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, 1996

                           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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .

         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 as of March 27, 1997 (computed by reference to
the closing price of such stock on the Nasdaq National Market) was $266,032,348.

         As of March 24, 1997, there were 11,647,791 shares of the registrant's
Class A Common Stock outstanding and 3,419,577 shares of its Class B Common
Stock outstanding.

                   DOCUMENTS INCORPORATED BY REFERENCE

                DOCUMENT                                    WHERE INCORPORATED

Portions of the Registrant's definitive Proxy Statement
regarding the 1997 Annual Meeting of Stockholders                    Part III

--------------------------------------------------------------------------------



<PAGE>



                          HVIDE MARINE INCORPORATED

                                   FORM 10-K

                               TABLE OF CONTENTS
<TABLE>
<CAPTION>

ITEM                                                                                                           PAGE


                                                      PART I
<S>      <C>                                                                                                 <C>
 1       Business...........................................................................................   1
 2       Properties.........................................................................................  14
 3       Legal Proceedings..................................................................................  15
 4       Submission of Matters to a Vote of Security Holders................................................  16
 4a      Executive Officers of the Registrant...............................................................  16

                                                      PART II

 5       Market for Registrant's Common Equity and Related Stockholder Matters..............................  19
 6       Selected Financial Data............................................................................  19
 7       Management's Discussion and Analysis of Financial Condition and Results of
         Operations.........................................................................................  22
 8       Financial Statements...............................................................................  33
 9       Changes in and Disagreements With Accountants on Accounting and Financial
         Disclosure.........................................................................................  33

                                                     PART III

10       Directors and Executive Officers of the Registrant.................................................  34
11       Executive Compensation.............................................................................  34
12       Security Ownership of Certain Beneficial Owners and Management.....................................  34
13       Certain Relationships and Related Transactions.....................................................  35

                                                      PART IV

14       Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................  35
</TABLE>



<PAGE>



                                       PART I

ITEM 1.  BUSINESS

GENERAL

         Hvide Marine Incorporated (the "Company") provides marine support and
transportation services primarily in the U.S. domestic trade and principally to
the energy and chemical industries. The Company is the third largest operator of
supply and crew boats in the U.S. Gulf of Mexico. In addition, the Company is
the sole provider of commercial tug services in Port Everglades and Port
Canaveral, Florida, and a leading provider of such services in Mobile, Alabama.
The Company also transports petroleum products and specialty chemicals in the
U.S. domestic trade, a market insulated from international competition under the
Jones Act. Four of the Company's five chemical carriers are among the last
independently owned chemical carriers scheduled to be retired under the Oil
Pollution Act of 1990 ("OPA 90").

         The Company began operations in 1958 as a harbor tug operator and in
1975 acquired its first petroleum product carrier. It began transporting
specialty chemicals in 1977 and expanded into the operation of offshore energy
support vessels with the acquisition of eight supply boats in 1989. In 1994, the
Company substantially expanded its fleet, adding 20 crew boats, six supply
boats, and two utility boats to its offshore energy support fleet and an
18-vessel tug and barge fleet to its petroleum product transportation
operations.

         In January 1996, the Company acquired eight crew boats, and in August
1996, utilizing the proceeds of its initial public offering, it acquired three
chemical carriers, 10 offshore supply boats, and one crew boat. In January 1997,
the Company completed a second public offering, a portion of the proceeds of
which are being utilized to fund further fleet expansions. From December 1996
through February 1997, the Company acquired three offshore supply boats, three
crew boats, one offshore anchor handling tug, and two harbor tugs. As of
February 28, 1997, the Company had entered into agreements or letters of intent
relating to the acquisition or construction of an additional five offshore
supply boats, eight crew boats, and three ship-docking modules.

         The Company's principal office is located at 2200 Eller Drive, Fort
Lauderdale, Florida 33316, and its telephone number is (954) 523-2200.

OPERATIONS

         All marine transportation between points in the United States,
including drilling rigs affixed to the U.S. outer continental shelf, is
restricted by law to vessels built and registered in the United States and owned
and manned by U.S. citizens. The U.S. domestic trade includes a number of market
segments, including the servicing of domestic offshore oil and gas drilling and
production platforms, the providing of offshore and harbor towing services to
the offshore energy industry, tankers and other vessels, and the transportation
of fuels, petroleum products, and chemicals along and between U.S. coasts. All
of the Company's vessels are eligible to participate in the U.S. domestic trade
except for two Panamanian-flag offshore supply boats operating in Southeast Asia
pursuant to contracts expiring in 1998.



                                                         1

<PAGE>



  MARINE SUPPORT SERVICES

         Offshore Energy Support. Marine support vessels serving offshore energy
exploration and production operations 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 activities, generally on a short-term (less than
six months) basis at varying day rates. See "Customers and Charter Terms."
Demand for such vessels, and the level of day rates paid for their utilization,
depend upon the level of drilling activity, which, in turn, is dependent upon
oil and gas prices, which are highly cyclical. The types of vessels primarily
utilized in these activities are supply boats, crew boats, and anchor handling
vessels.

         Supply Boats. Supply boats (also called workboats) are generally at
least 150 feet in length and serve exploration and production facilities and
support offshore construction and maintenance activities. Supply boats 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.

         The following table sets forth certain information concerning the 27
supply boats currently owned and operated by the Company and the four supply
boats that the Company has agreed to acquire. The Company has also entered into
a contract for the construction of one new supply boat.
<TABLE>
<CAPTION>

                                                                LENGTH   YEAR BUILT/   AREA OF
       SUPPLY BOAT NAME(1)                                      (FEET)     REBUILT      HORSEPOWER      OPERATION
<S>                                                             <C>      <C>           <C>          <C>
Seabulk New York(2).........................................     225      1975/1997        4,300      U.S. Gulf
Seabulk New Jersey(2).......................................     225      1975/1997        4,300      U.S. Gulf
Seabulk Minnesota...........................................     205      1976/1994        2,250      U.S. Gulf
Seabulk Montana(4)..........................................     205      1974/1994        5,350      U.S. Gulf
Matagorda Island(3)(4)......................................     191        1980           3,900      U.S. Gulf
Seabulk North Carolina(4)(5)................................     190      1979/1993        4,000      U.S. Gulf
Seabulk Colorado............................................     185      1982/1994        2,250      U.S. Gulf
Seabulk Missouri............................................     185        1982           2,250      U.S. Gulf
Seabulk Arkansas............................................     185        1982           2,250      U.S. Gulf
Jefferson(3)(4).............................................     185        1981           3,900      U.S. Gulf
Seabulk Wyoming.............................................     185        1979           2,250      Cameron
Sabine(3)(4)................................................     185        1979           3,900      U.S. Gulf
Seabulk Hawaii..............................................     180      1979/1995        3,000      U.S. Gulf
Seabulk Georgia.............................................     180        1984           3,000      U.S. Gulf
Seamark South Carolina(4)(6)................................     180        1983           3,000      SE Asia
Seabulk California..........................................     180        1982           2,250      U.S. Gulf
Seabulk Florida.............................................     180        1982           2,250      U.S. Gulf
Seabulk Alabama.............................................     180        1982           2,250      U.S. Gulf
Seamark Mississippi(6)......................................     180        1982           2,250      SE Asia
Seabulk Texas...............................................     180        1982           2,250      U.S. Gulf
Seabulk Louisiana...........................................     180        1982           2,250      U.S. Gulf
Seabulk Rhode Island........................................     180        1980           2,700      U.S. Gulf
</TABLE>

                                                         2

<PAGE>


<TABLE>
<S>                                                             <C>       <C>           <C>       <C>
Aransas(3)..................................................     180        1980           1,950      U.S. Gulf
Ross Seal...................................................     176      1977/1987        1,700      SE Asia
Seabulk Vermont.............................................     176        1977           1,700      Egypt
Seabulk Kentucky............................................     175        1983           2,400      U.S. Gulf
Seabulk Tennessee...........................................     175        1983           2,400      U.S. Gulf
Seabulk Oregon..............................................     175        1979           2,250      U.S. Gulf
Seabulk Washington..........................................     175        1978           2,250      U.S. Gulf
Seabulk Maryland(5).........................................     165        1980           1,860      U.S. Gulf
Seabulk Virginia(5).........................................     165        1979           1,860      U.S. Gulf
</TABLE>

(1)Certain names reflect name changes currently in process.
(2)Vessel expected to be put into service during second quarter of 1997.
   Vessel data reflect upgrading, refurbishment, and lengthening.
(3)Vessel to be acquired.
(4)Anchor handling tug/supply vessel.
(5)The Company is bareboat charterer and operator with an option to purchase the
   vessel at the end of the bareboat charter for a nominal amount.
(6)These offshore supply boats are currently chartered to a joint venture in
   which the Company has a 49% interest and are operated by the joint venture in
   Southeast Asia. The Company receives bareboat charter hire, which is at a
   rate that is approximately equivalent to the capital costs of the vessels,
   and has the right to receive a 49% share of net income from the venture. The
   joint venture has the right to purchase each vessel for $300,000 upon
   expiration of the charters in August 1998.

         Six of the vessels included in the foregoing table are anchor handling
tug/supply vessels. Anchor handling vessels are more powerful than supply boats
and are capable of towing and positioning drilling rigs, production facilities,
and construction barges. Some are specially equipped to assist tankers while
they are loading from single-point buoy mooring systems.

         Crew Boats. Crew boats (also called crew/supply boats) are faster and
smaller than supply boats and are utilized 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.

         The following table sets forth certain information concerning the 40
crew and two utility boats currently owned or operated by the Company and the
two crew boats the Company has agreed to acquire.
<TABLE>
<CAPTION>

                                                                             LENGTH   YEAR BUILT/
      CREW BOAT NAME(1)                                                       (FEET)      REBUILT    HORSEPOWER
<S>                                                                           <C>        <C>           <C>
Seabulk St. Frances........................................................     152        1996          4,400
Seabulk St. Charles(2).....................................................     152        1993          3,820
Seabulk Winn...............................................................     135        1991          3,056
Seabulk Galveston..........................................................     135        1990          3,056
Seabulk Bossier............................................................     135        1990          3,056
Sea Robin III..............................................................     135        1978          2,250
Seabulk Acadia.............................................................     135        1995          3,300
Seabulk Monroe.............................................................     135        1993          3,056
Capt. Evan(3)..............................................................     135        1991          3,056
Capt. Rami(3)..............................................................     135        1991          3,056
Seabulk Lexington..........................................................     135        1991          3,056
Seabulk LaFourche..........................................................     130        1991          2,040
</TABLE>

                                                         3

<PAGE>


<TABLE>
<S>                                                                          <C>         <C>          <C>
Seabulk Houston............................................................     125        1985          2,600
Seabulk Lafayette..........................................................     125        1985          2,040
Seabulk Starr..............................................................     120        1984          2,040
ThunderU.S.A...............................................................     120        1984          2,040
Seabulk Lamar..............................................................     120        1980          2,040
Seabulk Liberty............................................................     110        1985          2,040
Thunderplanet..............................................................     110        1982          2,040
Seabulk Mobile.............................................................     110        1982          2,040
Seabulk Evangeline.........................................................     110        1981          2,040
Thunderwar.................................................................     110        1981          2,040
Seabulk Madison............................................................     110        1980          2,040
Seabulk Bay................................................................     110        1980          2,040
Seabulk Beauregard.........................................................     110        1980          2,040
Seabulk Jackson............................................................     110        1980          2,100
David Jr.(4)...............................................................     110        1980          2,820
Seabulk Jasper(4)..........................................................     110        1980          2,820
Seabulk Nassau.............................................................     110        1979          2,040
Seabulk Aransas............................................................     110        1978          2,100
Ralph Thompson(4)..........................................................     110        1978          2,820
Seabulk Albany(4)..........................................................     110        1978          2,820
Seabulk Austin(5)..........................................................     110        1978          1,080
Seabulk Baldwin(4).........................................................     110        1976          2,400
Seabulk Claiborne(4).......................................................     110        1975          2,400
Seabulk Baton Rouge(4)(5)..................................................     100        1981            910
Thundereagle...............................................................     100      1977/1995       1,530
Seabulk Cameron............................................................     100      1976/1995       1,530
Thundercat.................................................................     100      1976/1995       1,530
Seabulk Sabine.............................................................     100      1976/1995       1,530
Seabulk Orleans............................................................     100        1981          1,530
Seabulk Iberia.............................................................     100        1981          1,530
Rig Runner(4)..............................................................      90        1974          1,650
Seabulk Maverick...........................................................      85        1976          1,200
</TABLE>

(1) Certain names reflect name changes currently in process.
(2) The Company is bareboat charterer and operator with an option to purchase
    the Seabulk St. Charles, at the end of the bareboat charter in 2002 for
    $400,000.
(3) Vessel to be acquired.
(4) The Company is bareboat charterer and operator with an option to purchase
    the vessel at the end of the bareboat charter for a nominal amount.
(5) Utility vessel.

         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. The Company's anchor handling tug/supply boats and offshore
towing-equipped tugs have been engaged in towing 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
those for towing services are based on hourly or daily rates. In most ports,
competition is unregulated, although a few port authorities -- including Port
Canaveral and Port Everglades, Florida where a majority of the Company's tugs
operate -- grant non-exclusive franchises to harbor tug operators. Rates are
unregulated in franchised ports

                                                         4

<PAGE>



served by the Company. See "Customers and Charter Terms." 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
current state legislation require oil tankers to be escorted in and around
certain ports located in Alaska and the U.S. Pacific coast. The Company
anticipates that such regulatory requirements will be expanded, increasing the
demand for specially designed tractor tugs, such as the Broward, to perform
escort services.

         The tugs currently owned or operated by the Company serve Port
Everglades and Port Canaveral, Florida and Mobile, Alabama, where they primarily
assist product carriers, barges, other cargo vessels, and cruise ships in
docking and undocking and in proceeding in confined waters. In 1995, the Company
took delivery of the Broward, a tractor tug that it operates pursuant to a
long-term operating lease. Tractor tugs have forward-mounted, omni-directional
propulsion units, giving them a high degree of maneuverability and control over
the operation of an escorted vessel, and are generally considered superior for
tanker escort service. In December 1996, the Company entered into one-year
bareboat charters of two newly constructed 4,000-hp tugs equipped with
omni-directional propulsion units and having some of the capabilities of tractor
tugs. These tugs are serving as harbor tugs in Mobile, enabling two of the
Company's harbor tugs to be utilized in offshore towing activities. In December
1996 and January 1997, the Company acquired one offshore towing-equipped tug and
two harbor tugs, respectively. The offshore towing-equipped tug is being
operated in the U.S. Gulf and the harbor tugs are being operated in Port
Everglades and Port Canaveral. The Company now operates five tugs with offshore
towing capabilities that conduct a variety of offshore towing services in the
U.S. Gulf and the Atlantic Ocean.

         The following table sets forth certain information with respect to the
14 tugs owned or operated by the Company and the two tugs chartered by the
Company.
<TABLE>
<CAPTION>

                                                                     LENGTH       YEAR BUILT/
     VESSEL NAME                                      HORSEPOWER     (FEET)         REBUILT           PORT
<S>                                                    <C>           <C>       <C>               <C>
Broward(1).........................................     5,100          100           1995         Port Everglades
Vigilant(1)........................................     4,600          120         1981/1994      Offshore
Ft. Lauderdale.....................................     4,200           90         1971/1996      Port Everglades
Hollywood(1).......................................     4,200          106           1985         Offshore
Mobile Power.......................................     4,100           98         1957/1986      Mobile
Z-One(2)...........................................     4,100           94           1996         Mobile
Z-Two(2)...........................................     4,000           94           1996         Mobile
Delaware...........................................     4,000          107         1952/1990      Mobile
Mary Dee Sanders...................................     3,600          105         1941/1984      Port Canaveral
Mobile Pride(1)....................................     3,300          107         1969/1989      Offshore
Paragon(1).........................................     3,300          105      1978/1989/1996    Offshore
Mobile Persistence(3)..............................     3,000           98         1940/1975      Port Canaveral
Brevard............................................     2,400           88      1945/1986/1996    Port Canaveral
Captain Brinn......................................     2,145           88         1960/1986      Port Canaveral
Everglades.........................................     2,145           88         1956/1984      Port Everglades
Manatee............................................     2,145           88         1959/1982      Port Everglades
</TABLE>

(1)Equipped for offshore towing.
(2)Vessel operated under a one-year bareboat charter.
(3)Expected to be retired in the second quarter of 1997.

                                                         5

<PAGE>




         The Company has contracted for the construction of three ship-docking
modules, or SDM(TM)s, for delivery in late 1997 or early 1998. SDM(TM)s are
innovative ship-docking vessels that are designed to be more maneuverable,
efficient, and flexible than harbor tugs. In addition, they are expected to have
lower operating costs than harbor tugs because they require fewer crew members.
Company personnel, working in conjunction with consulting marine engineers and
architects, prepared the conceptual design and detailed specifications for the
SDM(TM)s. The Company has filed a patent application on the design. It is
currently anticipated that one SDM(TM) will operate in Port Everglades and two
in Mobile and that their deployment will make one or two of the bareboat
chartered tugs available for alternative service or redelivery to their owner.

  MARINE TRANSPORTATION SERVICES

         Chemical Transportation. In the domestic chemical transportation trade,
vessels carry chemicals primarily from chemical manufacturing plants and storage
tank facilities along the U.S. Gulf of Mexico coast to industrial users in and
around the Atlantic and Pacific coast ports and along inland rivers and
waterways. The chemicals primarily transported are caustic soda, alcohols,
chlorinated solvents, paraxyzlene, alkylates, toluene, methyl tertiary butyl
ether (MTBE), phosphoric acid, and lubricating oils. Certain of the chemicals
transported must be carried in vessels with specially coated or stainless steel
cargo tanks. Many are very sensitive to contamination and require special
cargo-handling equipment.

         The Company estimates that approximately 11% (in terms of tonnage) of
bulk domestic chemical transportation is waterborne, with the remainder
transported by rail. The Company also estimates that approximately 60% of that
waterborne trade is in specialty chemicals, such as caustic soda, which can be
transported only by specially designed vessels. Although chemical carriers and
petroleum product carriers are similar in design, vessels engaged in the
transportation of petroleum products generally lack the large number of small
tanks, special tank coatings, and sophisticated cargo-handling capability
necessary to operate in the parcel or specialty chemical trade. Parcel shipments
are usually carried pursuant to contracts of affreightment by which a shipper
contracts for the use of a portion of a vessel's cargo capacity. See "Customers
and Charter Terms." Management believes that there are 13 specialty chemical
carriers active in the domestic trade, of which nine are independently operated
and four are owned by chemical or other companies that use the vessels to
transport cargoes for their own accounts. In addition to the specialty chemical
tankers, there are 44 tankers and 90 barges in the U.S.-flag domestic fleet over
10,000 gross tons that are capable of carrying some so-called "easy chemicals,"
such as gasoline additives (e.g. MTBE), and that compete with specialty chemical
carriers for the transportation of those chemicals.

         The Company's chemical carriers are the 298,000-barrel, 39,300 dwt
Seabulk Magnachem, the 297,000-barrel, 46,300 dwt Seabulk America, the
360,000-barrel, 50,900 dwt HMI Dynachem, the 360,000-barrel, 50,900 dwt HMI
Petrochem, and the 260,000-barrel, 37,100 dwt HMI Astrachem, which are primarily
engaged in the U.S. domestic chemical parcel trade. The Company operates the
Seabulk Magnachem pursuant to a long-term bareboat charter. The Company owns a
67% economic interest, and Stolt Tankers (U.S.A.), Inc. owns the remaining 33%
economic interest, in the Seabulk America.

         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 from a spill in the event of a

                                                         6

<PAGE>



mishap. 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, Norfolk, Wilmington, North Carolina, and
Charleston, South Carolina.

         Pursuant to the requirements of 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 utilized 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 utilized after 2000. See "Environmental and Other Regulation -- Clean
Water Regulations." They may, however, be permitted to continue to carry certain
chemicals in U.S. commerce and may be redocumented in another country and
transport chemicals in non-U.S. trades. Although it has no current plans to do
so, 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.

         The Company markets the five chemical carriers through its wholly owned
subsidiary OSTC. 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
18-month basis, with minimum and maximum cargo tonnages specified over the
period at fixed rates per ton. The HMI Dynachem and HMI Astrachem are currently
chartered to major oil companies under charters that expire in August 1997 and
November 1997, respectively. Upon the expiration of these charters, the Company
intends to enter into new contracts of affreightment or time charters to market
those vessels. 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 the U.S. Gulf of Mexico coast refineries and storage
facilities, 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 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 exceeded the
level at which it was economically feasible to order a new vessel.

         Seabulk Challenger. The Company's 320,000-barrel, 39,300 dwt CATUG(R)
ITB Seabulk Challenger is engaged in the transportation of fuel and other
petroleum products from refineries in Texas and Louisiana to tank farms and
industrial sites primarily in Port Everglades, Tampa, and Jacksonville, Florida.
Delivered in 1975, the Seabulk Challenger has six cargo segregations and was the
first CATUG(R) ITB constructed in the world. Like the Seabulk Magnachem, it
enjoys certain manning and other advantages over conventional tank vessels. In
1989 and 1991, the vessel had extensive steel renewals and tank recoatings. In
addition, in 1991 the vessel was outfitted with an inert-gas system at the
expense of the charterer.
                                                         7

<PAGE>



         The Seabulk Challenger has been under continuous contract to Shell Oil
Company ("Shell") since its delivery in 1975 and to date has performed over 600
voyages for Shell. In January 1990, Shell renewed the charter for a ten-year
period ending in January 2000. Under the charter, the Company is responsible for
operating costs such as crew, maintenance, and insurance, and Shell pays for
voyage costs such as fuel and port charges. The charter hire rate is adjusted
annually for inflation. The charter may be canceled by Shell in January 1998 and
January 1999 upon payment of a percentage of the charter hire due over the
remaining term of the charter. Shell has in the past repeatedly renewed its
charter of the Seabulk Challenger, and continues to fully utilize the vessel.
Because the termination penalties are substantial, and Shell has provided
significant capital enhancement to the vessel, the Company believes that Shell
will continue to charter the vessel until January 2000, although there can be no
assurance that it will do so. In the fourth quarter of 1996, the charter rate
was renegotiated and reduced by approximately 6% to reflect the lower current
market rate.

         The Seabulk Challenger cannot be operated in U.S. waters after its
January 2003 phase-out date under OPA 90. As with the Seabulk Magnachem, the
Company could, but has no current plans to, replace the barge portion of the
Seabulk Challenger with a double-hull barge, which the Company anticipates would
be substantially less expensive than constructing an entirely new double-hull
conventional tank vessel.

         Sun State. In September 1994, the Company acquired the marine assets of
Sun State Marine, Inc. ("Sun State"), which then owned and operated an energy
transportation fleet of ten towboats and eight fuel barges (one small barge was
acquired in April 1995 and four small barges were acquired in December 1995),
all of which are engaged in fuel transportation along the Atlantic intracoastal
waterway and in the St. Johns River in Florida. Sun State has been in operation
for over 50 years, and the Company continues to operate it as a wholly-owned
subsidiary, Sun State Marine Services, Inc.
(collectively with the predecessor company, "Sun State").

         A majority of Sun State's revenue for the year ended December 31, 1995
and 1996 was derived from a fuel transportation contract with Florida Power or
Light Company ("FPL"). The remainder of its revenue was derived from a fuel
transportation contract with another customer and its marine maintenance,
repair, and drydocking facility. See "Other Services." Under its contract with
FPL, which has a term extending to September 1998, Sun State has agreed to
transport 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
FPL contract has a specified guaranteed minimum utilization provision.

         The Sun State towboats are as follows:
<TABLE>
<CAPTION>

                                                                                          LENGTH      YEAR BUILT/
     VESSEL NAME                                                            HORSEPOWER    (FEET)        REBUILT
<S>                                                                          <C>           <C>        <C>
Sun River City.........................................................        1,000         72          1994
Sun Commander..........................................................        1,000         70        1968/1990
Sun Chief..............................................................        1,000         72        1971/1990
Sun Merchant...........................................................        1,000         65        1966/1994
Sun Trader.............................................................          850         56        1972/1980
Sun St. Johns..........................................................          850         58        1961/1990
Sun Explorer ..........................................................          800         57          1980
Sun Gypsy..............................................................          800         53        1976/1992
Sun Rebel..............................................................          800         60        1957/1991
Sun Venture............................................................          800         66        1956/1986
</TABLE>

                                                           8

<PAGE>




     The Sun State barges are as follows:
<TABLE>
<CAPTION>

                                                                               BARGE      LENGTH    YEAR BUILT/
     VESSEL NAME                                                             CAPACITY     (FEET)        REBUILT
<S>                                                                       <C>              <C>       <C>
Sun State No. .........................................................     25,684 bbls      290       1953/1994
Sun State No. 2........................................................     25,684 bbls      290       1952/1979
Sun State No. 3........................................................     25,974 bbls      290       1962/1986
Sun State No. 4........................................................     25,974 bbls      290       1962/1984
Sun State No. 6........................................................     21,408 bbls      264       1950/1982
Sun State No. 7........................................................     20,700 bbls      264       1967/1990
Sun State No. 8........................................................     23,000 bbls      272         1970
Sun State No. 9........................................................     23,000 bbls      272         1970
Sun State 501..........................................................      4,880 bbls      126         1966
Sun State 701..........................................................      7,000 bbls      175         1942
Sun State 901..........................................................      9,000 bbls      177         1948
Sun State 902..........................................................      9,500 bbls      195         1947
Sun State 1101.........................................................     11,000 bbls      200         1963
</TABLE>

         OPA 90 requires all single-hull barges, including the Sun State barges,
to discontinue transporting fuel and other petroleum products in 2015. The
Company is considering the construction of five double- hull barges at an
estimated aggregate cost of approximately $9.0 million. The decision to proceed
with the construction of these barges will be based upon successful completion
of negotiations of long-term contracts with a customer concerning use of these
vessels.

         New Product Carriers. The Company has a 2.4% equity interest in five
45,300 dwt double-hull petroleum product carriers currently under construction
by Newport News Shipbuilding and Drydock Co. for delivery during 1998. The
aggregate cost of the five carriers is estimated to be $255.0 million, of which
approximately $40.0 million will constitute equity investment and $215.0 million
will be financed with the proceeds of government-guaranteed Title XI ship
financing bonds issued in March 1996. In addition to the Company's interest, 25%
of the equity interest in the vessels is held by Van Ommeren International BV
and 49.3% and 23.4%, respectively, by two other investors. Subject to the
condition that the current owner of the 49.3% interest has not previously sold
such interest to a third party, the Company has an option, exercisable through
2002, to purchase the 49.3% interest at a price equal to (i) the investor's
equity investment plus a stated annual return, or (ii) if exercised after
December 31, 1997, the greater of the fair market value of the interest or the
amount set forth in (I). The Company also has an option, exercisable on January
15, 1998, to purchase the additional 23.4% interest at a price equal to the
investor's equity investment plus a stated return. Should the Company fail to
exercise the latter option, the investor has the option to acquire 1.6% of the
ownership interest from the Company for nominal consideration. The total
estimated cost of exercising the Company's options is up to $32.0 million
(assuming the options are exercised prior to January 1, 1998). The Company
currently has no understandings or agreements with respect to the financing that
it would require if it were to exercise either or both of these options, and
there can be no assurance that such financing will be available.

         The five double-hull product carriers, the operations of which will be
managed by the Company, are intended to serve the market currently served by
single-hull product carriers whose retirement is

                                                         9

<PAGE>



mandated by OPA 90. The vessels will operate in the U.S. domestic trade and may
be operated pursuant to long- or short-term charters, depending upon market
conditions during the period prior to their delivery and thereafter. The Company
is serving as the construction supervisor during the construction period.

  OTHER SERVICES

         As part of the Sun State acquisition, the Company also acquired 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 options, expires in 2000. The towboat Sun River City was constructed
in the Green Cove Springs facility. 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 October 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.

  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.

         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 are subject to
modification by the Company at any time, limited by 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. Shell is the Company's largest single customer and the long-term
charterer of the Seabulk Challenger. In addition, Chevron Corporation
("Chevron") 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 ("Phillips") and
Amoco Corporation ("Amoco") currently charters one of the Company's chemical
carriers. Shell, Chevron, and FPL each accounted for between 5% and 10% of the
Company's revenue for the year ended December 31, 1996, and Shell accounted for
14% of the Company's revenue for the year ended December 31, 1995. The loss of
any of these customers could have a material adverse effect on the Company.


                                                        10

<PAGE>



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. The Company's vessels that provide chemical and petroleum
products 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. See "Environmental and Other Regulation -- Clean
Water Regulations." 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, foreign-built, foreign-manned,
and foreign-owned vessels could be eligible to compete with the Company's
vessels.
See "Environmental and Other Regulation -- Coastwise Laws."

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 all owners and operators of vessels in United States waters, which
include the United States territorial sea 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 carriers, product carrier, and fuel
barges) and "other vessels" (which include the Company's tugs and offshore
energy service vessels).

         Under OPA 90, owners, operators, and certain charterers of vessels are
"responsible parties" and are jointly, severally, and strictly liable for
containment and cleanup costs and other damages arising from oil spills relating
to their vessels, unless the spill results solely from the act or omission of a
third party, an act of God, or an act of war. Such "other 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) net loss of taxes, royalties,
rents, fees, and other lost revenues 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) net cost of public
services necessitated by a spill response, such as protection from fire or other
hazards; and (vi) loss of subsistence use of natural resources.

         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 "other vessels," 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 to cooperate and assist in
connection with oil removal activities. Although the Company currently maintains
pollution liability insurance with

                                                        11

<PAGE>



coverage of $700 million per incident for its tank vessels ($500 million per
incident for its fuel barges), 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 tankers operating in United States waters must be built with double
hulls, and existing single-hull 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 chemical carriers and its
petroleum product carrier will be required to cease transporting petroleum
products over the next 19 years, and its fuel barges will cease transporting
fuel in 2015. The retirement dates of certain tankers may be extended by
reducing their gross registered tonnage and cargo capacity. There can be no
assurance that the useful life of any of the Company's vessels will be so
extended.

         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. U.S. 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, by increasing the amount of financial
responsibility from $1,200 to $1,500 per gross ton. The Company has obtained
COFRs pursuant to the Coast Guard regulations for its product carrier and for
its 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 a tank vessel to prepare vessel response plans and to
contract with oil spill response organizations to remove to the maximum extent
practicable a worst-case discharge (loss of all cargo). The Company has complied
with both 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 expressly permits individual states to impose 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 that have enacted such legislation have
not yet issued implementing regulations defining tanker owners' responsibilities
under the legislation. 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-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.


                                                        12

<PAGE>



         Clean Air Regulations. The federal Clean Air Act of 1970, as amended by
the Clean Air Act Amendments of 1990, requires the Environmental Protection
Agency 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 petroleum cargoes in Louisiana and when
loading, unloading, ballasting, cleaning, and conducting other operations in
certain ports in Texas. The Company's chemical and petroleum product carriers
are equipped with vapor control systems that satisfy the state requirements. The
fuel barges are not equipped with, and are not operated in areas that require,
such systems.

         Coastwise Laws. Most of the Company's operations are 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 in U.S. territorial
waters) 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 thereof, (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 the Jones Act or repeal it. Such changes could have a
material adverse effect on the Company's operations and financial condition.

         Occupational Health Regulations. The Company's vessel operations are
subject to occupational safety and health regulations issued by the Coast Guard.
Such regulations currently require the Company to perform extensive 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, seven of its tugs, and the fuel
barges are subject to periodic inspection and survey by, and drydocking and
maintenance requirements of, the Coast Guard and/or the American Bureau of
Shipping, a marine classification society 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 tug 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

                                                        13

<PAGE>



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
shipyard requirements, to which its operations are subject and is unaware of any
pending or threatened litigation or other judicial, administrative, or arbitral
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.

INSURANCE

         The Company's marine transportation services operations are subject to
the normal hazards associated with operating vessels carrying large volumes of
cargo or 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, 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 under which the coverage
against such hazards is currently unlimited for each incident except in the case
of pollution, which is limited to $700 million (the maximum amount available)
for each incident involving the Company's chemical and petroleum products
carriers and $500 million with respect to its other vessels. 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 25, 1997, the Company had approximately 1,035 employees.
Management considers relations with employees to be satisfactory. The Seabulk
America, Seabulk Challenger, and Seabulk Magnachem are manned by approximately
108 officers and crew who are subject to collective bargaining arrangements. In
addition, the HMI Dynachem, HMI Petrochem, and HMI Astrachem are manned by
approximately 90 members of national maritime labor unions pursuant to an
agreement between the Company and a third party employer.

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 that expires in 2009. In addition, the Company leases
facilities in Houston and Galveston, Texas, Lafayette and Amelia, Louisiana,
Mobile, Alabama, and Port Canaveral and Green Cove Springs, Florida, to support
its operations.



                                                        14

<PAGE>



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.,
pending 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 is seeking to recover from the Company
approximately $6.1 million for alleged additions and changes to the contract
work and costs of alleged delay and disruption, in addition to $2.4 million of
the $5.9 million contract price that the Company has withheld. In addition, the
shipyard is seeking legal fees and expenses and $10.0 million of punitive
damages. The Company has asserted counterclaims aggregating $5.6 million for
contract deletions, unfinished and defective work, and liquidated damages for
late delivery. In 1993, when this suit was filed, the Company was required to
obtain a $5.6 million letter of credit in order to furnish a bond to obtain the
release of the Seabulk America, which had been arrested pursuant to customary
procedures in litigation involving vessels. The suit, which involves numerous
complex factual issues, is currently in the pre-trial discovery stage. While the
Company believes that the plaintiff's claims are without merit and that its
counterclaims are meritorious, there can be no assurance that the ultimate
resolution of the suit will not require some payment by the Company in addition
to the $3.6 million previously paid.

     The  Company  is also a  defendant  in a suit  relating  to  certain of its
offshore supply boats pending in the Circuit Court of the 17th Judicial  Circuit
of Florida, U.S. Offshore,  Inc. v. Seabulk Offshore,  Ltd. (No. 93- 32963(09)).
The suit involves a claim by a former limited  partner in the  partnership  that
owns eight of the supply  boats  seeking an  unspecified  amount of damages  for
alleged breach of a contract by which the Company agreed to pay the plaintiff 5%
of the revenues  (not to exceed $1.3  million)  earned from the operation of the
boats  during the 40 months  ended  March 31,  1994.  The  Company  has paid the
plaintiff  approximately $769,000 pursuant to the contract and believes that the
claim for any additional amount is without merit.

         Affiliates of the Company have intervened in two parallel legal actions
brought by Kirby Corporation ("Kirby"), an operator of vessels with which the
five new product carriers in which the Company has an interest will compete,
seeking to have the construction project stopped. Kirby's actions allege that
the U.S. Maritime Administration acted unlawfully in guaranteeing, pursuant to
Title XI of the Merchant Marine Act, 1936, as amended ("Title XI"), the $215
million of ship financing bonds issued to finance the project, specifically
asserting that the Maritime Administration erroneously determined that the
project is economically sound and that the entities that will own the vessels
are U.S. citizens qualified to operate the vessels in the coastwise trade. The
Company believes the actions are without merit, has supported the U.S.
Department of Justice in obtaining dismissal of one of the actions, is
continuing to support the Department in defending against Kirby's appeal from
that dismissal and in seeking dismissal of the remaining action. Both actions
are currently pending in the United States Court of Appeals for the Fifth
Circuit, as Kirby Corporation v. United States (No. 96-60154) and Kirby
Corporation v. Pena (No. 96-20582).

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



                                                        15

<PAGE>



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

         Not applicable.

ITEM 4A.  EXECUTIVE OFFICERS

         The executive officers of the Company(1) are:
<TABLE>
<CAPTION>

     NAME                               AGE                           CURRENT POSITIONS
<S>                                    <C>    <C>
J. Erik Hvide.......................    48     President and Chief Executive Officer
John H. Blankey.....................    49     Executive Vice President and Chief Financial Officer
Eugene F. Sweeney...................    54     Executive Vice President--Operations
Andrew W. Brauninger................    50     Vice President--Offshore Division and President--Seabulk
                                               Offshore, Ltd.
Leo T. Carey........................    44     Vice President--Ship Management
Gene Douglas........................    49     Vice President--Legal & General Counsel and Secretary
William R. Ludt.....................    49     Vice President--Inland Services Division and President--Sun
                                               State Marine Services, Inc.
John J. O'Connell, Jr...............    53     Vice President--Corporate Communications
Robert A. Santos....................    64     Vice President--Offshore and Harbor Towing Operations
Christopher D. Strong...............    38     Treasurer
</TABLE>

(1)Donald L. Caldera, Executive Vice President -- Development of the Company
   since September 1993, will cease to serve in his position as an executive
   officer effective April 30, 1997.

     MR. HVIDE has been the  Company's  President  and Chief  Executive  Officer
since  January  1991.  From 1981 until 1991,  Mr. Hvide was  President and Chief
Operating Officer of the Company. He has been employed by the Company in various
capacities  since 1970 and became Vice  President in 1973. He is also a 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. Mr. Hvide is the son of Hans J. Hvide, the founder of the Company.

   MR. BLANKLEY has been Executive Vice President -- Chief Financial Officer
since September 1995. He previously served as a director and Chief Financial
Officer of Harris Chemical Group Inc., a chemical manufacturing company, from
April 1993 to August 1994. Mr. Blankley is the owner of Seafirst Capital, a ship
finance consulting business he founded in 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 container feeder
vessels.

   MR. SWEENEY has been Executive Vice President -- Operations of the Company
since September 1994. 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 sea-going and shore

                                                        16

<PAGE>



management  positions,  including  operations  manager of Texaco's  U.S.  tanker
fleet.  Mr. Sweeney is past President of the Chemical  Carriers  Association,  a
member of the Society of Naval  Architects and Marine  Engineers and served as a
member of a National  Academy of Sciences  Committee to study marine  navigation
and pilotage.

   MR. BRAUNINGER has been Vice President -- Offshore Division since March 1990
and the President of Seabulk Offshore, Ltd., the Company's offshore energy
support services subsidiary, since September 1994. He was Vice President of
Offshore Operations from May 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. 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. DOUGLAS has been Vice President -- Legal & General Counsel and Secretary
of the Company since 1975. He was an attorney with the Fort Lauderdale, Florida
law firm of Spear and Deuschle, P.A. prior to joining the Company. He has been
admitted to the Florida Bar since 1972 and is admitted to practice before
various federal courts. He is also a member of the American Bar Association, the
Maritime Law Association of the United States, and other professional
organizations.

   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 Vice
President of that association 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 on
Cost Control in the Federal Government from 1982 to 1984.

     MR.  SANTOS has been Vice  President  -- Towing  Operations  of the Company
since 1983.  Mr. Santos joined the Company as its Towing  Operations  Manager in
1962. He has served as a Commissioner of Florida's Board of Pilot Commissioners,
Chairman of the Escort Vessel  Subcommittee of the American Waterways  Operators
and as a member of various marine-related trade associations and boards.


                                                        17

<PAGE>



     MR.  STRONG has been  Treasurer  of the  Company  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.



                                                        18

<PAGE>



                                 PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

          Since August 9, 1996, the Class A Common Stock has been traded on the
Nasdaq National Market under the symbol "HMAR." The following table sets forth
the high and low sale prices per share of the Class A Common Stock as reported
by the Nasdaq National Market for each calendar quarter since the commencement
of trading.

                                                              HIGH         LOW
         1996
            Third Quarter (commencing August 9)...........  $  13 7/8  $  11
            Fourth Quarter................................     24 1/4     12 7/8
         1997
            First Quarter (through March 24)..............     28 5/8     18 1/4

         The Company 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, restrictions in
financing agreements, business conditions, and other factors. In addition, the
Company's ability to pay dividends or make distributions to its stockholders is
also restricted by the terms of the Credit Facility. As of March 24, 1997, there
were 65 holders of record of Class A Common Stock and 9 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
of the Company and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this report.

                                                        19

<PAGE>


<TABLE>
<CAPTION>

                                              SELECTED FINANCIAL DATA

                                                                           YEAR ENDED DECEMBER 31
                                                            1992       1993       1994        1995        1996
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                       <C>        <C>        <C>       <C>          <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
   Revenue.............................................   $ 39,639   $ 41,527   $ 49,792  $  70,562    $  109,356
                                                          --------   --------   --------  ---------    ----------
   Operating expenses..................................     24,602     24,032     29,873     40,664        63,777
   Overhead expenses...................................      6,778      6,176      9,581     12,518        14,979
   Depreciation and amortization.......................      4,106      4,735      4,500      6,308         9,830
                                                          --------   --------   --------  ---------    ----------
   Income from operations..............................      4,153      6,584      5,838     11,072        20,770
   Interest expense, net...............................      3,993      3,412      5,302     11,460        11,631
   Other income........................................          8        519         11         26           437
                                                          --------   --------   --------  ---------    ----------
   Income (loss) before provision for (benefit
     from) income taxes, extraordinary item
     and cumulative effect of a change in
     accounting principle..............................        168      3,691        547       (362)        9,576
   Provision for (benefit from) income
     taxes.............................................        158      1,873        189         (2)        3,543
                                                          --------   --------   --------  ---------    ----------
   Income (loss) before extraordinary item
     and cumulative effect of a change in
     accounting principle..............................         10      1,818        358       (360)        6,033
   Loss on extinguishment of debt, net(1)..............         --         --         --         --        (8,108)
   Cumulative effect of a change in
     accounting principle..............................         --      1,491         --         --            --
                                                          --------   --------   --------  ---------    ----------
   Net income (loss)...................................   $     10   $  3,309   $    358  $    (360)   $   (2,075)
                                                          ========   ========   ========  =========    ==========
EARNINGS (LOSS) PER COMMON SHARE:
     Income (loss) before extraordinary
       item and cumulative effect of a
       change in accounting principle..................   $  (0.01)  $   0.26   $   0.03  $   (0.14)   $     1.04
     Net income (loss)(2)..............................   $  (0.01)  $   0.50   $   0.03  $   (0.14)   $    (0.36)
                                                          ========   ========   ========  =========    ==========
     Weighted average number of common
       shares and common share equivalents
       outstanding(3)..................................      6,268      6,268      5,302      2,535         5,818
                                                          ========   ========   ========  =========    ==========
EARNINGS (LOSS) PER COMMON SHARE ASSUMING
   FULL DILUTION:
     Income (loss) before extraordinary item
       and cumulative effect of change in
       accounting principle(2).........................   $  (0.01)  $   0.26   $   0.06  $    0.12    $     0.99
     Net income (loss)(2)..............................   $  (0.01)  $   0.50   $   0.06  $    0.12    $    (0.23)
                                                          ========   ========   ========  =========    ==========
     Weighted average number of shares
       and common share equivalents
       outstanding(3)..................................      6,268      6,268      5,616      3,779         6,645
                                                          ========   ========   ========  =========    ==========
OTHER FINANCIAL DATA:
     EBITDA(4).........................................   $  8,259   $ 11,319   $ 10,338  $  17,380    $   30,600
</TABLE>



                                                         20

<PAGE>


<TABLE>
<CAPTION>

                                                                           YEAR ENDED DECEMBER 31
                                                            -------------------------------------
                                                              1992       1993       1994        1995       1996
                                                                               (IN THOUSANDS)
<S>                                                         <C>        <C>        <C>        <C>        <C>
NET CASH PROVIDED BY (USED IN):
   Operating activities...................................  $    (930) $  6,956   $  2,858   $  3,948   $  22,584
   Investing activities...................................     (1,592)   (2,247)   (39,815)   (8,066)     (84,354)
   Financing activities...................................     (2,473)   (6,158)    41,249        805      68,337
</TABLE>

<TABLE>
<CAPTION>

                                                                               AT DECEMBER 31
                                                            ---------------------------------
                                                              1992       1993       1994        1995       1996
                                                                          (IN THOUSANDS)
<S>                                                         <C>       <C>         <C>       <C>         <C>
BALANCE SHEET DATA:
   Working capital (deficit).............................   $     847  $  2,640   $  7,793   $  4,315   $  (8,704)
   Total assets..........................................      83,718    82,373    135,471    143,683     273,473
   Total debt............................................      57,011    51,273    104,281    109,051     141,642
   Stockholders' and minority partners'
     equity..............................................      15,858    19,926     14,903     13,999     101,989
</TABLE>

(1)Reflects the loss on the extinguishment of debt, net of applicable income
   taxes of $1,474,000.
(2)For the purposes of calculating earnings per share for the years 1992, 1993,
   and 1994, historical income available to common stockholders has been reduced
   for dividends on Class A Preferred Stock of $50,000, $203,000, and $222,000,
   respectively. The Class A Preferred Stock was redeemed on September 30, 1994.
(3)For the years 1992, 1993, and 1994, the weighted average number of common
   shares and common share equivalents assumes the conversion of the Class B
   Preferred Stock into shares of Common Stock. The Class B Preferred Stock was
   redeemed on September 30, 1994. For the years ended 1994, 1995, and 1996,
   shares outstanding assuming full dilution reflects the assumed conversion of
   a portion of the Junior Notes into shares of Common Stock. The Junior Notes
   were issued in September 1994 and converted into shares of Common Stock in
   September 1996.
(4)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 required by generally accepted accounting
   principles and 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.



                                                         21

<PAGE>



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.

HISTORICAL GROWTH

         Since September 1994, the Company's operations have expanded through a
series of consolidating acquisitions which aggregate 93 vessels. The following
table sets forth certain information with respect to these acquisitions.

<TABLE>
<CAPTION>
                                                          NUMBER OF              VESSELS             AGGREGATE
                                               PERIOD   TRANSACTIONS            ACQUIRED             INVESTMENT
<S>                                            <C>           <C>       <C>                       <C>
Offshore Energy Support....................    1994           5          6   supply boats        $  19.6 million
                                                                        20   crew boats
                                                                         2   utility boats
                                               1995           1          7   crew boats              5.9 million
                                               1996           7         12   supply boats           46.6 million(1)
                                                                        11   crew boats(2)
                                               1997           3          1   supply boat            10.3 million
                                                                         3   crew boats
Offshore and Harbor Towing.................    1994           1          1   tug                     1.8 million
                                               1995           1          1   tractor tug             6.4 million(3)
                                               1996           1          1   offshore tug            3.4 million
                                               1997                      2   harbor tugs             0.6 million
Chemical Transportation....................    1996           1          3   chemical carriers      64.7 million
Petroleum Product Transportation...........    1994           1         10   tugs                   13.9 million
                                                                         8   barges
                                               1995           1          5   barges                  0.1 million
</TABLE>

(1)Includes two vessels that are currently being upgraded, lengthened, and
   refurbished and are expected to enter service during the second quarter of
   1997. Aggregate investment includes the estimated cost of such upgrading,
   lengthening, and refurbishment.
(2)Includes nine vessels acquired under capital lease obligations.
(3) The Company operates the tractor tug pursuant to a long-term operating
    lease.




                                                         22

<PAGE>



PENDING ACQUISITIONS

         As of February 28, 1997, the Company had entered into agreements or
letters of intent for the acquisition or construction of 16 additional marine
support vessels. The following table sets forth certain information with respect
to these acquisitions.

<TABLE>
<CAPTION>
                                                                                   AREA OF
                                                               EXPECTED           INTENDED           AGGREGATE
          VESSELS                                              DELIVERY          DEPLOYMENT         INVESTMENT
<S>                                                         <C>               <C>                  <C>
Offshore Energy Support
   2 crew boats........................................      2nd Qtr. 1997    U.S. Gulf            $  3.6 million
   4 supply boats......................................      2nd Qtr. 1997    U.S. Gulf              21.8 million
   1 crew boat(1)......................................      2nd Qtr. 1997    U.S. Gulf               2.3 million(2)
   1 supply boat(1)....................................      4th Qtr. 1997    U.S. Gulf               7.5 million(2)
   5 crew boats(1).....................................      1998 and 1999    U.S. Gulf              13.0 million(2)
Offshore and Harbor Towing
   3 SDM(TM)s(1).......................................      1997 and 1998    Port Everglades        14.5 million
                                                                              Port Canaveral
</TABLE>

(1) Vessels to be constructed.
(2) Estimated cost of construction.


AREA OF OPERATIONS OVERVIEW

         The financial information presented below represents historical results
by major areas of operations. The historical financial data presented below
should be read in conjunction with the Company's consolidated financial
statements and notes thereto included elsewhere in this report.



                                                         23

<PAGE>


<TABLE>
<CAPTION>

                                                                                      YEAR ENDED DECEMBER 31,
                                                                                  1994        1995        1996
                                                                                --------    --------    ---------
<S>                                                                             <C>         <C>         <C>
Revenues:
   Marine support services:
     Offshore energy support.................................................   $  11,317   $  23,217   $  43,715
     Offshore and harbor towing..............................................      11,140      12,582      13,950
                                                                                ---------   ---------   ---------
                                                                                   22,457      35,799      57,665
   Marine transportation services:
     Chemical transportation.................................................      16,886      18,632      32,759
     Petroleum product transportation........................................      10,449      16,131      18,932
                                                                                ---------   ---------   ---------
                                                                                   27,335      34,763      51,691
                                                                                ---------   ---------   ---------
          Total revenues.....................................................      49,792      70,562     109,356
                                                                                ---------   ---------   ---------
   Operating expenses:
     Marine support services:
        Offshore energy support..............................................       7,017      13,335      22,525
        Offshore and harbor towing...........................................       5,568       6,001       7,480
                                                                                ---------   ---------   ---------
                                                                                   12,585      19,336      30,005
   Marine transportation services:
     Chemical transportation.................................................      10,698      11,105      20,976
     Petroleum product transportation........................................       6,590      10,223      12,796
                                                                                ---------   ---------   ---------
                                                                                   17,288      21,328      33,772
                                                                                ---------   ---------   ---------
          Total operating expenses...........................................      29,873      40,664      63,777
Direct overhead expenses:
   Marine support services:
     Offshore energy support.................................................       1,090       2,182       2,558
     Offshore and harbor towing..............................................         958       1,111       1,364
                                                                                ---------   ---------   ---------
                                                                                    2,048       3,293       3,922
   Marine transportation services:
     Chemical transportation.................................................         881       1,433       2,574
     Petroleum product transportation........................................         264         738         920
                                                                                ---------   ---------   ---------
                                                                                    1,145       2,171       3,494
                                                                                ---------   ---------   ---------
       Total direct overhead.................................................       3,193       5,464       7,416
                                                                                ---------   ---------   ---------
Fleet EBITDA(1):
   Marine support services:
     Offshore energy support.................................................       3,210       7,700      18,632
     Offshore and harbor towing..............................................       4,614       5,470       5,106
                                                                                ---------   ---------   ---------
                                                                                    7,824      13,170      23,738
   Marine transportation services:
     Chemical transportation.................................................       5,307       6,094       9,209
     Petroleum product transportation........................................       3,595       5,170       5,216
                                                                                ---------   ---------   ---------
                                                                                    8,902      11,264      14,425
                                                                                ---------   ---------   ---------
        Total fleet EBITDA(1)................................................      16,726      24,434      38,163
Corporate overhead expenses..................................................       6,388       7,054       7,563
                                                                                ---------   ---------   ---------
   EBITDA(1).................................................................      10,338      17,380      30,600
Depreciation and amortization expenses.......................................       4,500       6,308       9,830
                                                                                ---------   ---------   ---------
Income from Operations.......................................................   $   5,838   $  11,072   $  20,770
                                                                                =========   =========   =========
</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 required by generally accepted
    accounting principles and 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.

                                                         24

<PAGE>



REVENUE OVERVIEW

  MARINE SUPPORT SERVICES

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

         Offshore Energy Support. Revenue derived from the Company's offshore
energy support services 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 drilling, production, and
construction activities. Levels of offshore drilling, production, and
construction have increased over the past several years as a result of
fundamental changes in the U.S. Gulf of Mexico energy industry, including: (i)
improvements in exploration technologies, such as computer-aided exploration and
3-D seismic, that have increased drilling success rates in the region; (ii)
improvements in subsea completion and production technologies that have led to
increased deepwater drilling and development; and (iii) expansion of the
region's production infrastructure that has improved the economics of developing
smaller oil and gas fields. In addition, the short reserve life characteristics
of U.S. Gulf of Mexico gas production require continuous drilling to replace
reserves and maintain production. These higher overall activity levels have led
to increased demand for the Company's offshore energy support services and
higher overall vessel day rates and utilization in the U.S. Gulf of Mexico.
Contracts for the utilization of offshore service vessels commonly include
termination provisions with three- to five-day notice requirements and no
termination penalty. As a result, the operations of companies engaged in the
offshore energy service market 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>

                                                          1994                               1995
                                            ---------------------------------   ---------------------------------
                                              Q1       Q2       Q3       Q4       Q1      Q2       Q3        Q4
<S>                                         <C>      <C>      <C>      <C>       <C>     <C>      <C>      <C>
Number of supply boats at
   end of period.........................        5        7       7         8       10       10       10       10
Average supply boat day
   rates(1)..............................    $ 3,433  $ 3,035  $ 3,200  $ 3,060  $ 2,886  $ 2,843  $ 3,113  $ 3,244
Average supply boat
   utilization(2)........................       94%      73%     80%       90%      71%      76%       84%     93%
Number of crew boats at end
   of period(3)(4).......................       __       __      20        19       26       26       26       26
Average crew boat day
   rates(1)(3)...........................       __       __    $ 1,405  $ 1,435  $ 1,444  $ 1,412  $ 1,422  $ 1,458
Average crew boat
   utilization(2)(3).....................       __       __      87%       88%      79%      81%      90%      91%

</TABLE>


                                                         25

<PAGE>


<TABLE>
<CAPTION>
                                                          1996
                                                 Q1       Q2       Q3      Q4
<S>                                         <C>      <C>        <C>     <C>
Number of supply boats at
   end of period..........................       10       11       16      18
Average supply boat day
   rates(1)...............................   $ 3,468  $ 4,095   $ 5,034 $  5,776
Average supply boat
   utilization(2).........................       92%     100%     97%     90%
Number of crew boats at end
   of period(3)(4)........................       35       35       36      36
Average crew boat day
   rates(1)(3)............................    $ 1,460  $ 1,466   $ 1,528 $ 1,531
Average crew boat
   utilization(2)(3)......................       89%      93%     96%    96%
</TABLE>

(1)Average day rates are calculated based on vessels operating domestically by
   dividing total vessel revenue by the total number of days of vessel
   utilization.
(2)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.
(3)Excludes utility boats.
(4) The Company first began operating crew boats in July 1994.

         Management believes that the increased activity in the U.S. Gulf of
Mexico since the second quarter of 1995 has been primarily attributable to
improved technology in the seismic industry and an approximate balance in the
supply of and demand for offshore service vessels.

         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. The Company generally has maintained four to five tugs in Port Everglades,
and three each in Port Canaveral and Mobile, although it has shifted tugs among
ports depending upon demand. Since the August 1995 delivery of the tractor tug
Broward, the Company has operated up to five tugs in Port Everglades with one of
the tugs available to provide offshore towing services.

         The following table summarizes certain operating information for the
Company's tugs.

                                                   YEAR ENDED DECEMBER 31,
                                                 1994        1995       1996
                                              ---------   ---------   ------
Number of tugs at end of period(1).........        10          11          16(3)
Total ship docking tug jobs(2).............     8,740       9,233       9,034
Total offshore and harbor towing revenue
   (in thousands)..........................  $  11,140   $  12,582   $  13,951

(1)The Company's eleventh tug was delivered in August 1995.
(2)Excludes offshore towing operations.
(3)Includes four harbor tugs under bareboat charter agreements.

  MARINE TRANSPORTATION SERVICES

     Chemical   Transportation.   Generally,   demand  for  industrial  chemical
transportation  services coincides with overall economic  activity.  Since 1989,
revenue  derived  from  chemical  transportation  operations  has been  entirely
attributable to the operations of Ocean Specialty Tankers Corporation

                                                        26

<PAGE>



("OSTC"), a company owned equally by OMI Corp. ("OMI") and the Company until
August 1996, when the Company acquired OMI's interest in OSTC along with three
chemical carriers owned by OMI (the "OMI Chemical Carriers"). Prior to the
acquisition, the Company's chemical transportation revenue consisted of
distributions from OSTC attributable to the Company's two chemical carriers
marketed by OSTC based upon a formula that took into account individual vessel
performance characteristics applied to OSTC's revenue (net of fuel costs, port
charges, and overhead). Since the acquisition, the Company continues to have
OSTC market the five chemical carriers and receives the revenue attributable to
all five of the vessels.

         Petroleum Product Transportation. Since entering service in 1975, the
product carrier Seabulk Challenger has derived all of its revenue from
successive voyage and time charters to Shell. Under the current charter, fuel
and port costs are for the account of the charterer, charter hire escalates
based upon changes in the consumer price index, and charter hire is suspended
while the vessel is unavailable to transport cargo, as when it is undergoing
repairs or regularly scheduled maintenance. The charter extends to January 2000,
with the charterer retaining the right to early termination upon the payment to
the Company of a significant penalty. In the fourth quarter of 1996, the charter
rate was renegotiated and reduced by approximately 6% to reflect the lower
current market rate. 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 following table sets forth the average time charter equivalents for
the Company's chemical and product carriers, including the OMI Chemical Carriers
as if such vessels were owned by the Company during the periods presented.

                                                     YEAR ENDED DECEMBER 31,
                                                  1994        1995        1996
                                                --------    ---------   ------
Number of vessels........................          6            6           6
Time charter equivalents(1)..............      $ 24,751    $  25,629   $  25,276

(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.

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, charter hire, maintenance and repairs,
fuel, and insurance.

         The crews of Company-manned chemical and product carriers are paid on a
time-for-time basis by 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.

         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. In addition, the Company recently entered into
one-year charters of two newly built tugs. The Company also pays charter hire
when it charters harbor tugs to meet requirements in excess of its own tugs'
availability.

                                                        27

<PAGE>




         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 and vessel
maintenance and repair are capitalized only if they also 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,
offshore service vessels, and its four largest tugs are required to be drydocked
twice in a 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, 1994, 1995, and 1996, the Company dry docked 13, 42,
and 25 vessels, respectively, at an aggregate cost (exclusive of lost revenue)
of $1.6 million, $2.0 million, and $1.6 million respectively. See "Liquidity and
Capital Resources" for information regarding anticipated maintenance and
improvement expense, including drydocking expense. The Company accounts for its
drydocking costs under the deferral method. Under the deferral method,
capitalized drydocking costs are expensed over the period preceding the next
scheduled drydocking. See Note 1 of the Company's consolidated financial
statements. 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 a useful life ranging from 25 years for its
steel-hull offshore energy support vessels to 30 years for aluminum-hull
vessels, the lesser of any applicable lease term life or the OPA 90 life for its
product and chemical carriers, ten years for its fuel barges, and 40 years for
its towboats and tugs.

         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.

RESULTS OF OPERATIONS

   YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995

         Revenue. Revenue increased 55% to $109.4 million in 1996 from $70.6
million in 1995 primarily due to increased revenue in the Company's offshore
energy support and chemical transportation operations.

         Revenue from offshore energy operations increased 88% to $43.7 million
in 1996 from $23.2 million in 1995 primarily due to acquisitions and greater
utilization of supply and crew boats and higher day rates resulting from
increased offshore exploration and production activity. During 1996, day rates
for supply boats owned, operated, or managed by the Company increased 57% from
1995, and day rates for crew boats owned, operated, or managed by the Company
increased 7% from 1995. Utilization of supply boats increased to 94% for 1996
from 81% for 1995, and utilization of crew boats increased to 94% for 1996 from
85% for 1995.


                                                        28

<PAGE>



         Petroleum product transportation revenue increased 17% to $18.9 million
in 1996 from $16.1 million in 1995 primarily due to increased movements of
product by the Company's towboat and barge fleet.

         Chemical transportation revenue increased 76% to $32.8 million in 1996
from $18.6 million in 1995 primarily due to the August 1996 acquisition of the
OMI Chemical Carriers and the remaining 50% interest in OSTC.

         Revenue from offshore and harbor tug operations increased 11% to $14.0
million in 1996 from $12.6 million in 1995 primarily as a result of increased
tanker and freighter traffic in Port Everglades. Revenue also increased in the
port of Mobile due to a tariff increase and an increase in port traffic.

         Operating Expenses. Operating expenses increased 57% to $63.8 million
in 1996 from $40.7 million in 1995 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 remained stable at 58% for both 1996 and 1995.

         Overhead Expenses. Overhead expenses increased 20% to $15.0 million in
1996 from $12.5 million in 1995 primarily due to increased staffing requirements
due to acquisitions. As a percentage of revenue, overhead expenses decreased to
14% in 1996 from 18% in 1995.

         Depreciation and Amortization Expense. Depreciation and amortization
expense increased 56% to $9.8 million in 1996 compared with $6.3 million in 1995
as a result of an increase in fleet size due to acquisitions.

         Income from Operations. Income from operations increased 88% to $20.8
million, or 19% of revenue, in 1996 from $11.1 million, or 16% of revenue, in
1995 as a result of the factors noted above.

         Net Interest Expense. Net interest expense increased 1% to $11.6
million in 1996 from $11.5 million in 1995. As a percentage of revenue, net
interest expense decreased to 11% in 1996 from 16% in 1995.

         Net Income (Loss). The Company had a net loss of $2.1 million in 1996
after incurring a net loss of $0.4 million in 1995 primarily as a result of
non-recurring charges of $8.1 million, net of a $1.5 million income tax benefit,
related to an early extinguishment of debt in connection with the August 1996
initial public offering.

   YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED DECEMBER 31, 1994

         Revenue. Revenue increased 42% to $70.6 million in 1995 compared with
$49.8 million in 1994 primarily due to the Company's purchase of new businesses
and additional vessels.

         Offshore energy operations showed a 105% increase in revenue in 1995
primarily due to the acquisition of additional supply and crew boats. Although
revenue increased, the utilization of supply boats decreased to 81% in 1995 from
84% in 1994 and the utilization of crew boats decreased to 85% in 1995 from 88%
in 1994 due primarily to the relatively warm winter in early 1995, which caused
a decline in oil and gas prices thereby reducing exploration and production
activities. There was a 5% decrease in

                                                        29

<PAGE>



average day rates for the Company's supply boats in 1995 from 1994, while
average day rates for the Company's crew boats remained relatively stable.

         Chemical transportation revenue increased 10% in 1995 primarily due to
fewer off-hire (out-of- service) days incurred by the Seabulk Magnachem in 1995
following its regularly scheduled drydocking in 1994.

         Revenue from petroleum product transportation increased 54% in 1995
primarily due to a full year of operating results for the Sun State tug and
barge fleet, which was acquired in September 1994.

         Revenue from offshore and harbor tug operations increased 13% to $12.6
million in 1995 from $11.1 million in 1994 primarily due to an increase in
overall traffic in the ports served by the Company.

         Operating Expenses. Operating expenses increased 36% to $40.7 million
in 1995 from $29.9 million in 1994 primarily due to increased operating expenses
associated with acquisitions, although operating expenses decreased as a
percentage of revenues to 58% in 1995 from 60% in 1994.

         Overhead Expenses. Overhead expenses increased 31% to $12.5 million in
1995 compared with $9.6 million in 1994 primarily due to increases in staffing,
certain benefits, and insurance expenses directly related to new business
acquisitions. Also, in addition to paying discretionary performance bonuses in
April 1995 which were, in part, related to prior periods, an accrual of $400,000
was made at year end for 1995 performance bonuses. As a percentage of revenues,
overhead expenses decreased to 18% in 1995 from 19% in 1994.

         Depreciation and Amortization. Depreciation and amortization expense
increased 40% to $6.3 million in 1995 compared with $4.5 million in 1994
primarily due to an increase in fleet size as a result of acquisitions.

         Income from Operations. Income from operations increased 90% to $11.1
million, or 16% of revenue, in 1995 compared with $5.8 million, or 12% of
revenue, in 1994. This increase was a result of a substantial increase in income
from operations from the Company's offshore energy segment and an increase in
the Company's fuel energy segment that were mainly the result of acquisitions.
Harbor towing achieved an increase in income from operations of 25% over 1994 as
a result of an overall increase in traffic in Mobile, Port Canaveral, and Port
Everglades.

         Net Interest Expense. Net interest expense increased 116% to $11.5
million, or 16% of revenue, in 1995 compared with $5.3 million, or 11% of
revenue, in 1994 primarily due to interest on debt incurred in the last quarter
of 1994 to finance acquisitions.

         Net Income (Loss). The Company had a net loss of $0.4 million in 1995
compared with net income of $0.4 million in 1994, primarily due to an increase
in financing costs incurred in connection with acquisitions completed in 1994
and the other factors noted above.


                                                        30

<PAGE>



SEASONALITY

         The Company has experienced some slight seasonality in its overall
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

         The Company's capital requirements historically have arisen primarily
from its working capital needs, acquisition of marine vessels, improvements to
vessels, and debt service requirements. The Company's principal sources of cash
have been borrowings, cash provided by operating activities, proceeds from the
August 1996 initial public offering (the "IPO"), and proceeds from the second
public offering (the "Second Offering") in January 1997.

         In September 1994, the Company entered into a credit agreement (the
"Credit Facility") which, as amended, currently provides for a $60.5 million
term loan, a $10.0 million revolving line of credit, a $19.9 million vessel
acquisition credit line which decreases to $11.5 million over a four-year
period, and a $5.6 million letter of credit. Borrowings under the Credit
Facility bear interest at prime or LIBOR, at the Company's option, plus a margin
based on the Company's compliance with certain financial ratios. At December 31,
1996, borrowings outstanding under the Credit Facility aggregated $76.2 million,
consisting of $58.5 million under the term loan, $8.0 million under the
revolving line of credit, and $9.7 million under the vessel acquisition credit
line.

         Also in September 1994, the Company received $50.0 million in proceeds
from the issuance of Senior Notes, Junior Notes, and certain equity securities
to members of a group of investors. These proceeds, together with borrowings
under the Credit Facility, were utilized primarily to repay other indebtedness
and to fund vessel acquisitions.

         In August 1996, the Company completed the IPO, which resulted in net
proceeds to the Company of approximately $76.7 million. Of such net proceeds,
approximately $34.7 million was used to fund the $35.5 million cash portion of
the $97.5 million aggregate purchase price of three chemical carriers, 10 supply
boats and one crew boat (the "August 1996 Acquisitions") and approximately $42.0
million was used to repay certain indebtedness. The balance of the purchase
price of the August 1996 Acquisitions was paid by the assumption or incurrence
of $62.0 million of debt obligations. In addition, the Company agreed to
indemnify certain affiliates of one of the sellers for certain liabilities up to
a maximum of $7.0 million. Indebtedness repaid with proceeds from the IPO
included $7.0 million under the Credit Facility, $15.8 million of accrued
interest and principal under the Senior Notes, $15.1 million of accrued interest
and principal under the Junior Notes, and $4.1 million under certain notes
payable to affiliates of the Company. The $13.9 million balance of the
outstanding principal under the Junior Notes was converted into Class A Common
Stock and Class B Common Stock in September 1996. As of December 31, 1996, $10.1
million of accrued interest and principal under the Senior Notes was
outstanding.

         In January 1997, the Company completed the Second Offering, which
resulted in net proceeds to the Company of approximately $94.3 million. Of such
amount, approximately $10.2 million was used to repay remaining principal of and
interest on the Senior Notes, approximately $23.4 million was used to repay
amounts outstanding under the Credit Facility, and $2.6 million was used to
repay other indebtedness. Of the balance of approximately $58.1 million, as of
March 15, 1997, $5.5 million had been used to fund vessel acquisitions, $22.7
million has been designated to fund the reminder of the purchase

                                                        31

<PAGE>



price of four supply boats and two crew boats to be acquired in the second
quarter of 1997, $6.9 million has been designated to fund the refurbishment and
lengthening of two supply boats expected to be put into service during the
second quarter of 1997 and the remaining $23.0 million is available for general
corporate purposes and to fund a portion of the costs of the vessels to be
constructed.

         The Company's future capital needs are expected to relate primarily to
debt service obligations, maintenance and improvement of its fleet, and
acquisitions. The Company's outstanding indebtedness at December 31, 1996 was
approximately $141.6 million. After giving effect to repayments of an aggregate
of $36.2 million of indebtedness in January and February 1997 with a portion of
the proceeds of the Second Offering, the Company's principal and interest
payment obligations for 1997 are estimated to be approximately $17.8 and $7.9
million, respectively, and operating lease obligations for 1997 are estimated to
be approximately $3.9 million.

         Capital requirements for vessel improvements were approximately $13.1
million during 1996 which had been recorded as either vessel improvements or
construction in progress as of December 31, 1996, and are estimated to be
approximately $17.3 million for 1997.

         The Company has contracted for the construction of three SDM(TM)s at an
estimated aggregate cost of approximately $14.5 million with delivery expected
in late 1997 or early 1998. The Company is also considering the construction of
five double-hull barges at an estimated aggregate cost of approximately $9.0
million. The decision to proceed with the construction of these barges will be
based upon successful completion of negotiations of long-term contracts with a
customer concerning use of these vessels. These negotiations are in a
preliminary stage and there can be no assurance that the construction of these
barges will be undertaken. The Company has contracted for the construction of
one supply boat for delivery by the end of 1997 at a cost of $7.5 million. The
Company has also agreed to purchase for an estimated aggregate cost of $15.3
million six newly constructed 152-foot crew boats one of which is scheduled for
delivery in the second quarter of 1997 and the remainder in 1998 and 1999. The
Company currently intends to fund the aggregate cost of these SDM(TM)s, these
crew boats and supply boat, and, if built, these barges from available working
capital, borrowings under the Credit Facility, lease financing, or a combination
of such sources.

         The Company has a 2.4% equity interest in five 45,300 dwt double-hull
petroleum product carriers currently under construction. The aggregate cost of
the five carriers is estimated to be $255.0 million, of which approximately
$40.0 million will constitute equity investment and $215.0 million will be
financed with the proceeds of government-guaranteed Title XI ship financing
bonds issued in March 1996. Subject to certain conditions, the Company has an
option, exercisable through 2002, to purchase a 49.2% interest at a price equal
to (i) the investor's equity investment plus a stated annual return, or (ii) if
exercised after December 31, 1997, the greater of the fair market value of the
interest or the amount set forth in (I). The Company also has an option,
exercisable on January 15, 1998, to purchase an additional 23.4% interest at a
price equal to the investor's equity investment plus a stated return. Should the
Company fail to exercise the latter option, the investor has the option to
acquire 1.6% of the ownership interest from the Company for nominal
consideration. The total estimated cost of exercising the Company's options is
up to $32.0 million (assuming the options are exercised prior to January 1,
1998). The Company currently has no understandings or agreements with respect to
the financing that it would require if it were to exercise either or both of
these options, and there can be no assurance that such financing will be
available.

         The Company is the defendant in litigation in which one of the
shipyards that completed the Seabulk America is seeking additional payments
aggregating $8.5 million for its work and $10.0 million of punitive

                                                        32

<PAGE>



damages, plus legal fees and expenses. Although the Company believes the
shipyard's claims are without merit and has asserted counterclaims aggregating
$5.6 million, the Company has obtained a bank letter of credit to finance up to
$5.6 million of any additional payment that it might ultimately be required to
make pursuant to this litigation.

         The Company believes that the remaining proceeds of the Second
Offering, cash generated from operations, and amounts available under the Credit
Facility will be sufficient to fund debt service requirements, planned capital
expenditures, and working capital requirements for the foreseeable future. The
Company also believes that such resources, together with the potential future
use of debt or equity financing, will allow the Company to pursue its strategy
of growth through acquisitions. However, since future cash flows are subject to
a number of uncertainties, including the condition of the markets served by the
Company, there can be no assurance that these resources will continue to be
sufficient to fund the Company's cash requirements.

EFFECT 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. In some cases, these increases have been offset by charter hire
escalation clauses.

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

                                                        33

<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 1997 Annual Meeting of Stockholders 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.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

          Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and persons who own more
than ten percent of the Company's Common Stock, to file with the Securities and
Exchange Commission and the NASD National Market initial reports of ownership
and reports of changes in ownership of Common Stock of the Company. Officers,
directors, and greater than ten percent shareholders are required by Securities
and Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.

     Specific due dates for these reports have been established, and the Company
is  required  to  disclose  in this Form 10-K any failure to file by these dates
during 1996. To the Company's knowledge,  based solely on a review of the copies
of such reports furnished to the Company, the Company believes that Form 3s were
not timely filed on August 8, 1996 by reporting  persons to report their initial
ownership of common stock and derivative  securities.  Form 3s for the following
reporting  persons  were filed on August 23, 1996 and  amended on  November  12,
1996: J. Erik Hvide,  Hvide Family Trust I, Arthur E. Bailey,  John H. Blankley,
Andrew W. Brauninger,  Donald L. Caldera,  Robert B. Calhoun, Jr., Gene Douglas,
Gerald Farmer, Jean Fitzgerald, John J. Krumenacker,  John Lee, William R. Ludt,
Walter Mink,  Robert Rice, Robert A. Santos,  Eugene F. Sweeney,  and Raymond B.
Vickers.  Form 3s for the following  reporting  persons were filed on August 23,
1996: Clipper/Merchant HMI, L.P., Clipper/Merban,  L.P., Clipper/Park HMI, L.P.,
Clipper/Hercules,  L.P.,  Clipper  Capital  Associates,  L.P.,  Clipper  Capital
Associates,  Inc., Metropolitan Life Insurance Company,  Olympus Growth Fund II,
L.P., OGF II, L.P.,  Robert S. Morris,  Louis J. Mischianti and James A. Conroy.
Form 3s for the  following  reporting  persons  were filed on August  29,  1996:
Robert B. Calhoun,  Jr. and John Lee. The Company believes that all other filing
requirements applicable to its Reporting Persons were complied with.

ITEM 11.  EXECUTIVE COMPENSATION.

          The information required by Item 11 is contained in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders 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 1997 Annual Meeting of Stockholders under the caption
"Common Stock Ownership of Certain Beneficial Owners and Management," and is
incorporated herein by reference.



                                                        34

<PAGE>



ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

          The information required by Item 13 is contained in the Company's
Proxy Statement for the 1997 Annual Meeting of Stockholders under the caption
"Compensation Committee Interlocks and Insider Participation and Certain
Transactions," and is incorporated herein by reference.

                                  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, 1995 and 1996
         Consolidated Statements of Operations for the Years Ended December 31,
              1994, 1995 and 1996
         Consolidated Statements of Stockholders' Equity for
         the Years Ended December 31, 1994, 1995
              and 1996
         Consolidated Statements of Cash Flows for the Years Ended December
              31, 1994, 1995 and 1996
         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 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.(5)
 3.2       Bylaws of the Company, as amended.(5)
 4.1       Form of Class A Common Stock Certificate (Domestic).(5)
 4.2       Form of Class A Common Stock Certificate (Foreign).(5)
10.1       Non-Compete Agreement, between the Company and Hans J. Hvide, dated
           September 28, 1994.(2)
10.2       Consulting Agreement between Sun State Marine Services, Inc. and
           Frank V. Oliver, Jr., dated September 30, 1994.(2)
10.3       Equity Ownership Plan.(6)
10.4       Stock Option Plan for Directors.(6)
10.4.1     1996 Employee Stock Purchase Plan.(6)
10.4.2     Equity Ownership Plan.(5)

                                                        35

<PAGE>



10.4.3     Retirement Plan and Trust. (7)
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.(1)
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.(1)
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.(1)
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.(1)
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.(1)
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.(1)
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.(1)
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.(1)
10.14      Franchise Agreement, dated as of January 8, 1975, by and between
           Canaveral Port Authority and Port Everglades Towing, Inc.(1)
10.15      Non-Exclusive Franchise Agreement, dated as of March 7, 1991, by and
           between Port Everglades Authority and Hvide Shipping,
           Incorporated.(1)
10.16*     Contract for Fuel Transportation, dated as of February 18, 1993, by
           and between Florida Power & Light Company and Sun State Marine,
           Incorporated.(1)
10.17      Sale and Purchase Agreement between the Company and certain officers,
           directors and employees relating to the purchase of partnership
           interests, dated September 30, 1994.(2)
10.18      Post-Retirement Benefits Agreement between the Company and Hans J.
           Hvide, dated September 28, 1994.(2)
10.19      Junior Subordinated Note and Common Stock Purchase Agreement dated
           September 30, 1994.(2)
10.20      Senior Subordinated Note and Common Stock Purchase Agreement dated
           September 30, 1994.(2)
10.21      Letter of Credit Agreement, dated as of September 29, 1994, between
           Hvide Shipping, Inc. and Bank of Boston.(2)
10.22      Credit Agreement, dated as of September 28, 1994, among Hvide Marine
           Incorporated, Citibank, N.A., The First National Bank of Boston,
           and Citibank, N.A.(2)
10.22(a)   Amendment No. 1 dated as of May 15, 1995, to the Credit Agreement
           dated as of September 28, 1994, by and among Hvide Marine
           Incorporated, Citibank, N.A., The First National Bank of
           Boston, and others.(2)
10.22(b)   Amendment No. 2 dated as of March 26, 1996, to the Credit Agreement
           dated as of September 28, 1994, by and among Hvide Marine
           Incorporated, Citibank, N.A., The First National Bank
           of Boston, and others.(2)
10.22(c)   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.(5)
10.22(d)   Amended and Restated Credit Agreement dated as of February 3, 1997.
10.26      Amendment No. 2 to Charter of Seabulk Magnachem.(2)

                                                        36

<PAGE>



10.27      Form of Recapitalization Agreement among Hvide Corp., Hvide Marine
           Incorporated, the Junior Subordinated Noteholders, the Senior
           Subordinated Noteholders, J. Erik Hvide, and certain
           trusts.(5)
10.28      Form of Registration Rights Agreement by and between Hvide Marine
           Incorporated and certain shareholders.(5)
10.29      Form of Agreement Among Shareholders among certain shareholders.(5)
10.30      Form of Amended and Restated Contingent Share Issuance Agreement
           among Hvide Marine Incorporated and certain purchasers.(5)
11         Computation of Earnings (Loss) per Share
21         List of Subsidiaries.(4)
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  Registration  Statement on Form S-1
     (Registration No. 33-78166) filed with the Commission on April 26, 1994.

(2)  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.

(3)  Incorporated  herein  by  reference  to  Amendment  No.  2 to  Registration
     Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
     on May 13, 1996.

(4)  Incorporated  herein  by  reference  to  Amendment  No.  3 to  Registration
     Statement on Form S-1 (Registration No. 33-78166) filed with the Commission
     on July 11, 1996.

(5)  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.

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

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


                                                        37

<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 28, 1997
--------------------------------------
            J. Erik Hvide                       President, Chief Executive
                                                  Officer and Director
                                              (principal executive officer)

        /s/ JOHN H. BLANKLEY                    Executive Vice                            March 28, 1997
--------------------------------------
          John H. Blankley                     President -- Chief Financial
                                                   Officer and Director
                                               (principal financial officer)

        /s/ DONALD L. CALDERA                   Executive Vice President and               March 28, 1997
--------------------------------------
          Donald L. Caldera                             Director

       /s/ JOHN J. KRUMENACKER                  Controller (principal accounting            March 28, 1997
         John J. Krumenacker                       officer)

        /s/ EUGENE F. SWEENEY                   Executive Vice President and                March 28, 1997
--------------------------------------
          Eugene F. Sweeney                              Director


         /s/ ROBERT B. CALHOUN, JR.                      Director                           March 28, 1997
       Robert B. Calhoun, Jr.

                                                         Director                           March   , 1997
            Gerald Farmer

         /s/ JEAN FITZGERALD                             Director                           March 28, 1997
           Jean Fitzgerald

           /s/ JOHN J. LEE                               Director                           March 31, 1997
              John Lee

         /s/ WALTER C. MINK                              Director                           March 28, 1997
--------------------------------------
           Walter C. Mink

           /s/ ROBERT RICE                               Director                           March 28, 1997
             Robert Rice

       /s/ RAYMOND B. VICKERS                            Director                           March 28, 1997
--------------------------------------
         Raymond B. Vickers
</TABLE>

                                                        38

<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, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.


                                                       ERNST & YOUNG LLP

Miami, Florida
February 20, 1997, except the eighth paragraph of Note 3, as to which the date
   is March 25, 1997



                                                        F-1

<PAGE>



                 HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS
                                                               DECEMBER 31
                                                             1995       1996
                                                           (IN THOUSANDS EXCEPT
                                                              SHARE AMOUNTS)
                                 ASSETS
Current assets:
   Cash and cash equivalents............................   $  3,050   $  9,617
   Accounts receivable:
     Trade, net.........................................      9,602     16,049
     Insurance claims and other.........................      4,399      1,717
   Due from affiliate...................................        101         --
   Spare parts and supplies.............................      3,417      5,517
   Prepaid expenses.....................................        960      1,253
   Deferred costs (net).................................      2,550      4,173
                                                           --------   --------
     Total current assets...............................     24,079     38,326
Property:
   Construction in progress.............................      1,387      8,041
   Vessels and improvements.............................    122,198    229,776
     Less accumulated depreciation......................    (20,585)   (27,480)
   Furniture and equipment..............................      2,601      4,502
     Less accumulated depreciation......................       (998)    (1,409)
                                                           --------   --------
     Net property.......................................    104,603    213,430
Other assets:
   Deferred costs (net).................................      4,112      4,645
   Due from affiliates..................................        131         49
   Investment in affiliates.............................        423      1,291
   Goodwill (net).......................................      9,117      8,612
   Long-term receivable (net)...........................        831         59
   Deposits and other...................................        387      7,061
                                                           --------   --------
     Total other assets.................................     15,001     21,717
                                                           --------   --------
     Total..............................................   $143,683   $273,473
                                                           ========   ========
                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current maturities of long-term debt................   $   7,708  $  24,375
   Current obligations under capital leases............         577      1,443
   Accounts payable....................................       4,905      6,278
   Charter hire and other liabilities..................       6,574     14,934
                                                          ---------  ---------
     Total current liabilities.........................      19,764     47,030
Long-term liabilities:
   Long-term debt......................................      96,014    108,154
   Notes payable to related parties....................       1,302        178
   Obligations under capital leases....................       3,450      7,492
   Due to charterer....................................         547        831
   Deferred income taxes...............................       4,317      6,385
   Other...............................................       4,290      1,414
                                                          ---------  ---------
     Total long-term liabilities.......................     109,920    124,454
                                                          ---------  ---------
     Total liabilities.................................     129,684    171,484
Minority partners' equity in subsidiaries..............       1,654        898
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,
     0 and 7,647,791...................................          --          8
   Class B Common Stock--$.001 par value, authorized
     5,000,000 shares
     issued and outstanding, 1,558,210 and 3,419,577...           1          3
   Class C Common Stock--$.001 par value, authorized
     2,500,000 shares, issued and outstanding,
     976,630, and 0....................................           1         --
   Additional paid-in capital..........................       6,341     97,153
   Retained earnings...................................       6,002      3,927
                                                          ---------  ---------
       Total stockholders' equity......................      12,345    101,091
                                                          ---------  ---------
       Total minority partners' equity in
         subsidiaries and stockholders' equity.........      13,999    101,989
                                                          ---------  ---------
       Total...........................................   $ 143,683  $ 273,473
                                                          =========  =========

                   See notes to consolidated financial statements


                                         F-2

<PAGE>



                  HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                  1994        1995        1996
                                                                                ---------  ----------  -------
                                                                                        (IN THOUSANDS, EXCEPT
                                                                                           PER SHARE DATA)
<S>                                                                             <C>         <C>        <C>
Revenues.....................................................................   $  49,792   $ 70,562   $ 109,356
Operating expenses:
   Crew payroll and benefits.................................................      13,510     20,132      29,756
   Charter hire and bond guarantee fee.......................................       5,013      4,063       4,667
   Repairs and maintenance...................................................       3,847      5,347       8,984
   Insurance.................................................................       2,991      4,547       7,633
   Consumables...............................................................       2,237      3,395       6,643
   Other.....................................................................       2,275      3,180       6,094
                                                                                ---------   --------   ---------
     Total operating expenses................................................      29,873     40,664      63,777
Selling, general and administrative expenses:
   Salaries and benefits.....................................................       4,649      6,856       7,936
   Office expenses...........................................................         819      1,068       1,394
   Professional fees.........................................................       2,645      2,137       2,947
   Other.....................................................................       1,468      2,457       2,702
                                                                                ---------   --------   ---------
     Total overhead expenses.................................................       9,581     12,518      14,979
Depreciation and amortization................................................       4,500      6,308       9,830
                                                                                ---------   --------   ---------
Income from operations.......................................................       5,838     11,072      20,770
Interest:
   Interest expense..........................................................       5,614     11,748      11,908
   Interest income...........................................................        (312)      (288)       (277)
                                                                                ---------   --------   ---------
     Net interest............................................................       5,302     11,460      11,631
Other income (expense):
   Minority interest and equity in earnings of subsidiaries..................        (115)       137         894
   Other.....................................................................         126       (111)       (457)
                                                                                ---------   --------   ---------
     Total other income (expense)............................................          11         26         437
                                                                                ---------   --------   ---------
Income (loss) before provision for (benefit from) income
   taxes and extraordinary item..............................................         547       (362)      9,576
Provision for (benefit from) income taxes....................................         189         (2)      3,543
                                                                                ---------   --------   ---------
Income (loss) before extraordinary item......................................         358       (360)      6,033
                                                                                ---------   --------   ---------
Loss on early extinguishment of debt, net of applicable
   income taxes of $1,474....................................................          --         --       8,108
                                                                                ---------   --------   ---------
     Net income (loss).......................................................   $     358   $   (360)  $  (2,075)
                                                                                =========   ========   =========

Earnings (loss) per common and common equivalent share:
Income (loss) applicable to common shares before
   extraordinary item........................................................   $    0.03   $  (0.14)  $    1.04
Loss on early extinguishment of debt.........................................          --         --       (1.40)
                                                                                ---------   --------   ---------
     Net income (loss) applicable to common shares...........................   $    0.03   $  (0.14)  $   (0.36)
                                                                                =========   ========   =========
Earnings (loss) per common share--assuming full dilution:
Income applicable to common shares before
   extraordinary item........................................................   $    0.06   $   0.12   $    0.99
Loss on early extinguishment of debt.........................................          --         --       (1.22)
                                                                                ---------   --------   ---------
     Net income (loss) applicable to common shares...........................   $    0.06   $   0.12   $   (0.23)
                                                                                =========   ========   =========

Weighted average common and common equivalent
   shares outstanding........................................................   $   5,302   $  2,535   $   5,818
                                                                                =========   ========   =========

Weighted average common shares outstanding
   assuming full dilution....................................................   $   5,616   $  3,779   $   6,645
                                                                                =========   ========   =========
</TABLE>

               See notes to consolidated financial statements

                                                         F-3

<PAGE>


                    HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>

                          11%      5%           CLASS A               CLASS B              CLASS C
                        CLASS A  CLASS B      COMMON STOCK         COMMON STOCK         COMMON STOCK  ADDITIONAL
                       PREFERRED PREFERRED                                                              PAID-IN  RETAINED
                         STOCK    STOCK      SHARE     AMOUNT   SHARE        AMOUNT   SHARE     AMOUNT  CAPITAL  EARNINGS  TOTAL
                                                                  (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<S>                     <C>      <C>       <C>         <C>      <C>          <C>     <C>        <C>    <C>     <C>       <C>
Balance at January 1,
 1994.................  $ 2,669  $3,266            --  $   --     1,105,692  $    1   663,415   $  1   $ 1,025  $ 6,389  $ 13,351
Net income............       --      --            --      --            --      --        --     --        --      358       358
Common stock issued, net
 of issuance costs....       --      --            --      --       452,518      --   313,215     --     8,640       --     8,640
Redemption of preferred
 stock................   (2,669) (3,266)           --      --            --      --        --     --    (1,350)      --    (7,285)
Acquisition of limited
 partnership interests       --      --            --      --            --      --        --     --    (1,974)      --    (1,974)
Preferred stock cash
 dividends............       --      --            --      --            --      --        --                      (385)     (385)
                        -------  ------   -----------  ------   -----------  ------   -------   ----   -------  -------  --------
Balance at December 31,
 1994.................       --      --            --      --     1,558,210       1   976,630      1     6,341    6,362    12,705
Net loss..............       --      --            --      --            --      --        --     --        --     (360)     (360)
                        -------  ------   -----------  ------   -----------  ------   -------   ----   -------  -------  --------
Balance at December 31,
 1995.................       --      --            --      --     1,558,210       1   976,630      1     6,341    6,002    12,345
Net loss..............       --      --            --      --            --      --        --     --        --   (2,075)   (2,075)
Common Stock issued, net
 of issuance costs....       --      --     7,647,791       8     1,861,367       2   (976,630)    (1)   90,812       --    90,821
                        -------  ------   -----------  ------   -----------  ------   --------   ----   -------  -------  --------
Balance at December 31,
 1996.................  $    --  $   --     7,647,791  $    8     3,419,577  $    3        --   $ --   $97,153  $ 3,927  $101,091
                        =======  ======   ===========  ======   ===========  ======   =======   ====   =======  =======  ========
</TABLE>










                         See notes to consolidated financial statements.


                                                                F-4

<PAGE>



                 HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                      YEAR ENDED DECEMBER 31,
                                                                                   1994       1995       1996
                                                                                 --------   --------   ------
                                                                                         (IN THOUSANDS)
<S>                                                                             <C>       <C>        <C>
OTHER ACTIVITIES:
   Net Income (loss).........................................................   $    358  $    (360) $   (2,075)
   ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED BY OPERATING
    ACTIVITIES:
     Loss on early extinguishment of debt, net...............................         --         --       8,108
     Depreciation and amortization...........................................      4,500      6,308       9,830
     Provision for bad debts.................................................         --        114         125
     Gain on disposals of property...........................................         --        (73)        (13)
     Amortization of discount on long-term debt..............................         52        201         162
     Provision for (benefit from) deferred taxes.............................        189         (2)      3,543
     Minority partners' equity in earnings (losses) of subsidiaries, net.....        184       (625)       (756)
     Undistributed (earnings) losses of affiliates, net......................        (69)       488        (132)
     Other non-cash items....................................................         --         --          36
     Changes in operating assets and liabilities, net of effect of acquisitions:
        Accounts receivable..................................................     (4,574)    (5,056)     (1,928)
        Due from affiliates..................................................       (235)      (394)        182
        Other assets.........................................................     (1,622)    (1,317)        897
        Accounts payable and other liabilities...............................      4,075      4,664       4,605
                                                                                --------  ---------  ----------
Net cash provided by operating activities....................................      2,858      3,948      22,584
INVESTING ACTIVITIES:
   Purchase of property......................................................     (5,672)    (6,312)     (8,759)
   Deposits for the purchase of property.....................................         --         --      (6,349)
   Proceeds from disposals of property.......................................         --        690           8
   Capital contribution to affiliates........................................         --         --        (736)
     Deposits of funds in escrow.............................................       (500)        --          --
   Acquisitions, net of cash acquired of $106 in 1994, net of $500
     escrow deposit utilized in 1995 and net of cash acquired of
     $1,722 in 1996..........................................................    (33,643)    (2,444)    (68,518)
                                                                                --------  ---------  ----------
Net cash used in investing activities........................................    (39,815)    (8,066)    (84,354)
FINANCING ACTIVITIES:
   Proceeds of lines of credit, net..........................................         --      7,500       1,994
   Proceeds from long-term debt..............................................     90,580         --      36,964
   Proceeds from issuance of common stock, net...............................      8,640         --      76,595
   Principal payments of long-term debt......................................    (51,700)    (5,458)    (44,819)
   Payment of financing costs................................................     (3,478)      (727)       (838)
   Payment of obligations under capital leases...............................        (34)      (510)     (1,189)
   Payment of notes payable to related parties...............................         --         --        (370)
   Payment of dividends......................................................       (385)        --          --
   Redemption of preferred stock.............................................     (2,374)        --          --
                                                                                --------  ---------  ----------
Net cash provided by financing activities....................................     41,249        805      68,337
                                                                                --------  ---------  ----------
Increase (decrease) in cash and cash equivalents.............................      4,292     (3,313)      6,567
Cash and cash equivalents at beginning of period.............................      2,071      6,363       3,050
                                                                                --------  ---------  ----------
Cash and equivalents at end of period........................................   $  6,363  $   3,050  $    9,617
                                                                                ========  =========  ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Net assets recorded in connection with dissolution to affiliate..............   $     --  $     341  $       --
                                                                                ========  =========  ==========
Notes payable and notes payable to related parties issued for the
   acquisition of vessels....................................................   $  2,149  $   3,000  $      675
                                                                                ========  =========  ==========
Capital lease obligations for the acquisition of vessels and
   equipment.................................................................   $  4,534  $      --  $    6,098
                                                                                ========  =========  ==========
Note payable issued for the acquisition of minority interest.................   $  3,039  $      --  $       --
                                                                                ========  =========  ==========
Note payable issued and other liabilities incurred in conjunction with
   the redemption of preferred stock.........................................   $  4,911  $      --  $       --
                                                                                ========  =========  ==========
Liabilities assumed for the acquisition of vessels (see Note 3)..............   $    279  $      --  $   34,650
                                                                                ========  =========  ==========
Common stock issued for the redemption of notes payable to related
   parties...................................................................   $     --  $      --  $      307
                                                                                ========  =========  ==========
Common stock issued for the repayment of debt...............................   $     --  $      --  $   13,883
                                                                                ========  =========  ==========
</TABLE>

                 See notes to consolidated financial statements


                                                        F-5

<PAGE>



                    HVIDE MARINE INCORPORATED AND SUBSIDIARIES

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               DECEMBER 31, 1995 AND 1996

1.  SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

         Organization and Basis of Consolidation. Hvide Marine Incorporated
("HMI" and the "Company") was incorporated in the state of Florida on September
28, 1994 as the holding company for the former Hvide Marine Incorporated and its
majority-owned subsidiaries (the "Predecessor Company"). On September 30, 1994,
100% of the Common Stock of the Predecessor Company was exchanged for common
stock of HMI and accounted for in a manner similar to a pooling of interests.
Accordingly, the accompanying consolidated financial statements include the
combined successor/predecessor companies for all periods subsequent to September
30, 1994 and the Predecessor Company for all periods prior to September 30,
1994. All share and per share amounts have been adjusted to give retroactive
effect to the capital structure of HMI. All material intercompany transactions
and balances have been eliminated in the consolidated financial statements.
Investments in limited partnerships and less-than-majority-owned subsidiaries
are accounted for on the equity method.

         On August 14, 1996, the Company completed the initial public offering
(the "IPO") of 7,000,000 shares of its Class A Common Stock at $12.00 per share.
The net proceeds to the Company were approximately $74,821,000, after deducting
underwriting commissions and other offering expenses. The net proceeds were used
primarily to repay certain indebtedness that was outstanding prior to the IPO
and for the cash portion of the purchase price of certain acquisitions
consummated simultaneously with and subsequent to the IPO. On September 12,
1996, the underwriters' over-allotment option was exercised in part, pursuant to
which an additional 159,000 shares were issued. The net proceeds of
approximately $1,774,000 were used by the Company to repay certain outstanding
indebtedness. In addition, on August 14, 1996, the Company issued 182,000 and
1,188,000 shares of Class A and Class B Common Stock, respectively, in payment
of certain outstanding indebtedness.

         Operations. The principal operations of the Company consist of vessel
time charters, vessel operating agreements and harbor towing. Through its vessel
time charters and operating agreements, the Company serves the energy and
chemical industries primarily in the U.S. domestic trade. The Company's harbor
towing operations principally serve the passenger cruise ship, energy, and
chemical industries and are concentrated in ports located in the southeastern
United States.

         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),

                                                        F-6

<PAGE>



subject to applicable deductibles.  Deductible amounts related to covered
incidents are expensed in the period of occurrence of the incident.

         Spare Parts and Supplies. Inventories of spare parts and supplies are
stated at the lower of cost, determined on a basis that approximates the
last-in, first-out method, or market.

         Prepaid Expenses.  Prepaid expenses primarily include prepaid vessel
insurance.

         Long-Lived Assets. The Company accounts for long-lived assets pursuant
to Statement of Financial Accounting Standards No. 121 Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
("SFAS 121"), 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. The
Company, based on current circumstances, does not believe that any long-lived
assets are impaired at December 31, 1996.

         Property. Vessels, improvements, furniture and equipment are stated at
cost less accumulated depreciation. Major renewals and improvements are
capitalized and replacements, maintenance and repairs which 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 and improvements other than tankers are 15 to
40 years and the estimated useful lives of furniture and equipment are 3 to 10
years. Tankers and related improvements are depreciated over estimated useful
lives, as determined by the Oil Pollution Act of 1990 and other factors, ranging
from 4 to 24 years.

         Vessels under capital leases are amortized over the estimated useful
lives of the vessels. Included in vessels and improvements at December 31, 1995
and 1996 are vessels under capital leases of approximately $5,229,000 and
$11,594,000, net of accumulated amortization of approximately $149,000 and
$293,000, respectively.

         For the years ended December 31, 1994, 1995 and 1996, depreciation and
amortization of vessels, improvements, furniture and equipment was approximately
$3,397,000, $4,770,000, and $8,291,000, respectively.

         Deferred Costs. Deferred costs primarily represent drydocking and
financing costs. Deferred financing costs are amortized over the term of the
related borrowings. At December 31, 1995 and 1996, deferred costs include
unamortized drydocking of approximately $2,534,000 and $6,267,000, respectively.

         Goodwill. Goodwill represents the excess of the purchase price over the
fair value of certain long-lived assets acquired and is amortized on the
straight-line basis over 20 to 40 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, 1995 and 1996, accumulated amortization of goodwill was
approximately $1,689,000 and $2,194,000, respectively.

                                                        F-7

<PAGE>




         Income Taxes. HMI files a consolidated tax return with all corporate
subsidiaries other than Seabulk Ocean Systems Holdings, Inc. and Seabulk Ocean
Systems Corporation, which file a separate consolidated income tax return. Each
partnership subsidiary files a separate partnership tax return.

         The Company accounts for income taxes pursuant to Financial Accounting
Standards Board ("FASB") Statement No. 109 ("FASB 109"), "Accounting for Income
Taxes." Under FASB 109, 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.

         Earnings (Loss) per Common Share. Earnings (loss) per common share is
calculated based on the weighted average number of common shares and dilutive
common stock equivalents outstanding during the period. Common stock equivalents
result from convertible preferred stock outstanding in 1994 and outstanding
stock options at December 31, 1996. Earnings (loss) per common share-assuming
full dilution includes the if-converted dilutive effect of a portion of the
convertible Junior Note through conversion in August 1996 (see Note 3) and the
incremental dilutive effect of outstanding common stock options at December 31,
1996.

         Concentrations of Credit Risk. Financial instruments which potentially
subject the Company to concentrations of credit risk consist 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 the credit quality of the financial institutions. 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 that the Company participates in.

         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.

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

2.  CAPITAL CONSTRUCTION FUNDS

         Pursuant to a Dual Use Agreement between Seabulk Tankers, Ltd. ("STL")
and the United States of America ("U.S."), the Capital Construction Funds
maintained by STL is collateral to the U.S., which amounts were $36,000 and
$37,000 at December 31, 1995 and 1996, respectively.


                                                        F-8

<PAGE>



3. DEBT

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

                                                              DECEMBER 31,
                                                           1995         1996
         Lines of Credit...........................  $    7,500   $   10,647
         Term Loan.................................      46,000       58,500
         Acquisition Line..........................          --        9,700
         Senior Note...............................      23,200        9,153
         Junior Note...............................      17,633           --
         Title XI Debt.............................          --       32,243
         Notes Payable.............................       9,389       12,286
                                                     ----------   ----------
                                                        103,722      132,529
         Less: Current maturities..................      (7,708)     (24,375)
                                                     ----------   ----------
                                                     $   96,014   $  108,154
                                                     ==========   ==========

         On September 28, 1994, the Company entered into an agreement, as
amended on June 21, 1996, for a credit facility (the "Credit Facility") with its
principal banks.

         The Credit Facility provides for a working capital credit line of
$10,000,000 through January 15, 2001 (the "Line") and a stand-by letter of
credit (the "Letter of Credit") of $5,600,000. Borrowings under the Line bear
interest at the prime rate or LIBOR, at the option of the Company, plus an
applicable margin based upon the Company's compliance with certain financial
covenants (8.1% at December 31, 1996), and are subject to an annual commitment
fee of 0.50% of the unused portion of the Line. Borrowings outstanding under the
Line totaled $8,000,000 at December 31, 1996, which is currently due. The Letter
of Credit is collateral for a surety bond to fund any final award relating to
the shipyard's claims discussed in Note 5. Additionally, the Credit Facility
provides for a letter of credit in an amount equal to the greater of amounts
available to be drawn under the Line or $4,000,000. Amounts drawn under either
letter of credit are due on demand or the ultimate maturity date of January 15,
2001. There were no amounts outstanding under the letters of credit at December
31, 1996.

         The Credit Facility provides for a term loan (the "Term Loan") of
$60,500,000 and is payable in quarterly principal and interest payments.
Borrowings under the Term Loan bear interest at the prime rate or LIBOR, at the
option of the Company, plus an applicable margin based upon the Company's
compliance with certain financial covenants (8.1% at December 31, 1996).

         The Credit Facility also provides for a $19,900,000 Acquisition Line of
Credit (the "Acquisition Line") to fund the cash portion of acquisitions.
Borrowings under the Acquisition Line are limited to the lesser of 70% of the
purchase price or a multiple of six times projected EBITDA from the acquisition,
as defined. The Acquisition Line bears interest at the prime rate or LIBOR, at
the option of the Company, plus an applicable margin based upon the Company's
compliance with certain financial covenants (8.1% at December 31, 1996).
Principal amounts outstanding under the Acquisition Line are due in quarterly
payments beginning in January, 1998. At December 31, 1996, $9,700,000 was
outstanding under the Acquisition Line.


                                                        F-9

<PAGE>



         The collateral for the Company's indebtedness under the Credit Facility
includes all Company- owned vessels, its partnership interests in STL and
Seabulk Transmarine Partnership, Ltd., spare parts, fuel and supplies, and
eligible accounts receivable.

         On September 30, 1994, and as amended on May 24, 1995, the Company
issued a $25,000,000 senior subordinated note (the "Senior Note"). The Senior
Note bears interest at 12%, payable semi-annually on March 31 and September 30.
The principal portion of the Senior Note is payable in equal annual installments
on September 30, 2003 and 2004. The Company received proceeds of approximately
$23,072,000, net of a discount of $1,928,000 ($1,904,000, $1,800,000 and
$657,000 at December 31, 1994, 1995, and 1996, respectively) which is being
amortized as interest expense over the term of the Senior Note. On August 14,
1996 and September 12, 1996, the Company repaid $13,490,000, and $1,700,000,
respectively, of the principal balance of the Senior Note with a portion of the
proceeds from the IPO and the exercise of the underwriters' related
over-allotment option. Repayment of the Senior Note is subordinated to the
claims of the Company's principal banks for amounts outstanding under the Credit
Facility.

         The terms of the Credit Facility and Senior Note prohibit the Company
or any of its wholly owned subsidiaries from paying dividends on any class of
common stock and restrict, among other things, the Company's ability to enter
into new commitments or borrowings over specified amounts and dispose of assets
outside the ordinary course of business. In addition, the Company is required to
maintain a minimum level of tangible net worth, as defined.

         On August 14, 1996, the Company assumed approximately $34,650,000 of
Title XI Debt in connection with the acquisitions of certain vessels (see note
12). The Title XI Debt 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 semiannual principal and interest payments through December 1, 2006. 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. At December 31, 1996, the Company was not in compliance with the
working capital financial covenant. On March 25, 1997, the U.S. Department of
Transportation, which administers the Title XI debt, waived the Company's
non-compliance with this covenant through February 7, 1997, the date the company
became in compliance.

         In connection with redemption of the outstanding preferred stock of the
Predecessor Company in 1994 (see Note 10), the Company issued notes payable
totaling approximately $3,561,000 to the former stockholder. Interest on the
notes is payable quarterly at the greater of 12% or Prime +3% (12% at December
31, 1996). The principal portion of the notes is due in the year 2000. Repayment
of these notes is subordinated to the claims of the Company's principal banks
for amounts outstanding under the Credit Facility. On August 14, 1996,
approximately $1,548,000 was repaid with a portion of the proceeds from the IPO.

         In connection with the acquisition of the outstanding common stock of
its previously unconsolidated 50%-owned affiliate Ocean Specialty Tankers
Corporation ("OSTC"), on August 14, 1996, the Company assumed OSTC's obligations
under a $4,000,000 revolving line of credit secured by the outstanding accounts
receivables generated by three chemical tankers. The revolving line of credit
bears interest monthly at LIBOR + 1.5% (7.3% at December 31, 1996). At December
31, 1996, $2,647,000 was outstanding under the line of credit, which is
currently due.


                                                       F-10

<PAGE>



         On August 14, 1996, the Company issued a $675,000 note payable for the
acquisition of a vessel (see note 12). The note is due in quarterly principal
and interest payments (10%) through August, 2001.

         In connection with the acquisition of the outstanding limited
partnership interests in Hvide Chartering, Ltd. ("HCL") and Hvide Offshore
Services, Ltd. ("HOS") in 1994 (see Note 6), the Company issued notes payable of
approximately $2,149,000. Approximately $1,302,000 of these notes were issued to
certain officers and employees of the Company and the outstanding amounts are
recorded as notes payable to related parties in the accompanying consolidated
balance sheets. Interest on the notes is payable quarterly at 12% and the notes
are due in 2004. On August 14, 1996, approximately $678,000 of the notes payable
to related parties was repaid with $816,000 in cash and the issuance of 25,667
shares of Common Stock.

         On September 30, 1994, HMI issued a $25,000,000 junior subordinated
note (the "Junior Note") bearing interest at 8%. In August 1996, the principal
sum and all accrued and unpaid interest was repaid with $15,115,000 of the
proceeds from the IPO and the issuance of 1,244,002 shares of Common Stock.

         In connection with the acquisition of the minority interest in STL in
1994, the Company issued a note payable of approximately $3,039,000. On August
14, 1996, the outstanding balance of the note was repaid with proceeds from the
IPO.

         In connection with the acquisition of seven crew vessels in 1995 (see
Note 12), the Company issued a $3,000,000 note payable. The outstanding balance
of the note was repaid in February 1996.

         The aggregate annual future payments due on debt and notes payable as
of December 31, 1996 are as follows (in thousands):

         YEAR ENDING DECEMBER 31,
         1997.............................................  $    24,375
         1998.............................................       17,052
         1999.............................................       21,112
         2000.............................................       22,801
         2001.............................................       26,760
         Thereafter.......................................       20,429
                                                            -----------
                                                            $   132,529

         In addition to the Letter of Credit available pursuant to the Credit
Facility, the Company has an available letter of credit of $7,000,000 for future
charter hire payments relating to the Seabulk Magnachem lease financing.

         The Company made interest payments of approximately $3,062,000,
$8,952,000, and $19,213,000 in 1994, 1995 and 1996, respectively.


                                                       F-11

<PAGE>



4.  CAPITAL LEASES

         The Company owns certain 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 together with the present value of the net
minimum lease payments as of December 31, 1996 (in thousands):

         1997...............................................  $  2,108
         1998...............................................     2,105
         1999...............................................     2,004
         2000...............................................     1,907
         2001...............................................     1,629
         Thereafter.........................................     1,357
                                                              --------
         Total minimum lease payments.......................    11,110
         Less amount representing interest..................    (2,175)
                                                              --------
         Present value of minimum lease payment
            (including current
            portion of $1,443)..............................   $  8,935
                                                               ========

5.  COMMITMENTS AND CONTINGENCIES

         The Company leases its office facilities under operating lease
agreements which expire at various dates through 2001. Rent expense was
$467,000, $591,000, and $699,000 for the years ending December 31, 1994, 1995,
and 1996. Future annual rentals due under non-cancelable operating leases are as
follows (in thousands):

         YEAR ENDED DECEMBER 31,
         1997............................................  $         763
         1998............................................            705
         1999............................................            677
         2000............................................            654
         2001............................................            575
         Thereafter......................................          4,545
                                                           -------------
                                                           $       7,919
                                                           =============

         A portion of the Company's operations consists of charters of
ocean-going vessels. Two tankers are bareboat chartered for periods extending
through the years 1999 and 2002, respectively. Charter hire expense on these
tankers was approximately $3,100,000, $3,153,000, and $3,181,000 for the years
ended December 31, 1994, 1995 and 1996, respectively. Additionally one tug is
bareboat chartered through the year 2010. Charter hire expense on this tug was
approximately $217,000 and $614,000 for the years ended December 31, 1995 and
1996, respectively. The aggregate annual future payments due under these charter
agreements as follows (in thousands):

         YEAR ENDED DECEMBER 31,
         1997...........................................   $      3,842
         1998...........................................          3,893
         1999...........................................          3,949
         2000...........................................          2,592
         2001...........................................          2,608
                                                           ------------
                                                           $     16,884
                                                           ============

                                                       F-12

<PAGE>



         In 1990, the Company withheld approximately $2,400,000 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 $8,500,000
for costs allegedly due the shipyard, and the Company asserted a counterclaim
for approximately $5,600,000 against the shipyard. In addition, the shipyard is
seeking $10,000,000 of punitive damages. Management believes the shipyard's
claim amounts are unsubstantiated and that recoveries upon the Company's
counterclaim, together with insurance coverage, will exceed amounts, if any,
which may be awarded to the shipyard. Management believes that the additional
costs incurred to complete the construction of the vessel exceeded the amounts
withheld (settlement of construction costs, if any, would generally be
capitalized and depreciated over future periods); however, the Company is unable
to predict the final outcome of this matter.

         In November 1989, STL formed an 88%-owned subsidiary, Seabulk Offshore,
Ltd. ("SOL"), which acquired eight offshore supply vessels for approximately
$13,510,000. In December 1990, STL and Hvide Marine Transport, Incorporated (a
wholly-owned subsidiary of HMI) purchased the remaining 12% interest in SOL from
the limited partner ("U.S. Offshore") for $825,000. Additionally, SOL agreed to
pay U.S. Offshore an amount equal to 5% of gross revenues from the operation of
the vessels for a period not to exceed a maximum of 40 months (December 1, 1990
through March 31, 1994) and in a total amount not to exceed $1,300,000,
whichever occurred first. Approximately $769,000 has been paid to U.S. Offshore
under this agreement. U.S. Offshore has filed a claim against SOL related to the
amount due under the agreement. SOL is vigorously defending this claim and
believes that it will ultimately prevail; however, the Company is unable to
predict the final outcome of this matter.

         On August 6, 1992, a wholly-owned subsidiary, Seabulk Transmarine II,
Inc. acquired a 49% interest in a joint venture which charters two offshore
supply vessels from SOL for a period of six years. At the end of the charter
period, the joint venture shall have the option to purchase each of the vessels
at an agreed-upon purchase price of $300,000.

         On September 30, 1994, the Company acquired Sun State Marine Services,
Inc. ("SSMS"). The acquisition agreement provides the sellers contingent
payments for a period of five years from the date of the agreement. There were
no contingent amounts due related to SSMS for the year ended December 31, 1996.

         At December 31, 1996, Hvide Partners, L.P. ("HPLP"), an affiliated
entity in which the Company participates as the sole general partner, was party,
through its five 75%-owned limited liability companies Hvide Van Ommeren Tankers
I-V LLC ("HVOT I-V"), to contracts for the construction of five double-hull
petroleum product carriers. Pursuant to its general and indirect limited
partnership interests in HPLP, the Company is required to make capital
contributions to HPLP in 1997 totaling approximately $150,000. The Company was
also party to an agreement at December 31, 1996 to provide technical services
and support related to the operations of HVOT I-V. Pursuant to this agreement
and commencing in 1997, the Company is to be paid an annual fee of $295,000,
subject to future escalation equal to increases, if any, in the CPI.

         In November 1996, the Company entered into an agreement to bareboat
charter two tugs for a one year period.

         In December 1996, the Company entered an agreement (the Agreement) to
purchase four crew boats for cash of approximately $7,400,000. Two of these
boats were delivered in February 1997 (see Note 16). The Agreement also consists
of the purchase of three additional crew boats to be constructed

                                                       F-13

<PAGE>



and delivered on various dates from March 1998 to February 1999 at an aggregate
cost of approximately $8,200,000.

         In December 1996, the Company entered into an agreement to purchase
four supply boats for an aggregate cost of approximately $21,800,000.

6.  RELATED PARTY TRANSACTIONS

         In 1994, the Company acquired outstanding limited partnership interests
of HCL, a limited partnership in which the Company owned a 33 1/3% interest as
general partner, from certain officers and employees of the Company for cash and
notes payable of approximately $668,000 and $1,089,000, respectively.

         In 1994, the Company acquired the outstanding limited partnership
interests of HOS from certain officers and employees of the Company for cash and
notes payable of approximately $607,000 and $1,060,000, respectively.
Additionally, the company assumed HOS's outstanding capital lease obligations
and certain other liabilities.

         The purchase price of the vessels and other net assets acquired in the
acquisition of the limited partnership interests of HCL and HOS was
approximately $1,974,000 in excess of their historical net book value.
Accordingly, such amounts were deemed special distributions to the related
parties and recorded as a reduction of paid-in capital.

7.  EMPLOYEE BENEFIT PLANS

         The Company sponsors a Section 401(k) retirement plan covering
substantially all employees. Expense under this plan for the years ended
December 31, 1994, 1995 and 1996, was approximately $834,000, $1,047,000, and
$1,333,000, respectively. Contributions under the plan are determined on the
basis of employee compensation.

8.  STOCK OPTIONS

         The Company has authorized the grant of options for up to 1,000,000
shares of Class A common stock pursuant to a non-qualified stock option plan
(the "Plan") covering primarily employees and outside directors. Options under
the Plan are issuable at the discretion of committees appointed by the Board of
Directors and generally vest ratably over a four year period. Option terms range
from 5 to 10 years. At December 31, 1996, there were 806,000 options which were
all granted on August 12, 1996. The exercise price of all options ($12.00) is
equal to the fair market value of the underlying common stock at that date.
There were no options exercised or forfeited during 1996 and at December 31,
1996, 35,000 options are exercisable. The Class A Common Stock issuable pursuant
to the plan have been reserved.

         The Company has elected to account for stock-based employee
compensation awards under Accounting Principles Board Option No. 25 "Accounting
for Stock-Based Compensation" (APB 25). Under APB 25, because the exercise price
of the Company's employee stock options was equal to the market price of the
underlying stock at the date of grant, no compensation expense was recognized.


                                                       F-14

<PAGE>



         Pro forma information regarding net loss and loss per share is required
by FASB 123 as if the Company has accounted for its options under the fair value
method proscribed. However, the effect of applying the fair value method
proscribed by FASB 123 to the Company's stock options results in net loss and
loss per share that are not materially different from amounts reported.

9.  INCOME TAXES

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

                                                      YEAR ENDED DECEMBER 31,
                                                      1994     1995      1996
                                                     ------   ------  -------
         Current.................................   $   --   $   --  $      --
         Deferred................................      189       (2)     3,543
                                                    ------   ------  ---------
                                                    $  189   $   (2) $   3,543
                                                    ======   ======  =========

Income taxes paid were approximately $400,000 in 1994.  There were no income
taxes paid in 1995 and 1996.

A reconciliation of the Company's income tax rate to the federal rate of 34% is
as follows:

                                                        1994     1995     1996
                                                       ------   ------   -----
         Income tax expense (benefit) computed at the
            statutory rate..........................      34%   ( 34%)     34%
         State income taxes.........................       2      (2)       2
         Capital Construction Funds.................      16      24        1
         Other......................................     (17)     11       --
                                                       -----    ----     ----
                                                          35%     (1)%     37%
                                                        =====    ====     ====

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
components of the Company's deferred income tax assets and liabilities as of
December 31, 1995 and 1996 are as follows:

                                                              1995       1996
         Deferred income tax assets:
            Net operating loss carryforward..............  $  8,388   $ 14,416
            Charitable contributions carryforward.......         43         66
            Alternative minimum tax credit carryforward.      1,226      1,226
            Accrued compensation........................        315        410
            Other ...........................................   149        191
                                                             ------     ------
                  Total deferred income tax assets......     10,121     16,309
                                                           --------   --------
         Deferred income tax liabilities:
            Fixed asset differences......................    13,770     21,772
            Deferred drydocking costs....................       668        922
                                                           --------   --------
                  Total deferred income tax liabilities..    14,438     22,694
                                                           --------   --------
                  Net deferred income tax liability......  $  4,317   $  6,385
                                                           ========   ========


                                                       F-15

<PAGE>



         At December 31, 1996 the Company had approximately $40,500,000 in net
operating loss carryforwards for federal income tax purposes, expiring in
various amounts from 1998 to 2011. Due to a change in ownership, as defined in
Section 382 of the Internal Revenue Service Code, the utilization of
approximately $26,287,000 of net operating loss carryforwards, existing at the
date of the IPO, are limited to approximately $3,300,000 per year.

10.  CAPITAL STOCK

         On August 14, 1996 and September 12, 1996, the Company issued 7,000,000
and 159,000 shares of its Class A Common Stock, respectively, pursuant to the
IPO and underwriters' over-allotment option. Simultaneously with the IPO, shares
of the Company's Class C Common Stock were exchanged for 304,000 and 673,000
shares of the Company's Class A and Class B Common Stock, respectively.
Additionally, 182,000 and 1,188,000 shares of the Company's Class A and Class B
Common Stock, respectively, were issued in repayment of a portion of the Junior
Notes and other outstanding indebtedness.

         On May 10, 1996, the Company's Board of Directors authorized a
1.5843-for-1 split of its common stock, and an increase of the number of
authorized shares of its Class A, Class B, and Class C Common Stock to
100,000,000, 5,000,000, and 2,500,000, respectively. All share and per share
data in the accompanying financial statements have been restated to reflect the
stock split. Contemporaneous with the IPO, the Company's Board of Directors
authorized the retirement of the Company's Class C Common Stock.

         On September 28, 1994, all the stock of the Predecessor Company was
exchanged for shares of the Company's stock (see Note 1). The fair value of the
Predecessor Company's common stock and the Company's common stock were
equivalent.

         On September 29, 1994, all of the outstanding shares of Class A and
Class B Preferred Stock of the Predecessor Company were repurchased from the
shareholder for cash of $2,374,000, notes of $3,561,000 and certain agreements
providing for future payments over a specified term. The present value of the
agreements providing for future payments has been recorded in other liabilities
in the accompanying consolidated balance sheets and total approximately
$1,282,000 and $1,261,000 at December 31, 1995 and 1996, respectively.

         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, at the
holder's election and at any time, such shares 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 connection with the issuance of the Junior Note, the Company issued
to the note holders 765,733 shares of its Class B and Class C Common Stock and
Common Stock Contingent Share Issuances ("CSIs") to purchase a maximum of
554,495 additional shares of its common stock. The Junior Note, shares of Class
A and Class C Common Stock and the CSIs were recorded based upon their estimated
fair values at the date of issuance. The CSIs are exercisable at a price equal
to the par value of the underlying shares on June 10, 1997. The maximum amount
of CSIs that may be exercised is based upon the note holders return on their
investment in the Company.


                                                       F-16

<PAGE>



         Simultaneously with the issuance of the CSIs, the Company entered into
an agreement with its Chairman and principal stockholder and certain trusts
whereby the principal stockholder and the trusts agreed to contribute pro rata a
like amount of shares of common stock to the Company concurrently with the
issuance of shares pursuant to the CSIs. Accordingly, issuance of shares
pursuant to the CSIs will not effect the Company's financial position or results
of operations.

11.  SIGNIFICANT CUSTOMER

         The Company derived revenues from a long-term contract with one company
representing 17%, 13%, and 10% of its revenues over the three years ended
December 31, 1994, 1995, and 1996, respectively.

12.  ACQUISITIONS

         On March 8, 1995, the Company acquired seven crew boats for $5,875,000,
including cash of $2,875,000 and a $3,000,000 promissory note.

         In January and February 1996, the Company acquired nine crew boats
under capital lease obligations.

         On August 14, 1996, the Company purchased the remaining 50% of the
outstanding common stock of an entity and acquired three chemical tankers. The
aggregate purchase price of approximately $64,650,000 consisted of approximately
$30,000,000 in cash and the assumption of approximately $34,650,000 in mortgage
obligations related to two of the vessels acquired.

         On August 14, 1996, the Company purchased eight supply boats for
$26,075,000. The Company has agreed to indemnify certain affiliates of the
sellers against certain of one seller's liabilities due to its creditors. The
Company's maximum liability pursuant to the guarantee and indemnification is
$7,000,000.

         On August 14, 1996, the Company acquired two supply boat and one crew
boat for cash of $6,150,000 and the issuance of a $675,000 note payable.

         In October 1996, the Company purchased two supply boats for cash of
approximately $4,600,000.

         In November 1996, the Company purchased a crew boat for cash from the
Company's Chairman and the Investor Group for a purchase price of approximately
$2,200,000, which was equal to their cost of the vessel.

         In December 1996, the Company purchased a tug for cash of approximately
$3,400,000.

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

13.  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:

                                                       F-17

<PAGE>




         Cash and cash equivalents and accounts receivable. The carrying amounts
reported in the balance sheets approximates fair value due to the current
maturity of such instruments.

         Credit Facility. Amounts outstanding under the Company's Credit
Facility, as amended, bear interest at variable rates that periodically adjust
to reflect changes in overall market rates and approximate fair value.

         Senior Notes. Amounts outstanding under the Senior Notes bear interest
at 12%. The fair value of the Senior Notes at December 31, 1996 was estimated to
be $9.2 million, using a discounted cash flow analysis at estimated market
rates.

         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.

14.  SUPPLEMENTARY EARNINGS PER SHARE

         Primary earnings per share for the year ended December 31, 1996 would
have been $0.03 assuming the retirement of certain indebtedness with proceeds
from both the IPO and the public offering completed in January 1997 (see note
16), had taken place on January 1, 1996. Supplementary earnings per share
reflect an increase in weighted average shares outstanding during the period of
approximately 4,157,000 shares and an increase in net income applicable to
common shares of approximately $2,389,000 net of applicable income taxes for the
period.

15.  EXTRAORDINARY ITEM

         On August 14, 1996, the Company paid cash of $26,307,000; issued 55,500
shares of Class A Common Stock and 1,188,502 shares of Class B Common Stock to
repay $25,000,000 and $15,190,000 of the Junior and Senior Notes, respectively.
Accordingly, the Company recorded a loss on extinguishment of $8,108,000 for the
write off of deferred financing costs and related debt discounts, net of a tax
benefit of $1,474,000.

16.  SUBSEQUENT EVENTS

         In January 1997, the Company purchased a supply boat and two tug boats
for cash of approximately $4,700,000 and $600,000, respectively.

         On February 5, 1997, the Company completed a public offering of
4,000,000 shares of its Class A Common Stock at $24.875 per share. The net
proceeds to the Company were $94,300,000, after deducting underwriting
commissions. The net proceeds will be used primarily to repay certain
indebtedness, to fund the cash portion of certain potential acquisitions and for
general corporate purposes.

         In February 1997, the Company purchased three crew boats for cash of
approximately $5,575,000 and entered into a contract to construct one supply
boat for an estimated aggregate cost of $7,520,000.


                                                       F-18

<PAGE>


         In February 1997, the Company repaid $33,220,000 of its outstanding
debt and amended its Credit Facility. As a result, the Company recorded
extraordinary losses of $1,754,000 for the write off of deferred financing costs
associated with the early extinguishment of debt, net of income tax benefits of
$1,030,000.

         In February 1997, the Company purchased the outstanding common stock of
an entity for cash of approximately $1,500,000. Pursuant to the purchase
agreement, the Company assumed the entity's commitments to fund the remaining
construction costs of three crew boats currently under contract with a shipyard.
The aggregate remaining construction cost of the vessels is approximately $5.7
million. The fair value of net assets acquired approximates the purchase price
paid by the company.

         In February 1997, the Company contracted for the construction of three
ship-docking modules for an estimated aggregate cost of $14,500,000.


                                                       F-19