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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q

     X    Quarterly Report Pursuant to Section 13  or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2002

            Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period            to           

Commission File Number 0-28316

TRICO MARINE SERVICES, INC.
(Exact name of registrant as specified in its charter)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.
 

Yes       X      No                 
 

As of August 14, 2002, there were 36,262,335 shares outstanding of the Registrant's Common Stock, par value $.01 per share.

TRICO MARINE SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 1.   Financial Statement Presentation: 

The consolidated financial statements for Trico Marine Services, Inc. (the "Company") included herein are unaudited but reflect, in management's opinion, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of the nature of the Company's business.  The results of operations for the three and six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the full fiscal year or any future periods.  The financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company's consolidated financial statements for the year ended December 31, 2001. 

Certain prior period amounts have been reclassified to conform with the presentation shown in the interim consolidated financial statements.  These reclassifications had no effect on net income, total stockholders' equity, or cash flows.  

2.   Earnings Per Share: 

Following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands, except share and per share data).  

For the three-month and six-month periods ending June 30, 2002, options to purchase 2,116,468 and 2,119,218 common shares, respectively, at prices ranging from $0.91 to $23.13 have been excluded from the computation of diluted earnings per share because inclusion of these shares would have been antidilutive.  During the three-month and six-month periods ending June 30, 2001, options to purchase 1,865,843 and 1,879,343 shares of common stock, respectively, at prices ranging from $0.91 to $23.13 were outstanding but were not always included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of common shares at certain points during the period. 

 3.       Income Taxes: 

The Company's effective income tax rate for the three-month periods ended June 30, 2002 and 2001 was 31%.  The Company's effective income tax rate for the six-month periods ended June 30, 2002 and 2001, was 32%.  The variance from the Company's statutory rate is primarily due to income contributed by our wholly-owned Norwegian subsidiary, Trico Supply ASA, for which deferred income taxes are provided at the Norwegian statutory rate of 28%, due to the Company's intent to permanently reinvest the unremitted earnings and postpone their repatriation indefinitely. 

The Company's Brazilian subsidiary received a tax assessment from a Brazilian state tax authority for Reais 14,764,761 (approximately $5,439,000 at June 30, 2002).  The tax assessment is based on the premise that certain services provided in Brazilian federal waters are considered taxable by certain Brazilian states as transportation services and are subject to a state tax on gross receipts.  The Company has filed a timely defense in the Brazilian administrative courts and is currently under no obligation to pay the assessment unless and until such time as all appropriate appeals are exhausted. 

The Company intends to vigorously challenge the imposition of this tax.  The Company further expects broader industry actions against the tax.  If the Company's challenge to the imposition of this tax proves unsuccessful, which Brazilian counsel and the Company believe is improbable, current contract provisions could potentially mitigate the Company's tax exposure.

4.       Segment and Geographic Information (In Thousands): 

The Company is a provider of marine support services to the oil and gas industry.  Substantially all revenues result from the charter of vessels owned by the Company.  The Company's three reportable segments are based on geographic area, consistent with the Company's management structure.  The accounting policies of the segments are the same, except for purposes of income taxes and intercompany transactions and balances.   The North Sea segment provides for a flat tax,  in addition to taxes on equity and net financial income, at a rate of 28%, which is the Norwegian statutory tax rate.  Additionally, segment data includes intersegment revenues, receivables and payables, and investments in consolidated subsidiaries (excluding equity in earnings of consolidated subsidiaries).  The Company evaluates performance based on net income (loss).  The U.S. segment represents the Company's domestic operations and reflects interest expense on long-term debt associated with the acquisitions of foreign subsidiaries.  The North Sea segment includes those vessels that are managed by our North Sea offices and may, from time to time, include work performed in other geographic areas.  The Other segment primarily represents the Company's Brazilian operations. Segment data as of and for the three-month and six-month periods ended June 30, 2002 and 2001 are as follows: 

 A reconciliation of segment data to consolidated data as of and for the three-month and six-month periods ended June 30, 2002 and 2001 is as follows: 

 5.    Senior Notes: 

On May 31, 2002 the Company issued $250,000,000 of 8⅞% senior notes due 2012 (the "Notes"). The Notes were issued by Trico Marine Services, Inc. and are guaranteed by Trico Marine Assets, Inc., Trico Marine Operators, Inc., and certain future domestic subsidiaries, if applicable, pursuant to the indenture for the 8⅞% senior notes.  Interest is payable semi-annually on May 15 and November 15, commencing November 15, 2002. Up to 35% of the Notes may be redeemed at the Company's option at any time prior to May 15, 2005 at a redemption price equal to 108.875% of the principal amount plus any accrued and unpaid interest and other costs if applicable, subject to certain conditions.  Commencing May 15, 2007 all or a portion of the remaining Notes may be redeemed at the Company's option at a price of 104.438% plus accrued and unpaid interest and costs if applicable, with the redemption price declining ratably beginning on May 15 of each of the succeeding three years. No sinking fund payments are required on the Notes until their final maturity. 

The Notes contain certain covenants that, among other things limit the ability of the Company to incur additional indebtedness, issue preferred stock, pay dividends or make other distributions, create certain liens, sell assets or enter into certain mergers and acquisitions. The Company received proceeds of $242,677,500 net of underwriting fees and original issue discount. On May 31, 2002 the Company retired $201,175,000 of previously issued 8½% senior notes due 2005 plus accrued interest and premium for $213,714,908. On June 18, 2002 the Company retired an additional $967,000 of previously issued 8½% senior notes for $1,006,983, including accrued interest and premium. The balance of the Note proceeds were used to retire additional amounts of previously issued 8½% senior notes.  See Note 9 - Subsequent Events. 

Consolidating financial statements of Trico Marine Services, Inc., the Note guarantor subsidiaries and the non-guarantor subsidiaries are set forth in Note 8. 

6.   Sale of Vessels: 

In February 2002, the Company sold one of its crew boats for $725,000 and recognized a gain in the first quarter of 2002 of approximately $496,000 from the sale.  In March 2001, the Company entered into agreements to sell two of its crew boats.  The sale of one of those crew boats was closed in March 2001, and the sale of the other crew boat was closed in April 2001.  The Company recognized a gain of approximately $568,000 in the first quarter of 2001 on the sale of the first crew boat and recognized a gain of approximately $374,000 in the second quarter of 2001 on the sale of the second crew boat.  The proceeds from all three sales were used for working capital. 

In April 2002 the Company completed an agreement for a sales-type lease of three of its line handling vessels and recognized a loss of $(102,945) on the transaction.  The Company is to receive payments in accordance with the following schedule:

 The discounted present value of the future sale-type lease payments is $1,147,809.

 7.   New Accounting Standards:

 Effective January 1, 2002 the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations."  SFAS No. 141 supercedes Accounting Principles Board ("APB") Opinion No. 16, "Business Combinations," and prohibits the use of the pooling-of-interest (pooling) method of accounting for business combinations initiated after the issuance date of SFAS No. 141.  The adoption of SFAS No. 141 did not have a material impact on the Company's net income, cash flows or financial condition. 

Effective January 1, 2002 the Company adopted Statement of Financial Accounting Standards SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS No. 142 supercedes APB Opinion No. 17,  "Intangible Assets," by stating that goodwill will no longer be amortized, but will be tested for impairment in a manner different from how other assets are tested for impairment.  SFAS No. 142 establishes a new method of testing goodwill for impairment by requiring that goodwill be separately tested for impairment using a fair value approach rather than an undiscounted cash flow approach.  Goodwill is now tested for impairment at a level referred to as a reporting unit, generally a level lower than that of the total entity.  SFAS No. 142 requires entities to perform the first goodwill impairment test, by comparing the fair value with the book value of a reporting unit, on all reporting units within six months of adopting the Statement. The Company determined fair value of its reporting segments, and performed initial impairment testing as prescribed in SFAS 142, based on commonly used financial ratios and analysis. The Company completed its initial SFAS 142 impairment test as of January 1, 2002 and the analysis determined that there was no goodwill impairment. The Company's fair value analysis is based on reporting unit cash flow, comparable industry financial ratios and other assumptions. While the Company believes its analysis is reasonable, changes in industry conditions, geographic vessel demand, and other variables possibly affecting reporting unit cash flows, comparable financial ratios, and anticipated future performance could materially impact future SFAS 142 impairment analysis.  Goodwill of a reporting unit shall be tested for impairment after the initial adoption of the Statement on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.   

Since SFAS No. 142 was adopted at January 1, 2002, the Company no longer amortizes goodwill. Amortization of goodwill for the three months and six months ended June 30, 2001 was $640,484 and $1,300,580, respectively.  Had the Company not amortized goodwill for the three months and six months ended June 30, 2001, net income would have been $6,086,083 and $8,708,563, respectively.  Had we not amortized goodwill for the three month and six month periods ended June 30, 2001, basic earnings per share would have been $0.17 and $0.24, respectively, and diluted earnings per share would have been $0.17 and $0.24, respectively. 

The Company's goodwill balance as of June 30, 2002 represented approximately 13% of total Company assets and primarily relates to the December 1997 acquisition of its Norwegian subsidiary Saevik Supply ASA.

In June 2001, the Financial Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement Obligations" which requires companies to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related asset.  SFAS No. 143 is effective for fiscal years beginning after June 15, 2002. The adoption of SFAS No. 143 will not have a material impact on the Company's net income, cash flows or financial condition. 

Effective January 1, 2002 the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets".  SFAS No. 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets.  The adoption of SFAS No. 144 did not have a material impact on the Company's net income, cash flows or financial condition.

In May 2002, the Financial Accounting Standards Board issued SFAS 145, "Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS 13, and Technical Corrections as of April 2002."  This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment to that Statement, FASB Statement No. 64 "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements."  SFAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions.  SFAS No. 145 is effective for financial statements issued for fiscal years beginning after May 15, 2002.  SFAS No. 145 is not expected to affect our results of operations, liquidity or financial position except for the reclassification of extraordinary items for debt extinguishment.

In July 2002, the FASB issued SFAS 146, Accounting for Costs Associated with Exit or Disposal Activities.  This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of a commitment to an exit or disposal plan.  Examples of costs covered by this guidance include termination benefits provided to current employees that are involuntarily terminated under the terms of a benefit arrangement that, in substance, is not an ongoing benefit arrangement or an individual deferred compensation contract, costs to terminate a contract that is not a capital lease, and costs to consolidate facilities or relocate employees.  The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged.  The Company is currently evaluating SFAS 146 but does not expect it to have a material impact on operations, liquidity or financial position at this time.

In June 2001, the Accounting Standards Executive Committee of the AICPA issued an exposure draft of a proposed Statement of Position (SOP), "Accounting for Certain Costs and Activities Related to Property, Plant, and Equipment."  This SOP provides guidance on accounting for certain costs and activities relating to property, plant, and equipment (PP&E).  For purposes of this SOP, a project stage or timeline framework is used and PP&E assets are accounted for at a component level.  Costs incurred for PP&E are classified into four stages: preliminary, preacquisition, acquisition-or-construction and in-service.  The SOP requires, among other things, that preliminary, preacquisition and acquisition-or-construction stage costs, except for payments to obtain an option to acquire PP&E, should be charged to expense as incurred.  Costs related to PP&E that are incurred during the in-service stage, including costs of normal, recurring, or periodic repairs and maintenance activities, should be charged to expense as incurred unless the costs are incurred for acquisition of additional PP&E or components of PP&E or the replacement of existing PP&E or components of PP&E.  Costs of planned major maintenance activities are not a separate PP&E asset or component.  Those costs should be charged to expense, except for acquisitions or replacements of components that are capitalizable under the in-service stage guidance of this SOP.  This SOP is anticipated to be effective for financial statements for fiscal years beginning after June 15, 2002, with earlier application encouraged.  This proposed SOP is subject to change.  However, if this proposed SOP is adopted in its current form, the Company will have to write-off its net capitalized deferred marine inspection costs, which totaled $18,759,724 at June 30, 2002.  This write-off would be accounted for as a cumulative effect of a change in accounting principle as of the beginning of the year of adoption.  Further evaluation is required by the Company to fully quantify the impact of this proposed pronouncement, if adopted.

8.       Consolidating Financial Statements of Guarantors of 8⅞% Senior Notes: 

The following presents the unaudited condensed consolidating historical financial statements as of June 30, 2002, and for the three-month periods ended June 30, 2002 and 2001, for the subsidiaries of the Company that serve as guarantors of the 8⅞% senior notes and for the Company's subsidiaries that do not serve as guarantors.  The guarantor subsidiaries are 100% owned by the parent company and their guarantees are full and unconditional and joint and several.