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Table of Contents

 

 

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 March 31, 2011            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

SEACOR Holdings Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   13-3542736

(State or Other Jurisdiction of

Incorporation or Organization)

 

(IRS Employer

Identification No.)

2200 Eller Drive, P.O. Box 13038,  
Fort Lauderdale, Florida   33316
(Address of Principal Executive Offices)   (Zip Code)

954-523-2200

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer  x   Accelerated filer  ¨  

Non-accelerated filer  ¨

(Do not check if a smaller

reporting company)

  Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Exchange Act). Yes  ¨    No    x

The total number of shares of common stock, par value $.01 per share, outstanding as of April 21, 2011 was 21,657,856. The Registrant has no other class of common stock outstanding.

 

 

 


Table of Contents

SEACOR HOLDINGS INC.

Table of Contents

 

Part I.    Financial Information      3   
        
   Item 1.    Financial Statements (Unaudited)      3   
        
     

Condensed Consolidated Balance Sheets as of March 31, 2011

and December 31, 2010

     3   
        
     

Condensed Consolidated Statements of Income for the

Three Months Ended March 31, 2011 and 2010

     4   
        
     

Condensed Consolidated Statement of Changes in Equity for the

Three Months Ended March 31, 2011

     5   
        
     

Condensed Consolidated Statements of Cash Flows for the

Three Months Ended March 31, 2011 and 2010

     6   
        
      Notes to Condensed Consolidated Financial Statements      7   
        
   Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations      22   
        
   Item 3.    Quantitative and Qualitative Disclosures About Market Risk      44   
        
   Item 4.    Controls and Procedures      44   
        
Part II.    Other Information      45   
        
   Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds      45   
        
   Item 6.    Exhibits      45   

 

2


Table of Contents

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

    March 31,
2011
    December 31,
2010
 
ASSETS    

Current Assets:

   

Cash and cash equivalents

  $ 409,716      $ 370,028   

Restricted cash

    19,545        12,651   

Marketable securities

    149,026        147,409   

Receivables:

   

Trade, net of allowance for doubtful accounts of $3,666 and $4,212 in 2011 and 2010,
respectively

    324,218        450,912   

Other

    55,475        72,448   

Inventories

    97,405        67,498   

Deferred income taxes

    5,442        5,442   

Prepaid expenses and other

    22,794        18,414   
               

Total current assets

    1,083,621        1,144,802   
               

Property and Equipment

    2,862,386        2,803,754   

Accumulated depreciation

    (875,140     (835,032
               

Net property and equipment

    1,987,246        1,968,722   
               

Investments, at Equity, and Advances to 50% or Less Owned Companies

    190,472        182,387   

Construction Reserve Funds & Title XI Reserve Funds

    331,689        323,885   

Goodwill

    61,864        61,779   

Intangible Assets

    19,810        21,169   

Other Assets, net of allowance for doubtful accounts of $1,830 in 2011 and 2010

    59,996        57,645   
               
  $ 3,734,698      $ 3,760,389   
               
LIABILITIES AND EQUITY    

Current Liabilities:

   

Current portion of long-term debt

  $ 18,106      $ 14,618   

Current portion of capital lease obligations

    1,047        1,030   

Accounts payable and accrued expenses

    275,991        322,785   

Other current liabilities

    205,546        197,080   
               

Total current liabilities

    500,690        535,513   
               

Long-Term Debt

    694,872        697,427   

Capital Lease Obligations

    5,200        5,493   

Deferred Income Taxes

    563,023        567,880   

Deferred Gains and Other Liabilities

    150,593        156,711   
               

Total Liabilities

    1,914,378        1,963,024   
               

Equity:

   

SEACOR Holdings Inc. stockholders’ equity:

   

Preferred stock, $.01 par value, 10,000,000 shares authorized; none issued nor outstanding

             

Common stock, $.01 par value, 60,000,000 shares authorized; 36,333,746 and 36,110,719 shares
issued in 2011 and 2010, respectively

    363        361   

Additional paid-in capital

    1,233,250        1,225,296   

Retained earnings

    1,482,793        1,471,623   

Shares held in treasury of 14,681,620 and 14,711,211 in 2011 and 2010, respectively, at cost

    (901,386     (903,004

Accumulated other comprehensive loss:

   

Cumulative translation adjustments, net of tax

    (3,102     (3,995

Derivative losses on cash flow hedges, net of tax

    (2,511     (2,933

Other, net of tax

    (111     (111
               
    1,809,296        1,787,237   

Noncontrolling interests in subsidiaries

    11,024        10,128   
               

Total equity

    1,820,320        1,797,365   
               
  $ 3,734,698      $ 3,760,389   
               

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

 

3


Table of Contents

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share data, unaudited)

 

     Three Months Ended
March 31,
 
     2011     2010  

Operating Revenues

   $ 472,264      $ 394,575   
                

Costs and Expenses:

    

Operating

     371,011        312,305   

Administrative and general

     46,394        40,891   

Depreciation and amortization

     40,059        41,397   
                
     457,464        394,593   
                

Gains on Asset Dispositions and Impairments, Net

     7,255        13,659   
                

Operating Income

     22,055        13,641   
                

Other Income (Expense):

    

Interest income

     3,738        1,363   

Interest expense

     (10,041     (12,324

Debt extinguishment losses

     (48     (4

Marketable security gains, net

     1,534        1,961   

Derivative gains (losses), net

     (3,318     2,776   

Foreign currency gains (losses), net

     5,059        (2,701

Other, net

     (178     600   
                
     (3,254     (8,329
                

Income Before Income Tax Expense and Equity In Earnings of 50% or Less Owned Companies

     18,801        5,312   

Income Tax Expense

     7,366        2,316   
                

Income Before Equity in Earnings of 50% or Less Owned Companies

     11,435        2,996   

Equity in Earnings of 50% or Less Owned Companies, Net of Tax

     34        869   
                

Net Income

     11,469        3,865   

Net Income attributable to Noncontrolling Interests in Subsidiaries

     299        264   
                

Net Income attributable to SEACOR Holdings Inc.

   $ 11,170      $ 3,601   
                

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 0.53      $ 0.16   

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 0.52      $ 0.16   

Weighted Average Common Shares Outstanding:

    

Basic

     21,104,739        22,269,771   

Diluted

     21,439,424        22,474,651   

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

 

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SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands, unaudited)

 

    SEACOR Holdings Inc. Stockholders’ Equity     Non-
controlling
Interests in
Subsidiaries
    Total
Equity
    Comprehensive
Income
 
    Common
Stock
    Additional
Paid-in
Capital
    Retained
Earnings
    Shares
Held in
Treasury
    Accumulated
Other
Comprehensive
Loss
       

December 31, 2010

  $ 361      $ 1,225,296      $ 1,471,623      $ (903,004   $ (7,039   $ 10,128      $ 1,797,365     

Issuance of common stock:

               

Employee Stock Purchase Plan

                         1,672                      1,672     

Exercise of stock options

           2,860                                    2,860     

Director stock awards

           84                                    84     

Restricted stock and restricted stock units

    2        76                                    78     

Amortization of share awards

           4,880                                    4,880     

Cancellation of restricted stock

           54               (54                       

Dividends paid to noncontrolling interests

                                       (443     (443  

Cash received from noncontrolling interests

                                       1,040        1,040     

Comprehensive income:

               

Net income

                  11,170                      299        11,469      $ 11,469   

Other comprehensive income

                                1,315               1,315        1,315   
                                                               

Three months ended March 31, 2011

  $ 363      $ 1,233,250      $ 1,482,793      $ (901,386   $ (5,724   $ 11,024      $ 1,820,320      $ 12,784   
                                                               

The accompanying notes are an integral part of these consolidated financial statements

and should be read in conjunction herewith.

 

5


Table of Contents

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

     Three Months Ended
March 31,
 
     2011     2010  

Net Cash Provided by Operating Activities

   $ 105,226      $ 50,216   
                

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (65,096     (71,736

Proceeds from disposition of property and equipment

     13,632        28,828   

Cash settlements on derivative transactions, net

     3,314          

Investments in and advances to 50% or less owned companies

     (8,708     (14,700

Return of investments and advances from 50% or less owned companies

     2,674        9,308   

Net repayments (advances) on revolving credit line to 50% or less owned companies

     (3,728     450   

Principal payments on third party notes receivable, net

     545        67   

Net increase in restricted cash

     (6,894     (1,910

Net (increase) decrease in construction reserve funds and title XI reserve funds

     (7,804     37,078   

Net increase in escrow deposits on like kind exchanges

     (4,047       

Repayments of (investments in) leases, net

     1,373        (15,198

Business acquisitions, net of cash acquired

            (17
                

Net cash used in investing activities

     (74,739     (27,830
                

Cash Flows from Financing Activities:

    

Payments on long-term debt and capital lease obligations

     (3,081     (1,400

Net borrowings (payments) on inventory financing arrangements

     3,488        (13,663

Common stock acquired for treasury

            (19,848

Proceeds and tax benefits from share award plans

     4,633        1,583   

Purchase of subsidiary shares from noncontrolling interests

            (39

Cash received from noncontrolling interests, net

     597          
                

Net cash provided by (used in) financing activities

     5,637        (33,367
                

Effects of Exchange Rate Changes on Cash and Cash Equivalents

     3,564        (2,762
                

Net Increase (Decrease) in Cash and Cash Equivalents

     39,688        (13,743

Cash and Cash Equivalents, Beginning of Period

     370,028        465,904   
                

Cash and Cash Equivalents, End of Period

   $ 409,716      $ 452,161   
                
    

The accompanying notes are an integral part of these condensed consolidated financial statements

and should be read in conjunction herewith.

 

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Table of Contents

SEACOR HOLDINGS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1. Basis of Presentation and Accounting Policy

The condensed consolidated financial information for the three months ended March 31, 2011 and 2010 has been prepared by the Company and has not been audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries. In the opinion of management, all adjustments (consisting of normal recurring adjustments) have been made to present fairly the Company’s financial position as of March 31, 2011, its results of operations for the three months ended March 31, 2011 and 2010, its changes in equity for the three months ended March 31, 2011 and its cash flows for the three months ended March 31, 2011 and 2010. Results of operations for the interim periods presented are not necessarily indicative of operating results for the full year or any future periods.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles 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 year ended December 31, 2010.

Unless the context otherwise indicates, any reference in this Quarterly Report on Form 10-Q to the “Company” refers to SEACOR Holdings Inc. and its consolidated subsidiaries and any reference in this Quarterly Report on Form 10-Q to “SEACOR” refers to SEACOR Holdings Inc.

Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned. Revenue is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the buyer is fixed or determinable, and collectability is reasonably assured. Revenue that does not meet this criteria is deferred until the criteria are met. Deferred revenues, included in other current liabilities, for the three months ended March 31 were as follows (in thousands):

 

     2011     2010  

Balance at beginning of period

   $ 29,322      $ 15,015   

Revenues deferred during the period

     1,942        4,891   

Revenues recognized during the period

     (5,286     (2,745
                

Balance at end of period

   $ 25,978      $ 17,161   
                

As of March 31, 2011, deferred revenues included $16.5 million relating to the time charter of several offshore support vessels operating in the U.S. Gulf of Mexico that are scheduled to be paid through the conveyance of a limited net profit interest in developmental oil and gas producing properties owned by a customer. Payments from the conveyance of the limited net profit interest, and the timing of such payments, are contingent upon production and energy sale prices. Based on the current production payout estimate, the deferred revenues are expected to be paid through mid-2012. The Company expects to defer an additional $2.5 million of vessel charter hire under this arrangement through September 2011. The Company will continue to recognize revenues as cash is received or earlier should future payments become determinable. All costs and expenses related to these charters were recognized as incurred.

As of March 31, 2011, deferred revenues also included $6.1 million related to audit provisions in certain of Environmental Services’ response service contracts. The amount of revenues ultimately recognized following the completion of the billing audits or the expiration of the audit period could differ from the amounts billed and those differences may be material.

 

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Reclassifications. Certain reclassifications of prior period information have been made to conform to the presentation of current period information. These reclassifications had no effect on net income as previously reported.

 

2. Fair Value Measurements

The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company utilizes a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs derived from observable market data. Level 3 inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The Company’s assets and liabilities as of March 31, 2011 that are measured at fair value on a recurring basis are as follows (in thousands):

 

     Level 1      Level 2      Level 3  

ASSETS

        

Marketable securities(1)

   $ 104,429       $ 44,597       $   

Derivative instruments (included in other receivables)

     9,253         6,966           

Construction reserve funds and Title XI reserve funds

     331,689                   

LIABILITIES

        

Short sale of marketable securities (included in other current liabilities)

     46,914                   

Derivative instruments (included in other current liabilities)

     7,090         7,930           

 

(1) Marketable security gains (losses), net include losses of $0.6 million and gains of $1.7 million for the three months ended March 31, 2011 and 2010, respectively, related to marketable security positions held by the Company as of March 31, 2011.

The estimated fair value of the Company’s other financial assets and liabilities as of March 31, 2011 are as follows (in thousands):

 

     Carrying
Amount
     Estimated
Fair Value
 

ASSETS

     

Cash, cash equivalents and restricted cash

   $ 429,261       $ 429,261   

Investments, at cost, in 50% or less owned companies (included in other assets)

     8,315         see below   

Notes receivable from other business ventures (included in other assets)

     12,789         see below   

LIABILITIES

     

Long-term debt, including current portion

     712,978         733,864   

The carrying value of cash, cash equivalents and restricted cash approximates fair value. The fair value of the Company’s long-term debt was estimated based upon quoted market prices or by using discounted cash flow analyses based on estimated current rates for similar types of arrangements. It was not practicable to estimate the fair value of the Company’s investments, at cost, in 50% or less owned companies because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. It was also not practicable to estimate the fair value of the Company’s notes receivable from other business ventures because the timing of

 

8


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settlement of these notes is not certain. Considerable judgment was required in developing certain of the estimates of fair value and, accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

 

3. Derivative Instruments and Hedging Strategies

Derivative instruments are classified as either assets or liabilities based on their individual fair values. Derivative assets and liabilities are included in other receivables and other current liabilities, respectively, in the accompanying condensed consolidated balance sheets. The fair values of the Company’s derivative instruments as of March 31, 2011 were as follows (in thousands):

 

     Derivative
Asset
     Derivative
Liability
 

Derivatives designated as hedging instruments:

     

Forward currency exchange contracts (fair value hedges)

   $ 2,041       $   

Interest rate swap agreements (cash flow hedges)

             4,500   
                 
     2,041         4,500   
                 

Derivatives not designated as hedging instruments:

     

Options on equities and equity indices

     422         1,003   

Forward currency exchange, option and future contracts

     2,094         295   

Interest rate swap agreements

     313         2,198   

Commodity swap, option and future contracts:

     

Exchange traded

     1,938         5,666   

Non-exchange traded

     2,179         1,136   

U.S. treasury notes, rate locks and bond future and option contracts

     7,232         222   
                 
     14,178         10,520   
                 
   $ 16,219       $ 15,020   
                 

Fair Value Hedges. As of March 31, 2011, the Company designated certain of its forward currency exchange contracts with notional values of €55.1 million as fair value hedges in respect of capital commitments denominated in euros for assets scheduled to be delivered in 2011 through 2013. By entering into these forward currency exchange contracts, the Company has fixed a portion of its euro capital commitments in U.S. dollars to protect against currency fluctuations. During the three months ended March 31, 2011, the Company designated €47.1 million notional value of its forward currency exchange contracts as fair value hedges, in addition to €56.0 million previously so designated as of December 31, 2010, and €48.0 million notional value matured. Subsequent to March 31, 2011, the Company designated €8.0 million notional value of its forward currency exchange contracts as fair value hedges and €8.0 million notional value matured.

The Company recognized gains (losses) on derivative instruments designated as fair value hedges for the three months ended March 31 as follows (in thousands):

 

     Derivative gains (losses), net  
         2011             2010      

Forward currency exchange contracts, effective and ineffective portions

   $ 4,684      $ (2,163

Increase (decrease) in fair value of hedged items included in property and equipment corresponding to effective portion of derivative (gains) losses

     (4,684     2,063   
                
   $      $ (100
                
    

 

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Cash Flow Hedges. As of March 31, 2011, the Company was a party to various interest rate swap agreements with maturities ranging from 2013 to 2014 that have been designated as cash flow hedges. These agreements call for the Company to pay fixed interest rates ranging from 2.25% to 2.85% on aggregate notional values of $125.0 million and receive a variable interest rate based on LIBOR on these notional values. As of March 31, 2011, one of the Company’s Offshore Marine Services 50% or less owned companies had an interest rate swap agreement maturing in 2015 that has been designated as a cash flow hedge. This instrument calls for the joint venture to pay a fixed interest rate of 1.48% on the amortized notional value of $20.6 million and receive a variable interest rate based on LIBOR on the amortized notional value. By entering into these interest rate swap agreements, the Company and its joint venture have converted the variable LIBOR component of certain of their outstanding borrowings to a fixed interest rate.

The Company recognized gains (losses) on derivative instruments designated as cash flow hedges for the three months ended March 31 as follows (in thousands):

 

     Other
comprehensive
income (loss)
    Derivative
gains (losses), net
 
     2011     2010     2011     2010  

Interest rate swap agreements, effective portion

   $ (99   $ (2,399   $      $   

Interest rate swap agreements, ineffective portion

                   (79     52   

Reclassification of derivative losses to interest expense or equity in earnings of 50% or less owned companies

     748        823                 
                                
   $ 649      $ (1,576   $ (79   $ 52   
                                

Other Derivative Instruments. The Company recognized gains (losses) on derivative instruments not designated as hedging instruments for the three months ended March 31 as follows (in thousands):

 

     Derivative gains
(losses), net
 
     2011     2010  

Options on equities and equity indices

   $ (263   $ 292   

Forward currency exchange, option and future contracts

     418        (1,237

Interest rate swap agreements

     321        (1,191

Commodity swap, option and future contracts:

    

Exchange traded

     (3,127     7,686   

Non-exchange traded

     (452     (2,838

U.S. treasury notes, rate locks and bond future and option contracts

     (136     112   
                
   $ (3,239   $ 2,824   
                

The Company holds positions in publicly traded equity options that convey the right or obligation to engage in a future transaction on the underlying equity security or index. The Company’s investment in equity options primarily includes positions in energy, marine, transportation and other related businesses. These contracts are typically entered into to mitigate the risk of changes in market value of marketable security positions that the Company is either about to acquire, has acquired or is about to dispose of.

The Company has entered into and settled forward currency exchange, option and future contracts with respect to various foreign currencies. As of March 31, 2011, the outstanding forward currency exchange contracts translated into a net purchase of foreign currencies with an aggregate U.S. dollar equivalent of $62.5 million. These contracts enable the Company to buy currencies in the future at fixed exchange rates, which could offset possible consequences of changes in foreign exchange rates with respect to the Company’s business

 

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conducted in Europe, Africa, Mexico, Central and South America, the Middle East and Asia. The Company generally does not enter into contracts with forward settlement dates beyond twelve to eighteen months. Subsequent to March 31, 2011, the Company entered into additional forward currency exchange contracts with an aggregate U.S. dollar equivalent of $74.5 million and contracts with an aggregate U.S dollar equivalent of $51.2 million matured.

The Company has entered into various interest rate swap agreements maturing in 2012 through 2015 that call for the Company to pay fixed interest rates ranging from 1.67% to 2.59% on aggregate amortized notional values of $100.0 million and receive a variable interest rate based on LIBOR on these amortized notional values. In addition, one of the Company’s Offshore Marine Services 50% or less owned companies has entered into an interest rate swap agreement maturing in 2014. This instrument calls for the joint venture to pay a fixed interest rate of 3.05% on the amortized notional value of $26.8 million and receive a variable interest rate based on LIBOR on the amortized notional value. The general purpose of these interest rate swap agreements is to provide protection against increases in interest rates, which might lead to higher interest costs for the Company or its joint venture.

The Company has entered into and settled positions in various exchange and non-exchange traded commodity swap, option and future contracts. In the Company’s commodity trading and logistics business, fixed price future purchase and sales contracts of ethanol and sugar are included in the Company’s non-exchange traded derivative positions. The Company enters into exchange traded positions to protect these purchase and sale contracts as well as inventory balances from market changes. As of March 31, 2011, the net market exposure to ethanol and sugar under these positions was not material. The Company also enters into exchange traded positions (primarily natural gas, crude oil, gasoline, ethanol, and sugar) to provide value to the Company should there be a sustained decline in the price of commodities that could lead to a reduction in the market values and cash flows of the Company’s offshore marine and inland river businesses. As of March 31, 2011, these positions were not material.

The Company has entered into and settled various positions in U.S. treasury notes and bonds through rate locks, futures or options on futures tied to U.S. treasury notes. The general purpose of these transactions is to provide value to the Company should the price of U.S. treasury notes and bonds decline, leading to generally higher interest rates, which might lead to higher interest costs for the Company. As of March 31, 2011, these positions consisted primarily of treasury futures and options with a notional value of $15.3 million and a one-year rate-lock agreement with a notional value of $100.0 million. The treasury rate-lock agreement provides for a net cash settlement in October 2011 based on the then current ten-year U.S. Treasury Note versus the agreement rate of 2.845%.

 

4. Business Acquisitions

SES Kazakhstan Acquisition. On August 31, 2010, the Company obtained a 100% controlling interest in SES-Borkit LLP through its acquisition of its partners’ interest for $1.0 million (cash of $0.6 million and contingent consideration of $0.4 million). Upon acquisition, SES-Borkit LLP was renamed SES-Kazakhstan LLP (“SES-Kazakhstan”). The selling partner has the opportunity to receive additional consideration of up to $0.4 million based on certain performance measures over the period from the date of acquisition through August 2013. The Company performed a preliminary fair value analysis and the purchase price was allocated to the acquired assets and liabilities based on their fair values resulting in no goodwill being recorded. The preliminary fair value analysis is pending completion of a final valuation for the acquired assets and liabilities. No additional consideration has been earned by the selling partner through March 31, 2011.

PIER Acquisition. On December 1, 2009, the Company acquired all of the issued and outstanding shares of PIER Systems Inc. (“PIER”), a provider of crisis communication consulting services and software in the United States and abroad. The selling stockholders of PIER have the opportunity to receive additional consideration of up to $1.3 million, of which $0.7 million was accrued at acquisition, based upon certain performance measures over the period from the date of acquisition through May 2011. During the three months ended March 31, 2011,

 

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no additional consideration was earned by the selling stockholders. As of March 31, 2011, the Company had paid $0.2 million, in the aggregate, of additional consideration and reduced its accrued contingent liability.

Rivers Edge Acquisition. On November 15, 2007, the Company acquired all of the issued and outstanding shares of Rivers Edge Services, Inc. and Kemp’s Rivers Edge Vactor Services, Inc. (collectively referred to as “Rivers Edge”), providers of remediation, demolition, and environmental services in the pacific northwestern United States. The selling stockholder of Rivers Edge has the opportunity to receive additional consideration of up to $4.8 million based upon certain performance measures over the period from the date of acquisition through December 31, 2011, which will be recognized by the Company as compensation expense in the period earned by the selling stockholder. As of March 31, 2011, no additional consideration had been earned by the selling stockholders.

SRI Acquisition. On September 7, 2007, the Company acquired all of the issued and outstanding shares of Solid Resources, Inc. and Solid Resources, LLC (collectively referred to as “SRI”), providers of environmental services in the southeastern United States. The selling stockholder of SRI has the opportunity to receive additional consideration of up to $39.5 million based upon certain performance measures over the period from the date of acquisition through September 30, 2011, which will be recognized by the Company as additional cost of the acquisition when the contingency is resolved and when any additional consideration is distributable. During the three months ended March 31, 2011, no additional consideration was earned by the selling stockholders. As of March 31, 2011, the Company had paid $6.0 million, in the aggregate, of additional consideration, which was recorded as additional goodwill.

Subsequent Event. On April 13, 2011, the Company acquired from G&G Marine Inc. and certain of its related parties real property, vessels and a 70% interest in an operating company engaged in the container shipping trade between the United States, the Bahamas and the Caribbean. The operating company will lease-in the property and vessels purchased by the Company. The Company’s purchase price of $33.5 million included cash consideration of $30.3 million and the contribution of a $3.2 million note receivable.

 

5. Equipment Acquisitions, Dispositions, Impairments and Depreciation Policies

During the three months ended March 31, 2011, capital expenditures were $65.1 million. Equipment deliveries during the period included three helicopters, 55 inland river dry cargo barges and two liquid tank barges. In addition, the Company acquired the remaining interest in an offshore support vessel previously joint ventured.

During the three months ended March 31, 2011, the Company sold one offshore support vessel, two helicopters and other equipment for net proceeds of $13.6 million and recognized net gains of $6.2 million.

From time to time, the Company enters into vessel sale-leaseback transactions with finance companies, provides seller financing on sales of its vessels to third parties and sells vessels, helicopters and barges to its 50% or less owned companies. A portion of the gains realized from these transactions is not immediately recognized in income and has been recorded in the accompanying condensed consolidated balance sheets in deferred gains and other liabilities. Deferred gain activity related to these transactions for the three months ended March 31 was as follows (in thousands):

 

     2011     2010  

Balance at beginning of period

   $ 131,836      $ 93,231   

Deferred gains arising from vessel sales

              

Amortization of deferred gains included in operating expenses
as a reduction to rental expense

     (5,596     (4,147

Amortization of deferred gains included in gains on asset dispositions
and impairments, net

     (1,074     (3,667
                

Balance at end of period

   $ 125,166      $ 85,417   
                
    

 

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The Company performs an impairment analysis of long-lived assets used in operations, including intangible assets, when indicators of impairment are present. If the carrying value of the assets is not recoverable, as determined by the estimated undiscounted cash flows, the carrying value of the assets is reduced to fair value. Generally, fair value is determined using valuation techniques, such as expected discounted cash flows or appraisals, as appropriate. During the three months ended March 31, 2011, impairment charges recognized by the Company related to long-lived assets held for use were insignificant.

Equipment, stated at cost, is depreciated using the straight-line method over the estimated useful life of the asset to an estimated salvage value. With respect to each class of asset, the estimated useful life is based upon a newly built asset being placed into service and represents the point at which it is typically not justifiable for the Company to continue to operate the asset in the same or similar manner. From time to time, the Company may acquire older assets that have already exceeded the Company’s useful life policy, in which case the Company depreciates such assets based on its best estimate of remaining useful life, typically the next survey or certification date.

As of March 31, 2011, the estimated useful life (in years) of each of the Company’s major categories of new equipment was as follows:

 

Offshore support vessels

     20   

Helicopters

     12   

Inland river dry cargo and deck barges

     20   

Inland river liquid tank barges

     25   

Inland river towboats

     25   

U.S.-flag tankers(1)

     25   

Harbor and offshore tugs

     25   

Ocean liquid tank barges

     25   

 

(1) Subject to Oil Pollution Act of 1990 (“OPA 90”) requirements.

 

6. Investments at Equity and Receivables from 50% or Less Owned Companies

Illinois Corn Processing. On November 20, 2009, the Company and an ingredients and distillery product manufacturer formed Illinois Corn Processing LLC (“ICP”), a 50-50 joint venture to own and operate an alcohol manufacturing facility dedicated to the production of alcohol for beverage, industrial and fuel applications. The Company also provided to ICP a $10.0 million term loan with a maturity in November 2015 and a $20.0 million revolving line of credit with a maturity in November 2012 subject to certain borrowing restrictions. During the three months ended March 31, 2011, the Company made net advances of $3.7 million under the revolving line of credit. As of March 31, 2011, the outstanding balances under the term loan and revolving line of credit were $7.6 million and $13.1 million, respectively, inclusive of unpaid and accrued interest.

Hawker Pacific. On December 15, 2010, the Company acquired a 32.5% interest in Hawker Pacific Airservices, Limited (“Hawker Pacific”) for $25.0 million in cash. Hawker Pacific is an aviation sales and support organization and a distributor of aviation components from some of the world’s leading manufacturers. The Company has performed a preliminary fair value analysis of Hawker Pacific as of the acquisition date. The excess of the purchase price over the Company’s interest in Hawker Pacific’s net assets has been initially allocated to intangible assets in the amount of $7.4 million. Finalization of the preliminary fair value analysis may result in revisions to this allocation.

Dart. On February 28, 2011, the Company made an additional investment of $5.0 million in Dart Helicopter Services LLC (“Dart”), an international sales, marketing and manufacturing organization focusing on after-market helicopter accessories. The additional investment was made in accordance with an agreement whereby the

 

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Company will contribute its ownership in Dart, and the Company’s partner will contribute its ownership in Dart along with other assets into a newly formed entity in which each partner will own a 50% interest.

Subsequent Event. Dynamic Offshore Drilling Ltd. (“Dynamic”) was established on April 4, 2011 to construct and operate drilling rigs. The Company acquired a 20% interest in Dynamic for $10.0 million. Dynamic’s first jack-up drilling rig will be constructed in Singapore and is scheduled for delivery in the first quarter of 2013. Dynamic also has an option to build an additional jack-up drilling rig, which must be exercised before September 2011.

 

7. Commitments and Contingencies

The Company’s unfunded capital commitments as of March 31, 2011 consisted primarily of offshore support vessels, helicopters, an interest in a dry-bulk articulated tug-barge, an interest in a river grain terminal and other equipment. These commitments totaled $244.6 million, of which $164.8 million is payable during the remainder of 2011 with the balance payable through 2013. Of the total unfunded capital commitments, $2.8 million may be terminated without further liability. Subsequent to March 31, 2011, the Company committed to purchase additional equipment for $2.5 million.

The Company has guaranteed the payment of amounts owed by one of its joint ventures under a vessel charter agreement and has issued a performance guarantee on behalf of one of its joint ventures both of which expire in 2011. In addition, the Company has guaranteed amounts owed under banking facilities by certain of its joint ventures. As of March 31, 2011, the total amount guaranteed by the Company under these arrangements was $25.4 million. In addition, as of March 31, 2011, the Company had uncalled capital commitments to two of its joint ventures for a total of $2.6 million.

During 2006 and 2007, Marine Transportation Services (“MTS”) had two of its tankers retrofitted to a double-hull configuration in a foreign shipyard to enable each of them to continue to transport crude oil and petroleum products beyond their OPA 90 mandated retirement dates in 2011. Both vessels operate in the U.S. coastwise trade that, under the Shipping Acts, is restricted to vessels built or rebuilt in the United States. In May 2005, MTS received a determination from the U.S. Coast Guard (“USCG”), which administers the United States build requirements of the Shipping Acts, concluding the retrofit work would not constitute a foreign rebuilding and therefore would not jeopardize the tankers’ eligibility to operate in the U.S. coastwise trade. MTS completed the retrofit work in the foreign shipyard in reliance upon the USCG’s determination, which MTS believes was correct and in accord with the USCG’s long-standing regulations and interpretations. On July 9, 2007, a U.S. shipbuilders trade association and two operators of tankers in the U.S. coastwise trade (“Shipbuilders”) commenced a civil action in the U.S. District Court for the Eastern District of Virginia, Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:07cv665 (E.D. Va.) (the “SB Trader Litigation”), in which they sought to have the court set aside the USCG’s determination and direct the USCG to revoke the coastwise license of one of the two retrofitted tankers, the Seabulk Trader. MTS intervened in the action to assist the USCG in defending its determination. On April 24, 2008, the Court issued a Memorandum Opinion granting a motion for summary judgment by Shipbuilders setting aside the USCG’s determination and remanding the matter to the USCG for further proceedings with instructions to revoke the coastwise endorsement of the Seabulk Trader. On April 30, 2008, MTS appealed the decision to the U.S. Court of Appeals for the Fourth Circuit (the “Court of Appeals”), and the lower court’s decision was stayed pending appeal, subject to certain terms (which MTS also separately appealed). Those terms required that MTS pay to the plaintiffs 12.5% of the revenue generated by the Seabulk Trader from November 7, 2008 in the event that the Court of Appeals affirms the lower court’s decision to revoke its coastwise endorsement (the “Undertaking”). On July 2, 2008, Shipbuilders commenced a second civil action in the U.S. District Court for the Eastern District of Virginia, entitled Shipbuilders Council of America, Inc., et al. v. U.S. Department of Homeland Security, et al., No. 1:08cv680 (E.D. Va.) (the “SB Challenge Litigation”), alleging essentially identical claims as those asserted in the SB Trader Litigation against MTS’s second retrofitted tanker, the Seabulk Challenge. MTS has intervened in the SB Challenge Litigation that was stayed pending the decision of the Court of Appeals in the SB Trader

 

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Litigation. In September 2009, the Court of Appeals reversed the District Court, holding that the USCG’s interpretation was correct and that the District Court erred in requiring MTS to provide the Undertaking. On January 19, 2010, the District Court vacated its April 24, 2008 Order to the extent it directed the USCG to revoke the coastwise endorsement for the Seabulk Trader and remanded the matter to the USCG with instructions to (i) provide a fuller explanation of one aspect of its rebuild decision and (ii) consider further whether certain work relating to the vessel’s segregated ballast tanks constituted a prohibited foreign installation of required segregated ballast tanks. On August 31, 2010, the USCG issued a further determination further explaining its rebuild decision and concluding that the work relating to the vessel’s segregated ballast tanks did not constitute the installation of a required segregated ballast tank. OSG, the only remaining plaintiff in the litigation, filed a motion for summary judgment seeking to overturn the USCG’s determination. MTS and the USCG filed a cross motion for summary judgment to uphold the Coast Guard’s determination. On March 17, 2011, the District Court granted MTS’s motion for summary judgment and denied OSG’s motion for summary judgment holding that the Coast Guard’s well-reasoned decision to issue a coastwise endorsement to the Seabulk Trader was supported by the facts in the administrative record, was not arbitrary or capricious, and was in accord with the legislative history of the relevant legislation. The loss of coastwise eligibility for its two retrofitted tankers could lead to impairment concerns and could adversely affect the Company’s financial condition and its results of operations. The aggregate carrying value of the Company’s two retrofitted tankers was $44.3 million as of March 31, 2011 and such tankers contributed operating revenues of $5.4 million during the year ended March 31, 2011.

Certain subsidiaries of the Company are participating employers in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Officers Pension Fund (“MNOPF”). Under the direction of a court order, any deficit of the MNOPF is to be remedied through funding contributions from all participating employers. The Company’s participation relates to officers employed between 1978 and 2002 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation of the MNOPF in 2003, the Company was invoiced and expensed $4.4 million in 2005, representing the Company’s allocated share of a total funding deficit of $412.0 million. Subsequent to this invoice, the pension fund trustees determined that $49.0 million of the $412.0 million deficit was deemed uncollectible due to the non-existence or liquidation of certain participating employers and the Company was invoiced and expensed $0.6 million in 2007 for its allocated share of the uncollectible deficit. Based on an actuarial valuation of the MNOPF in 2006, the Company was invoiced and expensed $3.9 million in 2007, representing the Company’s allocated share of an additional funding deficit of $332.6 million. Based on an actuarial valuation of the MNOPF in 2009, the Company was invoiced and expensed $7.8 million in 2010, representing the Company’s allocated share of an additional funding deficit of $636.9 million. Depending on the results of future actuarial valuations, it is possible that the MNOPF will experience further funding deficits, requiring the Company to recognize payroll related operating expenses in the periods invoices are received.

A subsidiary of the Company is a participating employer in an industry-wide, multi-employer, defined benefit pension fund, the United Kingdom Merchant Navy Ratings Pension Fund (“MNRPF”). The Company’s participation relates to ratings employed between 1978 and 2001 by SEACOR’s Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors. Based on an actuarial valuation in March 2008, the Company was advised that its share of a $281.0 million (£175.0 million) accumulated funding deficit was $1.0 million (£0.6 million). The accumulated funding deficit is being recovered by additional annual contributions from current employers and is subject to adjustment following the results of future tri-annual actuarial valuations. As of March 31, 2011, $0.2 million, in the aggregate, of the Company’s funding deficit had been invoiced and expensed. Depending on the results of the future actuarial valuations, it is possible that the MNRPF will experience further funding deficits, requiring the Company to recognize additional payroll related operating expenses in the periods invoices are received.

On June 12, 2009, a purported civil class action was filed against SEACOR, Era Group Inc., Era Aviation, Inc., Era Helicopters LLC and two other defendants (collectively the “Defendants”) in the U.S. District Court for the District of Delaware, Superior Offshore International, Inc. v. Bristow Group Inc., et al., No. 09-CV-438 (D.Del.). SEACOR acquired Era Group Inc., Era Aviation, Inc., and Era Helicopters LLC in December 2004.

 

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The complaint alleges that the Defendants violated federal antitrust laws by conspiring with each other to raise, fix, maintain or stabilize prices for offshore helicopter services in the U.S. Gulf of Mexico during the period January 2001 to December 2005. The purported class of plaintiffs includes all direct purchasers of such services and the relief sought includes compensatory damages and treble damages. On September 14, 2010, the District Court entered an order dismissing the complaint. On November 30, 2010, the District Court granted the plaintiffs motion for reconsideration and amendment (the “Motions”), and ordered limited discovery strictly in regard to the allegations set forth on the plaintiff’s amended complaint. The limited discovery was completed and the defendants have filed a motion for summary judgment, which is pending. The Company is unable to estimate the potential exposure, if any, resulting from these claims but believes they are without merit and intends to vigorously defend the action.

On July 14, 2010, a group of individuals and entities purporting to represent a class commenced a civil action in the U.S. District Court for the Eastern District of Louisiana, Terry G. Robin, et al. v. Seacor Marine, L.L.C., et al., No. 2:10-cv-01986 (E.D. La.), in which they assert that support vessels, including vessels owned by the Company, responding to the explosion and resulting fire that occurred aboard the semi-submersible drilling rig, the Deepwater Horizon, were negligent in their efforts to save lives and put out the fire and contributed to the sinking of the Deepwater Horizon and subsequent oil spill. The action now is part of the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179. The complaint seeks compensatory, punitive, exemplary, and other damages. The Company believes that this lawsuit brought by class action lawyers targeting emergency responders acting under the direction of the U.S. Coast Guard has no merit and will seek its dismissal. The Company also recently filed petitions seeking exoneration from, or limitation of liability in relation to, any actions that may have been taken by vessels owned by the Company to extinguish the fire. Pursuant to the Limitation of Liability Act, those petitions impose an automatic stay on the Robin case, and the court set a deadline of April 20, 2011 for individual claimants to assert claims in the limitation cases.

On July 20, 2010, two individuals purporting to represent a class commenced a civil action in the Civil District Court for the Parish of Orleans in the State of Louisiana, John Wunstell, Jr. and Kelly Blanchard v. BP, et al., No. 2010-7437 (Division K) (the “Wunstell Action”), in which they assert, among other theories, that Mr. Wunstell suffered injuries as a result of his exposure to certain noxious fumes and chemicals in connection with the provision of remediation, containment and response services by O’Brien’s Response Management Inc. (“O’Brien’s), a subsidiary of SEACOR. The action now is part of the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179. The complaint also seeks to establish a “class-wide court-supervised medical monitoring program” for all individuals “participating in BP’s Deepwater Horizon Vessels of Opportunity Program and/or Horizon Response Program” who allegedly experience injuries similar to Mr. Wunstell. The Company believes this lawsuit has no merit and will seek its dismissal. Pursuant to contractual agreements with the responsible party, the responsible party has agreed, subject to certain potential limitations, to indemnify and defend O’Brien’s in connection with the Wunstell Action and claims asserted in the MDL.

On December 15, 2010, SEACOR subsidiaries O’Brien’s and National Response Corporation (“NRC”) were named as defendants in one of the several consolidated “master complaints” that have been filed in the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179. The master complaint naming O’Brien’s and NRC asserts various claims on behalf of a punitive class against multiple defendants concerning the clean-up activities generally, and the use of dispersants specifically. By court order, the Wunstell Action has been stayed as a result of the filing of the referenced master complaint. The Company believes that the claims asserted against its subsidiaries in the master complaint have no merit and will seek dismissal of the master complaint against both O’Brien’s and NRC. In addition to the indemnity provided to O’Brien’s, the Company has also sought indemnity from the responsible party pursuant to certain contractual arrangements for the claims asserted against NRC in the MDL.

Subsequent to the filing of the referenced master complaint, four additional individual civil actions have been filed in the U.S. District Court for the Eastern District of Louisiana concerning the clean-up activities generally, which name the Company, O’Brien’s and/or NRC as defendants and are part of the overall multi-

 

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district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179. On April 8, 2011, O’Brien’s was named as a defendant in Johnson Bros. Corporation of Louisiana v. BP, PLC, et al., No. 2:11-cv-00781 (E.D. La.), which is a suit by an individual business seeking damages allegedly caused by a delay on a construction project alleged to have resulted from the clean-up operations. On April 15, 2011, O’Brien’s and NRC were named as defendants in James and Krista Pearson v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00863 (E.D. La.), which is a suit by a husband and wife that allegedly participated in the clean-up effort who are seeking damages for personal injury, property damage to their boat, and amounts allegedly due under contract. On April 15, 2011, O’Brien’s and NRC were also named as defendants in Thomas Edward Black v. BP Exploration & Production, Inc., et al., No. 2:11-cv-00867 (E.D. La.), which is a suit by an individual who is seeking damages for lost income because he allegedly could not find work in the fishing industry after the oil spill. On April 20, 2011, a complaint was filed in Darnell Alexander, et al. v. BP, PLC, et al., No. 2:11-cv-00951 (E.D. La.) on behalf of 117 individual plaintiffs that seek to adopt the allegations made in the referenced master complaint against O’Brien’s and NRC (and the other defendants). By court order, all four of these additional individual cases have been stayed as a result of the filing of the referenced master complaint.

In addition, Triton Asset Leasing GmbH, Transocean Holdings LLC, Transocean Offshore Deepwater Drilling Inc., and Transocean Deepwater Inc. (collectively “Transocean”) has named O’Brien’s and NRC as third-party defendants in a Rule 14(c) Third-Party Complaint in Transocean’s own Limitation of Liability Act action, which is part of the overall multi-district litigation, In re Oil Spill by the Oil Rig “Deepwater Horizon”, MDL No. 2179, tendering to O’Brien’s and NRC the claims in the referenced master complaint that have already been asserted against O’Brien’s and NRC. Transocean, Cameron International Corporation, and Halliburton Energy Services Inc. have also filed cross-claims against O’Brien’s and NRC for contribution should they be found liable for any damages in Transocean’s Limitation of Liability Act action.

In the normal course of its business, the Company becomes involved in various other litigation matters including, among other things, claims by third parties for alleged property damages and personal injuries. Management has used estimates in determining the Company’s potential exposure to these matters and has recorded reserves in its financial statements related thereto where appropriate. It is possible that a change in the Company’s estimates of that exposure could occur, but the Company does not expect that any such change in estimated costs would have a material effect on the Company’s consolidated financial position or its results of operations.

During the year ended December 31, 2010, the Company received notice from the Internal Revenue Service of $12.6 million in proposed penalties regarding Marine Transportation Services’ informational excise tax filings for prior years. The Company intends to vigorously defend its position that the proposed penalties are erroneous and believes the resolution of this matter will not have a material effect on the Company’s consolidated financial position or its results of operations.

During the three months ended March 31, 2011, the Company received a Notice of Infringement (the “Notice”) from the Brazilian Federal Revenue Office. The Notice alleged the Company had imported a number of vessels into Brazil without properly completing the required importation documents and levied an assessment of $25.7 million. The Company intends to vigorously defend its position that the proposed assessment is erroneous and believes the resolution of this matter will not have a material effect on the Company’s consolidated financial position or its results of operations. Of the levied assessment, $19.3 million relates to managed vessels whose owner would be responsible for any potential payment.

 

8. Long-Term Debt and Capital Lease Obligations

As of March 31, 2011, the Company had $125.0 million of outstanding borrowings under its revolving credit facility. The remaining availability under this facility was $323.5 million, net of issued letters of credit of $1.5 million. In addition, the Company had other outstanding letters of credit totaling $40.4 million with various expiration dates through 2014.

During the three months ended March 31, 2011, the Company made payments on long term debt and capital lease obligations of $2.0 million and had net borrowings on its inventory financing arrangements of $3.5 million.

 

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SEACOR’s Board of Directors has previously authorized the Company to purchase any or all of its 5.875% Senior Notes and its 7.375% Senior Notes, which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the three months ended March 31, 2011, the Company purchased $1.0 million, in principal amount, of its 5.875% Senior Notes due 2012 for $1.1 million.

 

9. Stock Repurchases

SEACOR’s Board of Directors previously approved a securities repurchase plan that authorizes the Company to acquire shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), which may be acquired through open market purchases, privately negotiated transactions or otherwise, depending on market conditions. During the three months ended March 31, 2011, the Company did not acquire any Common Stock for treasury. As of March 31, 2011, the remaining authority under the repurchase plan was $113.0 million.

 

10. Earnings Per Common Share of SEACOR

Basic earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share of SEACOR are computed based on the weighted average number of common shares issued and outstanding plus the effect of potentially dilutive securities through the application of the treasury stock and if-converted methods. Dilutive securities for this purpose assumes restricted stock grants have vested and common shares have been issued pursuant to the exercise of outstanding stock options. For the three months ended March 31, 2011 and 2010, diluted earnings per common share of SEACOR excluded 182,839 and 872,444, respectively, of certain share awards as the effect of their inclusion in the computation would have been antidilutive.

Computations of basic and diluted earnings per common share of SEACOR for the three months ended March 31 were as follows (in thousands, except per share data):

 

     Net
Income
         Average O/S    
Shares
     Per
Share
 

2011

        

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 11,170         21,105       $ 0.53   
              

Effect of Dilutive Securities, net of tax:

        

Options and Restricted Stock

             334      
                    

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 11,170         21,439       $ 0.52   
                          

2010

        

Basic Earnings Per Common Share of SEACOR Holdings Inc.

   $ 3,601         22,270       $ 0.16   
              

Effect of Dilutive Securities, net of tax:

        

Options and Restricted Stock

             205      
                    

Diluted Earnings Per Common Share of SEACOR Holdings Inc.

   $ 3,601         22,475       $ 0.16   
                          

 

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Table of Contents
11. Comprehensive Income

For the three months ended March 31, 2011 and 2010, total comprehensive income was $12.8 million and $1.3 million, respectively. The components of other comprehensive income (loss) and allocated income tax (expense) benefit for the three months ended March 31 were as follows (in thousands):

 

     Before-Tax
Amount
    Tax
(Expense)
Benefit
    Net-of-Tax
Amount
 

2011

      

Foreign currency translation adjustments

   $ 1,374      $ (481   $ 893   

Derivative gains on cash flow hedges (see Note 3)

     649        (227     422   
                        

Other comprehensive income

   $ 2,023      $ (708   $ 1,315   
                        

2010

      

Foreign currency translation adjustments

   $ (2,427 )   $ 849      $ (1,578

Derivative losses on cash flow hedges (see Note 3)

     (1,576     552        (1,024
                        

Other comprehensive loss

   $ (4,003 )   $ 1,401      $ (2,602
                        

 

12. Share Based Compensation

The following transactions have occurred in connection with the Company’s share based compensation plans during the three months ended March 31, 2011:

 

Director stock awards granted

     1,000   
        

Employee Stock Purchase Plan (“ESPP”) shares issued

     30,151   
        

Restricted stock awards granted

     179,750   
        

Restricted stock awards cancelled

     560   
        

Shares released from Deferred Compensation Plan

       
        

Restricted Stock Unit Activities:

  

Outstanding as of December 31, 2010

     531   

Granted

     650   

Converted to shares and issued to Deferred Compensation Plan

       
        

Outstanding as of March 31, 2011

     1,181   
        

Stock Option Activities:

  

Outstanding as of December 31, 2010

     1,130,356   

Granted

     66,765   

Exercised

     (42,277

Forfeited

       

Expired

       
        

Outstanding as of March 31, 2011

     1,154,844   
        

Shares available for future grants and ESPP purchases as of March 31, 2011

     799,962   
        

 

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13. 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. The Company’s basis of measurement of segment profit or loss is as previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

The following tables summarize the operating results, capital expenditures and assets of the Company’s reportable segments.

 

    Offshore
Marine
Services
$’000
    Aviation
Services
$’000
    Inland
River
Services
$’000
    Marine
Transportation
Services

$’000
    Environmental
Services

$’000
    Commodity
Trading and
Logistics
$’000
    Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the three months ended March 31, 2011

                 

Operating Revenues:

                 

External customers

    80,323        56,155        43,928        17,224        63,086        194,012        17,536               472,264   

Intersegment

    21               2,541        88                             (2,650       
                                                                       
    80,344        56,155        46,469        17,312        63,086        194,012        17,536        (2,650     472,264   
                                                                       

Costs and Expenses:

                 

Operating

    63,020        33,465        27,884        8,979        44,044        187,018        9,142        (2,541     371,011   

Administrative and general

    11,770        7,020        2,697        1,417        7,551        2,660        2,620        10,659        46,394   

Depreciation and amortization

    12,533        11,919        5,622        4,978        2,231        13        2,289        474        40,059   
                                                                       
    87,323        52,404        36,203        15,374        53,826        189,691        14,051        8,592        457,464   
                                                                       

Gains on Asset Dispositions and Impairments, Net

    4,364        2,194        697                                           7,255   
                                                                       

Operating Income (Loss)

    (2,615     5,945        10,963        1,938        9,260        4,321        3,485        (11,242     22,055   
                                                                       

Other Income (Expense):

                 

Derivative gains (losses), net

           310                             (4,750            1,122        (3,318

Foreign currency gains (losses), net

    725        353               16        (51     (5     1        4,020        5,059   

Other, net

                  1                             (1     (178     (178

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

    735        (99     (256            (8     51        (389            34   
                                                           

Segment Profit (Loss)

    (1,155     6,509        10,708        1,954        9,201        (383     3,096       
                                                           

Other Income (Expense) not included in Segment Profit

  

            (4,817

Less Equity Earnings included in Segment Profit

  

            (34
               

Income Before Taxes and Equity Earnings

  

            18,801   
                       

Capital Expenditures

    18,093        9,209        31,521        4,199        1,774               229        71        65,096   
                                                                       

As of March 31, 2011

                 

Property and Equipment

    617,170        603,904        343,618        217,938        34,786        143        150,983        18,704        1,987,246   

Investments, at Equity, and Receivables from 50% or Less Owned Companies

    45,865        32,669        40,472               2,147        14,546        54,773               190,472   

Goodwill

    13,367        353        1,743               45,099               1,302               61,864   

Intangible Assets

    7,502               1,001        1,834        8,971               502               19,810   

Other current and long-term assets, excluding cash and near cash assets(1)

    113,853        78,993        44,061        2,783        144,433        97,084        44,931        39,192        565,330   
                                                           

Segment Assets

    797,757        715,919        430,895        222,555        235,436        111,773        252,491       
                                                           

Cash and near cash assets(1)

                    909,976   
                       

Total Assets

                    3,734,698   
                       
                 

 

(1) Cash and near cash assets include cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

 

20


Table of Contents
    Offshore
Marine
Services
$’000
    Aviation
Services
$’000
    Inland
River
Services
$’000
    Marine
Transportation
Services

$’000
    Environmental
Services

$’000
    Commodity
Trading and
Logistics
$’000
    Other
$’000
    Corporate
and
Eliminations
$’000
    Total
$’000
 

For the three months ended March 31, 2010

                 

Operating Revenues:

                 

External customers

    106,229        50,323        30,135        19,452        28,158        142,992        17,286               394,575   

Intersegment

    957        (48     3,301                             154        (4,364       
                                                                       
    107,186        50,275        33,436        19,452        28,158        142,992        17,440        (4,364     394,575   
                                                                       

Costs and Expenses:

                 

Operating

    73,764        32,026        19,554        13,432        20,337        147,372        10,039        (4,219     312,305   

Administrative and general

    12,449        5,391        2,061        837        6,037        2,744        2,845        8,527        40,891   

Depreciation and amortization

    13,478        10,447        4,876        8,008        1,983        20        2,183        402        41,397   
                                                                       
    99,691        47,864        26,491        22,277        28,357        150,136        15,067        4,710        394,593   
                                                                       

Gains (Losses) on Asset Dispositions, Net

    12,651        90        887               (17                   48        13,659   
                                                                       

Operating Income (Loss)

    20,146        2,501        7,832        (2,825     (216     (7,144     2,373        (9,026     13,641   
                                                                       

Other Income (Expense):

                 

Derivative gains (losses), net

           (100                          4,308               (1,432     2,776   

Foreign currency gains (losses), net

    374        135               15        30        (717     (18     (2,520     (2,701

Other, net

                  10                                    590        600   

Equity in Earnings (Losses) of 50% or Less Owned Companies, Net of Tax

    2,251        (275     (98            38        (1,022     (25            869   
                                                           

Segment Profit (Loss)

    22,771        2,261        7,744        (2,810     (148     (4,575     2,330       
                                                           

Other Income (Expense) not included in Segment Profit

  

            (9,004

Less Equity Earnings included in Segment Profit

  

            (869
                       

Income Before Taxes and Equity Earnings

  

            5,312   
                       

Capital Expenditures

    6,336        37,772        12,632               1,098                      13,898        71,736   
                                                                       

As of March 31, 2010

                 

Property and Equipment

    706,886        552,495        275,806        356,836        35,652        208        153,441        19,967        2,101,291   

Investments, at Equity, and Receivables from 50% or Less Owned Companies

    41,776        25,923        80,061               2,169        14,037        22,639               186,605   

Goodwill

    13,367        353        1,743               37,678               1,302               54,443   

Intangible Assets

    9,673               1,372        2,233        8,479               612               22,369   

Other current and long-term assets, excluding cash and near cash assets(1)

    173,978        72,348        37,688        9,145        46,574        77,768        42,537        54,898        514,936   
                                                           

Segment Assets

    945,680        651,119        396,670        368,214        130,552        92,013        220,531       
                                                           

Cash and near cash assets(1)

                    803,928   
                       

Total Assets

                    3,683,572   
                       
                 

 

(1) Cash and near cash assets include cash, cash equivalents, restricted cash, marketable securities, construction reserve funds and Title XI reserve funds.

 

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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q includes “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: decreased demand for the Company’s services as a result of declines in the global economy, declines in valuations in the global financial markets and illiquidity in the credit sectors, including, interest rate fluctuations, availability of credit, inflation rates, change in laws, trade barriers, commodity prices and currency exchange fluctuations, the cyclical nature of the oil and gas industry, loss of U.S. coastwise endorsement for the retro-fitted double-hull tankers, Seabulk Trader and Seabulk Challenge, if the Company is unsuccessful in defending litigation seeking the revocation of their coastwise charters, activity in foreign countries and changes in foreign political, military and economic conditions, changes in foreign and domestic oil and gas exploration and production activity, safety record requirements related to Offshore Marine Services, Marine Transportation Services and Aviation Services, decreased demand for Marine Transportation Services and Harbor and Offshore Towing Services due to construction of additional refined petroleum products, natural gas or crude oil pipelines or due to decreased demand for refined petroleum products, crude oil or chemical products or a change in existing methods of delivery, compliance with U.S. and foreign government laws and regulations, including environmental laws and regulations, the dependence of Offshore Marine Services, Marine Transportation Services and Aviation Services on several customers, consolidation of the Company’s customer base, the ongoing need to replace aging vessels and aircraft, industry fleet capacity, restrictions imposed by the Shipping Acts and Aviation Acts on the amount of foreign ownership of the Company’s Common Stock, increased competition if the Jones Act is repealed, operational risks of Offshore Marine Services, Marine Transportation Services, Harbor and Offshore Towing Services and Aviation Services, effects of adverse weather conditions and seasonality, future phase-out of Marine Transportation Services’ double-bottom tanker, dependence of spill response revenue on the number and size of spills and upon continuing government regulation in this area and Environmental Services’ ability to comply with such regulation and other governmental regulation, changes in National Response Corporation’s Oil Spill Removal Organization classification, liability in connection with providing spill response services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, the effect of international economic and political factors in Inland River Services’ operations, adequacy of insurance coverage, the attraction and retention of qualified personnel by the Company and various other matters and factors, many of which are beyond the Company’s control. In addition, these statements constitute the Company’s cautionary statements under the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors. Consequently, the foregoing should not be considered a complete discussion of all potential risks or uncertainties. The words “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. The Company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. The forward-looking statements in this Form 10-Q should be evaluated together with the many uncertainties that affect the Company’s businesses, particularly those mentioned under “Forward-Looking Statements” in Item 7 on the Company’s Form 10-K and SEACOR’s periodic reporting on Form 8-K (if any), which are incorporated by reference.

Overview

The Company’s operations are divided into six main business segments – Offshore Marine Services, Aviation Services, Inland River Services, Marine Transportation Services, Environmental Services and

 

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Table of Contents

Commodity Trading and Logistics. The Company also has activities that are referred to and described under Other that primarily includes Harbor and Offshore Towing Services, various other investments in joint ventures and lending and leasing activities.

Consolidated Results of Operations

The sections below provide an analysis of the Company’s operations by business segment for the three months ended March 31, 2011 (“Current Year Quarter”), compared with the three months ended March 31, 2010 (“Prior Year Quarter”). See “Item 1. Financial Statements – Note 13. Segment Information” included in Part I for consolidating segment tables for each period presented.

Offshore Marine Services

 

     For the Three Months
Ended March 31,
     Change
’11/’10
 
     2011     2010      3 Mos.  
     $’000     %     $’000      %      %  

Operating Revenues:

            

United States, primarily U.S. Gulf of Mexico

     19,161        24        39,484         37      
                                    

Africa, primarily West Africa

     19,467        24        18,875         18      

Middle East

     11,758        15        13,533         12      

Mexico, Central and South America

     11,910        15        12,167         11      

United Kingdom, primarily North Sea

     16,746        21        16,023         15      

Asia

     1,302        1        7,104         7      
                                    

Total Foreign

     61,183        76        67,702         63      
                                    
     80,344        100        107,186         100         (25
                                    

Costs and Expenses:

            

Operating:

            

Personnel

     32,451        40        37,659         35      

Repairs and maintenance

     8,751        11        10,375         10      

Drydocking

     4,664        6        6,916         6      

Insurance and loss reserves

     2,766        3        3,175         3      

Fuel, lubes and supplies

     5,164        7        5,427         5      

Leased-in equipment

     3,437        4        3,163         3      

Brokered vessel activity

     2,470        3        2,143         2      

Other

     3,317        4        4,906         5      
                                    
     63,020        78        73,764         69      

Administrative and general

     11,770        15        12,449         12      

Depreciation and amortization

     12,533        15        13,478         12      
                                    
     87,323        108        99,691         93      
                                    

Gains on Asset Dispositions

     4,364        5        12,651         12      
                                    

Operating Income (Loss)

     (2,615     (3     20,146         19         (113
                                    

Other Income (Expense):

            

Foreign currency gains, net

     725        1        374              

Other, net

                                

Equity in Earnings of 50% or Less Owned Companies

     735        1        2,251         2      
                                    

Segment Profit

     (1,155     (1     22,771         21         (105
                                    

 

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Table of Contents

Operating Revenues by Type. The table below sets forth, for the periods indicated, operating revenues earned by type.

 

     For the Three Months
Ended March 31,
     Change
’11/’10
 
     2011      2010      3 Mos.  
     $’000      %      $’000      %      %  

Operating Revenues:

              

Time charter:

              

United States, primarily U.S. Gulf of Mexico

     17,379         22         37,728         35         (54

Africa, primarily West Africa

     16,313         20         17,100         16         (5

Middle East

     9,429         12         10,992         10         (14

Mexico, Central and South America

     10,487         13         10,569         10         (1

United Kingdom, primarily North Sea

     16,696         21         15,950         15         5   

Asia

     1,321         2         6,936         7         (81
                                      

Total time charter

     71,625         90         99,275         93         (28
                                      

Bareboat charter

     207                 251                 (18

Brokered vessel activity

     3,368         4         2,692         2         25   

Other marine services

     5,144         6         4,968         5         4   
                                      
     80,344         100         107,186         100      
                                      
              

 

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Table of Contents

Time Charter Operating Data. The table below sets forth the average rates per day worked, utilization and available days data for each group of Offshore Marine Services’ vessels operating under time charters for the periods indicated. The rate per day worked is the ratio of total time charter revenues to the aggregate number of days worked. Utilization is the ratio of aggregate number of days worked to total calendar days available for work. Available days represents the total calendar days during which owned and chartered-in vessels are operated by the Company.

 

     For the Three  Months
Ended March 31,
 
     2011      2010  

Rates Per Day Worked:

     

Anchor handling towing supply

   $ 29,685       $ 30,602   

Crew

     6,630         6,682   

Mini-supply

     7,677         7,001   

Standby safety

     8,870         8,302   

Supply

     13,224         13,151   

Towing supply

     10,388         11,967   

Specialty

     6,987         8,138   

Overall Average Rates Per Day Worked

     10,123         11,339   

Utilization:

     

Anchor handling towing supply

     34%         62%   

Crew

     66%         68%   

Mini-supply

     62%         54%   

Standby safety

     84%         89%   

Supply

     65%         78%   

Towing supply

     68%         76%   

Specialty

     72%         67%   

Overall Fleet Utilization

     65%         72%   

Available Days:

     

Anchor handling towing supply

     1,530         1,710   

Crew

     3,870         4,500   

Mini-supply

     779         990   

Standby safety

     2,250         2,160   

Supply

     1,548         1,710   

Towing supply

     540         809   

Specialty

     360         360   
                 

Overall Fleet Available Days

     10,877         12,239   
                 
     

Current Year Quarter compared with Prior Year Quarter

Operating Revenues. Time charter revenues were $27.6 million lower. Overall fleet utilization was 65% compared with 72%. The number of days available for charter was 10,877 compared with 12,239, a 1,362 day or 11% reduction, due to net fleet dispositions. Overall average day rates were $10,123 per day compared with $11,339 per day, a decrease of $1,216 per day or 11%. Lower utilization decreased time charter revenues by $15.3 million. Net fleet dispositions, the impact of vessels mobilizing between geographic regions and other changes in fleet mix combined to reduce time charter revenues by $7.3 million. In overall terms, lower average day rates decreased time charter revenues by $5.4 million while the impact of favorable changes in currency exchange rates increased time charter revenues by $0.4 million.

 

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Table of Contents

In the U.S. Gulf of Mexico, time charter revenues were $20.3 million lower primarily due to soft market conditions attributable to the ongoing slow down in the issuance of drilling permits by the Bureau of Ocean Energy Management, Regulation and Enforcement in the aftermath of the Deepwater Horizon oil spill. In overall terms, time charter revenues decreased by $16.2 million due to lower fleet utilization and reduced average day rates. Vessels that mobilized out of the region and net fleet dispositions further decreased time charter revenues by $4.1 million. As of March 31, 2011, the Company had twelve vessels cold-stacked in this region compared with 14 as of March 31, 2010.

In the Middle East, time charter revenues were $1.6 million lower primarily due to more off hire time attributable to softer market conditions.

In Asia, time charter revenues were $5.6 million lower, of which $4.3 million was attributable to net fleet dispositions. Reduced fleet utilization and lower average day rates combined to reduce time charter revenues by $1.3 million.

Costs and Expenses. Operating expenses were $10.7 million lower primarily due to net fleet dispositions, which contributed $3.6 million of the overall reduction. Personnel costs in the Prior Year Quarter included a $3.3 million accrual for the settlement of litigation. Drydocking expenses were lower due to reduced drydocking activity in all geographical regions except the North Sea and Asia. Administrative and general expenses were $0.7 lower primarily due to reduced legal fees associated with litigation proceedings in the Prior Year Quarter.

Gains on Asset Dispositions. During the Current Year Quarter, the Company sold one offshore support vessel and other equipment for proceeds of $9.6 million and recognized gains on dispositions of $4.4 million. During the Prior Year Quarter, the Company sold one offshore support vessel and other equipment for proceeds of $22.8 million and recognized gains on dispositions of $12.7 million.

Equity in Earnings of 50% or Less Owned Companies. Equity in earnings in 50% or less owned companies was $1.5 million lower primarily due to lower utilization for a vessel operating in the U.S. Gulf of Mexico, following the termination of its contract in the preceding quarter.

 

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Table of Contents

Fleet Count. The composition of Offshore Marine Services’ fleet as of March 31 was as follows:

 

     Owned      Joint
Ventured
     Leased-in      Pooled or
Managed
     Total  

2011

              

Anchor handling towing supply

     15         2         2                 19   

Crew

     40         2         7         3         52   

Mini-supply

     6                 3                 9   

Standby safety

     25         1                         26   

Supply

     10                 7         9         26   

Towing supply

     4         1         2                 7   

Specialty

     4         5                 3         12   
                                            
     104         11         21         15         151   
                                            

2010

              

Anchor handling towing supply

     18         1         1                 20   

Crew

     41         2         11         3         57   

Mini-supply

     6                 5                 11   

Standby safety

     24         1                         25   

Supply

     11                 8         7         26   

Towing supply

     6         1         2         1         10   

Specialty

     4         5                 3         12   
                                            
     110         10         27         14         161   
                                            
              

 

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Table of Contents

Aviation Services

 

     For the Three Months
Ended March 31,
    Change
’11/’10
 
     2011      2010     3 Mos.  
     $’000     %      $’000     %     %  

Operating Revenues:

           

United States

     39,233        70         38,071        76     

Foreign

     16,922        30         12,204        24     
                                   
     56,155        100         50,275        100        12   
                                   

Costs and Expenses:

           

Operating:

           

Personnel

     14,615        26         13,702        27     

Repairs and maintenance

     9,680        17         8,633        17     

Insurance and loss reserves

     1,609        3         2,279        4     

Fuel

     4,761        8         3,830        8     

Leased-in equipment

     460        1         482        1     

Other

     2,340        4         3,100        6     
                                   
     33,465        59         32,026        63     

Administrative and general

     7,020        13         5,391        11     

Depreciation and amortization

     11,919        21         10,447        21     
                                   
     52,404        93         47,864        95     
                                   

Gains on Asset Dispositions and Impairments, Net

     2,194        4         90            
                                   

Operating Income

     5,945        11         2,501        5        138   
                                   

Other Income (Expense):

           

Derivative gains (losses), net

     310                (100         

Foreign currency gains, net

     353        1         135            

Other, net

                               

Equity in Losses of 50% or Less Owned Companies

     (99             (275     (1  
                                   

Segment Profit

     6,509        12         2,261        4        188   
                                   

Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues by service line.

 

     For the Three Months
Ended March 31,
     Change
’11/’10
 
     2011      2010      3 Mos.  
     $’000     %      $’000     %      %  

Operating Revenues:

            

U.S. Gulf of Mexico, primarily from oil and gas services

     26,161        47         25,679        51         2   

Alaska, primarily from oil and gas services

     5,104        9         5,250        10         (3

Leasing

     16,922        30         12,520        25         35   

Air Medical Services

     5,856        10         4,662        9         26   

Flightseeing

     3                                 

FBO

     2,214        4         2,247        5         (1

Intersegment Eliminations

     (105             (83             27   
                                    
     56,155        100         50,275        100      
                                    
            

 

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Operating Data. The table below sets forth, for the periods indicated, flight hours flown by service line.

 

     For the Three Months
Ended March 31,
     Change
’11/’10
 
     2011      2010      3 Mos.  
     Hours      %      Hours      %      %  

U.S. Gulf of Mexico

     7,291         56         8,229         65         (11

Alaska

     714         5         668         5         7   

Leasing

     3,552         27         2,128         17         67   

Air Medical Services

     1,587         12         1,686         13         (6

Flightseeing

                                       
                                      
     13,144         100         12,711         100         3   
                                      

Current Year Quarter compared with Prior Year Quarter

Operating Revenues. Operating revenues from leasing activities were $4.4 million higher primarily due to additional helicopters placed on long-term leases in foreign jurisdictions and new maintenance support contracts on helicopters operating in Brazil. As of March 31, 2011, 46 aircraft were dedicated to the leasing market compared with 36 as of March 31, 2010. Operating revenues from Air Medical Services were $1.2 million higher primarily due to the placement of additional aircraft on existing contracts.

Operating Expenses. Personnel expenses were $0.9 million higher primarily due to pilot pay scale adjustments implemented during 2010. Repair and maintenance expenses were $1.0 million higher as additional helicopters were placed in power-by-hour maintenance contracts. Insurance and loss reserves were lower primarily due to a helicopter premium adjustment received in the Current Year Quarter as a result of “good experience.” Fuel expenses were $0.9 million higher primarily due to higher fuel prices. Other operating expenses were $0.8 million lower primarily due to the receipt of insurance proceeds related to hurricane damages sustained in 2005.

General and administrative. General and administrative expenses were $1.6 million higher primarily due to higher wage and benefit costs.

Depreciation and amortization. Depreciation and amortization expenses were $1.5 million higher primarily due to the placement of additional helicopters into service.

Gains on Asset Dispositions and Impairments, Net. During the Current Year Quarter, the Company sold equipment for proceeds of $4.1 million and recognized gains on dispositions of $2.2 million.

 

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Table of Contents

Fleet Count. The composition of Aviation Services’ fleet as of March 31 was as follows:

 

     Owned(1)      Joint
Ventured
     Leased-in(2)      Managed      Total  

2011

              

Light helicopters – single engine

     52         6         3                 61   

Light helicopters – twin engine

     29                 6         9         44   

Medium helicopters

     58                 2         3         63   

Heavy helicopters

     9                                 9   
                                            
     148         6         11         12         177   
                                            

2010

              

Light helicopters – single engine

     51         6         3                 60   

Light helicopters – twin engine

     33                 6         9         48   

Medium helicopters

     54                 2         3         59   

Heavy helicopters

     9                                 9   
                                            
     147         6         11         12         176   
                                            

 

(1) Excludes one and two helicopter(s) removed from service as of March 31, 2011 and 2010, respectively.
(2) Excludes three helicopters removed from service as of March 31, 2011 and 2010.

Inland River Services

 

     For the Three Months
Ended March 31,
     Change
’11/’10
 
     2011     2010      3 Mos.  
     $’000     %     $’000     %      %  

Operating Revenues:

           

United States

     46,469        100        33,436        100         39   
                                   

Costs and Expenses:

           

Operating:

           

Barge logistics

     17,644        38        11,277        34      

Personnel

     3,390        7        2,883        9      

Repairs and maintenance

     1,101        2        1,182        3      

Insurance and loss reserves

     658        2        593        2      

Fuel, lubes and supplies

     809        2        1,057        3      

Leased-in equipment

     2,769        6        1,486        4      

Other

     1,513        3        1,076        3      
                                   
     27,884        60        19,554        58      

Administrative and general

     2,697        6        2,061        6      

Depreciation and amortization

     5,622        12        4,876        15      
                                   
     36,203        78        26,491        79      
                                   

Gains on Asset Dispositions

     697        2        887        2      
                                   

Operating Income

     10,963        24        7,832        23         40   
                                   

Other Income (Expense):

           

Other, net

     1               10             

Equity in Losses of 50% or Less Owned Companies

     (256     (1     (98          
                                   

Segment Profit

     10,708        23        7,744        23         38   
                                   
           

 

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Operating Revenues by Service Line. The table below sets forth, for the periods indicated, the amount of operating revenues earned by service line.

 

     For the Three  Months
Ended March 31,
     Change
’11/’10
 
     2011      2010      3 Mos.  
     $’000      %      $’000      %      %  

Operating Revenues:

              

Dry cargo barge pools

     27,965         60         17,209         51         63   

Liquid unit tow operation

     6,677         14         7,438         22         (10

Charter-out of dry cargo barges

     2,034         5         2,274         7         (11

10,000 barrel liquid tank barge operations

     3,671         8         1,831         6         100   

Inland river towboat operations and other activities

     6,122         13         4,684         14         31   
                                      
     46,469         100         33,436         100      
                                      
              

Dry Cargo Barge Pool Operating Data. The following table presents, for the periods indicated, Inland River Services’ interest in tons moved and its available barge days in the dry cargo barge pools. Available barge days represents the total calendar days during which the Company’s owned and chartered-in barges were in the pool.

 

     For the Three Months
Ended March 31,
     Change
’11/’10
 
     2011      2010      3 Mos.  
     Tons      %      Tons      %      %  

Tons Moved (in thousands):

              

Grain

     964         68         686         63         41   

Non-Grain

     462         32         395         37         17   
                                            
     1,426         100         1,081         100         32   
                                            
     Days             Days                

Available Barge Days

     47,354            38,577            23   
                                
              

Current Year Quarter compared with Prior Year Quarter

Operating Revenues. Operating revenues were $13.0 million higher primarily due to a larger fleet following the addition of newly constructed dry cargo barges and the addition of dry cargo and 10,000 barrel liquid tank barges previously included in the Seaspraie joint venture. Operating revenues from inland river towboat operations and other activities were $1.4 million higher primarily due to improved utilization and the contribution from repair and maintenance and shore side tankering services that began in the third quarter of 2010.

Operating Expenses. Operating expenses were $8.3 million higher primarily due to higher barge logistic, personnel and leased-in equipment expenses. Barge logistic expenses were $6.4 million higher primarily due to the impact of the larger fleet as discussed above. Personnel expenses were $0.5 million higher primarily due to the Company’s repair and maintenance and shore side tankering services that began in the third quarter of 2010. Leased-in equipment expenses were $1.3 million higher due to chartering in a substitute vessel to temporarily replace a towboat undergoing refurbishment.

 

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Fleet Count. The composition of Inland River Services’ fleet as of March 31 was as follows:

 

     Owned      Joint
Ventured
     Leased-in      Pooled or
Managed
     Total  

2011

              

Inland river dry cargo barges

     689         172         2         634         1,497   

Inland river liquid tank barges

     70                         10         80   

Inland river deck barges

     26                                 26   

Inland river towboats

     17         15                         32   

Dry cargo vessel(1)

             1                         1   
                                            
     802         188         2         644         1,636   
                                            

2010

              

Inland river dry cargo barges

     607         262         2         548         1,419   

Inland river liquid tank barges

     51         34         2                 87   

Inland river deck barges

     26                                 26   

Inland river towboats

     17         12                         29   

Dry cargo vessel(1)

             1                         1   
                                            
     701         309         4         548         1,562   
                                            

 

(1) Argentine-flag.

Marine Transportation Services

 

     For the Three Months
Ended March 31,
    Change
‘11/’10
 
     2011      2010     3 Mos.  
     $’000      %      $’000     %     %  

Operating Revenues:

            

United States

     17,312         100         19,452        100        (11
                                    

Costs and Expenses:

            

Operating:

            

Personnel

     3,881         22         6,045        31     

Repairs and maintenance

     610         4         831        4     

Drydocking

     400         2         4,237        22     

Insurance and loss reserves

     490         3         595        3     

Fuel, lubes and supplies

     322         2         1,090        6     

Leased-in equipment

     2,900         17                    

Other

     376         2         634        3     
                                    
     8,979         52         13,432        69     

Administrative and general

     1,417         8 &n