (183)         311
                 Undistributed earnings of affiliates, net...............................      (132)      (110)     (1,103)
                 Other non-cash items....................................................         36         95         217
                 Changes in operating assets and  liabilities,  net of effect of
                  acquisitions:
                    Accounts receivable..................................................    (1,928)   (20,640)    (40,628)
                    Other assets.........................................................    (1,978)    (9,500)    (21,008)
                    Accounts payable and other liabilities...............................      4,605      2,145      28,630
                                                                                            --------   --------   ---------
             Net cash provided by operating activities...................................     22,584     40,042      64,536

             Investing activities:
               Purchase of property......................................................    (8,759)   (67,117)   (103,569)
               Deposits for the purchase of property.....................................    (6,349)      (910)          --
               Proceeds from disposals of property.......................................          8      1,633          --
               Investments in non-consolidated affiliates................................      (736)      (226)    (21,702)
               Acquisitions, net of cash acquired of $1,722 in
                1996 and net of escrow deposits
                utilized of $6,349 and cash acquired of $3,525 in 1997...................   (68,518)   (194,723)  (373,535)
                                                                                            -------    --------   ---------
             Net cash used in investing activities.......................................   (84,354)   (261,343)  (498,806)

             Financing activities:
               Proceeds (repayments) of short-term borrowings, net.......................      1,994   (16,242)          --
               Proceeds from long-term debt..............................................     36,964    177,210     464,321
               Proceeds from issuance of senior notes, net of offering costs.............         --         --     292,500
               Proceeds from issuance of common stock, net...............................     76,595     94,628         800
               Proceeds from issuance of redeemable preferred securities, net............         --    111,109          --
               Principal payments of long-term debt......................................   (45,189)   (135,877)  (321,278)
               Payment of financing costs................................................      (838)    (2,724)     (2,760)
               Payment of obligations under capital leases...............................    (1,189)    (1,468)     (5,088)
                                                                                            -------    -------    ---------
             Net cash provided by financing activities...................................     68,337    226,636     428,495
                                                                                            --------   --------   ---------
             Increase (decrease) in cash and cash equivalents............................      6,567      5,335     (5,775)
             Cash and cash equivalents at beginning of period............................      3,050      9,617      14,952
                                                                                            --------   --------   ---------
             Cash and cash equivalents at end of period..................................   $  9,617   $ 14,952   $   9,177
                                                                                            ========   ========   =========

             Supplemental   schedule   of  noncash   investing   and   financing
                    activities:
             Notes payable issued for the acquisition of vessels.........................   $    675   $  6,000   $      --
                                                                                            ========   ========   =========
             Capital lease obligations for the acquisition of vessels and
               equipment.................................................................   $  6,098   $  4,972   $  32,621
                                                                                            ========   ========   =========
             Title XI debt assumed for the acquisition of vessels........................   $ 34,650   $ 15,057   $      --
                                                                                            ========   ========   =========
             Short-term debt assumed in connection with acquisition of business..........   $     --   $  5,595   $      --
                                                                                            ========   ========   =========
             Common stock issued for the redemption of notes payable.....................   $    307   $     --   $      --
                                                                                            ========   ========   =========
             Common stock issued for the repayment of debt...............................   $ 13,883   $     --   $      --
                                                                                            ========   ========   =========
             Common stock issued for the acquisition of vessels..........................   $     --   $  3,650   $      --
                                                                                            ========   ========   =========
</TABLE>

                  See notes to consolidated financial statements

                                   F-4



<PAGE>
                   HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1998

1.  Description of Business and Significant Accounting and Reporting Policies

         Description of Business.  Hvide Marine  Incorporated  and  subsidiaries
(collectively, the "Company") is a provider of marine support and transportation
services,  serving  primarily  the energy and chemical  industries.  The Company
operates  offshore  energy  support  vessels,  principally  in the U.S.  Gulf of
Mexico,  the Arabian Gulf and Southeast  Asia.  The  Company's  fleet of tankers
transports  petroleum  products and  specialty  chemicals  in the U.S.  domestic
trade. The Company also provides commercial tug services in several ports in the
southeastern U.S.

         Organization and Basis of Consolidation.  The accompanying consolidated
financial statements include the accounts of Hvide Marine Incorporated ("HMI" or
the "Parent") and its  majority-owned  subsidiaries.  All material  intercompany
transactions  and balances have been  eliminated in the  consolidated  financial
statements.

         Revenues.  Revenues from time  charters are earned and  recognized on a
daily basis.  Time charter rates are adjusted  periodically  based on changes in
specified price indices and market conditions.  Revenues on voyage contracts are
recognized based upon the percentage of voyage completion.

         Cash and Cash  Equivalents.  The Company  considers  all highly  liquid
investments  with a maturity of three  months or less when  purchased to be cash
equivalents.

         Insurance  Claims  Receivable.  Insurance claims  receivable  represent
costs  incurred in  connection  with  insurable  incidents for which the Company
expects to be  reimbursed  by the  insurance  carrier(s),  subject to applicable
deductibles. Deductible amounts related to covered incidents are expensed in the
period of occurrence of the incident.

         Inventory,  Spare  Parts and  Supplies.  Inventories  consist of vessel
spare parts,  fuel and supplies  that are recorded at cost and charged to vessel
expenses as consumed.

         Long-Lived  Assets. The Company accounts for long-lived assets pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the  Impairment of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed
Of", which requires  impairment  losses to be recorded on long-lived assets used
in operations when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable.  Management reviews long-lived assets
and the related  intangible assets for impairment  whenever events or changes in
circumstances indicate the assets may be impaired.



                                F-5

<PAGE>



         Property. Vessels,  improvements and furniture and equipment are stated
at cost less  accumulated  depreciation.  Major  renewals and  improvements  are
capitalized,  and  replacements,  maintenance and repairs that do not improve or
extend the lives of the assets are  expensed.  Depreciation  is  computed on the
straight-line  method  over  the  estimated  useful  lives  of the  assets.  The
estimated useful lives of vessels, other than tankers, range from 12 to 40 years
and the estimated  useful lives of furniture  and  equipment  range from 3 to 10
years.  Tankers and related  improvements  are depreciated over estimated useful
lives ranging from 1 to 17 years, as determined by the Oil Pollution Act of 1990
and other factors.

         Vessels under capital leases are amortized over the lesser of the lease
term or their estimated  useful lives.  Included in vessels and  improvements at
December 31, 1997 and 1998 are vessels  under  capital  leases of  approximately
$17.6  million  and  $47.1   million,   net  of  accumulated   amortization   of
approximately $1.0 million and $1.7 million, respectively.

         Deferred  Costs.  Deferred  costs  primarily  represent  drydocking and
financing costs.  Drydocking costs are deferred and amortized over the period to
the next  drydocking,  generally 30 to 36 months.  Deferred  financing costs are
amortized  over the term of the related  borrowings.  At  December  31, 1997 and
1998, deferred costs include unamortized  drydocking costs of approximately $7.0
million and $16.0 million, respectively, and net financing costs of $7.1 million
and $14.8 million, respectively.

         Goodwill. Goodwill represents the excess of the purchase price over the
fair value of assets acquired and is amortized on the  straight-line  basis over
periods ranging from 20 to 35 years.  The carrying value of goodwill is reviewed
if facts and  circumstances  suggest  that it may be  impaired.  If this  review
indicates  that goodwill  will not be  recoverable,  as determined  based on the
estimated  undiscounted  cash flows of the assets  acquired  over the  remaining
amortization  periods,  the  carrying  value will be  adjusted  accordingly.  At
December  31,  1997  and  1998,   accumulated   amortization   of  goodwill  was
approximately $2.8 million and $6.0 million, respectively.

         Investments.  Investments in companies in which the Company's ownership
interest ranges from 20 to 50% and the Company exercises  significant  influence
over operating and financial policies are accounted for using the equity method.

         Income Taxes.  HMI files a consolidated  tax return with  substantially
all corporate  subsidiaries;  the others file separate income tax returns.  Each
partnership and trust subsidiary files a separate tax return.

         Deferred  income tax assets and  liabilities  are  determined  based on
differences between financial reporting and tax bases of assets and liabilities,
and are  measured  using the  enacted  tax  rates  and laws in  effect  when the
differences  are  expected  to reverse.  The effect on  deferred  tax assets and
liabilities  of a change in tax rates is recognized in income in the period that
includes the enactment date.

         Foreign Currency Translation.  In accordance with SFAS No. 52, "Foreign
Currency Translation",  assets and liabilities denominated in foreign currencies
are  translated  into  U.S.  dollars  at the rate of  exchange  in effect at the
balance sheet date,  while  revenue and expenses are  translated at the weighted
average rates  prevailing  during the respective  years.  The Company's  foreign
subsidiaries use the U.S. dollar as their functional  currency and substantially
all external transactions are denominated in U.S. dollars. Gains



                                 F-6

<PAGE>


and  losses  resulting  from  changes  in  exchange  rates from year to year are
insignificant for all years presented.

         Recent Pronouncements. In June 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 130, Reporting Comprehensive Income. This statement
establishes  standards for reporting  and the display of  comprehensive  income,
which is defined as the change in equity  arising  from  non-owner  sources.  It
includes  foreign currency items,  minimum pension  liability  adjustments,  and
unrealized  gains  and  losses  on  certain   investments  in  debt  and  equity
securities.  This  statement  is  effective  for fiscal  years  beginning  after
December 15, 1997.  The adoption of SFAS No. 130 did not have a material  effect
on the Company's consolidated financial statements.

         In June 1997, FASB issued SFAS No. 131,  Disclosures  about Segments of
an  Enterprise  and Related  Information.  This  statement  requires that public
business  enterprises  report certain  information  about operating  segments in
complete  sets  of  financial  statements  of the  enterprise  and in  condensed
financial  statements for interim periods. It also requires that public business
enterprises  report certain  information about their products and services,  the
geographic  areas in  which  they  operate,  and  their  major  customers.  This
statement is effective for fiscal years  beginning  after December 15, 1997. The
adoption  of SFAS No. 131 had no impact on the  Company's  financial  condition,
results  of  operation  or cash  flows and  increased  the  Company's  financial
statement disclosures (see Note 16).

     Reclassifications.   Certain  amounts  from  prior  periods'   consolidated
financial statements have been reclassified to conform with the current period's
presentation.

2.      Basis of Financial Statement Presentation and Issues Affecting Liquidity

         As a result of a decline in revenues, the Company does not expect to be
in compliance, as of March 31, 1999, with one or more covenants contained in its
Restated  and  Revolving  Credit and Term Loan  Agreement,  as amended  ("Credit
Facility").   Management  and  the  Credit  Facility   lenders  are  engaged  in
discussions to resolve this matter. In the event the parties are unable to reach
an agreement, the lenders are entitled, at their discretion, to exercise certain
remedies  including  acceleration  or  repayment of the $253.0  million  balance
($266.0 million at March 31, 1999), plus accrued interest, outstanding under the
Credit Facility. There can be no assurance that the Credit Facility lenders will
provide the Company with an amendment  or waiver of the  defaults.  In addition,
the  Company's  Senior Notes  contain  provisions  under which  repayment of the
outstanding principal amount of $300.0 million, plus accrued interest,  could be
accelerated in the event that repayment of the Credit Facility is accelerated.

         In the event that the Credit  Facility  lenders elect to exercise their
right to accelerate  repayment,  such acceleration would have a material adverse
effect on the Company, its operations and its financial condition.  Furthermore,
there can be no assurance that the Company would be successful in identifying or
consummating  financing  necessary to satisfy the obligations which would become
immediately  due and payable.  As a result of the  uncertainty  related to these
matters,  the  obligations  with  respect  to the Credit  Facility  are shown as
current liabilities on the Company's  consolidated balance sheet at December 31,
1998  and the Company has a deficit in working  capital of  approximated  $205.0
million.  These matters raise  substantial  doubt about the Company's ability to
continue as a going  concern.  In addition to continuing  to negotiate  with the
Credit Facility lenders to obtain waivers or amendments, the Company has various
plans to increase liquidity,  including: (i) workforce and wage reductions and a
hiring  freeze aimed at reducing the  Company's  overall  expense  levels;  (ii)
identification  of assets for



                                  F-7

<PAGE>



disposition  in order to increase  available  cash;  (iii)  reduction of capital
expenditures;  (iv)  reductions  in  operating  and overhead  expenses;  and (v)
deferral of interest payments on the debentures (see Note 21).

         The  financial  statements  do not include any further  adjustments  to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.

3.  Change in Estimates

         In 1998, the Company changed the estimated useful lives of its offshore
energy  support  vessels  and the  amortization  period for  certain  intangible
assets.  Management  believes these changes more accurately reflect the economic
lives of the Company's  assets.  For 1998, the change had the effect of reducing
depreciation  expense by $4.0 million which increased earnings per diluted share
by $0.21, for both income before extraordinary item and net income.

4.  Equity Investment in Affiliate

         In June 1998,  the Company  paid $18.5  million to increase  its equity
interest in five 45,300 dead weight ton double-hull  carriers  (collectively the
"Lightship  Tankers") from 0.8% to 50.8%. Three of these carriers were delivered
in the fourth  quarter of 1998, a fourth was  delivered  in early 1999,  and the
fifth and final carrier is expected to be delivered in mid-1999.  At the time of
the increase in its equity interest, the Company intended, and it still intends,
to  reduce  its  equity  interest  to less than 50%.  Accordingly,  the  Company
accounts for this temporary investment under the equity method.

         The  Company has  exclusive  options to purchase  the  remaining  49.2%
equity  interest in the carriers at an estimated  cost of $16.5  million.  These
options  expire at year-end  2000,  after  which time the Company  will retain a
right of first  refusal  to  purchase a 24.2%  interest  for $9.0  million  plus
interest.  The Company has not yet determined  whether or to what extent it will
exercise the options or the right of first refusal.

         Summary  financial  information for the Lightship Tankers as of and for
the period ended December 31, 1998 is as follows (in thousands):

                                                                1998     
                                                            -------------
         Current assets................................     $      10,652
         Vessels and other assets......................           254,220
         Current liabilities...........................             6,579
         Long term debt................................           221,373

         Revenues......................................             3,185
         Loss from operations..........................              (37)
         Net loss......................................             (130)


                                  F-8

<PAGE>

5.  Senior Notes and Other Debt

 Senior Notes

         In February 1998,  the Company  completed an offering of $300.0 million
of 8.375%  senior  notes (the "Senior  Notes").  The net proceeds to the Company
were approximately $292.5 million, after deducting underwriting  commissions and
other offering expenses, which are included in deferred costs and amortized over
the term to maturity. Of such proceeds, approximately $268.0 million was used to
repay certain  indebtedness and approximately $24.5 million was used for general
corporate  purposes.  Interest on the Senior Notes is payable  semi-annually  in
arrears on February 15 and August 15. The Senior  Notes  mature on February  15,
2008 and are redeemable, in whole or in part, at the option of the Company on or
after  February 15,  2003.  The Senior  Notes are  guaranteed  by certain of the
Company's subsidiaries (see Note 19).

         Covenants  under the Senior Notes,  among other  things,  (i) limit the
creation or incurrence of certain liens; (ii) limit the incurrence of additional
indebtedness;  (iii) restrict certain payments and asset sales; and (iv) contain
certain  cross-default  provisions under which holders of the Senior Notes could
accelerate  repayment of principal and accrued  interest in the event of certain
defaults on other indebtedness.

 Other Debt

         Long-term debt consisted of the following (in thousands):

                                                        December 31,       
                                                   1997            1998    
                                               -------------  -------------
         Lines of Credit.....................  $     135,000  $     135,000
         Term Loan...........................             --        117,954
         Title XI Debt.......................         42,162         36,701
         Notes Payable.......................          7,945          5,874
                                               -------------  -------------
                                                     185,107        295,529
         Less:  Current maturities...........        (7,534)        261,965
                                               ------------   -------------
                                               $     177,573  $      33,564
                                               =============  =============

         In September 1997, the Company entered into a $175.0 million  revolving
line of credit through  September  1999. In November  1997, the Company  entered
into a Term Loan Agreement  that provided for $300.0  million of term loans.  In
February 1998, the Company entered into an Amended and Restated Revolving Credit
and Term Loan  Agreement  which  merged the Credit  Agreement  and the Term Loan
Agreement and resulted in their individual termination.

        Effective  September 30, 1998, the Company  entered into Amendment No. 1
to the  Amended  and  Restated  Revolving  Credit and Term Loan  Agreement  (the
"Credit  Facility").  Pursuant  to the  Credit  Facility,  borrowings  under the
revolving line of credit may not initially exceed $150.0 million, inclusive of a
letter of credit  sub-limit of $20.0  million,  increasing to (1) $166.0 million
subsequent to March 1, 1999,  subject to repayment of a portion of the term loan
with proceeds  from a specified  sale and  leaseback  transaction  or (2) $175.0
million,  based upon the Company's  compliance with a specified  leverage ratio.
The Credit  Facility  provides  that  borrowings  thereunder  will be secured by
Company-owned  vessels having an appraised  value of at least $600.0 million and
by substantially all other assets of the Company and its subsidiaries.  Interest
on borrowings is based on one of two rates,  at the Company's  election,  plus a
margin based on the Company's compliance with certain financial ratios. Interest
on 


                                  F-9

<PAGE>


amounts  outstanding at December 31, 1998 ranged from 7.2% to 7.6%. In addition,
the  revolving  line of credit is  subject  to a  commitment  fee of 0.4% on the
unused  portion.  The revolving  line of credit and term loan mature on February
12, 2003 and March 31, 2005,  respectively.  At December 31, 1998, the Company's
outstanding  indebtedness  under the revolving line of credit was  approximately
$135.0  million with $14.5  million  available  and $0.5 million of  outstanding
stand-by  letter of credits and  approximately  $118.0  million was  outstanding
under the term loan.

         Covenants under the Credit  Facility,  among other things,  (i) require
the Company to meet certain  financial  tests,  including  tests  requiring  the
maintenance  of minimum  leverage  ratios,  debt service  coverage  ratios,  and
indebtedness to tangible net worth ratios; (ii) limit the creation or incurrence
of certain liens;  (iii) limit the incurrence of additional  indebtedness;  (iv)
prohibit  the Company from making  certain  investments;  (v)  restrict  certain
payments,  including  dividends  with  respect to shares of any class of capital
stock; and (vi) restrict  modification of the terms of the Preferred  Securities
(see  Note 6),  and in  certain  circumstances  the  repayment,  redemption,  or
repurchase of the Preferred Securities.

         Based upon current  circumstances  the Company does not believe it will
be in compliance,  at March 31, 1999, with certain of the covenants contained in
the Credit Facility (See Note 2).

         The Company has  approximately  $36.7 million of Title XI debt which is
collateralized  by first  preferred  mortgages  on  certain  vessels  and  bears
interest at rates  ranging  from 5.4% to 10.1%.  The debt is due in  semi-annual
principal  and interest  payments  through June 1, 2021.  Under the terms of the
Title XI debt,  the Company is  required to maintain a minimum  level of working
capital, as defined, and comply with certain other financial covenants.

         The Company has  outstanding  notes payable that bear interest at rates
ranging from 7.92% to 10% and mature at various dates through November 2011. The
notes payable are collateralized by certain vessels.

         At  December  31,  1998,   the  Company  also  had  letters  of  credit
outstanding in the amount of approximately  $2.3 million which expire on various
dates  through  December  2002.  These  letters of credit are not secured by any
collateral.

         The aggregate  annual future payments due (prior to  classification  of
certain amounts subject to  acceleration)  on the Senior Notes and other debt as
of December 31, 1998 are as follows (in thousands):

         1999.................................................  $    30,440
         2000.................................................       27,123
         2001.................................................       25,874
         2002.................................................       24,322
         2003.................................................      159,330
         Thereafter...........................................      328,440
                                                                -----------
                                                                $   595,529
                                                                ===========

                                     F-10

<PAGE>



         The Company made interest payments of approximately $19.2 million, $9.2
million and $33.0 million in 1996, 1997 and 1998, respectively,  and capitalized
interest  of  approximately  $0.9  million  and $1.4  million  in 1997 and 1998,
respectively. No interest was capitalized in 1996.

6.  Capital Leases

         The Company  has entered  into  sale-leaseback  transactions  for seven
vessels.  The obligations pursuant to the transactions are classified as capital
lease obligations.

         The Company owns certain other vessels and other equipment under leases
that are  classified  as capital  leases.  The following is a schedule of future
minimum  lease  payments  under  capital  leases,  including  obligations  under
sale-leaseback transactions,  together with the present value of the net minimum
lease payments as of December 31, 1998 (in thousands):

         1999......................................................... $   5,284
         2000.........................................................     5,650
         2001.........................................................     5,377
         2002.........................................................     4,546
         2003.........................................................     4,408
         Thereafter...................................................    33,045
                                                                       ---------
         Total minimum lease payments.................................    58,310
         Less amount representing interest............................  (18,336)
                                                                       --------
         Present value of minimum lease payments (including current
            portion of $2,991)........................................ $  39,974
                                                                       =========

7.  Company Obligated Mandatorily Redeemable Preferred Securities

            In June  1997,  a  private  offering  of  2,300,000  of 6 1/2% Trust
Convertible  Preferred Securities (the "Preferred  Securities") was completed by
Hvide Capital Trust (the "Trust"),  a 100%-owned  subsidiary of the Company. The
Trust  exists for the sole  purpose  of issuing  the  Preferred  Securities  and
investing  the proceeds  from their  issuance in 6 1/2% Convertible Subordinated
Debentures due June 15, 2012 (the "Debentures")  issued by the Company.  The net
proceeds to the Company were approximately $111.1 million.

         Holders  of  the   Preferred   Securities   are   entitled  to  receive
preferential  cumulative cash  distributions from the Trust at an annual rate of
6.5% of the liquidation  preference of $50 per Preferred  Security accruing from
the date of the  original  issuance  of the  Preferred  Securities  and  payable
quarterly  in arrears on January 1, April 1, July 1 and  October 1 of each year.
The  distribution  rate and the  distribution  and other  payment  dates for the
Preferred  Securities  correspond  to the  interest  rate and interest and other
payment dates for the  Debentures,  which are the sole assets of the Trust.  The
Company provides a full and unconditional  guarantee of the Trust's  obligations
under the Preferred  Securities.  These  instruments  also provide,  among other
things,  that  payments of interest on the  Debentures,  and of dividends on the
Preferred  Securities,  may be deferred at the Company's election for periods of
up to five years. On March 17, 1999, the Company elected to defer the bonds 1999
payments of interest on the debentures (see Note 21).


                                  F-11

<PAGE>


         The Preferred Securities are convertible,  beginning September 25, 1997
and prior to the maturity  date of the  Debentures  or, in the case of Preferred
Securities called for redemption, prior to the close of business on the business
day prior to the redemption date, at the option of the holder into shares of the
Company's  Class A Common  Stock at the rate of 1.7544  shares of Class A Common
Stock for each Preferred  Security  (equivalent to a conversion  price of $28.50
per  share  of  Class  A  Common  Stock),   subject  to  adjustment  in  certain
circumstances.

8.  Commitments and Contingencies

         The  Company  leases  its  office   facilities  under  operating  lease
agreements  which expire at various dates through 2013.  Rent expense under such
leases was $0.7 million, $0.9 million, and $2.0 million for 1996, 1997 and 1998,
respectively.

         A  portion  of  the  Company's   operations  consists  of  charters  of
ocean-going  vessels.  Two tankers are bareboat  chartered for periods extending
through 1999 and 2002.  Charter hire expense on these tankers was  approximately
$3.2 million for 1996 and 1997 and $3.3 million for 1998.

         Aggregate  annual future  payments due under  non-cancelable  operating
leases and charter agreements are as follows (in thousands):

         1999...........................................   $      6,109
         2000...........................................          4,777
         2001...........................................          4,795
         2002...........................................          3,800
         2003...........................................          2,813
                                                           ------------
                                                           $     22,294

         In  1990,  the  Company  withheld  approximately  $2.4  million  from a
shipyard  relating to delays and other problems  encountered in the construction
of a vessel. In 1993, the shipyard filed a claim to recover  approximately  $6.1
million for  additional  construction  costs  allegedly  due the  shipyard.  The
proceeding  was  settled in the fourth  quarter of 1998.  Under the terms of the
settlement,  all claims were dismissed with  prejudice in  consideration  of the
Company's  agreement  to pay the shipyard  $4.75  million in  installments  from
December  1998 to May  1999.  As part of the  settlement,  a $5.6  million  bond
previously  provided by the Company was released and a related  letter of credit
was  terminated.   Included  in  charter  hire  and  other  liabilities  on  the
accompanying  December 31, 1998 balance  sheet is $3.75 million due the shipyard
in 1999,  representing  the Company's  remaining  payments  under the settlement
agreement.

         At December 31, 1998, the Company had  contracted for the  construction
of 10 vessels under various  agreements  at an aggregate  cost of  approximately
$72.0  million.  The vessels are to be delivered  on various  dates from January
1999 to April 2000. At December 31, 1998, the Company had incurred approximately
$29.1 million of construction costs under such agreements.  Capital requirements
under the agreements for 1999 and 2000 are estimated to be  approximately  $38.0
million and $4.9 million, respectively.


                                 F-12

<PAGE>

9.  Acquisitions

         In February  1998, the Company  acquired a fleet of 37 offshore  energy
support vessels,  operating  primarily  offshore West Africa and Southeast Asia,
which now  operate as Seabulk  Offshore  Operators,  Inc.  ("SOOP"),  for a cash
purchase price of  approximately  $291.7 million.  The acquisition was accounted
for under the  purchase  method  and  resulted  in costs in excess of net assets
acquired  of  approximately  $61.4  million,  which  is  being  amortized  on  a
straight-line basis over 30 years.

         In May 1997, the Company acquired substantially all of the assets of an
entity, which now operates as Seabulk Offshore International,  Inc. ("SOII"), in
a transaction  accounted for as a purchase.  The consideration,  valued at $58.7
million,  consisted of $49.0  million  cash, a $6.0 million note (repaid in June
1997) and 141,760  shares of Class A Common Stock valued at  approximately  $3.7
million.  The fair value of net assets acquired  approximated the purchase price
paid by the Company.

         In October 1997, the Company  acquired 100% of the  outstanding  common
stock of Bay  Transportation  Corporation  ("Bay") for $36.5 million in cash and
the assumption of  approximately  $20.6 million of debt. The purchase  agreement
provided for additional  consideration based on specified changes in the working
capital of Bay,  which  resulted  in the  payment of  approximately  $500,000 in
January 1998. The  acquisition  was accounted for under the purchase  method and
resulted in goodwill of approximately $17.4 million, which is being amortized on
a straight-line basis over 35 years.

         The  Company's  unaudited   pro-forma  condensed   consolidated  income
statements,  assuming that the acquisition of SOOP, SOII and Bay had occurred on
January 1, 1997,  are  summarized  as follows  (in  thousands,  except per share
amounts):
<TABLE>
<CAPTION>

                                                                                   Year Ended December 31,
                                                                                     1997          1998     
                                                                                  -----------  -------------
<S>                                                                              <C>           <C>
         Revenues............................................................    $    292,248  $     409,494
         Income before extraordinary item....................................          21,032         22,549
         Net income..........................................................          18,900         21,815
         Diluted earnings per common share, before
           extraordinary item................................................            1.37           1.40
         Diluted earnings per common share...................................            1.24           1.36
</TABLE>

         This  pro-forma  information  does not purport to be  indicative of the
results which might have been obtained had the acquisitions  been consummated at
the dates assumed.

         In March 1998,  the Company  acquired  seven harbor tugs, two petroleum
product  carriers,  and a topside repair  facility from Kirby  Corporation for a
cash  purchase  price of $31.9  million.  The fair value of net assets  acquired
approximated the purchase price paid by the Company.

         In 1998,  the  Company  also  acquired 3 vessels  under  various  asset
purchase  agreements for an aggregate cash  consideration of approximately  $8.9
million and  completed the  construction  of 10 vessels at a total cost of $56.0
million.

         In 1997,  the Company  also  acquired 64 vessels  under  various  asset
purchase  agreements  for an aggregate  consideration  of  approximately  $115.2
million and acquired one vessel under a capital lease obligation.


                                      F-13

<PAGE>


         The  operations of the acquired  vessels and businesses are included in
the accompanying consolidated statements of operations for periods subsequent to
their acquisition dates.

10.  Stock Option Plans

         The Equity  Ownership  Plan (the "EOP")  provides for the issuance of a
maximum of 2,000,000 shares of Class A Common Stock. Under the terms of the EOP,
the Company is authorized to grant incentive stock options,  nonqualified  stock
options,  stock appreciation rights,  stock awards and cash awards.  Options and
other  awards are  issuable at the  discretion  of a committee  appointed by the
Board of Directors and generally vest ratably over a four-year period.  Pursuant
to the EOP, options may be granted to employees at exercise prices not less than
the fair market  value of the  underlying  common stock at date of grant and, to
employees  who own more than 10% of the  Company's  combined  voting  power,  at
exercise  prices  not less  than  110% of the fair  market  value at the date of
grant. Option terms range from 5 to 10 years.

         The Stock  Option Plan for  Directors  provides  for the  issuance of a
maximum of 70,000  shares of Class A Common  Stock to  directors of the Company.
Each director receives options to purchase 5,000 shares of Common Stock upon the
date of his or her initial  election,  and options to purchase  2,000  shares of
Common Stock each year following the grant of the initial options.  The exercise
price for all options is equal to the fair market value of the underlying Common
Stock at the date of grant and options become 100% vested and exercisable on the
first anniversary of the date of grant. The term of these options is 10 years.

         Information  for all stock option  plans for 1996,  1997 and 1998 is as
follows.

<TABLE>
<CAPTION>

                                                          1996                  1997                  1998         
                                                 ----------------------  --------------------  --------------------
                                                              Weighted              Weighted              Weighted
                                                    Number     average    Number     average    Number     average
                                                      of      exercise      of      exercise      of      exercise
                                                    options     price     options     price     options     price  
<S>                                              <C>          <C>        <C>        <C>        <C>        <C>
   Options outstanding at beginning of year.....          --  $      --    806,000  $   12.00    894,025  $   14.83
     Granted....................................     806,000      12.00    150,950      28.96    221,350      13.61
     Exercised..................................          --         --   (53,425)      12.00      (100)      12.00
     Canceled...................................          --         --    (9,500)      14.73  (127,600)      29.35
                                                  ----------             --------              ---------
   Options outstanding at end of year...........     806,000      12.00    894,025      14.83    987,675      12.60
                                                  ==========             =========             =========

   Options exercisable at end of year...........      35,000      12.00     99,325      12.00    228,325      12.73
   Options available for future grants at end
     of year....................................     264,000         --    113,050         --    891,700         --
   Weighted average fair value of options
     granted during the year....................          --       7.78         --      18.38         --       7.98
</TABLE>


                                     F-14

<PAGE>

<TABLE>
<CAPTION>
                                          Options Outstanding at December 31, 1998 
                                                                     Weighted average
                                                                   remaining contractual
                      Exercise Price        Outstanding                 life (in years)         Exercisable
<S>                                       <C>                    <C>                           <C>
                       $ 6.00                    50,950                  10                           --
                        12.00 - 17.13           921,225              7 - 10                      216,575
                        23.00 - 28.00            15,500               8 - 9                      11,750
</TABLE>

         The Company  has adopted  SFAS No.  123,  "Accounting  for  Stock-Based
Compensation." As permitted by SFAS No. 123, the Company continues to follow the
measurement   provisions  of  Accounting   Principles   Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees," and does not recognize  compensation
expense for its stock-based incentive plans because the fair market value of the
underlying  common stock equals or exceeds the exercise  price of the options at
their grant date. Had compensation cost for these plans been determined based on
the fair value at the grant dates of awards under those plans, pursuant with the
methodology  prescribed  by SFAS No. 123, the  Company's net income and earnings
per share would have been reduced to the pro-forma  amounts  indicated below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>

                                                                            1996          1997         1998   
                                                                         -----------  -----------  -----------
<S>                                                                      <C>          <C>          <C>
         Net income (loss):
           As reported.................................................  $   (2,075)  $    25,523  $    21,748
           Pro-forma...................................................      (2,498)       24,334       20,261

         Earnings (loss) per share--assuming dilution:
           As reported.................................................       (0.24)         1.63         1.35
           Pro-forma...................................................       (0.30)         1.56         1.27
</TABLE>

         The fair  value of each  option is  estimated  on the date of the grant
using the  Black-Scholes  option-pricing  model with the  following  assumptions
applied to grants in 1996, 1997 and 1998:
<TABLE>
<CAPTION>


                                                                            1996          1997         1998   
                                                                         -----------  -----------  -----------
<S>                                                                      <C>          <C>          <C>
         Dividend yield................................................         0.0%         0.0%         0.0%
         Expected volatility factor....................................        0.72         0.62         0.68
         Approximate risk-free interest rate...........................         7.0%         6.5%         4.5%
         Expected life (in years)......................................          5            6            6
</TABLE>

         Because the  determination of the fair value of all options is based on
the  assumptions  described  above and  because  additional  option  grants  are
expected  to be  made  each  year,  the  above  pro-forma  disclosures  are  not
representative of the pro-forma effects on reported net income or loss in future
years.

11.  Employee Benefit and Stock Plans

         The  Company   sponsors  a  retirement  plan  and  trust  (the  "Plan")
established  pursuant to Section  401(k) of the  Internal  Revenue  Code,  which
covers  substantially  all  employees.  Subject to certain  dollar  limitations,
employees may  contribute a percentage of their  salaries to this Plan,  and the
Company will match a portion of the  employees'  contributions.  Profit  sharing
contributions by the Company to the Plan are  discretionary.  For 1996, 1997 and
1998, the Company contributed  approximately $1.3 million, $1.5 million and $2.7
million, respectively, to the Plan.

         The 1996 Stock Purchase Plan (the "1996 Plan") provides for the sale of
a maximum of 500,000  shares of Class A Common Stock to employees of the Company
at a price equal to 85% of the market value of the Common Stock at the beginning
or end of each purchase period, whichever is 

                                      F-15


lower. Participants under the 1996 Plan received 0, 21,639 and 112,319 shares of
Common Stock for 1996, 1997 and 1998, respectively.

         The Key Employee Stock  Compensation  Plan was approved by the Board of
Directors in 1997 and provides for the issuance of a maximum of 65,000 shares of
Class A Common Stock to key employees.  Key employees are determined annually by
a committee  appointed  by the Board of  Directors.  Pursuant  to the plan,  key
employees may elect to receive up to 50% of their annual incentive  compensation
denominated  in shares of Common  Stock at the fair  value of the  shares at the
date of issuance. Under the terms of the plan, such shares of stock vest 100% on
the third  anniversary of the election to receive such shares.  During 1998, key
employees elected to receive  approximately  $194,000 of incentive  compensation
under the plan and 13,752  shares have been  reserved for issuance at the end of
the vesting period. No shares of Common Stock were issued under the Key Employee
Stock Compensation Plan in 1997 or 1998.

         The Board of Directors Stock Compensation Plan was approved in 1997 and
provides  for the  issuance  of a maximum  of 30,000  shares of Common  Stock to
non-employee  directors.  Each  eligible  director may elect to convert all or a
portion of his or her fees for  attendance at Board and committee  meetings into
shares of the  Company's  Common Stock at a 20% discount  from the fair value of
the shares at the date of issuance.  The Company  issued 1,208 and 14,374 shares
of Common Stock under the Board of Directors Stock Compensation Plan in 1997 and
1998, respectively.


12.  Income Taxes

         The  United  States  and  foreign  components  of  income  (loss)  from
continuing operations before income taxes are as follows (in thousands):

                                     1996           1997            1998   
                                 -----------     -----------    -----------

United States  .............      $    9,576     $    39,013    $    (3,393)
Foreign......................             --           5,592         39,364
                                 -----------     -----------    -----------
    Total....................    $     9,576     $    44,605    $    35,971
                                 ===========     ===========    ===========


         The  components  of the  provision  for income taxes are as follows (in
thousands):


                                           1996          1997           1998   
                                       -----------    -----------   -----------
Current:
    Federal........................    $        --    $     3,803   $        --
    Foreign........................             --             --         4,603
                                       -----------    -----------   -----------
       Total Current ..............             --          3,803         4,603

Deferred...........................          3,543         13,147         8,886
                                       -----------    -----------   -----------
    Total income tax expense.......    $     3,543    $    16,950   $    13,489
                                       ===========    ===========   ===========


                                      F-16

<PAGE>


     Income taxes paid were  approximately $3.5 million in 1997. No income taxes
were paid in 1996 or 1998.

         A reconciliation  of income tax  attributable to continuing  operations
computed at the U.S. federal statutory tax rates to income tax expense is:

<TABLE>
<CAPTION>

                                                                      1996           1997            1998   
                                                                  -----------     -----------    -----------
<S>                                                               <C>             <C>            <C>
Income tax expense computed at the federal statutory
    rate......................................................            34%             35%            35%
State income taxes............................................              2               3              1
Capital construction funds....................................              1              --             --
Other.........................................................             --              --              1
                                                                  -----------     -----------    -----------
                                                                          37%             38%            37%
                                                                  -----------     -----------    -----------
</TABLE>


         The significant  components of the Company's  deferred income taxes are
approximately as follows (in thousands):

<TABLE>
<CAPTION>

                                                                        December 31,         
                                                                      1997           1998    
                                                                  -----------     -----------
<S>                                                               <C>             <C>
Deferred income tax assets:
   Net operating loss carryforwards                               $    13,480     $    26,903
   Alternative minimum tax credit carryforward................          5,322           6,141
   Foreign tax credit carryforward............................             --           4,683
   Accrued compensation.......................................            755           1,118
   Other......................................................            730             773
                                                                  -----------     -----------
     Total deferred income tax assets.........................         20,287          39,618
Deferred income tax liabilities:
   Fixed asset differences....................................         45,109          70,450
   Deferred drydocking costs..................................            827           1,172
                                                                  -----------     -----------
     Total deferred income tax liabilities....................         45,936          71,622
                                                                  -----------     -----------

Net deferred income tax liability.............................    $    25,649     $    32,004
                                                                  ===========     ===========
</TABLE>

         At December 31, 1998,  the Company had  approximately  $75.3 million in
net operating loss carryforwards for U.S. federal income tax purposes,  expiring
in various  amounts from 1999 to 2012 and in 2018. Due to a change of ownership,
as defined in Section 382 of the  Internal  Revenue  Code,  the  utilization  of
approximately  $23.8 million of net operating loss  carryforwards are limited to
approximately $3.3 million per year.



                                  F-17

<PAGE>

         The Company has  available  approximately  $6.1 million in  alternative
minimum  tax credit  carryforwards  which  carry  forward  indefinitely  and are
available  to offset  future  federal  tax  liabilities.  The  Company  also has
approximately  $4.6  million in foreign tax  credits,  expiring in 2003 that are
available to offset future federal tax liabilities.

13.  Common Stock

         Each share of the  Company's  Class A Common  Stock is  entitled to one
vote per share and each share of Class B Common  Stock is  entitled to ten votes
per share.  The holders of Class B Common  Stock are  entitled  to convert  such
shares,  at the  holder's  election  at any time,  into shares of Class A Common
Stock at the rate of one share of Class B Common  Stock for one share of Class A
Common Stock. In 1996, the Company's Class C Common Stock was retired.

         In February 1997, the Company completed an offering of 4,000,000 shares
of Class A Common  Stock at $24.875 per share.  The net  proceeds to the Company
were $93.5 million, after deducting underwriting  commissions and other offering
expenses. Of such amount,  approximately $36.2 million was used to repay certain
indebtedness.  The remaining  $57.3 million was used to fund the acquisition and
construction of certain vessels and for general corporate purposes.

         At December 31, 1998,  2,455,240  shares of Common Stock were  reserved
for  issuance,  primarily  under the  Company's  benefit  plans,  and  4,035,120
additional  shares of Common Stock were reserved for issuance upon conversion of
the Preferred Securities.

14.  Earnings Per Share

         The  following  table sets forth the  computation  of basic and diluted
earnings (loss) per share before  extraordinary  item (in thousands,  except per
share amounts).
<TABLE>
<CAPTION>

                                                                         1996            1997           1998     
                                                                     -------------  -------------  --------------
<S>                                                                  <C>            <C>            <C>
Numerator:
  Income before extraordinary item................................   $      6,033   $      27,655  $      22,482
                                                                     ------------   -------------  -------------
  Numerator for basic earnings per share--income
    available to common shareholders..............................          6,033          27,655         22,482

Effect of dilutive securities:
  Payments on convertible preferred securities....................             --           2,369          4,635
  Interest on convertible junior note (a).........................            515              --             --
                                                                     ------------   -------------  -------------

Numerator for diluted earnings per share--income
  available to common shareholders after assumed
  conversions.....................................................   $      6,548   $      30,024  $      27,117
                                                                     ============   =============  =============
</TABLE>


                                    F-18
<PAGE>



<TABLE>
<CAPTION>
<S>                                                                 <C>            <C>             <C>
Denominator:
  Denominator for basic earnings per share--weighted
    average shares................................................          5,763          14,785         15,324

Effect of dilutive securities:
  Convertible preferred securities................................             --           2,067          4,035
  Convertible junior note (a).....................................            772              --             --
  Deferred compensation (b).......................................             --              --             14
  Stock options...................................................             55             268             78
                                                                     ------------   -------------  -------------
Dilutive potential common shares..................................            827           2,335          4,127
                                                                     ------------   -------------  -------------
Denominator for diluted earnings per share--adjusted
  weighted average shares and assumed conversions.................          6,590          17,120         19,451
                                                                     ============   =============  =============

Earnings per share before extraordinary item......................   $       1.05   $        1.87  $        1.47
                                                                     ============   =============  =============

Earnings per share before extraordinary
  item--assuming dilution..........................................  $       0.99   $        1.75  $        1.39
                                                                     ============   =============  =============
</TABLE>

(a) Repaid in 1996.
(b) Includes  shares  contingently  issuable  pursuant to the Key Employee Stock
    Plan (see Note 11).

15.  Business Risks

         Risks and Uncertainties.  The Company's operating results and financial
condition may vary in the future depending on a number of factors. The following
factors may impact the Company's  business,  results of operations and financial
condition.

         Significant  Customers.  The Company derived revenues from one customer
representing  approximately 16% of total offshore and harbor towing revenues for
the year ended  December  31,  1998.  The Company  derived  revenues  from three
customers,  each  representing  10-11% of total marine  transportation  services
revenue for 1997.  The Company also derived  revenues from a long-term  contract
with one company representing  approximately 18% of total marine  transportation
services  revenues  and one  customer  representing  approximately  13% of total
offshore energy support revenue for 1996.

         Dependence on Oil and Gas Industry.  The Company's current business and
operations  are  substantially  dependent  upon  conditions  in the  oil and gas
industry,  particularly  the  expenditures by oil and gas companies for offshore
exploration  and production  activities.  To the extent that oil and natural gas
prices decline or remain at present  levels for an extended  period of time, the
Company's   business  could  be  adversely   affected  due  to  a  reduction  in
expenditures for offshore exploration and production.

         International Operations.  The Company derives substantial revenue from
international operations, primarily under U.S. dollar-denominated contracts with
major   international   oil  companies.   Risks  associated  with  operating  in
international markets include vessel seizure,  foreign exchange restrictions and
currency fluctuations,  foreign taxation, political instability,  expropriation,
nationalization,  modification  or  renegotiation  of  contracts,  war and civil
disturbances or other risks that may limit or disrupt markets.




                                F-19


<PAGE>


         Concentrations of Credit Risk. Financial  instruments which potentially
subject the Company to  concentrations  of credit risk consists  principally  of
cash and cash  equivalents  in banks,  trade  accounts  receivable and insurance
claims receivable.  The credit risk associated with cash and cash equivalents in
banks is  considered  low due to their  credit  quality.  The  Company  performs
ongoing credit evaluations of its trade customers and generally does not require
collateral.  The credit risk  associated  with  insurance  claims  receivable is
considered  low due to the credit  quality  and funded  status of the  insurance
pools in which the Company participates.

         Estimates.  The preparation of financial  statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those estimates.

         Litigation.   The  Company  is  sometimes   named  as  a  defendant  in
litigation,  usually  relating to claims for bodily injuries or property damage.
The  Company  maintains  insurance  coverage  against  such claims to the extent
deemed prudent by management and  applicable  deductible  amounts are accrued at
the time of the incident. The Company believes that there are no existing claims
of a potentially  material  adverse nature for which it has not already provided
appropriate accruals.

         Unions and  Collective  Bargaining  Agreements.  At December  31, 1998,
approximately  10% of the Company's  employees were members of national maritime
labor unions , or are subject to collective  bargaining  agreements.  Management
considers   relations  with   employees  to  be   satisfactory;   however,   the
deterioration  of these  relations could have an adverse effect on the Company's
operating results.

16.  Segment and Geographic Data

         The Company organizes its business principally into three segments. The
accounting  policies of the reportable  segments are the same as those described
in Note 1. The Company does not have significant intersegment transactions.

         These segments and their respective operations are as follows:

         Offshore  Energy Support - Offshore  energy support  includes  vessels,
         operating in U.S.  and foreign  locations  used  primarily to transport
         materials,  supplies,  equipment  and personnel to drilling rigs and to
         support the construction, positioning and ongoing operations of oil and
         gas productions platforms.

         Offshore and Harbor  Towing - Offshore and harbor  towing  services are
         provided  by tugs to  vessels  utilizing  the  ports in which  the tugs
         operate and to vessels at sea to the extent  required by  environmental
         regulations, casualty or other emergency.

         Marine  Transportation   Services  -  Marine  transportation   services
         includes  oceangoing  and  inland-waterway  vessels  used to  transport
         chemicals,  fuel and other petroleum products,  primarily from chemical
         manufacturing plants,  refineries and storage facilities along the U.S.
         Gulf of Mexico coast to industrial users and distribution facilities in
         and around the Gulf of Mexico,  Atlantic  and  Pacific  coast ports and
         inland rivers.


                                      F-20

<PAGE>


         The company evaluates  performance by operating  segment.  Also, within
the offshore energy support segment, the Company performs additional performance
evaluation  of vessels  marketed in U.S. and foreign  locations.  Resources  are
allocated based on segment profit or loss from  operations,  before interest and
taxes.

         Revenues  by segment  and  geographic  area  consist  only of  services
provided to external  customers,  as reported in the  Statement  of  Operations.
Income  from  operations  represents  net  revenues  less  applicable  costs and
expenses related to those revenues. Unallocated expenses are primarily comprised
of general  and  administrative  expenses of a  corporate  nature.  Identifiable
assets  represent  those  assets  used  in the  operations  of each  segment  or
geographic area and unallocated assets include corporate assets and intercompany
eliminations.

          The  following  schedule  presents  information  about  the  Company's
operations  in these  segments  for the years  shown and at  December 31 of each
year:














                                    F-21




<PAGE>

<TABLE>
<CAPTION>



                                                      1996                  1997                  1998      
                                                 ---------------       ---------------       ---------------
<S>                                              <C>                   <C>                   <C>
Revenues
    Offshore energy support.................     $        43,715       $       111,385       $       242,656
    Offshore and harbor towing..............              13,950                20,424                46,368
    Marine transportation services..........              51,691                78,448               112,882
                                                 ---------------       ---------------       ---------------
Consolidated revenue........................     $       109,356       $       210,257       $       401,906
                                                 ===============       ===============       ===============

Operating expenses
    Offshore energy support.................     $        22,525       $        45,322       $       120,207
    Offshore and harbor towing..............               7,480                12,296                22,556
    Marine transportation services..........              33,772                52,665                80,126
                                                 ---------------       ---------------       ---------------
Consolidated operating expenses.............     $        63,777       $       110,283       $       222,889
                                                 ===============       ===============       ===============

Selling, general and administrative
   expenses
    Offshore energy support.................     $         2,558       $         5,866       $        14,707
    Offshore and harbor towing..............               1,364                 2,361                 5,528
    Marine transportation services..........               3,494                 5,739                 7,395
    General corporate.......................               7,563                10,825                14,675
                                                 ---------------       ---------------       ---------------
Consolidated selling, general and
   administrative expenses..................     $        14,979       $        24,791       $        42,305
                                                 ===============       ===============       ===============

Depreciation and Amortization
    Offshore energy support.................     $         3,300       $         9,324       $        35,708
    Offshore and harbor towing..............                 408                 1,147                 3,752
    Marine transportation services..........               5,904                 8,954                11,226
    General corporate.......................                 218                   425                 1,071
                                                 ---------------       ---------------       ---------------
Consolidated depreciation and amortization..     $         9,830       $        19,850       $        51,757
                                                 ===============       ===============       ===============

Income from operations
    Offshore energy support.................     $        15,332       $        50,873       $        72,034
    Offshore and harbor towing..............               4,698                 4,620                14,532
    Marine transportation services..........               8,521                11,090                14,135
    General corporate.......................             (7,781)              (11,250)              (15,746)
                                                 ---------------       ---------------       ---------------
Consolidated income from operations.........     $        20,770       $        55,333       $        84,955
                                                 ===============       ===============       ===============

Identifiable assets
    Offshore energy support.................     $       110,056       $       237,131       $       653,687
    Offshore and harbor towing..............               4,750               101,547               116,381
    Marine transportation services..........             179,419               298,707               333,138
    Unallocated.............................            (20,752)              (33,602)                 5,619
                                                 ---------------       ---------------       ---------------
Total  .....................................     $       273,473       $       603,783       $     1,108,825
                                                 ===============       ===============       ===============

Capital expenditures
    Offshore energy support.................     $        51,382       $       207,207       $       304,387
    Offshore and harbor towing..............               2,440                47,003                27,525
    Marine transportation services..........              26,283                 7,513                23,240
    Unallocated.............................              36,028                37,404                50,057
                                                 ---------------       ---------------       ---------------
Total ......................................     $       116,133       $       299,127       $       405,209
                                                 ===============       ===============       ===============
</TABLE>


                                     F-22

<PAGE>





         The Company is engaged in providing  marine support and  transportation
services in the United States and foreign locations (see Note 15). The Company's
foreign  operations  are primarily  conducted in the Arabian Gulf,  West Africa,
Southeast  Asia and Mexico.  These  operations  are subject to risks inherent in
operating in such locations.

         The following table presents selected financial information  pertaining
to the Company's geographic operations for 1997 and 1998 (in thousands):
<TABLE>
<CAPTION>

                                                                           1997                  1998     
                                                                       -------------         -------------
<S>                                                                   <C>                    <C>
         Revenues
           Domestic...............................................     $     189,336         $     251,695
           Foreign................................................            20,921               150,211
                                                                       -------------         -------------
         Consolidated revenues....................................     $     210,257         $     401,906
                                                                       =============         =============

         Income from operations
           Domestic...............................................     $      57,782         $      57,370
           Foreign................................................             8,376                43,331
           Unallocated expenses...................................          (10,825)              (15,746)
                                                                       -------------         -------------
         Consolidated income from operations......................     $      55,333         $      84,955
                                                                       =============         =============

         Identifiable assets
           Domestic...............................................     $     454,688         $     590,473
           Foreign................................................           147,332               512,733
           Unallocated............................................             2,541                 5,619
                                                                       -------------         -------------
         Consolidated identifiable assets.........................     $     604,561         $   1,108,825
                                                                       =============         =============
</TABLE>

17.  Fair Value of Financial Instruments

         The following  methods and  assumptions  were used to estimate the fair
value of financial instruments included in the following categories:

         Cash and Cash Equivalents and Accounts Receivable. The carrying amounts
reported  in the  balance  sheets  approximate  fair  value  due to the  current
maturity of such instruments.

         Senior Notes. The Senior Notes are publicly  traded.  The fair value of
the Senior Notes is  approximately  $237.0  million at December 31, 1998,  based
upon quoted market rates.

         Revolving Credit and Term Loan Agreement. Amounts outstanding under the
Credit  Facility bear  interest at variable  rates that  periodically  adjust to
reflect changes in overall market rates and approximate fair value.

         Notes Payable and Title XI Debt.  The carrying  amount  reported in the
balance sheets  approximates fair value using a discounted cash flow analysis at
estimated market rates.

         Preferred Securities.  The Preferred Stock is publicly traded. The fair
value of the Preferred Securities is approximately $39.0 million at December 31,
1998, based upon quoted market rates.



                                 F-23

<PAGE>

18.  Extraordinary Items

         In 1996, the Company paid cash of $26.3  million,  issued 55,500 shares
of Class A Common  Stock and  1,188,502  shares of Class B Common Stock to repay
$25.0  million  and $15.2  million  of junior and  senior  notes,  respectively.
Accordingly,  the Company recorded a loss on  extinguishment of $8.1 million net
of a tax benefit of $1.5 million.

         In 1997, the Company repaid $126.7 million of its outstanding  debt and
amended its then existing credit facility.  As a result,  the Company recorded a
loss on  extinguishment  of $2.1  million,  net of an income tax benefit of $1.2
million.

         In February 1998, the Company repaid $268.0 million of its  outstanding
debt.  As  a  result,   the  Company  recorded  a  loss  on   extinguishment  of
approximately $0.7 million, net of an income tax benefit of $0.4 million.

19.  Supplemental Condensed Consolidating Financial Information

     The  Senior  Notes  described  in  Note  5 are  fully  and  unconditionally
guaranteed  on a joint and several basis by  substantially  all of the Company's
consolidated  subsidiaries,  each of which is  wholly  owned by the  Company.  A
substantial   portion  of  the  Company's   cash  flows  are  generated  by  its
subsidiaries. As a result, the funds necessary to meet the Company's obligations
are  provided  in  substantial  part  by  distributions  or  advances  from  its
subsidiaries. Under certain circumstances, contractual or legal restrictions, as
well as the financial and operating requirements of the Company's  subsidiaries,
could limit the Company's  ability to obtain cash from its  subsidiaries for the
purpose of meeting its  obligations,  including  the payments of  principal  and
interest on the Senior Notes.

         The  following  is   summarized   condensed   consolidating   financial
information for the Company,  segregating the Parent,  the combined wholly owned
guarantor subsidiaries, the combined foreign subsidiary guarantors, the combined
mostly  owned   guarantors,   the  combined   non-guarantor   subsidiaries   and
eliminations.  Two of the guarantor  subsidiaries,  Seabulk America Partnership,
Ltd.  and Seabulk  Transmarine  Partnership,  Ltd.,  are only  81.59%-owned  and
67.33%-owned  by the Company and have been presented  separately from the wholly
owned  guarantors.   The  foreign  guarantor  subsidiaries  are  also  presented
separately from the wholly owned guarantors.  Separate  financial  statements of
the wholly owned guarantor  subsidiaries  are not presented  because  management
believes that these financial  statements  would not be material to investors in
the Senior Notes.  Separate audited financial statements of the non-wholly owned
guarantor  subsidiaries  have  been  filed  with  the  Securities  and  Exchange
Commission.






                                 F-24
<PAGE>







                    Condensed Consolidating Balance Sheet
                             (in thousands)
<TABLE>
<CAPTION>

                                                                          December 31, 1997              
                                              Wholly Owned        Foreign  Mostly Owned
                                                Guarantor        Guarantor  Guarantor    Non-guarantor                Consolidated
                                    Parent    Subsidiaries    Subsidiaries Subsidiaries  Subsidiaries   Eliminations      Total  
<S>                              <C>          <C>           <C>            <C>          <C>            <C>           <C>
Assets
Current assets
  Cash and cash equivalents....  $     2,510  $      8,238   $      4,104  $        17  $          83  $          --  $     14,952
  Accounts receivable:
    Trade, net.................        3,460        25,224          8,872           --             --          (653)        36,903
    Insurance claims and other.          471         1,218            753           14             --             --         2,456
  Inventory, spare parts and
    supplies ..................        2,498         2,433          1,918        1,320             --            (7)         8,162
  Prepaid expenses.............          819         1,762            402           97              5             --         3,085
  Deferred costs, net..........        2,300         1,669            332          215             --             --         4,516
                                 -----------  ------------   ------------  -----------  -------------  -------------  ------------
    Total current assets.......       12,058        40,544         16,381        1,663             88          (660)        70,074
Property, net..................       89,925       240,630        128,409       33,996          3,611        (2,213)       494,358
Other assets:
  Deferred costs, net..........        2,903         1,718            775          426          3,758             --         9,580
  Due from affiliates..........      161,385         1,174      (130,062)     (31,797)          (414)             --           286
  Investments in affiliates....      278,908       552,088             --        2,723         32,333      (864,425)         1,627
  Goodwill, net................           --        25,361             --           --             --             --        25,361
  Other........................        1,304           184            909           --        118,657(1)   (118,557)         2,497
                                 -----------  ------------   ------------  -----------  -------------  ------------   ------------
    Total other assets.........      444,500       580,525      (128,378)     (28,648)        154,334      (982,982)        39,351
                                 -----------  ------------   ------------  -----------  -------------  ------------   ------------
      Total....................  $   546,483  $    861,699   $     16,412  $     7,011  $     158,033  $   (985,855)  $    603,783
                                 ===========  ============   ============  ===========  =============  ============   ============

Liabilities and Stockholders' Equity 
Current liabilities:
Accounts payable                 $     3,046  $    10,812    $      3,329  $        --  $         --   $         --   $     17,187
  Current maturities of long-term
    debt.......................        6,693          841             --            --            --             --          7,534
  Current obligations
    under capital
    leases.....................          356        1,358             --            --            --             --          1,714
  Other .......................        7,063        7,072          3,678            741              3          (708)        17,849
                                 -----------  -----------   ------------  -------------  -------------  ------------   ------------
    Total current liabilities..       17,158       20,083          7,007            741              3          (708)        44,284
Long-term liabilities:
  Long-term debt...............      279,507       16,623             --             --             --      (118,557)       177,573
  Obligations under 
    capital leases.............        4,986        5,740             --             --             --            --         10,726
  Deferred income taxes........       18,577        7,072             --             --             --             --        25,649
  Other long term obligations..        1,268        1,645            247            109             --             --         3,269
                                 -----------  -----------   ------------  -------------  -------------  -------------  ------------
    Total long-term liabilities      304,338       31,080            247            109             --      (118,557)       217,217
                                 -----------  -----------   ------------  -------------  -------------  -------------  ------------
Total liabilities..............      321,496       51,163          7,254            850              3      (119,265)       261,501
Company-obligated mandatorily
  redeemable preferred securities
  issued by a subsidiary trust
  holding solely debentures issued
  by the Company...............           --           --             --             --        115,000             --       115,000
Minority partners' equity in sub-
  sidiaries....................           --           --             --             --             --          2,295         2,295
Stockholders' equity                 224,987      810,536          9,158          6,161         43,030      (868,885)       224,987
                                 -----------  -----------   ------------  -------------  -------------  ------------   ------------
    Total......................  $   546,483  $   861,699   $     16,412  $       7,011  $     158,033  $   (985,855)  $    603,783
                                 ===========  ===========   ============  =============  =============  ============   ============
</TABLE>


(1) Represents receivable for debentures of the Company held by the Trust.


                                      F-26

<PAGE>


           Condensed Consolidating Balance Sheet (in thousands)
<TABLE>
<CAPTION>

                                                                        December 31, 1998                 
                                                Wholly Owned   Foreign    Mostly Owned
                                                  Guarantor   Guarantor    Guarantor    Non-guarantor                Consolidated
                                    Parent      Subsidiaries Subsidiaries Subsidiaries  Subsidiaries    Eliminations     Total  
<S>                               <C>          <C>          <C>          <C>            <C>           <C>            <C>
Assets
Current assets
  Cash and cash equivalents....  $      1,401  $    2,118   $     3,460  $          31  $       2,167  $          --  $      9,177
  Accounts receivable:
    Trade, net.................         5,337      26,769        33,954             --          2,573          (672)        67,961
    Insurance claims and other.         4,874       3,698         3,282           (33)             94             --        11,915
  Inventory, spare parts and
    supplies ..................         2,707       3,093         9,726          1,320            886          (277)        17,455
  Prepaid expenses.............         1,373       1,463         1,050             63            393             --         4,342
  Deferred costs, net..........         3,881       4,255         1,865            241            414          (174)        10,482
                                 ------------  ----------   -----------  -------------  -------------  -------------  ------------
    Total current assets.......        19,573      41,396        53,337          1,622          6,527        (1,123)       121,332
Property, net..................       113,688     285,974       366,885         37,319         50,785        (2,845)       851,806
Other assets:
  Deferred costs, net..........        11,761       3,556         1,639            160          3,974          (112)        20,978
  Due from affiliates..........       167,216     (2,443)     (128,038)       (30,681)        (5,629)             --           425
  Investments in affiliates....       695,479     582,135            --          3,143         40,840    (1,298,176)        23,421
  Goodwill, net................           114      24,505        62,257             --             79             --        86,955
  Other........................         1,526         362         2,006             --        118,571(1)   (118,557)         3,908
                                 ------------  ----------   -----------  -------------  -------------  ------------   ------------
    Total other assets.........       876,096     608,115      (62,136)       (27,378)        157,835    (1,416,845)       135,687
                                 ------------  ----------   -----------  -------------  -------------  ------------   ------------
                                 $  1,009,357  $  935,485   $   358,086  $      11,563  $     215,147  $ (1,420,813)  $  1,108,825
                                 ============  ==========   ===========  =============  =============  ============   ============

Liabilities and Stockholders'
 Equity Current liabilities:
  Accounts payable.............  $      6,190  $    9,635   $     9,525  $          19  $         453  $          --  $     25,822
  Current maturities of long-term
    debt.......................         8,152         859            --             --             --             --         9,011
  Current obligations under capital
    leases.....................           630       2,361            --             --             --             --         2,991
  Debt subject to acceleration        252,954          __            __             __             __             __       252,954
  Other .......................        14,854       6,521         9,712          3,844          1,371          (722)        35,580
                                 ------------  ----------   -----------  -------------  -------------  ------------   ------------
    Total current liabilities..       282,780      19,376        19,237          3,863          1,824          (722)       326,358
Long-term liabilities:
  Long-term debt...............       436,355      15,766            --             --             --      (118,557)       333,564
  Obligations under capital leases     14,186      22,797            --             --             --            --         36,983
  Deferred income taxes........        25,649       7,072            --             --             --             --        32,721
  Other long term obligations..         2,352       1,200         1,885            114             --             --         5,551
                                 ------------  ----------   -----------  -------------  -------------  -------------  ------------
    Total long-term liabilities       478,542      46,835         1,885            114             --      (118,557)       408,819
                                 ------------  ----------   -----------  -------------  -------------  -------------  ------------
Total liabilities..............       761,322      66,211        21,122          3,977          1,824      (119,279)       735,177
Company-obligated mandatorily
  redeemable preferred securities
  issued by a subsidiary trust
  holding solely debentures issued
  by the Company...............            --          --            --             --        115,000             --       115,000
Minority partners' equity in sub-
  sidiaries....................            --          --            --             --             --         10,613        10,613
Stockholders' equity                  248,035     869,274       336,964          7,586         98,323    (1,312,147)       248,035
                                 ------------  ----------   -----------  -------------  -------------  ------------   ------------
                                 $  1,009,357  $  935,485   $   358,086  $      11,563  $     215,147  $ (1,420,813)  $  1,108,825
                                 ============  ==========   ===========  =============  =============  ============   ============
</TABLE>

 (1) Represents  receivable for debentures of the Company held by the Trust.


                                      F-27

<PAGE>



                      Condensed Consolidating Statement of Operations
                                   (in thousands)
<TABLE>
<CAPTION>

                                                                          December 31, 1996           
                                                 Wholly Owned     Foreign     Mostly Owned
                                                   Guarantor     Guarantor     Guarantor  Non-guarantor              Consolidated
                                     Parent      Subsidiaries  Subsidiaries  Subsidiaries Subsidiaries  Eliminations     Total  
<S>                              <C>             <C>           <C>         <C>            <C>          <C>           <C>
Revenues.......................  $       46,910  $    77,778   $       --  $      10,193  $        --  $    (25,525)  $    109,356
Operating expenses:
  Crew payroll and benefits....          13,969       13,026           --          2,761           --             --        29,756
  Charter hire and bond guarantee
    fee........................           3,191       27,223           --             --           --       (25,747)         4,667
  Repairs and maintenance .....           4,429        3,800                         755           --             --         8,984
  Insurance....................           3,308        3,610           --            715           --             --         7,633
  Consumables..................           2,061        4,279           --            303           --             --         6,643
  Other........................           1,948        3,915           --            241           --           (10)         6,094
                                 --------------  -----------   ----------  -------------  -----------  -------------  ------------
    Total operating expenses...          28,906       55,853           --          4,775           --       (25,757)        63,777
Selling, general and administrative
  expenses.....................           4,935        7,548           --          2,485            1             10        14,979
Depreciation and amortization..           4,107        4,323           --          1,400           --             --         9,830
                                 --------------  -----------   ----------  -------------  -----------  -------------  ------------
Income from operations.........           8,962       10,054           --          1,533          (1)            222        20,770
Net interest...................           3,598        3,882           --          4,151           --             --        11,631
Other income (expense):
  Minority interest and equity
    earnings of subsidiaries...           4,375       12,751           --          (964)           --       (15,268)           894
  Other........................           (163)        (376)           --            304           --          (222)         (457)
                                 --------------  -----------   ----------  -------------  -----------  -------------  ------------
    Total other income (expense)          4,212       12,375           --           (660)          --        (15,490)         437
Income (loss) before provision for
  (benefit from) income taxes and
  extraordinary item...........           9,576       18,547           --        (3,278)          (1)       (15,268)         9,576
Provision for income taxes.....           3,543           --           --             --           --             --         3,543
                                 --------------  -----------   ----------  -------------  -----------  -------------  ------------
Income (loss) before extraordinary
  item.........................           6,033       18,547           --        (3,278)          (1)       (15,268)         6,033
Loss on early extinguishment
  item.........................           8,108           --           --             --           --             --         8,108
                                 --------------  -----------   ----------  -------------  -----------  -------------  ------------
Net income (loss)..............  $      (2,075)  $    18,547   $       --  $     (3,278)  $       (1)  $    (15,268)  $    (2,075)
                                 ==============  ===========   ==========  =============  ===========  =============  ============
</TABLE>






                                    F-28


<PAGE>




                  Condensed Consolidating Statement of Operations
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                          December 31, 1997            
                                                  Wholly Owned      Foreign   Mostly Owned
                                                   Guarantor       Guarantor    Guarantor  Non-guarantor               Consolidated
                                      Parent      Subsidiaries   Subsidiaries Subsidiaries  Subsidiaries Eliminations     Total  
<S>                              <C>             <C>            <C>           <C>          <C>          <C>           <C>
Revenues.......................  $       52,280  $    187,817   $     31,879  $    10,329  $        39  $    (72,087)  $    210,257
Operating expenses:
  Crew payroll and benefits....          15,866        26,909          4,194        2,741           --          (978)        48,732
  Charter hire and bond guarantee
    fee........................           4,170        59,124             --           --           --       (52,746)        10,548
  Repairs and maintenance .....           5,476         7,579          1,772          685           --             --        15,512
  Insurance....................           2,230         5,345            821          471           --             --         8,867
  Consumables..................           2,796        13,445          2,305          254           --        (5,146)        13,654
  Other........................           2,636         8,576          1,332          448           --           (22)        12,970
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
    Total operating expenses...          33,174       120,978         10,424        4,599           --       (58,892)       110,283
Selling, general and administrative
  expenses.....................          13,166         6,436          4,037        3,166           69        (2,083)        24,791
Depreciation and amortization..           6,654         8,973          2,784        1,439           --             --        19,850
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
Income from operations.........           (714)        51,430         14,634        1,125         (30)       (11,112)        55,333
Net interest...................           7,928         1,146            149        1,650      (3,849)             --         7,024
Other income (expense):
  Minority interest and equity
    earnings of subsidiaries...          53,147       118,102              1        (233)      (3,396)      (171,148)       (3,527)
  Other........................              99         (238)        (8,895)         (36)           --          8,893         (177)
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
    Total other income (expense)         53,246       117,864        (8,894)        (269)      (3,396)      (162,255)       (3,704)

Income (loss) before provision for
  (benefit from) income taxes and
  extraordinary item...........          44,604       168,148          5,591        (794)          423      (173,367)        44,605
Provision for income taxes.....          16,950            --             --           --           --             --        16,950
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
Income (loss) before extraordinary
  item.........................          27,654       168,148          5,591        (794)          423      (173,367)        27,655
Loss on early extinguishment
  item.........................           2,132            --             --           --           --             --         2,132
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
Net income (loss)..............  $       25,522  $    168,148   $      5,591  $     (794)  $       423  $   (173,367)  $     25,523
                                 ==============  ============   ============  ===========  ===========  =============  ============
</TABLE>




                                      F-29



<PAGE>




                 Condensed Consolidating Statement of Operations
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                             December 31, 1998             
                                                 Wholly Owned       Foreign    Mostly Owned
                                                  Guarantor        Guarantor    Guarantor   Non-guarantor             Consolidated
                                      Parent     Subsidiaries    Subsidiaries  Subsidiaries Subsidiaries Eliminations     Total  
<S>                              <C>             <C>            <C>           <C>          <C>          <C>            <C>
Revenues.......................  $       69,616  $    224,533   $    211,172  $    10,505  $    19,691  $   (133,611)  $    401,906
Operating expenses:
  Crew payroll and benefits....          21,507        36,313         29,107        2,725        3,324        (1,619)        91,357
  Charter hire and bond guarantee
    fee........................           3,633        68,392             77           --          644       (53,067)        19,679
  Repairs and maintenance .....           8,463        12,516          8,508          733          909             --        31,129
  Insurance....................           2,014         5,632          4,264          305          453             --        12,668
  Consumables..................           5,994        19,612         15,920          282        1,313        (3,899)        39,222
  Other........................           3,408        12,725         12,762           18        1,196        (1,275)        28,834
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
    Total operating expenses...          45,019       155,190         70,638        4,063        7,839       (59,860)       222,889
Selling, general and administrative
  expenses.....................          17,846        11,784         11,713        2,101        4,206        (5,345)        42,305
Depreciation and amortization..           9,115        17,412         23,053        1,448          729             --        51,757
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
Income from operations.........         (2,364)        40,147        105,768        2,893        6,917       (68,406)        84,955
Net interest...................          47,716             8             39        2,162      (7,483)             --        42,442
Other income (expense):
  Minority interest and equity
    earnings of subsidiaries...          81,513        81,932          (747)          420      (6,039)      (163,777)       (6,698)
  Other........................           4,538         (839)       (67,324)          275      (3,707)         67,213           156
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
    Total other income (expense)         86,051        81,093       (68,071)          695      (9,746)       (96,564)       (6,542)

Income (loss) before provision for
  (benefit from) income taxes and
  extraordinary item...........          35,971       121,232         37,658        1,426        4,654      (164,970)        35,971
Provision for income taxes.....          13,489            --             --           --           --             --        13,489
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
Income (loss) before extraordinary
  item.........................          22,482       121,232         37,658        1,426        4,654      (164,970)        22,482
Loss on early extinguishment
  item.........................             734            --             --           --           --             --           734
                                 --------------  ------------   ------------  -----------  -----------  -------------  ------------
Net income (loss)..............  $       21,748  $    121,232   $     37,658  $     1,426  $     4,654  $   (164,970)  $     21,748
                                 ==============  ============   ============  ===========  ===========  =============  ============
</TABLE>








                                      F-30





<PAGE>




                  Condensed Consolidating Statement of Cash Flows
                                    (in thousands)
<TABLE>
<CAPTION>

                                                                             December 31, 1996                   
                                                  Wholly Owned        Foreign     Mostly Owned
                                                    Guarantor        Guarantor      Guarantor     Non-guarantor        Consolidated
                                               Parent      Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations  Total
<S>                                           <C>         <C>          <C>            <C>        <C>        <C>        <C>
Operating activities:
  Net income (loss) .......................   $ (2,075)   $  18,547    $       --     $(3,278)   $    (1)   $(15,268)   $ (2,075)
  Adjustments to reconcile net income
    (loss) to net cash provided by
    operating activities:
  Loss on early extinguishment of debt,
    net ...................................      8,108         --              --        --         --          --         8,108
  Depreciation and amortization of
    property ..............................      3,417        3,474            --       1,400       --          --         8,291
  Amortization of drydocking costs ........      1,651        1,088            --         318       --          --         3,057
  Amortization of intangible assets .......       --            505            --        --         --          --           505
  Amortization of discount on long-term
    debt and financing costs ..............        446          345            --         639       --          (234)      1,196
  Provision for bad debts .................        100           25            --        --         --          --           125
  Gain on disposals of property ...........        (13)        --              --        --         --          --           (13)
  Provision for deferred taxes ............      3,543         --              --        --         --          --         3,543
  Minority partners' equity in losses of
    subsidiaries, net .....................       --           --              --        --         --          (756)       (756)
  Undistributed earnings (losses) of
    affiliates, net .......................     (4,375)     (12,750)           --         963       --        16,030        (132)
  Other non-cash items ....................         36         --              --        --         --          --            36
  Changes in operating assets
   and liabilities, net of effect
   of acquisitions:
  Accounts receivable .....................      6,176       (9,383)           --       1,262       --            17      (1,928)
  Other assets ............................    (30,896)      26,313            --       1,244          1       1,360      (1,978)
  Accounts payable and
   other liabilities ......................      3,827        1,743            --         178       --        (1,143)      4,605
Net cash provided by operating
  activities ..............................    (10,055)      29,907                      --        2,726           6      22,584
Investing activities:
  Purchase of property ....................     27,212      (35,775)           --        (196)      --          --        (8,759)
  Deposits for the purchase of
    property ..............................       --         (6,349)           --        --         --          --        (6,349)
Proceeds from disposals
   of property ............................          8         --              --        --         --          --             8
  Capital contribution to affiliates ......     (1,863)     (82,959)           --        --         --        84,086        (736)
  Acquisitions, net of cash
   acquired of
    $1,722 ................................    (61,384)      (7,134)           --        --         --          --       (68,518)
                                              --------    ---------    ------------   -------    -------    --------    --------
Net cash used
 in investing activities ..................    (36,027)    (132,217)           --        (196)      --        84,086     (84,354)
Financing activities:
  Proceeds (repayments) of short-term
    borrowings, net .......................        500        1,494            --        --         --          --         1,994
  Proceeds from long-term debt ............     13,259       23,705            --        --         --          --        36,964
  Proceeds from issuance of common
    stock, net ............................     76,595         --              --        --         --          --        76,595
  Principal payments of long-term debt ....    (38,836)      (3,832)                     --       (2,521)       --          --
                                                                                                                         (45,189)
  Payment of financing costs ..............       (838)        --              --        --         --          --          (838)
  Payment of obligations under capital
    leases ................................       (126)      (1,063)           --        --         --          --        (1,189)
Capital contributions from parent/
    partners ..............................       --         84,092            --        --         --       (84,092)       --
                                              --------    ---------    ------------   -------    -------    --------    --------
  Net cash provided by financing
    activities ............................     50,554      104,396            --      (2,521)      --       (84,092)     68,337
Increase in cash and
 cash equivalents .........................      4,472        2,086            --           9       --          --         6,567
Cash and cash equivalents at beginning
    of period .............................      2,765          275            --           9          1        --         3,050
                                              --------    ---------    ------------   -------    -------    --------    --------
  Cash and cash equivalents at end of
    period ................................   $  7,237    $   2,361    $       --     $    18    $     1    $   --      $  9,617
                                              ========    =========    ============   =======    =======    ========    ========
</TABLE>

                                  F-31


<PAGE>



              Condensed Consolidating Statement of Cash Flows
                              (in thousands)
<TABLE>
<CAPTION>

                                                                             December 31, 1997      
                                                           Wholly Owned  Foreign    Mostly Owned
                                                            Guarantor   Guarantor    Guarantor  Non-guarantor          Consolidated
                                                 Parent   Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations  Total
<S>                                            <C>          <C>          <C>         <C>        <C>         <C>           <C>
Operating activities:
  Net income (loss) ........................   $  25,523    $ 168,148    $  5,591    $  (794)   $     423    $(173,368)   $  25,523
  Adjustments to reconcile net income
    (loss) to net cash provided by
    operating activities:
  Loss on early extinguishment of debt,
    net ....................................       2,132         --          --         --           --           --          2,132
  Depreciation and amortization of
    property ...............................       6,616        8,275       2,784      1,418         --           --         19,093
  Amortization of drydocking costs .........       3,096        1,858         104        292         --           --          5,350
  Amortization of intangible assets ........          38          698        --           21         --           --            757
  Amortization of discount on long-term
    debt and financing costs ...............         680         --          --          176         --           (176)         680
  Provision for bad debts ..................         217          812        --         --           --           --          1,029
  Loss on disposals of property ............         493           31        --         --           --           --            524
  Provision for deferred taxes .............      13,147         --          --         --           --         13,147
  Minority partners' equity in losses of
    subsidiaries, net ......................        --           --          --         --           --           (183)        (183)
  Undistributed earnings of affiliates,
    net ....................................     (53,147)    (117,993)       --          233         (425)     171,222         (110)
  Other non-cash items .....................          95         --          --         --           --           --             95
  Changes in operating assets
  and liabilities, net of effect
  of acquisitions:
  Accounts receivable ......................        (735)     (10,479)     (9,625)       182         --             17      (20,640)
  Other assets .............................     175,682      (72,486)      8,028       (139)    (118,112)      (2,473)      (9,500)
  Accounts payable and other
      liabilities ..........................      (2,372)      (3,306)      6,253        415            3        1,152        2,145
Net cash provided by operating
  activities ...............................     171,465      (24,442)     13,135      1,804     (118,111)      (3,809)      40,042
Investing activities:
  Purchase of property .....................     (15,061)     (43,840)     (8,039)      (359)      (2,031)       2,213      (67,117)
  Deposits for the purchase of
    property ...............................        --           --          (910)      --           --           --           (910)
  Proceeds from
     disposals of property .................        --          1,633        --         --           --           --          1,633
  Capital contribution
     to affiliates .........................    (113,210)    (286,152)       --         --           --        399,136         (226)
  Acquisitions, net of cash acquired of
    escrow deposits and cash ...............    (194,723)        --          --         --           --           --       (194,723)
                                               ---------    ---------    --------    -------    ---------    ---------    ---------
Net cash used in
  investing activities .....................    (322,994)    (328,359)     (8,949)      (359)      (2,031)     401,349     (261,343)
Financing activities:
  Proceeds (repayments) of short-term
    borrowings, net ........................      (8,000)      (8,242)       --         --           --           --        (16,242)
  Proceeds from long-term debt .............     177,210         --          --         --           --           --        177,210
  Proceeds from issuance of common
    stock, net .............................      94,628         --          --         --           --           --         94,628
  Proceeds from issuance of redeemable
    preferred securities, net ..............        --           --          --         --        111,109         --        111,109
  Principal payments of long-
      term debt ............................    (114,121)     (21,756)       --       (1,446)        --          1,446     (135,877)
  Payment of financing costs ...............      (2,724)        --          --         --           --           --         (2,724)
  Payment of obligations under capital
    leases .................................        (191)      (1,277)       --         --           --           --         (1,468)
Capital contributions from parent/
    partners ...............................        --        389,953         (82)      --          9,115     (398,986)        --
                                               ---------    ---------    --------    -------    ---------    ---------    ---------
  Net cash provided by financing
    activities .............................     146,802      358,678         (82)    (1,446)     120,224     (397,540)     226,636
Increase (decrease) in cash and cash
    equivalents ............................      (4,727)       5,877       4,104         (1)          82         --          5,335
Cash and cash equivalents at beginning
    of period ..............................       7,237        2,361        --           18            1         --          9,617
                                               ---------    ---------    --------    -------    ---------    ---------    ---------
  Cash and cash equivalents at end of
    period .................................   $   2,510    $   8,238    $  4,104    $    17    $      83    $    --      $  14,952
                                               =========    =========    ========    =======    =========    =========    =========
</TABLE>

                                   F-32

<PAGE>

                Condensed Consolidating Statement of Cash Flows
                              (in thousands)
<TABLE>
<CAPTION>

                                                                            December 31, 1998
                                                           Wholly Owned  Foreign    Mostly Owned
                                                            Guarantor   Guarantor     Guarantor  Non-guarantor          Consolidated
                                                   Parent  Subsidiaries Subsidiaries Subsidiaries Subsidiaries Eliminations  Total
<S>                                             <C>         <C>          <C>         <C>        <C>          <C>          <C>
Operating activities:
  Net income ................................   $  21,748    $ 121,232    $ 37,658    $ 1,426    $  4,654    $(164,970)   $  21,748
  Adjustments to reconcile net income
    to net cash provided by
    operating activities:
  Loss on early extinguishment of debt,
    net .....................................         734         --          --         --          --           --            734
  Depreciation and amortization of
    property ................................       9,088       16,291      20,964      1,448         696         --         48,487
  Amortization of drydocking costs ..........       4,575        3,309       2,755        240         475         --         11,354
  Amortization of intangible assets .........          27        1,121       2,142       --           (20)        --          3,270
  Amortization of discount on long-term
    debt and financing costs ................       1,274         --          --         --          --           --          1,274
  Provision for bad debts ...................         176          550         322       --            39         --          1,087
  Loss (gain) on disposals of property ......          --         --          --         --          --           --             -- 
  Provision for deferred taxes ..............      10,189         --          --         --          --           --         10,189
  Minority partners' equity in losses of
    subsidiaries, net .......................        --           --          --         --          --            311          311
  Undistributed earnings of affiliates,
    net .....................................     (81,513)     (81,511)       --         (420)     (1,436)     163,777       (1,103)
  Other non-cash items ......................         188          (17)       --         --          20           --            191
  Changes in operating assets
   and liabilities, net of
   effect of acquisitions:
  Accounts receivable .......................      (6,456)      (4,575)    (26,957)        47      (2,706)          19      (40,628)
  Other assets ..............................     (12,713)      (4,446)     (7,151)    (1,081)      3,828          555      (21,008)
  Accounts payable and
      other liabilities .....................       9,381        1,445      12,872      3,126       1,818          (12)      28,630
Net cash provided by operating
  activities ................................     (43,302)      53,399      42,605      4,786       7,368         (320)      64,536
Investing activities:
  Purchase of property ......................     (15,803)     (28,749)    (37,544)    (4,772)    (25,375)       8,674     (103,569)
  Capital contribution
      to affiliates .........................     (11,836)     (40,461)       --         --       (36,696)      67,291      (21,702)
  Acquisitions, net of cash acquired of
    escrow deposits and cash ................    (341,442)     (32,014)    (14,702)      --           (67)      14,690     (373,535)
                                                ---------    ---------    --------    -------    --------    ---------    ---------
Net cash used in investing
         activities .........................    (369,081)    (101,224)    (52,246)    (4,772)    (62,138)      90,655     (498,806)
Financing activities:
  Proceeds from long-term debt ..............     441,725       22,596        --         --          --           --        464,321
  Proceeds from issuance of senior
    notes, net of offering costs ............     292,500         --          --         --          --           --        292,500
  Proceeds from issuance of common
    stock, net ..............................         800         --          --         --          --           --            800
  Principal payments of
     long-term debt .........................    (320,439)        (839)       --         --          --           --       (321,278)
  Payment of financing costs ................      (2,760)        --          --         --          --           --         (2,760)
  Payment of obligations under capital
    leases ..................................        (552)      (4,536)       --         --          --           --         (5,088)
Capital contributions from parent/
    partners ................................        --         24,484       8,997       --        56,854      (90,335)        --
                                                ---------    ---------    --------    -------    --------    ---------    ---------
  Net cash provided by financing
    activities ..............................     411,274       41,705       8,997       --        56,854      (90,335)     428,495
Increase (decrease) in cash and cash
    equivalents .............................      (1,109)      (6,120)       (644)        14       2,084         --         (5,775)
Cash and cash equivalents at beginning
    of period ...............................       2,510        8,238       4,104         17          83         --         14,952
                                                ---------    ---------    --------    -------    --------    ---------    ---------
  Cash and cash equivalents at end of
    period ..................................   $   1,401    $   2,118    $  3,460    $    31    $  2,167    $    --      $   9,177
                                                =========    =========    ========    =======    ========    =========    =========
</TABLE>


                                    F-33





<PAGE>




20.  Selected Quarterly Financial Information (unaudited)

         The  following  information  is  presented as  supplementary  financial
information for 1997 and 1998 (in thousands, except per share information):

<TABLE>
<CAPTION>

                                                             First       Second        Third        Fourth
             Year Ended December 31, 1998                   Quarter      Quarter      Quarter       Quarter 
             ----------------------------                 -----------  -----------  -----------  -----------
<S>                                                       <C>          <C>          <C>          <C>
     Revenues..........................................   $    86,485  $   109,332  $   100,149  $   105,940
     Income from operations............................        20,563       28,121       19,615       16,656
     Income before extraordinary item..................         7,184        9,472        3,904        1,922
     Loss on early extinguishment of debt (1)..........           734           --           --           --
     Net income........................................         6,450        9,472        3,904        1,922
     Earnings per share--basic:
       Income before extraordinary item................   $      0.47  $      0.62  $      0.25  $      0.13
       Net income......................................          0.42         0.62         0.25         0.13
     Earnings per share--assuming dilution(2):
       Income before extraordinary item................   $      0.43  $      0.55  $      0.25  $      0.12
       Net income......................................          0.39         0.55         0.25         0.12

</TABLE>

<TABLE>
<CAPTION>

                                                             First       Second        Third        Fourth
             Year Ended December 31, 1997                   Quarter      Quarter      Quarter       Quarter 
             ----------------------------                 -----------  -----------  -----------  -----------
<S>                                                       <C>          <C>          <C>          <C>
     Revenues..........................................   $    39,652  $    46,295  $    56,906  $    67,404
     Income from operations............................         9,737       10,989       14,404       20,203
     Income before extraordinary item..................         4,626        5,720        7,500        9,809
     Loss on early extinguishment of debt (1)..........         1,754          378           --           --
     Net income........................................         2,872        5,342        7,500        9,809
     Earnings per share--basic:
       Income before extraordinary item................   $      0.34  $      0.38  $      0.49  $      0.64
       Net income......................................          0.21         0.35         0.49         0.64
     Earnings per share--assuming dilution(2):
       Income before extraordinary item................   $      0.34  $      0.37  $      0.45  $      0.56
       Net income......................................          0.21         0.35         0.45         0.56
</TABLE>

----------------
(1)  See Note.
(2)  The sum of the four quarters' earnings per share will not necessarily equal
     the annual  earnings per share,  as the  computations  for each quarter are
     independent of the annual computation.

21.  Subsequent Events

         On March 17, 1999,  the Company  exercised its right to defer the April
1, 1999 payment of interest on the Debentures  (see Note 7). Under its governing
instruments, the Trust is required to use interest payments on the Debentures to
pay  dividends  on the  Preferred  Securities.  Therefore,  the  deferral of the
interest  payment on  Debentures  will also result in the deferral of payment of
the April 1, 1999 dividend on the Preferred Securities.


                                F-34