ITEM 1. BUSINESS
GENERAL
Seabulk Transmarine Partnership, Ltd. (STPL or the Partnership), a Florida limited partnership, was formed on August 30, 1985, pursuant to a partnership agreement (the Agreement), to own and operate a chemical transportation carrier, the SEABULK AMERICA. The general partner of the Partnership is Seabulk Tankers, Ltd. (STL), a Florida limited partnership (holding a 33% interest in the Partnership), and the limited partners are STL (holding a 0.33% interest in the Partnership), Seabulk America Partnership Ltd. (SAPL), a Florida limited partnership (holding a 41.67% interest in the Partnership), and Stolt Tankers (U.S.A.) Inc. (holding a 25% interest in the Partnership).
In the U.S. domestic chemical transportation trade, vessels carry chemicals, primarily from chemical manufacturing plants and storage tank facilities along the coast of the U.S. Gulf of Mexico to industrial users in and around Atlantic and Pacific coast ports. The chemicals transported consist primarily of caustic soda, alcohol, chlorinated solvents, paraxylene, alkylates, toluene, methyl tertiary butyl ether (MTBE), phosphoric acid, and lubricating oils. Certain of the chemicals transported must be carried in vessels with specially coated or stainless steel cargo tanks; further, many of these chemicals are very sensitive to contamination and require special cargo-handling equipment.
The SEABULK AMERICA has full double bottoms (as distinct from double-hulls). Double bottoms provide increased protection over single-hull vessels in the event of a spill. Delivered in 1990, the SEABULK AMERICA is the only vessel in the U.S. domestic trade capable of carrying large cargoes of acid, as a vessel strengthened to carry relatively heavy cargoes such as phosphoric and other acids. The SEABULK AMERICA'S stainless steel tanks were constructed without internal structure, which greatly reduces cargo residue from transportation and results in less cargo degradation. Stainless steel tanks, unlike epoxy-coated tanks, also do not require periodic sandblasting and recoating. The SEABULK AMERICA was one of the first U.S.-Flag carriers to be equipped with state-of-the-art-integrated navigation, cargo control monitoring, and automated engine room equipment.
The SEABULK AMERICA has 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 it the ability to handle a broader range of chemicals than many chemical-capable product carriers. Many of the chemicals transported by the Partnership are hazardous substances. Under current arrangements, voyages are conducted from the Houston and Corpus Christi, Texas, and Lake Charles, Louisiana areas to such ports as New York, Philadelphia, Baltimore, Wilmington, North Carolina, Charleston, South Carolina, Los Angeles and San Francisco.
Pursuant to the Oil Pollution Act of 1990, the Seabulk America, which was built with full double bottoms, but not double sides, cannot be used to transport petroleum and petroleum products in U.S. commerce after 2015. It is possible that it could continue to carry certain chemicals in U.S. commerce after 2015, or that it could be redocumented in another country and be used to transport chemicals in the non-U.S. trades after 2015. The Partnership has no present plans to take any of these actions, and no assurance can be given as to the feasibility or economic liability of doing so.
EMPLOYEES
As of March 1, 2004, the Partnership had approximately 36 employees, which are comprised of the officers and crew of the SEABULK AMERICA. The crew of the Seabulk America is subject to two collective bargaining agreements that expire on December 31, 2006 and December 31, 2007. Management considers relations with employees to be satisfactory.
ITEM 2.
ITEM 2. PROPERTIES
The Partnership's operations are conducted at the Parent's principal offices located in Fort Lauderdale, Florida, where the parent leases approximately 36,000 square feet of office and shop space under a lease that expires in 2009.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Partnership may also be a party to litigation arising in the ordinary course of its business, most of which is covered by insurance, subject to substantial deductibles.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted pursuant to General Instruction I to Form 10-K (the "Instruction").
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Partnership's equity securities are not publicly traded. The Partnership files reports under the Securities Exchange Act of 1934 (the "Exchange Act") due to its status as a non-wholly owned subsidiary guarantor of the Parent's 9.50% Senior Notes due 2013.
The Partnership is presently 75%-owned by indirect subsidiaries of the Parent and 25% owned by Stolt Tankers (U.S.A.), Inc., an unaffiliated third party ("Stolt"). Seabulk Tankers, Ltd., an indirect wholly owned subsidiary of the Parent, owns a 33% general partnership interest and a .33% limited partnership interest in the Partnership; Seabulk America Partnership, Ltd., an 81.59%-owned indirect subsidiary of the Parent, owns a 41.67% limited partnership interest in the Partnership. The Partnership's partnership agreement allows for distributions to be made to the partners at any time based on the partners' percentage ownership of the partnership assets without priority or preference. No distributions have been made to the partners since the Partnership's formation. In addition, the Partnership is restricted from making distributions in certain circumstances by covenants contained in the Parent's credit facility and senior notes documentation.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Omitted pursuant to the Instruction.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS
This discussion should be read in conjunction with the Partnership's historical financial statements and the related notes thereto included elsewhere in this report.
FORWARD-LOOKING INFORMATION
Certain statements in the following analysis contain "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act of 1933. All statements other than statements of historical fact included in this discussion are forward-looking statements. Although the Partnership believes the expectations and beliefs reflected in such forward-looking statements are reasonable, it can give no assurance that they will prove to have been correct.
GENERAL
The Partnership is only a small part of the Parent's overall marine support and transportation services business and operations. For the year ended December 31, 2003, the assets and revenues of the Partnership respectively represented 4.79% and 4.32% of the consolidated assets and revenues of the Parent.
2003 COMPARED WITH 2002
REVENUE. Revenue increased 10.6% to $13.7 million for the year ended December 31, 2003 from $12.4 million for the year ended December 31, 2002. The increase is primarily due to more off-hire days in the 2002 period as a result of a scheduled drydocking in 2002.
OPERATING EXPENSES. Operating expenses increased 10.7% to $8.6 million for the year ended December 31, 2003 from $7.8 million for the same period in 2002. The increase is primarily due to an increase in fuel and port charges as a result of more off-hire days in the 2002 period. Fuel and port charges generally are not incurred during a drydocking. As a percentage of revenue, operating expenses remained substantially the same at 63.1% for the year ended December 31, 2003 from 63.0% for the 2002 period.
OVERHEAD EXPENSES. Overhead expenses remained substantially the same at $0.9 million for the year ended December 31, 2003 and 2002. As a percentage of revenue, overhead expenses decreased to 6.5% for the year ended December 31, 2003 compared to 7.1% for the same period in 2002 as a result of the higher revenue in the 2003 period as discussed above.
DEPRECIATION, AMORTIZATION AND DRYDOCKING. Depreciation, amortization and drydocking increased 29.2% to $3.0 million for the year ended December 31, 2003 from $2.3 million for the year ended December 31, 2002. The increase is due to higher drydock amortization in the 2003 period as the cost of the drydock in the third quarter of 2002 was substantially higher than the cost of the previous drydocking. Drydocking costs are deferred and amortized over 30 months.
INTEREST EXPENSE CHARGED BY AFFILIATE. Interest expense charged by affiliate decreased 20.9% to $1.6 million for the year ended December 31, 2003 from $2.0 million for the same period in 2002. The decrease is primarily due to a reduction in the interest rate charged by SBI as a result of the SBI recapitalization in September 2002.
COMMITMENTS
Under applicable regulations, the Partnership's vessel is required to be drydocked twice in each five-year period for inspection and routine maintenance and repairs. The next drydock is scheduled for June 2005 with an estimated cost of between $4 and $6 million.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Jones Act restricts the U.S. coastwise trade to vessels owned, operated and crewed substantially by U.S. citizens. The Jones Act continues to be in effect and supported by Congress and the Administration. However, it is possible that SBI's and STPL's advantage as a U.S. citizen operator of Jones Act vessels could be somewhat eroded over time as there continue to be periodic efforts and attempts by foreign interests to circumvent certain aspects of the Jones Act.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS
The Partnership's Financial Statements are listed in Item 15 (a), included at the end of this report on Form 10-K beginning on page, and incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES.
As part of the group of entities that are subsidiaries of SBI, the Partnership relies on the disclosure controls and procedures of the parent. SBI maintains systems of disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) designed to ensure that SBI and its subsidiaries are able to record, process, summarize and report, within the applicable time periods, the information required in the annual and quarterly reports filed by SBI, the Partnership and SAPL under the Securities Exchange Act of 1934. Management has evaluated the effectiveness of these disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the principal executive officer and principal financial officer concluded that these disclosure controls and procedures are effective to accomplish their purpose. No changes were made during the period covered by this report to the Partnership's internal control over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that have materially affected the Partnership's internal control over financial reporting or are reasonably likely to materially affect the Partnership's internal control over financial reporting.
Attached as Exhibits 31.1 and 31.2 hereto are certifications by the principal executive officer and chief financial officer, which are required by Section 302 of the Sarbanes-Oxley Act of 2002. The information set forth in this Item 4 should be read in conjunction with these Section 302 certifications.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted pursuant to the Instruction.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Omitted pursuant to the Instruction.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Omitted pursuant to the Instruction.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted pursuant to the Instruction.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Partnership's accountant fees and services are included as part of the consolidated amount shown in Item 14 of the Parents Form 10-K for 2003.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS AND SCHEDULES. See Index to consolidated financial statements and Schedules which appears on page herein.
(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) LISTS OF EXHIBITS. The following is a list of exhibits furnished. Copies of exhibits will be furnished upon request of any stockholder at a charge of $0.25 per page plus postage. The Partnership hereby files as part of this Form 10-K the exhibits required by Item 15(c) listed below. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the Commission, 450 Fifth Street N.W., Room 1024, Washington, D.C. 29549 and at the Commission's regional office at CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661-2511. Copies of such material can also be obtained from the Public Reference Section of the Commission, 450 Fifth Street N.W., Washington, D.C. 29549, at prescribed rates.
EXHIBIT NUMBER EXHIBITS - --------- --------
3.1(a) Supplemental Affidavit and Amended and Restated Certificate of Limited Partnership of Seabulk Transmarine Partnership, Ltd. [incorporated by reference to Form 10-K filed April 1999 (Registration No. 333-42039-01)].
3.1(b) Certificate of Amendment to Certificate of Limited Partnership For: Seabulk Transmarine Partnership, Ltd. (Certificate filed September 17, 1985) dated January 1, 1991. [incorporated by reference to Form 10-K filed April 1999 (Registration No. 333-42039-01)].
3.1(c) Certificate of Amendment to Certificate of Limited Partnership For: Seabulk Transmarine Partnership, Ltd. (Certificate filed September 17, 1985) dated January 1, 1991. [incorporated by reference to Form 10-K filed April 1999 (Registration No. 333-42039-01)].
3.2(a) Limited Partnership Agreement of Seabulk Transmarine Partnership, Ltd. dated August 30, 1985. [incorporated by reference to Form 10-K filed April 1999 (Registration No. 333-42039-01)].
3.2(b) Amendment to Limited Partnership Agreement of Seabulk Transmarine Partnership, Ltd., dated December 24, 1986. [incorporated by reference to Form 10-K filed April 1999 (Registration No. 333-42039-01)].
3.2(c) Amendment to Limited Partnership Agreement of Seabulk Transmarine Partnership, Ltd., dated May 31, 1989. [incorporated by reference to Form 10-K filed April 1999 (Registration No. 333-42039-01)].
4.1 Indenture, dated as of August 5, 2003, among Seabulk International, Inc., the Guarantors named therein and Wachovia Bank, National Association, as Trustee [incorporated by reference to Form S-4 filed October, 2003 (Registration No. 333-110138)].
4.2 Supplemental Indenture, dated as of October 3, 2003, among Seabulk International, Inc., the Guarantors named therein, and Wachovia National Bank, National association, as Trustee [incorporated by reference to Form S-4 filed October, 2003 (Registration No. 333-110138)].
4.3* Second Supplemental Indenture and Amendment -- Subsidiary Guarantee, dated as of March 22, 2004, among Seabulk International, Inc., the Guarantors named therein, and Wachovia National Bank, National Association, as Trustee.
10.1 Tanker Time Charter Party, dated December 15, 1989, between Seabulk Transmarine Partnership, Ltd. and Ocean Specialty Tankers Corporation, with respect to Seabulk America. [incorporated by reference to Form S-4 filed April 1994 (Registration No. 333-78166)].
23.1* Consent of Ernst & Young LLP
31.1* Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
32.1* Certification of Principal Executive Officer pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and rule 13a-14(b) of the Securities Exchange Act of 1934 (furnished herewith).
32.2* Certification of Principal Financial Officer pursuant to 18 U.S.C.ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and rule 13a-14(b) of the Securities Exchange Act of 1934 (furnished herewith).
- --------------- * Furnished herewith
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.
SEABULK TRANSMARINE PARTNERSHIP, LTD.
By: SEABULK TANKERS, LTD. its General Partner
By: SEABULK TRANSPORT, INCORPORATED its General Partner
By: /s/ GERHARD E. KURZ --------------------------------------- Gerhard E. Kurz Chairman, President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the report has been signed by the following persons in the capacities and on the dates indicated.
SEABULK TRANSMARINE PARTNERSHIP, LTD.
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
All schedules have been omitted because the information is not applicable or is not material or because the information required is included in the consolidated financial statements or the notes thereto.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners Seabulk Transmarine Partnership, Ltd.
We have audited the balance sheets of Seabulk Transmarine Partnership, Ltd. (a Florida limited partnership) as of December 31, 2003 and 2002, and the related statements of operations, partners' capital and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 the Partnership's 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 financial position of Seabulk Transmarine Partnership, Ltd. at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Fort Lauderdale, Florida February 27, 2004
SEABULK TRANSMARINE PARTNERSHIP, LTD. BALANCE SHEETS (IN THOUSANDS)
SEE NOTES TO FINANCIAL STATEMENTS.
SEABULK TRANSMARINE PARTNERSHIP, LTD. STATEMENTS OF OPERATIONS (IN THOUSANDS)
SEE NOTES TO FINANCIAL STATEMENTS.
SEABULK TRANSMARINE PARTNERSHIP, LTD. STATEMENTS OF PARTNERS' CAPITAL (IN THOUSANDS)
SEE NOTES TO FINANCIAL STATEMENTS
SEABULK TRANSMARINE PARTNERSHIP, LTD. STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SEE NOTES TO FINANCIAL STATEMENTS.
SEABULK TRANSMARINE PARTNERSHIP, LTD. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003
1. ORGANIZATION AND BASIS OF PRESENTATION
Seabulk Transmarine Partnership, Ltd. (STPL or the Partnership), a Florida limited partnership, was formed on August 30, 1985, pursuant to a partnership agreement (the Agreement), to own and operate a chemical transportation carrier, the SEABULK AMERICA. The general partner of the Partnership is Seabulk Tankers, Ltd. (STL), a Florida limited partnership (holding a 33% interest in the Partnership), and the limited partners are STL (holding a 0.33% interest in the Partnership), Seabulk America Partnership Ltd. (SAPL), a Florida limited partnership (holding a 41.67% interest in the Partnership), and Stolt Tankers (U.S.A.) Inc. (holding a 25% interest in the Partnership).
The following table sets forth each limited partners' share of the total limited partners capital:
December 31, ---------------------------- 2003 2002 -------- -------
STL $ 18 $ 19 SAPL 2,449 2,636 Stolt Tankers (U.S.A), Inc. (1,419) (1,307) -------- ------- Total $ 1,048 $ 1,348 ======== =======
2. PARTNERSHIP AGREEMENT
The general partner is responsible for the management of the Partnership. Pursuant to the Agreement, the general partner and the limited partners (collectively referred to as the Partners) are required to make capital contributions at such times and in such amounts as the general partner requests by notice. No additional capital contributions were required for the year ended December 31, 2003 or 2002. The Partners are not entitled to withdraw any part of their capital accounts or to receive any distribution from the Partnership except as specifically provided in the Agreement. All net income or net losses of the Partnership are to be allocated to the Partners' capital accounts in proportion to their partnership interests. The Partnership terminates on August 30, 2010, unless sooner terminated, liquidated or dissolved by law or pursuant to the Agreement or unless extended by amendment to the Agreement.
3. SUMMARY OF ACCOUNTING POLICIES
REVENUES. Revenue earned on voyage contracts is recognized based upon the percentage of voyage completion. Demurrage revenue is recognized when earned.
MARINE OPERATING SUPPLIES. Marine operating supplies consist of vessel spare parts and supplies that are recorded at cost and charged to operating expenses as consumed.
INSURANCE CLAIMS RECEIVABLE. Insurance claims receivable represent costs incurred in connection with insurable incidents for which the Partnership expects to be reimbursed by the insurance carrier(s), subject to applicable deductibles. Deductible amounts related to covered incidents are expensed in the period of occurrence of the incident. The credit risk associated with insurance claims receivable is considered low due to the credit quality and funded status of the insurance clubs in which the Partnership participates.
DEFERRED DRYDOCKING COSTS. Periodically, the Partnership's vessel is drydocked for major repairs and maintenance to pass inspections to maintain its operating classification, as mandated by maritime regulations. Costs incurred to drydock the vessel are deferred and amortized using the straight-line method over the period to the next drydocking, generally 30 to 36 months. Drydocking costs are comprised of painting the vessel hull and sides, recoating cargo and fuel tanks, and performing other maintenance activities to bring the vessel into compliance with classification standards and which can typically only be performed while the vessel is drydocked.
VESSEL AND EQUIPMENT. Vessel and equipment are stated at cost, less accumulated depreciation. Significant renewals and improvements that extend the useful lives of the assets are capitalized. Maintenance and repairs that do not improve or extend the lives of the assets are expensed and incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets ranging from 5 to 29 years, as determined by the Oil Pollution Act of 1990 and other factors. Pursuant to OPA 90, the SEABULK AMERICA cannot be used to transport petroleum or petroleum products in U.S. commerce after 2015. In June 2003, the Partnership reduced the remaining useful life of the vessel by five years to 2015. The Partnership has determined that the vessel will likely not be working in foreign waters after its OPA 90 life in the United States. This change in estimate increased depreciation by approximately $415,000 for the year ended December 31, 2003.
4. TRANSACTIONS WITH AFFILIATES
The amount payable to affiliates represents an advance between the Partnership and SBI as a result of various transactions. The Partnership pays against the advance balance when it has generated a positive cash flow from operations. The advance is primarily the result of the Partnership's participation in SBI's central cash management program, wherein substantially all the Partnership's cash receipts are remitted to SBI and substantially all cash disbursements are funded by SBI. Other transactions include miscellaneous administrative expenses incurred by SBI on behalf of the Partnership.
SBI provides various administrative services to the Partnership, including legal assistance and technical expertise on ship management and maintenance. It is SBI's policy to charge these expenses and all other central operating costs, first on the basis of direct usage when identifiable, with the remainder allocated pursuant to the terms of the Agreement. Amounts charged by SBI include interest on the outstanding amounts due to SBI and a monthly management fee (overhead allocated from SBI), as set forth in the Agreement, which can be adjusted annually based on changes in the Consumer Price Index. During the year ended December 31, 2003, SBI charged interest at the weighted average rate of 5.20% based on the amount due to SBI. SBI also allocates 10% of its tanker administrative overhead cost to the Partnership. In the opinion of management, these allocation methodologies are reasonable.
Transactions in the Due to Affiliates account for the year ended December 31, 2003, 2002 and 2001 are as follows:
5. COMMITMENTS AND CONTINGENCIES
UNIONS AND COLLECTIVE BARGAINING AGREEMENTS. Substantially all of the crew of the SEABULK AMERICA is subject to collective bargaining agreements. Management considers relations with the crewmembers to be satisfactory; however, if these relations were to deteriorate, it could have an adverse effect on the Partnership's operating results. The collective bargaining agreement with the officers (licensed crew) union, which represents approximately 50% of the total crew, expires on December 31, 2006. The collective bargaining agreement for the non-union crew (unlicensed crew), which represents approximately 50% of the total crew, will expire on December 31, 2007.
LITIGATION. The Partnership is sometimes named as a defendant in litigation, usually relating to claims for bodily injuries or property damage. The Partnership, through SBI, maintains insurance coverage against such claims to the extent deemed prudent by management and applicable deductible amounts are accrued at the time of the incident. In the opinion of management, the Partnership is not currently a party to any legal proceeding, the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on its financial position, results of operations, or cash flows.
6. CONCENTRATION OF CREDIT RISK
SIGNIFICANT CUSTOMER. Substantially all of the Partnership's accounts receivable are due from entities that operate in the oilfield or chemical industries. The Partnership performs ongoing credit evaluations of its trade customers and generally does not require collateral. For the year ended December 31, 2003, seven customers accounted for 79% of the Partnership's revenue. As of December 31, 2003, accounts receivables from these customers amounted to 88% of total accounts receivable. The Partnership provides for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Actual losses have historically been within management's expectations and estimates. Recoveries on accounts receivable are recorded against bad debt expense.
7. SENIOR NOTES OFFERING
On August 5, 2003, SBI completed the offering of $150 million of Senior Notes ("Notes") due 2013 through a private placement eligible for resale under Rule 144A and Regulation S. The net proceeds of the offering were used to repay a portion of the Parent's indebtedness under its existing $180 million credit facility. Interest on the Notes will be payable semi-annually in arrears, commencing on February 15, 2004. The interest rate on the Notes sold to private investors is 9.50%. The Notes are senior unsecured obligations guaranteed by certain of the Parent's U.S. subsidiaries, including the Partnership. The Notes are subject to certain covenants, including, among other things, limiting the Parent's and certain U.S. subsidiaries' (including the Partnership's) ability to incur additional indebtedness or issue preferred stock, pay dividends to stockholders, and make investments or sell assets. On October 31, 2003, SBI and certain U.S. subsidiaries (including the Partnership) filed a registration statement with the SEC to register substantially identical senior notes to be exchanged for the Notes pursuant to a registration rights agreement, so that the notes may be eligible for trading in the public markets. On November 13, 2003, the registration statement was declared effective and SBI commenced the exchange offer. The exchange offer expired on December 16, 2003.