UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2004 or
------------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________
Commission file number 1-12289
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SEACOR HOLDINGS INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 13-3542736
- ----------------------------------------- --------------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
11200 Richmond, Suite 400, Houston, Texas 77082
- ---------------------------------------------- --------------------------------
(Address of Principal Executive Offices) (Zip Code)
(281) 899-4800
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]
The total number of shares of common stock, par value $.01 per share,
outstanding as of November 2, 2004 was 18,294,127. The Registrant has no other
class of common stock outstanding.
SEACOR HOLDINGS INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
--------
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of
September 30, 2004 and December 31, 2003....................................................1
Condensed Consolidated Statements of Operations for each of the
Three and Nine Months Ended September 30, 2004 and 2003.....................................2
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2004 and 2003...............................................3
Notes to the Condensed Consolidated Financial Statements........................................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................16
Item 4. Controls and Procedures.........................................................................17
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.....................................18
Item 6. Exhibits........................................................................................18
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SEACOR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA, UNAUDITED)
September 30, December 31,
2004 2003
--------------- ---------------
ASSETS
Current Assets:
Cash and cash equivalents....................................... $ 199,239 $ 263,135
Available-for-sale securities................................... 97,569 48,856
Trade and other receivables, net of allowance for
doubtful accounts of $3,127 and $2,800, respectively.......... 113,312 108,676
Prepaid expenses and other current assets....................... 28,342 23,551
--------------- ---------------
Total current assets.......................................... 438,462 444,218
--------------- ---------------
Investments, at Equity, and Receivables from
50% or Less Owned Companies................................... 53,471 59,848
Property and Equipment............................................. 1,066,629 1,021,703
Less accumulated depreciation................................... (289,268) (283,487)
--------------- ---------------
Net property and equipment.................................... 777,361 738,216
--------------- ---------------
Construction Reserve Funds......................................... 143,283 126,140
Other Assets....................................................... 43,959 34,189
--------------- ---------------
$ 1,456,536 $ 1,402,611
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt............................... $ 42 $ 93
Accounts payable and accrued expenses........................... 33,345 30,333
Other current liabilities....................................... 49,383 47,089
--------------- ---------------
Total current liabilities..................................... 82,770 77,515
--------------- ---------------
Long-Term Debt..................................................... 382,319 332,179
Deferred Income Taxes.............................................. 191,451 190,704
Deferred Income and Other Liabilities.............................. 26,657 29,858
Minority Interest in Subsidiaries.................................. 6,576 1,909
Stockholders' Equity:
Common stock, $.01 par value, 24,529,793 and
24,466,010 shares issued, respectively........................ 245 245
Additional paid-in capital...................................... 411,303 408,828
Retained earnings............................................... 531,957 531,384
Treasury stock, at cost, 6,237,466
and 5,884,971 shares, respectively............................ (197,826) (183,531)
Unamortized restricted stock compensation....................... (2,903) (2,998)
Accumulated other comprehensive income -
Cumulative translation adjustments.......................... 13,908 12,994
Unrealized gain on available-for-sale securities............ 10,079 3,524
--------------- ---------------
Total stockholders' equity............................... 766,763 770,446
--------------- ---------------
$ 1,456,536 $ 1,402,611
=============== ===============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
1
SEACOR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA, UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ---------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Operating Revenues......................................... $ 116,486 $ 103,234 $ 309,863 $ 305,253
----------- ----------- ----------- -----------
Costs and Expenses:
Operating expenses...................................... 79,134 72,264 227,923 208,786
Administrative and general.............................. 14,900 13,676 43,833 41,146
Depreciation and amortization........................... 14,352 13,411 42,469 41,755
----------- ----------- ----------- -----------
108,386 99,351 314,225 291,687
----------- ----------- ----------- -----------
Gains (Losses) on Asset Sales.............................. (119) 2,349 9,636 7,910
----------- ----------- ----------- -----------
Operating Income........................................... 7,981 6,232 5,274 21,476
----------- ----------- ----------- -----------
Other Income (Expense):
Interest income......................................... 2,180 1,540 5,222 5,966
Interest expense........................................ (5,565) (4,603) (16,331) (14,528)
Debt extinguishment expenses............................ - - - (2,091)
Derivative income (loss), net........................... (140) (443) (621) 3,930
Foreign currency transaction gains (losses), net........ (184) (1,714) (407) 115
Marketable securities sale gains (losses), net.......... (756) 2,411 4,746 5,852
Other, net.............................................. 79 (15) 431 (759)
----------- ----------- ----------- -----------
(4,386) (2,824) (6,960) (1,515)
----------- ----------- ----------- -----------
Income (Loss) Before Income Tax Expense, Minority
Interest in Income of Subsidiaries, and Equity in
Earnings of 50% or Less Owned Companies................. 3,595 3,408 (1,686) 19,961
Income Tax Expense......................................... 1,511 1,334 178 7,329
----------- ----------- ----------- -----------
Income (Loss) Before Minority Interest in Income of
Subsidiaries and Equity in Earnings of 50% or Less
Owned Companies........................................ 2,084 2,074 (1,864) 12,632
Minority Interest in Income of Subsidiaries................ (108) (112) (194) (451)
Equity in Earnings of 50% or Less Owned Companies.......... 1,388 935 2,631 1,503
----------- ----------- ----------- -----------
Net Income................................................. $ 3,364 $ 2,897 $ 573 $ 13,684
=========== =========== =========== ===========
Basic Earnings Per Common Share............................ $ 0.18 $ 0.16 $ 0.03 $ 0.71
=========== =========== =========== ===========
Diluted Earnings Per Common Share.......................... $ 0.18 $ 0.15 $ 0.03 $ 0.71
=========== =========== =========== ===========
Weighted Average Common Shares:
Basic................................................... 18,211 18,630 18,341 19,183
Diluted................................................. 18,357 18,785 18,496 19,479
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
2
SEACOR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
Nine Months Ended
-----------------------------
September 30,
-----------------------------
2004 2003
------------- -------------
Net Cash Provided by Operating Activities.............................. $ 9,356 $ 12,230
------------- -------------
Cash Flows from Investing Activities:
Purchase of property and equipment.................................. (129,859) (101,314)
Purchase of third party contracts................................... (2,893) -
Proceeds from asset sales........................................... 63,049 103,962
Purchase of available-for-sale securities........................... (89,803) (24,469)
Proceeds from sale of available-for-sale securities................. 62,814 58,057
Net increase in construction reserve funds.......................... (17,143) (14,499)
Investments in and advances to 50% or less owned companies.......... (554) (7,267)
Principal payments on notes due from 50% or less owned companies.... 3,367 1,318
Proceeds on sale of investments in 50% or less owned companies...... 5,133 -
Dividends received from 50% or less owned companies................. 1,115 11,569
Investment in note due from non-affiliate........................... (5,352) -
Principal payments on note due from non-affiliate................... 42 -
Cash settlements of derivative transactions......................... (306) (171)
Other, net.......................................................... - 957
------------- -------------
Net cash provided by (used in) investing activities............... (110,390) 28,143
------------- -------------
Cash Flows from Financing Activities:
Payments of long-term debt.......................................... (82) (71,341)
Proceeds from issuance of long-term debt............................ 50,000 -
Proceeds from share award plans..................................... 1,418 703
Common stock acquired for treasury.................................. (14,920) (48,108)
Premium paid with 5-3/8% note extinguishment........................ - (632)
Other............................................................... 62 (179)
------------- -------------
Net cash provided by (used in) financing activities............... 36,478 (119,557)
------------- -------------
Effect of Exchange Rate Changes on Cash and Cash Equivalents........... 660 (1,036)
------------- -------------
Net Decrease in Cash and Cash Equivalents.............................. (63,896) (80,220)
Cash and Cash Equivalents, Beginning of Period......................... 263,135 342,046
------------- -------------
Cash and Cash Equivalents, End of Period............................... $ 199,239 $ 261,826
============= =============
The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.
3
SEACOR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial information for the three and nine months
ended September 30, 2004 and 2003 has been prepared by the Company and was not
audited by its independent public accountants. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) have been made to
present fairly the financial position, results of operations and cash flows of
the Company as of and for the three and nine months ended September 30, 2004 and
2003. Results of operations for the interim periods presented are not
necessarily indicative of the operating results for the full year or any future
periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and related notes thereto included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2003.
Unless the context otherwise indicates, any references in this Quarterly Report
on Form 10-Q to the "Company" refer to SEACOR Holdings Inc. and its consolidated
subsidiaries, and any references in this Quarterly Report on Form 10-Q to
"SEACOR" refer to SEACOR Holdings Inc.
Certain reclassifications of prior period information have been made to conform
to the current period presentation.
2. EQUIPMENT ACQUISITIONS AND DISPOSITIONS
Equipment delivered to the Company during the nine months ended September 30,
2004 included 8 new offshore marine vessels, 1 used offshore marine vessel, 1
new helicopter, 262 new dry cargo hopper barges, 14 chemical tank barges, and 3
used inland river towboats for aggregate consideration of $146.8 million,
primarily funded while such new equipment was under construction. The Company
sold 43 vessels and other equipment during the nine months ended September 30,
2004 for aggregate consideration of $63.0 million. Such vessels sold included
all 28 of those remaining in the Company's "retired from service" fleet, 1 that
was sold to a joint venture and 1 that was leased-back.
3. COMMITMENTS AND CONTINGENCIES
The Company's unfunded capital commitments as of September 30, 2004 for 4 new
offshore marine vessels, 68 new dry cargo hopper barges, 22 new chemical tank
barges, 7 new helicopters and other equipment aggregated $76.0 million.
Deliveries are expected through the remainder of the year and into 2005. An
option to acquire 150 new dry cargo hopper barges expired shortly after the end
of the quarter.
The Company has guaranteed the payment of amounts owed by certain of its joint
ventures under vessel charter agreements that expire through October 2009. As of
September 30, 2004, the total amount of future charter payments guaranteed by
the Company was $15.1 million.
In connection with an examination of the Company's income tax returns for fiscal
years 2000 and 2001, the Internal Revenue Service ("IRS") previously indicated
that it was considering whether to propose a change in the manner in which
vessel assets are classified for purposes of depreciation and asserted
deficiencies with respect to the deduction of certain other expenses.
Settlements have been reached with the IRS on all outstanding issues resulting
in no material impact to the Company's financial position or results of
operations.
4. SUBSEQUENT EVENTS
On October 14, 2004, the Company agreed to acquire all of the outstanding shares
of capital stock of ERA Aviation, Inc. ("ERA") for a cash purchase price of
approximately $118 million, subject to post-closing working capital adjustments.
The acquisition is subject to the expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and to the
satisfaction of customary closing conditions. It is anticipated that the
transaction will close by December 31, 2004.
4
On October 22, 2004, the American Jobs Creation Act was signed into law. The
Company is exploring the full impact of this legislation but currently believes
it would be able to repatriate, for a limited time, accumulated foreign earnings
at an effective federal tax rate of 5.25% which would result in tax obligations
significantly less than the deferred taxes previously provided for unremitted
earnings of foreign subsidiaries.
5. LONG-TERM DEBT
During second and third quarter of 2004, the Company borrowed $50.0 million in
the aggregate under its five year, non-reducing, unsecured revolving credit
facility that terminates in February 2007. As of September 30, 2004, the Company
had $146.7 million available for use under this facility.
6. INCOME TAXES
The Company's effective income rate for the nine months ended September 30, 2004
was (10.6%). The customary benefit associated with pre-tax losses for this nine
month period was offset by tax provisions for state jurisdictions with taxable
income and the consequence of non-deductible compensation expenses excluded from
the U.S. consolidated tax return.
7. STOCK AND DEBT REPURCHASES
During the nine months ended September 30, 2004, the Company acquired 370,490
shares of its common stock, par value $.01 per share ("Common Stock"), for
treasury at an aggregate cost of $14.9 million. As of September 30, 2004, $43.3
million of repurchase authority granted by the Company's Board of Directors
remains available for acquisition of additional shares of Common Stock, the
Company's 7.2% Senior Notes Due 2009 ("7.2% Notes") and its 5-7/8% Senior Notes
due 2012 ("5-7/8% Notes"). Securities are acquired from time to time through
open market purchases, privately negotiated transactions or otherwise, depending
on market opportunity.
8. STOCK COMPENSATION
Under Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
companies could either adopt a "fair value method" of accounting for their
stock-based compensation plans or continue to use the "intrinsic value method"
as prescribed by APB Opinion No. 25. The Company has elected to continue
accounting for its stock-based compensation plans using the intrinsic value
method. Had compensation costs for the plans been determined using a fair value
method consistent with SFAS 123, the Company's net income and earnings per
common share would have been reduced to the following pro forma amounts:
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------------
Earnings Net Income Earnings (Loss)
Net Income Per Common Share (Loss) Per Common Share
------------------------------- ----------------------------------
2004 Basic Diluted Basic Diluted
------ ------ ------- ------ -------
(in thousands, except per share data)
- --------------------------------------------------
As reported................................................. $ 3,364 $ 0.18 $ 0.18 $ 573 $ 0.03 $ 0.03
========= ========= ========= =========
Add: stock-based compensation included in net income........ 381 1,145
Less: stock-based compensation using fair value method...... (583) (1,763)
---------- ---------
Pro forma................................................... $ 3,162 $ 0.17 $ 0.17 $ (45) $ 0.00 $ 0.00
========== ========= ========= ========= ========= =========
2003
----
(in thousands, except per share data)
- --------------------------------------------------
As reported................................................. $ 2,897 $ 0.16 $ 0.15 $ 13,684 $ 0.71 $ 0.71
========= ========= ========= =========
Add: stock-based compensation included in net income........ 425 1,331
Less: stock-based compensation using fair value method...... (709) (2,145)
---------- ---------
Pro forma................................................... $ 2,613 $ 0.14 $ 0.14 $ 12,870 $ 0.67 $ 0.67
========== ========= ========= ========= ========= =========
The effects of applying a fair value method consistent with SFAS 123 in this pro
forma disclosure are not indicative of future events, and the Company
anticipates that it will award additional stock based compensation in future
periods.
During the nine months ended September 30, 2004, the Company issued 63,783
shares of Common Stock for restricted stock grants, director stock grants and
the exercise of stock options. In addition, the Company released from treasury
19,195 shares of Common Stock for employee stock plan purchases and received
into treasury 1,200 shares of Common Stock on the cancellation of previously
issued restricted stock grants.
5
9. FINANCIAL INFORMATION OF 50% OR LESS OWNED COMPANIES
Summarized combined income statement information of business ventures for which
the Company applies the equity method of accounting is as follows:
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2004 2003 2004 2003
------------- ------------- ------------- -------------
(In thousands)
- -------------------------------------
Operating Revenues.................. $ 43,374 $ 34,072 $ 104,662 $ 85,654
Operating Income.................... 3,974 3,084 10,470 9,805
Net Income.......................... 2,919 3,881 7,708 8,602
10. EARNINGS PER SHARE
Basic earnings per common share were computed based on the weighted average
number of "unrestricted" common shares issued and outstanding (i.e., all issued
and outstanding shares other than those subject to forfeiture pursuant to grants
of restricted shares) during the relevant periods. Diluted earnings per common
share were computed based on the weighted average number of unrestricted common
shares issued and outstanding plus all potentially dilutive common shares that
would have been outstanding in the relevant periods assuming the vesting of
restricted stock grants and the issuance of common shares for stock options and
convertible subordinated notes through the application of the treasury stock and
if-converted methods. Diluted earnings per common share exclude certain options
and share awards, totaling 70,000 and 180,924 in the three and nine months ended
September 30, 2004, respectively, and 242,200 and 329,485 in the three and nine
months ended September 30, 2003, respectively, as the effect of their inclusion
in the computation would have been antidilutive.
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------------- --------------------------------------
Average O/S Per Average O/S Per
Net income Shares Share Net income Shares Share
----------- ---------- --------- ----------- ----------- ---------
2004
----
(in thousands, except per share data)
- --------------------------------------------
Basic Earnings Per Common Share........ $ 3,364 18,211 $ 0.18 $ 573 18,341 $ 0.03
========= ==========
Effect of Dilutive Securities, net of tax:
Options and restricted stock.......... - 146 - 155
---------- ---------- -------------- -----------
Diluted Earnings Per Common Share....... $ 3,364 18,357 $ 0.18 $ 573 18,496 $ 0.03
========== ========== ========= ============== =========== ===========
2003
----
(in thousands, except per share data)
- --------------------------------------------
Basic Earnings Per Common Share........ $ 2,897 18,630 $ 0.16 $ 13,684,000 19,183 $ 0.71
========= ==========
Effect of Dilutive Securities, net of tax:
Options and restricted stock......... - 155 - 158
Convertible securities............... - - 167,000 138
---------- ---------- -------------- -----------
Diluted Earnings Per Common Share...... $ 2,897 18,785 $ 0.15 $ 13,851,000 19,479 $ 0.71
========== ========== ========= ============== =========== ==========
11. COMPREHENSIVE INCOME (LOSS)
For the three months ended September 30, 2004 and 2003, total comprehensive
income (loss) was $9.4 million and ($2.2) million, respectively. For the nine
months ended September 30, 2004 and 2003, total comprehensive income was $8.0
million and $9.0 million, respectively. Other comprehensive income (loss) in
2004 and 2003 consisted of gains and losses from foreign currency translation
adjustments and unrealized holding gains and losses on available-for-sale
securities.
6
12. SEGMENT INFORMATION
Accounting standards require public business enterprises to report information
about each of their operating business segments that exceed certain quantitative
thresholds or meet certain other reporting requirements. Operating business
segments have been defined as a component of an enterprise about which separate
financial information is available and is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.
In accordance with Statement of Financial Accounting Standards No 131, the
Company's inland river services segment has been separately reported in the
segment information presented below due to its increased significance resulting
from capital expansion. The Company's basis of measurement of segment profit or
loss has not changed from previous reported periods. Certain reclassifications
of prior period information have been made to conform to the current period's
reportable segment presentation.
Offshore Inland
Marine Environmental River
Services Services Services Other Total
----------- ------------ ---------- ---------- -----------
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
(in thousands)
- ------------------------------------------------------------------
Operating Revenues:
External customers.............................................. $ 72,757 $ 21,144 $ 16,076 $ 6,509 $ 116,486
Intersegment.................................................... 68 - - 976 1,044
----------- ----------- ----------- ----------- -----------
72,825 21,144 16,076 7,485 117,530
Operating expenses................................................ (48,434) (14,738) (10,405) (6,659) (80,236)
Administrative and general........................................ (7,572) (2,793) (455) (228) (11,048)
Depreciation and amortization..................................... (10,468) (740) (2,067) (1,073) (14,348)
Gain (Loss) on asset sales........................................ 9 (131) 4 - (118)
Other income (expense), primarily foreign currency transactions... (202) (19) - - (221)
Equity in earnings (losses) of 50% or less owned companies........ 1,547 (21) - (139) 1,387
----------- ----------- ----------- -----------
Reportable Segment Profit (Loss).................................. $ 7,705 $ 2,702 $ 3,153 $ (614)
=========== =========== =========== ===========
Corporate......................................................... (3,879)
Other income (expense) not included above......................... (4,165)
Equity in earnings of 50% or less owned companies................. (1,387)
Segment Eliminations.............................................. 80
-----------
Income before Taxes, Minority Interest and Equity Earnings........ $ 3,595
===========
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
(in thousands)
- ------------------------------------------------------------------
Operating Revenues:
External customers.............................................. $ 81,190 $ 10,611 $ 7,195 $ 4,238 $ 103,234
Intersegment.................................................... 4 14 52 565 635
----------- ----------- ----------- ----------- -----------
81,194 10,625 7,247 4,803 103,869
Operating expenses................................................ (58,022) (5,016) (4,994) (4,811) (72,843)
Administrative and general........................................ (8,211) (1,850) (360) (517) (10,938)
Depreciation and amortization..................................... (11,529) (340) (923) (597) (13,389)
Gain on asset sales............................................... 2,348 1 - - 2,349
Other income (expense), primarily foreign currency transactions .. (1,991) - - (87) (2,078)
Equity in earnings (losses) of 50% or less owned companies........ 839 (5) - 101 935
----------- ----------- ----------- -----------
Reportable Segment Profit (Loss).................................. $ 4,628 $ 3,415 $ 970 $ (1,108)
=========== =========== =========== ===========
Corporate......................................................... (2,816)
Other income (expense) not included above......................... (746)
Equity in earnings of 50% or less owned companies................. (935)
-----------
Income before Taxes, Minority Interest and Equity Earnings........ $ 3,408
===========
7
Offshore Inland
Marine Environmental River
Services Services Services Other Total
----------- ------------ ---------- ---------- -----------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(in thousands)
- --------------------------------------------------------------------
Operating Revenues:
External customers............................................... $ 205,739 $ 52,190 $ 34,690 $ 17,244 $ 309,863
Intersegment..................................................... 141 - - 2,748 2,889
----------- ----------- ------------ ----------- ------------
205,880 52,190 34,690 19,992 312,752
Operating expenses................................................. (149,684) (37,888) (23,677) (19,563) (230,812)
Administrative and general......................................... (24,116) (7,717) (1,228) (1,078) (34,139)
Depreciation and amortization...................................... (32,361) (2,009) (4,761) (3,153) (42,284)
Gain (Loss) on asset sales......................................... 9,793 (64) 77 124 9,930
Other income (expense), primarily foreign currency transactions.... (333) 2 - - (331)
Equity in earnings (losses) of 50% or less owned companies......... 3,793 (21) - (1,141) 2,631
----------- ----------- ------------ -----------
Reportable Segment Profit (Loss)................................... $ 12,972 $ 4,493 $ 5,101 $ (4,819)
=========== =========== ============ ===========
Corporate.......................................................... (10,253)
Other income (expense) not included above.......................... (6,629)
Equity in earnings of 50% or less owned companies.................. (2,631)
Segment Eliminations............................................... 80
------------
Loss before Taxes, Minority Interest and Equity Earnings........... $ (1,686)
============
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(in thousands)
- --------------------------------------------------------------------
Operating Revenues:
External customers............................................... $ 241,840 $ 32,272 $ 16,976 $ 14,165 $ 305,253
Intersegment..................................................... 15 41 155 1,190 1,401
----------- ----------- ------------ ----------- ------------
241,855 32,313 17,131 15,355 306,654
Operating expenses................................................. (169,353) (16,303) (10,287) (14,074) (210,017)
Administrative and general......................................... (25,096) (5,854) (1,030) (1,203) (33,183)
Depreciation and amortization...................................... (35,375) (2,005) (2,805) (1,503) (41,688)
Gain (Loss) on asset sales......................................... 8,238 83 (311) (100) 7,910
Other income (expense), primarily foreign currency transactions
and an impairment charge for an investment...................... 254 - - (1,277) (1,023)
Equity in earnings (losses) of 50% or less owned companies......... 1,993 (2) - (488) 1,503
----------- ----------- ------------ -----------
Reportable Segment Profit (Loss)................................... $ 22,516 $ 8,232 $ 2,698 $ (3,290)
=========== =========== ============ ===========
Corporate.......................................................... (8,200)
Other income (expense) not included above.......................... (492)
Equity in earnings of 50% or less owned companies.................. (1,503)
------------
Income before Taxes, Minority Interest and Equity Earnings......... $ 19,961
============
AS OF SEPTEMBER 30, 2004
(in thousands)
- --------------------------------------------------------------------
Assets:
Investments and receivables in 50% or less owned companies....... $ 29,791 $ 163 $ - $ 23,517 $ 53,471
Goodwill......................................................... 12,646 14,264 1,493 305 28,708
Other Segment Assets............................................. 647,854 35,978 185,089 49,910 918,831
----------- ----------- ------------ ----------- ------------
$ 690,291 $ 50,405 $ 186,582 $ 73,732 1,001,010
=========== =========== ============ ===========
Cash, Investments and Corporate Assets............................. 455,526
------------
$ 1,456,536
============
AS OF DECEMBER 31, 2003
(in thousands)
- --------------------------------------------------------------------
Assets:
Investments and receivables in 50% or less owned companies....... $ 33,891 $ (10) $ - $ 25,967 $ 59,848
Goodwill......................................................... 12,646 14,264 1,493 305 28,708
Other Segment Assets............................................. 683,193 26,898 102,795 45,021 857,907
----------- ----------- ------------ ----------- ------------
$ 729,730 $ 41,152 $ 104,288 $ 71,293 946,463
=========== =========== ============ ===========
Cash, Investments and Corporate Assets............................. 456,148
------------
$ 1,402,611
============
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS
OF OPERATIONS
Certain statements discussed in Item 2 (Management's Discussion and Analysis of
Financial Condition and Results of Operations), Item 3 (Quantitative and
Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-Q
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
concerning management's expectations, strategic objectives, business prospects,
anticipated economic performance and financial condition and other similar
matters involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of
results to differ materially from any future results, performance or
achievements discussed or implied by such forward-looking statements. Such
risks, uncertainties and other important factors include, among others: the
cyclical nature of the oil and gas industry, adequacy of insurance coverage,
currency exchange fluctuations, changes in foreign political, military and
economic conditions, the ongoing need to replace aging vessels, dependence of
Offshore Marine Services on several customers, dependence of spill response
revenue on the number and size of spills and upon continuing government
regulation in this area and our ability to comply with such regulation and other
governmental regulation, industry fleet capacity, changes in foreign and
domestic oil and gas exploration and production activity, competition,
vessel-related risks, effects of adverse weather conditions and seasonality on
Aviation Services, helicopter related risks, effects of adverse weather and
river conditions and seasonality on Inland River Services, the level of grain
export volume, the effect of fuel prices on barge towing costs, variability in
freight rates for inland river barges, changes in Environmental Services "Oil
Spill Removal Organization" classification with the Coast Guard, liability in
connection with providing spill response services, restrictions imposed by the
Shipping Acts on the amount of foreign ownership of the Company's Common Stock,
the effect of international economic and political factors in Inland River
Services and various other matters, many of which are beyond the Company's
control and other factors as are described at the end of Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of Operations) of the
Company's Form 10-K for the fiscal year ended December 31, 2003. The words
"expect," "anticipate," "estimate," "project," "intend," "believe," "plan" and
similar expressions are intended to identify forward-looking statements.
Forward-looking statements speak only as of the date of the document in which
they are made. We disclaim any obligation or undertaking to provide any updates
or revisions to any forward-looking statement to reflect any change in our
expectations or any change in events, conditions or circumstances on which the
forward-looking statement is based.
CONSOLIDATED RESULTS OF OPERATIONS
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
---------------------------------------- ----------------------------------------
2004 2003 2004 2003
------------------- ------------------- ------------------- -------------------
(in thousands) Amount % Amount % Amount % Amount %
- ------------------------------------------- ----------- ------ ----------- ------ ----------- ------ ----------- ------
Operating revenues......................... $ 116,486 100 $ 103,234 100 $ 309,863 100 305,253 100
----------- ------ ----------- ------ ----------- ------ ----------- ------
Cost and expenses:
Operating expenses...................... 79,134 68 72,264 70 227,923 74 208,786 68
Administrative and general.............. 14,900 13 13,676 13 43,833 14 41,146 14
Depreciation and amortization........... 14,352 12 13,411 13 42,469 14 41,755 14
----------- ------ ----------- ------ ----------- ------ ----------- ------
108,386 93 99,351 96 314,225 102 291,687 96
----------- ------ ----------- ------ ----------- ------ ----------- ------
Gains (losses) on asset sales.............. (119) 0 2,349 2 9,636 3 7,910 3
----------- ------ ----------- ------ ----------- ------ ----------- ------
Operating income........................... 7,981 7 6,232 6 5,274 1 21,476 7
Other income (expense), net................ (4,386) (4) (2,824) (3) (6,960) (2) (1,515) (1)
----------- ------ ----------- ------ ----------- ------ ----------- ------
Income (loss) before taxes,
minority interest and equity earnings... 3,595 3 3,408 3 (1,686) (1) 19,961 6
Income tax expense......................... 1,511 1 1,334 1 178 0 7,329 2
----------- ------ ----------- ------ ----------- ------ ----------- ------
Income (loss) before minority interest
and equity earnings....................... 2,084 2 2,074 2 (1,864) (1) 12,632 4
Minority interest.......................... (108) 0 (112) 0 (194) 0 (451) 0
Equity earnings............................ 1,388 1 935 1 2,631 1 1,503 0
----------- ------- ----------- ------- ----------- ------- ----------- -------
Net income................................. $ 3,364 3 $ 2,897 3 $ 573 0 $ 13,684 4
=========== ======= =========== ======= =========== ======= =========== =======
The table above provides an analysis of the Company's consolidated results of
operations for each quarter and nine month period indicated. See "Item 1.
Financial Statements - Note 12. Segment Information" included in Part I for
additional financial information about the Company's business segments.
Additional discussions of results of operations by business segment are
presented below. The Company's operations are divided among the following four
business segments: "Offshore Marine Services;" "Environmental Services;" "Inland
River Services" and "Other," which primarily includes its "Aviation Services"
business. The Company began separately reporting its Inland River Services
business as a segment in the first quarter of 2004 due to its increased
significance resulting from fleet expansion.
9
OVERVIEW
For the past several years, the Company has been pursuing a strategy of reducing
its overall exposure to the offshore marine services industry and adjusting the
mix of equipment it operates. The Company has been balancing its exposure to the
energy service sector with investments in inland river assets and by expanding
its environmental activities.
Weak demand for Offshore Marine Services' fleet continued to depress profits,
but vessel utilization and rates per day worked have recently improved. The
Company expanded its environmental service operations with the fourth quarter
2003 acquisition of Foss Environmental Services Company ("Foss"), but had less
emergency response activity in the current year periods than in the year before.
Profits increased in Inland River Services due primarily to barge fleet
expansion. Its fleet count has risen from 735 barges at September 30, 2003 to
1,043 at September 30, 2004. Aviation Services' losses declined with improved
helicopter utilization.
Management believes that the acquisition of ERA, subject to satisfaction of all
applicable closing conditions, will substantially increase SEACOR's exposure to
the Gulf of Mexico helicopter market. ERA operates mostly twin-engine equipment,
serving the drilling "crew change" market and has large equipment that can
support deep-water operations. We expect the combination of ERA with Aviation
Services will result in synergies. The acquisition of ERA is consistent with
SEACOR's recently developed plan to invest cash previously dedicated to foreign
operations in US assets.
OPERATING REVENUES BY BUSINESS SEGMENT AND GEOGRAPHIC REGION
For the Three Months Ended September 30, For the Nine Months Ended September 30,
------------------------------------------ ------------------------------------------
2004 2003 2004 2003
------------------ ------------------- -------------------- --------------------
(in thousands) Amount % Amount % Amount % Amount %
- --------------------------- ----------- ------------------------------------------------------------- -------
BUSINESS SEGMENT:
Offshore Marine Services.. $ 72,825 63 $ 81,194 79 $ 205,880 66 $ 241,855 79
Environmental Services.... 21,144 18 10,625 10 52,190 17 32,313 11
Inland River Services..... 16,076 14 7,247 7 34,690 11 17,131 6
Other..................... 7,485 6 4,803 5 19,992 7 15,355 5
Elimination............... (1,044) (1) (635) (1) (2,889) (1) (1,401) (1)
----------- ------ ----------- ------ ----------- ------ ----------- ------
$ 116,486 100 $ 103,234 100 $ 309,863 100 $ 305,253 100
=========== ====== =========== ====== =========== ====== =========== ======
GEOGRAPHIC REGION:
United States............. $ 73,761 63 $ 54,245 52 $ 189,399 61 $ 159,031 52
----------- ------ ----------- ------ ----------- ------ ----------- ------
United Kingdom............ 18,196 16 17,693 17 51,838 17 54,701 18
West Africa............... 11,028 10 13,219 13 35,210 11 41,139 14
Latin America & Mexico.... 6,964 6 5,941 6 18,904 6 15,880 5
Asia...................... 3,961 3 5,057 5 9,705 3 15,123 5
Other..................... 2,576 2 7,079 7 4,807 2 19,379 6
----------- ------ ----------- ------ ----------- ------ ----------- ------
42,725 37 48,989 48 120,464 39 146,222 48
----------- ------ ----------- ------ ----------- ------ ----------- ------
$ 116,486 100 $ 103,234 100 $ 309,863 100 $ 305,253 100
=========== ====== =========== ====== =========== ====== =========== ======
OFFSHORE MARINE SERVICES. Operating revenues decreased 10%, or $8.4 million, to
$72.8 million in the three months ended September 30, 2004 ("Current Year
Quarter") from the three months ended September 30, 2003 ("Prior Year Quarter")
and 15%, or $36.0 million, to $205.9 million in the nine months ended September
30, 2004 ("Current Nine Months") from the nine months ended September 30, 2003
("Prior Nine Months") due principally to net vessel dispositions and a net
increase in the number of vessels entering bareboat charter-out service upon
concluding time charter-out arrangements. Fewer days worked and lower rates per
day worked for vessels that operated between comparable nine month periods also
contributed to lower operating revenues in the Current Nine Months. These
declines were partly offset by an increase in reported North Sea revenues in the
Current Year Quarter and Current Nine Months resulting from the translation of a
strengthening Pound Sterling currency relative to the U.S. dollar.
Since the beginning of 2003 and through the end of the Current Year Quarter, the
number of revenue generating vessels in Offshore Marine Services' fleet declined
by 31% to 168 vessels, resulting from 77 net vessel dispositions. Eighty-seven
vessels were sold and charters for 18 vessels were not renewed upon termination.
The Company completed the divestiture of Offshore Marine Services' utility fleet
in the previous quarter and at September 30, 2004 had no remaining "retired from
service" vessels. Fleet dispositions were offset by Offshore Marine Services'
purchase of 19 vessels and the charter-in of 9 vessels.
10
At September 30, 2004, Offshore Marine Services had 11 vessels bareboat
chartered-out, including 8 to joint venture partners. Operating revenues earned
from bareboat chartered-out vessels are generally lower than for vessels owned
and operated by the Company because certain vessel expenses, which must be
recovered through charter revenue, are the burden of the charterer.
Days worked and rates per day worked declined in the Current Nine Months and
lowered operating revenues earned by the Company's fleet of towing, supply,
anchor handling towing supply and mini-supply vessels that operated between
comparable periods. These declines were partly offset by an improvement in
operating revenues resulting from increased days worked and rates per day worked
for the Company's crew and standby safety fleets.
An increase in demand for U.S. vessels that began in the second quarter of 2004
has continued into the Current Year Quarter and rates per day worked have
recently improved. Days worked by vessels in Asia, Latin America, and the North
Sea also increased in the Current Year Quarter as compared to the previous
quarter; and rates per day worked improved modestly in the North Sea.
The Company is optimistic that the market improvement can be maintained. Strong
commodity prices have generated significant cash flow for the Company's clients,
most of whom have modestly increased their capital spending budgets for the
remainder of this year and 2005. Countering this trend towards increased
investment are concerns over the sustainability of high commodity prices and a
lack of suitable rigs and/or shortage of attractive exploration prospects in
mature markets such as the Gulf of Mexico and North Sea.
Rates per day worked and related operating revenues for North Sea vessels are
earned in Pounds Sterling. For financial statement reporting purposes, these
revenues are translated to U.S. dollar equivalents at weighted average exchange
rates in effect during the applicable periods. A strengthening between years of
the Pound Sterling currency relative to the U.S. dollar has increased Offshore
Marine Services' reported operating revenues by approximately $1.8 million in
the Current Year Quarter and $5.6 million in the Current Nine Months.
The table below sets forth operational data for Offshore Marine Services during
the periods indicated.
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
2004 2003 2004 2003
------ ------ ------ ------
RATES PER DAY WORKED ($): (1) (2)
Anchor Handling Towing Supply - Domestic............ 22,009 20,095 19,133 18,155
Anchor Handling Towing Supply - Foreign............. 9,534 9,927 9,255 10,203
Crew................................................ 3,458 3,257 3,359 2,971
Geophysical, Freight and Other(3)................... - - 14,000 -
Mini-Supply......................................... 2,937 2,998 2,948 3,041
Standby Safety...................................... 7,839 6,733 7,752 6,613
Supply - Domestic................................... 6,720 6,062 6,310 6,428
Supply - Foreign.................................... 10,095 8,926 9,642 9,320
Towing- Domestic.................................... 6,118 6,093 6,072 6,293
Towing - Foreign.................................... 6,769 7,236 6,695 7,143
Utility(3).......................................... - 1,774 - 1,778
OVERALL UTILIZATION (%): (1)
Anchor Handling Towing Supply - Domestic............ 85.2 65.9 73.7 66.9
Anchor Handling Towing Supply - Foreign............. 90.4 81.9 72.1 84.1
Crew................................................ 93.5 75.9 88.4 78.3
Geophysical, Freight and Other(4)................... - - 17.7 -
Mini-Supply......................................... 90.9 91.6 86.3 89.3
Standby Safety...................................... 89.7 89.9 87.5 87.0
Supply - Domestic................................... 68.9 72.7 72.3 64.1
Supply - Foreign.................................... 86.9 88.7 77.4 92.5
Towing - Domestic................................... 64.3 100.0 68.3 96.7
Towing - Foreign.................................... 61.7 82.7 64.0 84.2
Utility(3).......................................... - 58.7 - 56.8
Overall Fleet.................................... 88.2 77.5 83.3 77.2
** TABLE CONTINUED **
11
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
2004 2003 2004 2003
------ ------ ------ ------
AVAILABLE DAYS: (1)
Anchor Handling Towing Supply - Domestic............ 276 460 853 1,365
Anchor Handling Towing Supply - Foreign............. 759 1,012 2,224 3,071
Crew................................................ 6,024 6,699 18,133 20,196
Geophysical, Freight and Other(4)................... 50 92 141 273
Mini-Supply......................................... 2,619 2,760 8,057 8,190
Standby Safety...................................... 1,932 1,840 5,754 5,478
Supply - Domestic................................... 644 920 2,165 3,206
Supply - Foreign.................................... 828 1,104 2,648 3,030
Towing - Domestic................................... 275 184 730 741
Towing - Foreign.................................... 736 1,196 2,599 3,581
Utility(3).......................................... - 3,253 - 10,098
------- ------- ------- -------
Overall Fleet.................................... 14,143 19,520 43,304 59,229
======= ======= ======= =======
At September 30, At December 31,
----------------------- ---------------
2004 2003 2003
------------ ---------- ---------------
FLEET COUNT AT PERIOD END:
Anchor Handling Towing Supply - Domestic............ 4 5 6
Anchor Handling Towing Supply - Foreign............. 13 21 20
Crew................................................ 77 90 87
Geophysical, Freight and Other...................... 2 2 4
Mini-Supply......................................... 30 32 32
Standby Safety...................................... 27 26 27
Supply - Domestic................................... 8 11 9
Supply - Foreign.................................... 13 18 17
Towing - Domestic................................... 3 2 2
Towing - Foreign.................................... 30 36 31
Utility............................................. - 36 -
------- ------- -------
Overall Fleet.................................... 207 (5) 279 235
======= ======= =======
** TABLE COMPLETE **
____________________
(1) Rates per day worked, overall utilization and available days exclude owned
vessels that are bareboat chartered-out, minority-owned joint venture
vessels and managed vessels and include vessels bareboat and time
chartered-in by the Company.
(2) Revenues for certain of the Company's vessels included in the calculation
of rates per day worked, primarily its North Sea fleet, are earned in
foreign currencies, primarily Pounds Sterling, and have been converted to
U.S. dollars at the weighted average exchange rate for the periods
indicated.
(3) During the first six months of 2004, the Company sold 26 "retired from
service" vessels that remained in this class. The Company decided in the
fourth quarter of 2003 to divest of this class of vessel.
(4) Vessels in this class were out of service during the three and nine months
ended September 2003 and the three months ended September 2004.
(5) Includes 131 owned, 31 chartered-in, 5 managed and 1 pooled. Joint ventures
in which the Company owned a 50% or less interest owned or chartered-in 33
vessels and joint ventures in which the Company owned a majority interest
owned 6 vessels.
ENVIRONMENTAL SERVICES. Operating revenues increased 99%, or $10.5 million, to
$21.1 million in the Current Year Quarter from the Prior Year Quarter and 62%,
or $19.9 million, to $52.2 million in the Current Nine Months from the Prior
Nine Months. Results improved with the acquisition of Foss and due to increased
consulting and project management activities. A decline in foreign oil spill
response activities in Iraq partly offset these improvements. Spill response
operating revenues are dependent on the number of spill responses in a given
period and the magnitude of each spill. Consequently, spill response revenues
can vary materially between comparable periods and the revenues from any one
period are not indicative of a trend or of anticipated results in future
periods.
Foss, now known as NRC Environmental Services Inc. ("NRCES"), was acquired in
the fourth quarter of 2003 and primarily operates on the West Coast. NRCES
provides oil spill emergency response services, industrial and marine cleaning
services, petroleum storage tank removal and site remediation, transportation
and disposal of hazardous waste and environmental equipment and product sales.
INLAND RIVER SERVICES. Operating revenues increased 122%, or $8.8 million, to
$16.1 million in the Current Year Quarter from the Prior Year Quarter and 102%,
or $17.6 million, to $34.7 million in the Current Nine Months from the Prior
Nine Months due to fleet expansion, the hauling of greater freight volumes,
improved freight rates and an increase in cargo stored aboard dry cargo hopper
barges ("hopper barges").
The fleet of Inland River Services included 1,043 barges as of September 30,
2004 (645 owned, 182 chartered-in, 210 managed and 6 joint ventured). Since the
beginning of 2003, net fleet additions have totaled 508 barges, primarily
including newly constructed and chartered-in hopper barges. Freight volumes and
rates increased due to the short supply of properly positioned hopper barges,
increased non-grain loadings and improved harvest activity. Storage revenues
also increased in the Current Nine Months due to higher levels of fertilizer
imports and adverse river conditions during the winter months.
12
OTHER. Operating revenues increased 56%, or $2.7 million, to $7.5 million in the
Current Year Quarter from the Prior Year Quarter and 30%, or $4.6 million, to
$20.0 million in the Current Nine Months from the Prior Nine Months. These
increases resulted principally from helicopter fleet expansion in the Company's
Aviation Services business.
OPERATING INCOME (LOSS) BY BUSINESS SEGMENT
For the Three Months Ended For the Nine Months Ended
Sept. 30, Sept. 30,
------------------------------ -----------------------------
(in thousands) 2004 2003 2004 2003
- -------------------------------------------------- -------------- ------------- ------------- -------------
BUSINESS SEGMENT:
Offshore Marine Services..................... $ 6,360 $ 5,780 $ 9,512 $ 20,269
Environmental Services....................... 2,742 3,420 4,512 8,234
Inland River Services........................ 3,153 970 5,101 2,698
Other........................................ (475) (1,122) (3,678) (1,525)
Corporate and Eliminations................... (3,799) (2,816) (10,173) (8,200)
-------------- ------------- ------------- -------------
$ 7,981 $ 6,232 $ 5,274 $ 21,476
============== ============= ============= =============
OFFSHORE MARINE SERVICES. Operating income increased 10%, or $0.6 million, to
$6.4 million in the Current Year Quarter from the Prior Year Quarter and
decreased 53%, or $10.8 million, to $9.5 million in the Current Nine Months from
the Prior Nine Months.
Operating income improved in the Current Year Quarter as decreases in costs and
expenses exceeded declines in operating revenues and gains from asset sales.
Repair costs were lower and other operating expenses declined due to a cost
reduction program. Staff reductions lowered administrative expenses. Gains from
asset sales declined due to fewer vessel dispositions. Net vessel dispositions
marginally affected operating income as profits earned from fleet additions
offset profits lost from fleet dispositions.
Operating income decreased in the Current Nine Months. Those factors affecting
operating revenues, described above, and higher vessel operating expenses were
partly offset by lower administrative costs, increased gains on asset sales and
the effects from changing fleet composition. Operating expenses increased due to
(i) a rise in compensation in the third quarter of 2003 for United Kingdom
seamen, (ii) higher seamen redundancy costs associated with workforce reductions
(iii) increased vessel importation fees in certain West African countries, and
(iv) the provisioning for loss contingencies with respect to insurance contract
deductibles. These operating expense increases were partly offset by lower
repair costs and declines in other operating expenses resulting from a cost
reduction program. Staff reductions decreased administrative expenses. Gains on
asset sales increased due to the disposition of additional vessels. Increases in
profits resulting from the addition of vessels to the fleet exceeded declines in
profits that occurred as a result of fleet dispositions as newer vessels
replaced under-utilized older equipment.
Translation of the operating activities of subsidiaries whose functional
currency is Pound Sterling decreased reported operating income by $0.6 million
in the Current Nine Months. Costs and expenses exceeded revenues in a period
when the Pound Sterling currency strengthened against the U.S. dollar.
ENVIRONMENTAL SERVICES. Operating income decreased 20%, or $0.7 million, to $2.7
million in the Current Year Quarter from the Prior Year Quarter and 45%, or $3.7
million, to $4.5 million in the Current Nine Months from the Prior Nine Months
due to a decline in profitability from emergency response activities. Profit
margins from emergency response activities can vary greatly between periods and
are dependent upon contract pricing relative to the direct costs of labor,
material and other resources engaged in emergency response projects in the
comparable periods.
INLAND RIVER SERVICES. Operating income increased 225%, or $2.2 million, to $3.2
million in the Current Year Quarter from the Prior Year Quarter and 89%, or $2.4
million, to $5.1 million in the Current Nine Months from the Prior Nine Months.
Higher fuel costs and lease costs for the recent charter-in of 182 hopper barges
partly offset increases in operating revenues.
OTHER. Operating loss decreased 58%, or $0.6 million, to $0.5 million in the
Current Year Quarter from the Prior Year Quarter but increased 141%, or $2.2
million, to $3.7 million in the Current Nine Months from the Prior Nine Months.
Other operating loss primarily resulted from the activities of the Company's
Aviation Services business. An increase in expenses resulting from the
commencement of operation of six new helicopters in the third and fourth
quarters of 2003 and the first quarter of 2004, including costs for mandatory
FAA proving flights and flight and maintenance training related to introducing a
new type of medium-sized twin engine helicopter, and major repairs to restore to
service existing helicopters whose status was non-operational
13
exceeded increases in operating revenues. Losses did decline in the Company's
Aviation Services business in Current Year Quarter as compared to the previous
quarter and an improvement in results are expected in future periods. Such
improvement remains dependent on, amongst other things, offshore production and
drilling activities of major oil and production management companies operating
in the U.S. Gulf of Mexico.
CORPORATE. Corporate expenses increased 38%, or $1.1 million, to $3.9 million in
the Current Year Quarter from the Prior Year Quarter and 25%, or $2.1 million,
to $10.3 million in the Current Nine Months from the Prior Nine Months primarily
due to increased business development and facility expenses and costs necessary
to comply with Section 404 of the Sarbanes-Oxley Act of 2002.
OTHER INCOME (EXPENSE), NET
For the Three Months Ended For the Nine Months Ended
Sept. 30, Sept. 30,
----------------------------- -----------------------------
(in thousands) 2004 2003 2004 2003
- -------------------------------------------------- -------------- ------------- ------------- -------------
Net interest expense............................... $ (3,385) $ (3,063) $ (11,109) $ (8,562)
Debt extinguishment expense........................ - - - (2,091)
Derivative income (loss), net...................... (140) (443) (621) 3,930
Foreign currency transaction gains (losses), net... (184) (1,714) (407) 115
Marketable securities sale gains (losses), net..... (756) 2,411 4,746 5,852
Other, net......................................... 79 (15) 431 (759)
------------- ------------- ------------- -------------
$ (4,386) $ (2,824) $ (6,960) $ (1,515)
============= ============= ============= =============
NET INTEREST EXPENSE. Net interest expense increased 11%, or $0.3 million, to
$3.4 million in the Current Year Quarter from the Prior Year Quarter and 30%, or
$2.5 million, to $11.1 million in the Current Nine Months from the Prior Nine
Months. This was primarily due to reduced capitalized interest and the 2003
fourth quarter termination of interest rate swap agreements with respect to the
Company's 7.2% Notes.
DEBT EXTINGUISHMENT EXPENSE. The Company redeemed the outstanding principal
amount of its 5-3/8% Notes on February 20, 2003 and accelerated the repayment of
notes due to former shareholders of an acquired company on April 7, 2003. These
debt repayments in the Prior Nine Months resulted in a write-off of related
unamortized deferred financing costs and premium payments totaling $2.1 million.
DERIVATIVE INCOME (LOSS), NET. Derivative transactions resulted in a loss of
$0.6 million in the Current Nine Months as compared to income of $3.9 million
the Prior Nine Months. Derivative income in the Prior Nine Months included a
$1.6 million gain from interest rate swap agreements with respect to the
Company's 7.2% Notes and a $1.7 million gain from costless collars associated
with the Company's common stock investment in ENSCO International Incorporated.
The costless collars and interest swap agreements were terminated in the second
and fourth quarters of 2003, respectively.
FOREIGN CURRENCY TRANSACTION GAINS (LOSSES), NET. Foreign currency transaction
losses decreased $1.5 million to $0.2 million in the Current Year Quarter from
the Prior Year Quarter and increased $0.5 million to $0.4 million in the Current
Nine Months from a gain of the Prior Nine Months. Gains and losses primarily
resulted from the effect of currency exchange rate changes on loans between
SEACOR and certain of its foreign subsidiaries and other transactions
denominated in currencies other than the functional currency of various
subsidiaries.
MARKETABLE SECURITIES SALE GAINS (LOSSES), NET. Marketable securities sale gains
decreased $3.2 million to a loss of $0.8 million in the Current Year Quarter
from the Prior Year Quarter and decreased $1.1 million to a gain of $4.7 million
in the Current Nine Months from the Prior Nine Months. The loss in the Current
Year Quarter is primarily the result of reduced trading activity in
available-for-sale securities. Unrealized gains on available-for-sale securities
increased $8.0 million, net of tax, to $10.1 million as of September 30, 2004
from $2.1 million as of September 30, 2003.
INCOME TAXES
The Company's effective income rate for the Current Nine Months was (10.6%). The
customary benefit associated with pre-tax losses for the Current Nine Months was
offset by tax provisions for state jurisdictions with taxable income and the
consequence of non-deductible compensation expenses excluded from the U.S.
consolidated tax return.
14
EQUITY EARNINGS
Equity earnings increased 48%, or $0.5 million, to $1.4 million in the Current
Year Quarter from the Prior Year Quarter and 75%, or $1.1 million, to $2.6
million in the Current Nine Months from the Prior Nine Months. This was due
primarily to improved joint venture operating results in Offshore Marine
Services. Results for the Current Nine Months included a loss recognized on the
sale of an interest in an Asian marine joint venture and an impairment charge
relating to the Company's investment in an entity that develops and sells
software to the ship brokerage and shipping industry.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company's ongoing liquidity requirements arise primarily from the funding of
working capital needs, acquisition, construction or improvement of equipment,
repayment of debt obligations, repurchase of Common Stock and purchase of other
investments. The Company's principal sources of liquidity are cash balances,
available-for-sale securities, construction reserve funds, cash flows from
operations and borrowings under its revolving credit facility although, from
time to time, it may issue debt, shares of Common Stock, preferred stock, or a
combination thereof, or sell vessels and other assets to finance the acquisition
of equipment and businesses or make improvements to existing equipment.
As of September 30, 2004, the Company had $146.7 million available under a five
year, non-reducing, unsecured revolving credit facility that terminates in
February 2007.
OPERATING ACTIVITIES
Cash flows provided by operating activities were $9.4 million in the Current
Nine Months and $12.2 million in the Prior Nine Months. The decline in operating
cash flows resulted primarily from the same factors producing the decline in net
earnings between the periods (see Consolidated Results of Operations discussion
above) partially offset by a reduction in accounts payables in the Prior Nine
Months and a reduction in the provision for deferred taxes between the periods.
INVESTING ACTIVITIES
Cash flows used in investing activities were $110.4 million in Current Nine
Months as compared to cash flows provided by investing activities of $28.1
million in the Prior Nine Months. The decline in investing cash flows resulted
primarily from a net increase available-for-sale security purchases, an increase
in equipment purchases, reduced proceeds from equipment sales and reduced
dividends received from 50% or less owned companies.
The Company's unfunded capital commitments as of September 30, 2004 for 4 new
offshore marine vessels, 68 new dry cargo hopper barges, 22 new chemical tank
barges, 7 new helicopters and other equipment aggregated $76.0 million.
Deliveries are expected through the remainder of the year and into 2005. An
option to acquire 150 new dry cargo hopper barges expired shortly after the end
of the third quarter.
On October 14, 2004, the Company agreed to acquire all of the outstanding shares
of capital stock of ERA for a cash purchase price of approximately $118 million,
subject to post-closing working capital adjustments. The acquisition is subject
to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and to the satisfaction of customary
closing conditions. It is anticipated that the transaction will close by
December 31, 2004. The acquisition of ERA is consistent with SEACOR's recently
developed plan to invest cash previously dedicated to foreign operations, in
U.S. assets.
FINANCING ACTIVITIES
Cash flows provided by financing activities were $36.5 million in the Current
Nine Months as compared to cash flows used in financing activities of $119.6
million in the Prior Nine Months. The Company repaid $71.3 million of its
outstanding indebtedness in the Prior Nine Months with proceeds from the sale in
2002 of its 5-7/8% Notes. In addition, the Company repurchased fewer shares of
Common Stock between periods. During the Current Nine Months, the Company
borrowed $50.0 million under its revolving credit facility.
15
During the Current Nine Months, the Company acquired 370,490 shares of its
Common Stock for treasury at an aggregate cost of $14.9 million. As of September
30, 2004, $43.3 million of repurchase authority granted by the Company's Board
of Directors remains available for acquisition of additional shares of Common
Stock, the Company's 7.2% Notes and its 5-7/8% Notes. Securities are acquired
from time to time through open market purchases, privately negotiated
transactions or otherwise, depending on market opportunity.
FINANCIAL POSITION
Total assets of the Company remained relatively constant at $1.5 billion and
$1.4 billion as of September 30, 2004 and December 31, 2003, respectively. The
Company's combined cash, available-for-sale securities and construction reserve
funds remained relatively constant at $440.1 million and represented 30% of
total assets as of September 30, 2004. Net property and equipment increased 5%
to $777.4 million and represented 54% of total assets as of September 30, 2004.
Long-term debt increased 15% to $382.3 million.
SHORT AND LONG-TERM LIQUIDITY REQUIREMENTS
The Company anticipates it will generate positive cash flows from operations in
the near term and these cash flows will be adequate to meet the Company's
working capital requirements and contribute toward defraying the costs of its
capital expenditures. As in the past and in further support of the Company's
capital expenditure program and anticipated acquisitions, the Company intends to
sell vessels, enter into sale and leaseback transactions for vessels, borrow
under its revolving credit facility or utilize construction reserve funds, or a
combination thereof. To the extent the Company relies on existing cash balances,
proceeds from the sale of available-for-sale securities or construction reserve
funds, the Company's liquidity would be reduced.
The Company's long-term liquidity is dependent upon its ability to generate
operating cash flows sufficient to meet its requirements for working capital,
capital expenditures and a reasonable return on shareholders' investment. The
Company believes that earning such operating profits will permit it to maintain
its access to favorably priced debt, equity and off-balance sheet financing
arrangements. With the cyclical nature of the energy business and the recent
adverse effect it has had on the Company's results of operations and cash flows,
the Company has adopted a strategy of reducing its overall dependency on
Offshore Marine Services and reinvesting certain of its capital resources in
Inland River Services and Aviation Services.
CONTINGENCIES
The Company has guaranteed the payment of amounts owed by certain of its joint
ventures under vessel charter agreements that expire through October 2009. As of
September 30, 2004, the total amount of future charter payments guaranteed by
the Company was $15.1 million.
In connection with an examination of the Company's income tax returns for fiscal
years 2000 and 2001, the Internal Revenue Service ("IRS") previously indicated
that it was considering whether to propose a change in the manner in which
vessel assets are classified for purposes of depreciation and asserted
deficiencies with respect to the deduction of certain other expenses.
Settlements have been reached with the IRS on all outstanding issues resulting
in no material impact to the Company's financial position or results of
operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has been no material change in the Company's exposure to market risk
during the Current Nine Months. For discussion of the Company's exposure to
market risk, refer to Item 7A, Quantitative and Qualitative Disclosures about
Market Risk, contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003.
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ITEM 4. CONTROLS AND PROCEDURES
The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), as of September 30, 2004. Based on their evaluation, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective as of September 30,
2004.
There has been no change in the Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during the Company's fiscal quarter ended September 30, 2004, that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
As a result of Section 404 of the Sarbanes-Oxley Act of 2002 and the rules
issued thereunder, the Company will be required to include in its Annual Report
on Form 10-K for the year ending December 31, 2004 a report on management's
assessment of the effectiveness of the Company's internal controls over
financial reporting. The Company's independent auditors will also be required to
attest to and report on management's assessment.
As part of the process of preparing for compliance with these requirements, in
2003, the Company initiated a review of its internal controls over financial
reporting. As part of this review, management has been engaged in a process to
document and evaluate the Company's internal controls over financial reporting.
In this regard, management has dedicated internal resources, engaged outside
consultants and adopted a detailed plan to (i) document the Company's internal
controls over financial reporting, (ii) assess the adequacy of the Company's
internal controls over financial reporting, (iii) take steps to improve control
processes where appropriate and (iv) validate through testing that controls are
functioning as documented.
Management identified and reported to the Audit Committee of the Board of
Directors certain matters involving internal control deficiencies. Although none
of the deficiencies, individually, is believed to be a material weakness, if
such deficiencies remain uncorrected, they could, in the aggregate, amount to a
material weakness in internal controls over financial reporting under
definitions established by the Securities and Exchange Commission and the Public
Company Accounting Oversight Board.
Although management believes that it is likely that the Company will be able to
implement changes to correct any deficiencies that would amount to a material
weakness in internal controls over financial reporting and to document
sufficiently and test the revised internal controls procedures in order to make
a positive assertion as to the effectiveness of internal controls over financial
reporting, there can be no assurance that all the identified issues, and any
other issues found during the ongoing documentation and evaluation process, will
be resolved in time to do so.
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PART II - OTHER INFORMATION
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
This table provides information with respect to purchases by the Company of
shares of Common Stock during the Current Year Quarter:
Approximate Dollar
Total Total Number of Shares Value of Shares that
Number of Purchased as Part of May Yet Be Purchased
Shares Average Price Publicly Announced Under the Plans or
Period Purchased Paid per Share Plans or Programs (1) Programs (1)
----------------------------------------------------------------------------------------------------
July 1 - 31, 2004 0 - 0 $45,371,000
August 1 - 31, 2004 50,200 $41.15 50,200 $43,302,000
September 1 - 30, 2004 833 $45.07 833 $43,265,000
----------- -----------
Total 51,033 $41.21 51,033
(1) Beginning in February 1997 and extended at various times through
November 2003, the Board of Directors authorized the repurchase of $347.0
million of Common Stock, debt or combination thereof. Through September 30,
2004, the Company has repurchased $225.5 million and $78.2 million of
Common Stock and debt, respectively.
ITEM 6. EXHIBITS
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) of the Exchange Act.
32.1 Certification of Chief Executive Officer required by Rule
13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350
(furnished herewith).
32.2 Certification of Chief Financial Officer required by Rule
13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350
(furnished herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEACOR Holdings Inc.
(Registrant)
DATE: November 9, 2004 By: /s/ Charles Fabrikant
------------------------------------------
Charles Fabrikant, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
DATE: November 9, 2004 By: /s/ Randall Blank
------------------------------------------
Randall Blank, Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial Officer)
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EXHIBIT INDEX
31.1 Certification by the Chief Executive Officer pursuant to Rule
13a-14(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
31.2 Certification by the Chief Financial Officer pursuant to Rule
13a-14(a) of the Exchange Act.
32.1 Certification of Chief Executive Officer required by Rule 13a-14(b) of
the Exchange Act and 18 U.S.C. Section 1350 (furnished herewith).
32.2 Certification of Chief Financial Officer required by Rule 13a-14(b) of
the Exchange Act and 18 U.S.C. Section 1350 (furnished herewith).
19