UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

ý   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended             September 30, 2005           or

 

o   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.)

 

 

 

11200 Richmond, Suite 400, Houston, Texas

 

77082

(Address of Principal Executive Offices)

 

(Zip Code)

 

(281) 899-4800

(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 ý   No o

 

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes ý   No o

 

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

 

The total number of shares of common stock, par value $.01 per share, outstanding as of November 7, 2005 was 25,015,318. The Registrant has no other class of common stock outstanding.

 

 


 

SEACOR HOLDINGS INC.

 

Table of Contents

 

 

Part I.

Financial Information

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of
September 30, 2005 and December 31, 2004

1

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for each of
the Three and Nine Months Ended September 30, 2005 and 2004

2

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2005 and 2004

3

 

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

4

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

18

 

 

 

 

 

Item 4.

Controls and Procedures

18

 

 

 

 

Part II.

Other Information

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

 

 

 

 

 

Item 6.

Exhibits

19

 



 

PART I – FINANCIAL INFORMATION

 

ITEM 1.                  FINANCIAL STATEMENTS

 

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data, unaudited)

 

 

 

September 30,
2005

 

December 31,
2004

 

ASSETS

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

469,513

 

$

214,389

 

Restricted cash

 

46,781

 

 

Available-for-sale securities

 

32,503

 

136,992

 

Trade and other receivables, net of allowance for doubtful accounts of $12,606 and $3,357, respectively

 

267,108

 

193,050

 

Inventories

 

23,879

 

18,837

 

Prepaid expenses and other current assets

 

27,506

 

35,453

 

Total current assets

 

867,290

 

598,721

 

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

 

46,750

 

47,870

 

Property and Equipment

 

2,113,818

 

1,236,261

 

Less accumulated depreciation

 

(329,735

)

(310,674

)

Net property and equipment

 

1,784,083

 

925,587

 

Construction Reserve Funds

 

102,008

 

144,006

 

Goodwill

 

87,285

 

28,755

 

Intangible Assets

 

39,906

 

4,566

 

Other Assets

 

31,847

 

16,504

 

 

 

$

2,959,169

 

$

1,766,009

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Current portion of long-term debt

 

$

9,994

 

$

13,228

 

Current portion of capital lease obligation

 

3,170

 

 

Accounts payable and accrued expenses

 

64,442

 

63,461

 

Other current liabilities

 

131,790

 

65,797

 

Total current liabilities

 

209,396

 

142,486

 

Long-Term Debt

 

1,098,363

 

582,367

 

Capital lease obligations

 

28,068

 

 

 

Deferred Income Taxes

 

303,989

 

211,542

 

Deferred Income and Other Liabilities

 

32,691

 

28,988

 

Minority Interest in Subsidiaries

 

6,634

 

6,869

 

Stockholders’ Equity:

 

 

 

 

 

Common stock, $.01 par value, 31,318,651 and 24,545,428 shares issued at September 30, 2005 and December 31, 2004

 

313

 

245

 

Additional paid-in capital

 

857,637

 

412,210

 

Retained earnings

 

615,485

 

551,273

 

Treasury stock, 6,310,090 and 6,237,932 shares at September 30, 2005 and December 31, 2004, at cost

 

(202,979

)

(197,850

)

Unamortized restricted stock compensation

 

(4,271

)

(2,423

)

Accumulated other comprehensive income -

 

 

 

 

 

Cumulative translation adjustments

 

11,089

 

18,296

 

Unrealized gain on available-for-sale securities

 

2,754

 

12,006

 

Total stockholders’ equity

 

1,280,028

 

793,757

 

 

 

$

2,959,169

 

$

1,766,009

 

 

The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.

 

1



 

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data, unaudited)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues

 

$

294,869

 

$

116,486

 

$

637,885

 

$

309,863

 

 

 

 

 

 

 

 

 

 

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

Operating expenses

 

180,136

 

79,134

 

412,916

 

227,923

 

Administrative and general

 

31,115

 

14,900

 

68,939

 

43,833

 

Depreciation and amortization

 

46,535

 

14,352

 

83,309

 

42,469

 

 

 

257,786

 

108,386

 

565,164

 

314,225

 

 

 

 

 

 

 

 

 

 

 

Gains (Losses) on Asset Sales and Impairments

 

(618

)

(119

14,710

 

9,636

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

36,465

 

7,981

 

87,431

 

5,274

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

Interest income

 

4,754

 

2,180

 

12,917

 

5,222

 

Interest expense

 

(16,541

)

(5,565

)

(31,682

)

(16,331

)

Derivative loss, net

 

(4,425

)

(140

)

(6,193

)

(621

)

Foreign currency transaction gains (losses), net

 

2,436

 

(184

)

6,288

 

(407

)

Marketable securities sale gains (losses), net

 

10,388

 

(756

25,124

 

4,746

 

Other, net

 

891

 

79

 

1,531

 

431

 

 

 

(2,497

)

(4,386

)

7,985

 

(6,960

)

Income (Loss) from Continuing Operations Before Income Tax Expense, Minority Interest in (Income) Loss of Subsidiaries and Equity In Earnings of 50% or Less Owned Companies

 

33,968

 

3,595

 

95,416

 

(1,686

)

Income Tax Expense

 

13,894

 

1,511

 

36,082

 

178

 

Income (Loss) from Continuing Operations Before Minority Interest in (Income) Loss of Subsidiaries and Equity in Earnings of 50% or Less Owned Companies

 

20,074

 

2,084

 

59,334

 

(1,864

)

Minority Interest in (Income) Loss of Subsidiaries

 

223

 

(108

)

103

 

(194

)

Equity in Earnings of 50% or Less Owned Companies

 

200

 

1,388

 

4,411

 

2,631

 

Income from Continuing Operations

 

20,497

 

3,364

 

63,848

 

573

 

Income from Discontinued Operations, net of $196 in income tax expense

 

 

 

364

 

 

Net Income

 

$

20,497

 

$

3,364

 

$

64,212

 

$

573

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Common Share:

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.83

 

$

0.18

 

$

3.12

 

 

0.03

 

Income from Discontinued Operations

 

 

 

0.01

 

 

Net Income

 

$

0.83

 

$

0.18

 

$

3.13

 

0.03

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Common Share:

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.76

 

$

0.18

 

$

2.79

 

 

0.03

 

Income from Discontinued Operations

 

 

 

0.02

 

 

Net Income

 

$

0.76

 

$

0.18

 

$

2.81

 

0.03

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Common Shares Outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

24,789

 

18,211

 

20,486

 

18,341

 

Diluted

 

28,562

 

18,357

 

24,151

 

18,496

 

 

The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.

 

2



 

SEACOR HOLDINGS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, unaudited)

 

 

 

Nine Months Ended
September 30,

 

 

 

2005

 

2004

 

 

 

 

 

 

 

Net Cash Provided by Operating Activities

 

$

102,440

 

$

9,356

 

 

 

 

 

 

 

Cash Flows from Investing Activities:

 

 

 

 

 

Purchase of property and equipment

 

(178,709

)

(129,859

)

Purchase of third party contracts

 

 

(2,893

)

Proceeds from asset sales, including those previously held for sale

 

223,349

 

63,049

 

Purchase of available-for-sale securities

 

(104,160

)

(89,803

)

Proceeds from sale of available-for-sale securities

 

215,093

 

62,814

 

Investments in and advances to 50% or less owned companies

 

(859

)

(554

)

Principal payments on notes due from 50% or less owned companies

 

142

 

3,367

 

Proceeds on sale of investments in 50% or less owned companies

 

 

5,133

 

Dividends received from 50% or less owned companies

 

5,279

 

1,115

 

Net increase in restricted cash

 

(14,523

)

 

Net (increase) decrease in construction reserve funds

 

41,998

 

(17,143

)

Investment in note due from non-affiliate

 

 

(5,352

)

Principal payments on note due from non-affiliate

 

7,319

 

42

 

Cash settlements of derivative transactions

 

485

 

(306

)

Seabulk Merger, net of cash acquired

 

(69,498

)

 

Acquisition of Era Aviation, Inc., adjustments to purchase price

 

4,793

 

 

Sale of Discontinued Operation

 

15,000

 

 

Net cash provided by (used in) investing activities

 

145,709

 

(110,390

)

 

 

 

 

 

 

Cash Flows from Financing Activities:

 

 

 

 

 

Payments of long-term debt

 

(58,139

)

(82

)

Proceeds from issuance of long term debt

 

64,819

 

50,000

 

Proceeds from share award plans

 

6,728

 

1,418

 

Common stock acquired for treasury

 

(6,026

)

(14,920

)

Other

 

(245

)

62

 

Net cash provided by financing activities

 

7,137

 

36,478

 

 

 

 

 

 

 

Effect of Exchange Rate Changes on Cash and Cash Equivalents

 

(162

)

660

 

 

 

 

 

 

 

Net Increase (Decrease) in Cash and Cash Equivalents

 

255,124

 

(63,896

)

Cash and Cash Equivalents, Beginning of Period

 

214,389

 

263,135

 

Cash and Cash Equivalents, End of Period

 

$

469,513

 

$

199,239

 

 

The accompanying notes are an integral part of these financial statements
and should be read in conjunction herewith.

 

3



 

SEACOR HOLDINGS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

1.             Basis of Presentation

 

The condensed consolidated financial information for the three and nine months ended September 30, 2005 and 2004 has been prepared by the Company and was not audited by its independent registered public accounting firm. The condensed consolidated financial statements include the accounts of SEACOR Holdings Inc. and its consolidated subsidiaries, which effective July 1, 2005 include Seabulk International, Inc. (“Seabulk” – see Note 2). In the opinion of management, all adjustments (consisting of normal recurring adjustments and those described in Note 2) have been made to present fairly the Company’s financial position as of September 30, 2005 and its results of operations and cash flows for the three and nine months ended September 30, 2005 and 2004. Results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year or any future periods.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

 

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

 

2.             Seabulk Merger and Disposition of Held for Sale Seabulk Assets

 

On July 1, 2005, SEACOR completed its acquisition of Seabulk through a merger with a wholly-owned subsidiary of SEACOR (the “Seabulk Merger”). Under the terms of the merger agreement, Seabulk’s stockholders received 0.2694 shares of SEACOR common stock, par value $0.01 per share (“Common Stock”), plus cash of $4.00 for each issued and outstanding share of Seabulk common stock. Based on the closing price of Common Stock on June 30, 2005 of $64.30 per share, Seabulk stockholders received $21.32 in Common Stock and cash for each share of Seabulk common stock exchanged. The Company’s purchase price was approximately $522.7 million, including 6,354,642 shares of Common Stock, 394,446 options to purchase Common Stock, plus additional cash consideration and deal costs of approximately $96.9 million.  Immediately after the merger, Seabulk had unrestricted cash of $27.4 million and outstanding debt of $537.6 million at fair value.

 

The Seabulk Merger was accounted for as a purchase with SEACOR as the acquirer in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations.  Accordingly, SEACOR has performed a preliminary fair value analysis and the purchase price was allocated to the assets and liabilities of Seabulk, including certain identifiable intangible assets, based on their estimated fair values as of July 1, 2005, with the excess of purchase price over fair value recorded as goodwill in the amount of $59.3 million.  Changes to the preliminary fair value analysis are expected as valuations of assets and liabilities are finalized and additional information becomes available.

 

As part of the fair value analysis, Seabulk designated certain vessels as held for sale which aggregated $96.1 million as of July, 1, 2005, including two foreign-flag double-hulled product tankers, one tug and 13 offshore supply vessels.  During the three months ended September 30, 2005, Seabulk sold the two foreign-flag double-hull product tankers, one tug and three offshore supply vessels for aggregate consideration of $87.9 million.  No gain or loss on the sale of the vessels was recorded as the fair value of the vessels was equal to the sales price.

 

Pro forma Information – The following pro forma information has been prepared as if the acquisition of Seabulk had occurred on January 1, 2005. This pro forma information has been prepared for informational purposes only and is not necessarily indicative of what would have occurred if the acquisition had taken place on that date, nor does it purport to be indicative of the future operating results of the Company.

 

 

 

For the Nine Months
Ended September 30,

 

(in thousands, except per share data)

 

Reported

 

Pro forma

 

 

 

 

 

 

 

Revenue

 

$

637,885

 

$

830,153

 

Operating Income

 

87,431

 

96,417

 

Net Income

 

64,212

 

57,459

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

$

3.13

 

$

2.33

 

Diluted Earnings Per Common Share

 

2.81

 

2.14

 

 

4



 

3.             Equipment Acquisitions, Dispositions and Depreciation Policy

 

Capital expenditures aggregated $178.7 million in the nine months ended September 30, 2005. Equipment deliveries during the period included 4 used anchor handling towing supply vessels, 3 new crew vessels, 75 new dry cargo covered hopper barges, 24 new chemical tank barges and 5 new helicopters. In addition to the disposition of assets designated as held for sale, the Company sold 13 offshore support vessels, 6 helicopters and other equipment for aggregate consideration of $131.7 million in the nine months ended September 30, 2005.

 

Equipment, stated at cost, is depreciated over the estimated useful lives of the assets using the straight-line method.  Estimated useful lives are generally 20 years from date of build for offshore support vessels and related equipment, 25 years from date of build or the required retirement date of the vessels as determined by the Oil Pollution Act of 1990 for marine transportation tankers, 20 years from date of build for inland river dry cargo and chemical tank barges, over 12 years from date of build for helicopters and related equipment, over 40 years from date of build for harbor and offshore tugs, and over 2 to 15 for all other equipment.

 

4.           Acquisition of Era Aviation, Inc. and Disposition of Held for Sale Era Assets

 

On December 31, 2004, the Company acquired all of the issued and outstanding shares of Era Aviation, Inc. (“Era”), the owner of 81 helicopters and 16 fixed wing aircraft. Immediately following the acquisition of Era, the Company combined Era’s helicopter business with its pre-existing helicopter services and began a process to sell Era’s regional airline service business that included its fixed wing aircraft. During the nine months ended September 30, 2005, the purchase price of $118.1 million was reduced by $4.8 million resulting from the final determination of post-closing working capital adjustments partially offset by additional closing costs.

 

Effective May 27, 2005, the Company sold Era’s regional airline service business, previously “held for sale,” for $15.0 million. The operating results of the regional airline service business, including $15.3 million of operating revenues earned in the nine months ended September 30, 2005, have been reported as “Discontinued Operations” in the Company’s Condensed Consolidated Statement of Operations. The Company also sold other previously “held for sale” Era assets for $3.7 million, including 1 helicopter and 4 fixed wing aircraft, during the second quarter of 2005.

 

5.             Construction Reserve Funds

 

During the second quarter of 2005, the Company withdrew $50.9 million from its joint depository construction reserve fund accounts with the consent of the Maritime Administration (“MARAD”). The withdrawals reimbursed the Company for prior purchases of a number of dry cargo hopper barges and chemical tank barges and one anchor handling towing supply vessel.  During the nine months ended September 30, 2005, these withdrawals were partly offset by the Company’s deposit into its joint depository construction reserve fund accounts of additional offshore support vessel sale proceeds and interest earned on invested fund balances totaling $8.9 million.

 

Construction reserve fund accounts were established by the Company pursuant to Section 511 of the Merchant Marine Act, 1936, as amended. In accordance with the statute, the Company has been permitted to deposit proceeds from the sale of certain vessels into the joint depository construction reserve fund accounts for the purpose of acquiring U.S. flag vessels and qualifying for the temporary deferral of taxable gains realized from the sale of vessels.

 

6.             Commitments and Contingencies

 

The Company’s unfunded capital commitments as of September 30, 2005 for new helicopters, new dry cargo covered hopper barges, new offshore support vessels and other equipment totaled $415.3 million. Of these commitments, up to approximately $160.0 million may be terminated without liability other than the payment of liquidated damages of $3.0 million in the aggregate. Deliveries are expected in 2005 through 2009 for helicopters, 2006 through 2007 for barges and 2005 through 2007 for offshore support vessels. In addition to these purchase commitments, the Company has placed refundable deposits for additional new helicopters.  Subsequent to quarter end, the Company committed to an additional $148.5 million for offshore support and harbor and towing vessels.

 

The Company has guaranteed the payment of amounts owed by certain of its joint ventures under vessel charter agreements that expire through 2009. In addition, the Company has guaranteed amounts owed by certain of its joint ventures under a banking facility and a performance guarantee. As of September 30, 2005, the total amount guaranteed by the Company was $13.6 million.

 

A subsidiary of SEACOR has received a document subpoena from the Antitrust Division of the U.S. Department of Justice. This subpoena relates to a grand jury investigation of potential antitrust violations among providers of helicopter transportation services in the Gulf of Mexico. The Company believes that this subpoena is part of a broader industry inquiry and that the other providers also have received such subpoenae. SEACOR intends to provide all information requested in the response to this investigation.

 

Under United States law, “United States persons” are prohibited from business activities and contracts in certain countries, including Sudan and Iran.  Relating to the prohibitions, Seabulk has filed three reports with and submitted documents to the Office of Foreign Asset Control (“OFAC”) of the U.S. Department of Treasury.  One of the reports was also filed with the Bureau of Export Administration of the U.S. Department of Commerce.  The reports and documents related to certain limited charters with third parties involving three of the Seabulk vessels which called in Sudan for several months in 1999 and January 2000, and charters with third parties involving several of the Seabulk’s vessels which called in Iran in 1998.  In March 2003, Seabulk received notification from OFAC that the case has been referred to its Civil Penalties Division. Should OFAC determine that these activities constituted violations of the laws or regulations, civil penalties, including fines, could be assessed against Seabulk and/or certain individuals who knowingly participated in such activity.  The Company cannot predict the extent of such penalties; however, management does not believe the outcome of these matters will have a material impact on its financial position or results of operations.

 

7.     Multi-employer Pension Obligation

 

Certain subsidiaries of the Company were previously participating employers in an industry-wide, multi-employer, defined benefit pension fund based in the United Kingdom: the Merchant Navy Officers Pension Fund (“MNOPF”).  The most recent actuarial review of the MNOPF determined there was a funding deficit of $412 million as of September 30, 2005.  Under the direction of a court order,

 

5



 

the deficit is to be remedied through future funding contributions from all participating employers.

 

The deficit allocable to the Company relates to officers formerly employed by the Stirling group of companies (which had been acquired by SEACOR in 2001) and its predecessors between 1978 and 2002.  In August 2005, the Company received an invoice from the MNOPF for $4.4 million representing the Company’s share of the deficit and recorded this amount as a payroll related operating expense in the accompanying condensed consolidated statement of operations.  Under the terms of the invoice, the Company has elected to pay the amount due over a 10-year period with the first payment of $0.5 million made during the third quarter of 2005.  The remaining obligation is included in deferred income and other liabilities in the accompanying condensed consolidated balance sheet.

 

The amount of the Company’s share of the deficit will ultimately depend on future actuarial valuations which are due to occur every three years, the next of which is scheduled for March 2006.  It is possible that the MNOPF will issue additional invoices to the Company depending on the results of future actuarial valuations.

 

8.             Long-Term Debt

 

As of September 30, 2005, SEACOR had outstanding borrowings of $65.0 million under its revolving credit facility which terminates in February 2007. Remaining availability under the SEACOR credit facility was $132.3 million, net of issued letters of credit of $2.7 million.  Seabulk had outstanding borrowings of $33.0 million under its credit facility (see description below).  Remaining availability under the Seabulk credit facility was $8.6 million, net of issued letters of credit of $22.4 million.  Repayments of long-term debt in 2005 of $58.1 million primarily relate to an obligation due to a vessel builder and Seabulk’s long-term debt associated with the two foreign-flag double-hull product tankers which were sold during the third quarter.

 

Outstanding debt of Seabulk (see Note 2) was $537.6 million and $492.0 million at July 1, 2005 and September 30, 2005, respectively.  Seabulk debt consists of the following:

 

Senior notes (fair value of $155.6 million at July 1, 2005 held by non affiliates) – On August 5, 2003, Seabulk completed the offering of $150.0 million of Senior Notes (the “2003 Senior Notes”) due 2013 through a private placement to institutional investors eligible for resale under Rule 144A and Regulation S.  The net proceeds of the offering were used to repay a portion of Seabulk’s indebtedness under a prior $180.0 million credit facility.  The 2003 Senior Notes bear interest at 9.5% per annum, payable semi-annually in arrears.  The 2003 Senior Notes are senior unsecured obligations guaranteed by certain of Seabulk’s U.S. subsidiaries.  The 2003 Senior Notes are subject to certain covenants, including, among other things, limiting Seabulk and certain of its U.S. subsidiaries’ ability to incur additional indebtedness or issue preferred stock, pay dividends to stockholders, and make investments or sell assets under certain conditions.  On October 31, 2003, Seabulk filed a registration statement with the SEC to register substantially identical senior notes to be exchanged for the 2003 Senior Notes pursuant to a registration rights agreement, so that the 2003 Senior Notes may be eligible for trading in the public markets.  On November 13, 2003, the registration statement was declared effective and Seabulk completed the exchange offer on December 16, 2003.

 

Amended credit facility ($33.0 million outstanding at July 1, 2005) – In connection with the 2003 Senior Notes offering, Seabulk amended and restated its $180.0 million credit facility.  The amended credit facility consists of a revolving credit facility with an original amount available of $80.0 million and has a five-year maturity (the “Amended Credit Faciltiy”).  The Amended Credit Facility is subject to semi-annual reductions commencing February 5, 2004.  The principal reductions on the Amended Credit Facility are as follows: $4.0 million each February and August from 2004 through 2007, and $48.0 million in 2008.  Interest on the Amended Credit Facility is payable monthly, with a variable interest rate.  The rate is either LIBOR or a base rate plus a margin based upon certain financial ratios of Seabulk.  It is secured by first liens on certain of the Seabulk’s vessels (excluding vessels financed with Title XI financing and some of its other vessels) and stock of certain subsidiaries and is also guaranteed by certain subsidiaries.  The Amended Credit Facility is subject to various Seabulk financial covenants, including minimum ratios of adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) to adjusted interest expense and a minimum ratio of adjusted funded debt to adjusted EBITDA, minimum adjusted tangible net worth, and minimum fair market value of the Company’s vessels.

 

Title XI debt (fair value of $228.7 million at July 1, 2005) – Seabulk’s five double-hull product and chemical tankers are financed through Title XI Government Guaranteed Ship Financing Bonds.  There are a total of seven bonds with interest rates ranging from 6.50% to 7.54% that require principal amortization through June 2024.  Covenants under the Title XI Bond agreements contain financial tests which, if not met by the five double-hull tanker companies, among other things (1) restrict the withdrawal of capital; (2) restrict certain payments, including dividends, increases in employee compensation and payments of other indebtedness; (3) limit the incurrence of additional indebtedness; and (4) prohibit the five double-hull tanker companies from making certain investments or acquiring additional fixed assets.  In the event of default, all of the vessels, in addition to the assignment of earnings on one vessel, serve as collateral on the United States Government guarantee of the Title XI Bonds.  The five double-hull vessel companies are required to make deposits to a Title XI reserve fund based on a percentage of net income attributable to the operations of the five double-hull tankers, as defined by the Title XI financial agreement.  Cash held in a Title XI reserve fund is invested by the trustee of the fund, and any income earned thereon is either paid to the double-hull companies or retained in the reserve fund.  Withdrawals from the Title XI reserve fund may be made for limited purposes, subject to prior approval from MARAD.  As of September 30, 2005, the amount on deposit in the reserve fund was $13.3 million and is included in other assets in the accompanying balance sheets.

 

6



 

Additionally, according to the Title XI financial agreement, Seabulk is restricted from distributing excess cash from the five double-hull tankers until certain working capital levels have been reached and maintained.  Accordingly, at September 30, 2005, Seabulk had approximately $44.1 million in restricted cash, which is restricted for use for the operations of the five double-hull tankers and cannot be used to fund Seabulk ‘s general working capital requirements.

 

Other notes payable (fair value of $88.0 million at July 1, 2005) – Seabulk has various outstanding notes payable through 2021 that bear interest at rates ranging from 4.0% to 8.5%.  The notes include certain restrictive financial covenants and are collateralized by securities of certain subsidiaries and certain equipment.

 

Capital lease obligations (fair value of $32.3 million at July 1, 2005) – Seabulk operates certain vessels and other equipment under leases expiring through 2013 that are classified as capital leases.

 

9.           Income Taxes

 

The Company’s effective income tax rate for the nine months ended September 30, 2005 varied from the customary tax rate primarily due to foreign tax credits not recognized and tax provisions for state jurisdictions.  The Company’s effective income tax rate for the nine months ended September 30, 2004 varied from the customary tax rate primarily due to tax provisions for state jurisdictions with taxable income and the consequence of non-deductible compensation expenses excluded from the U.S. consolidated tax return.

 

As a result of the American Jobs Creation Act of 2004, the Company believes it will be in the position to repatriate, for a limited time, accumulated foreign earnings at an effective federal tax rate of 5.25%, which would result in tax obligations significantly less than the deferred taxes previously provided for its unremitted earnings of foreign subsidiaries. The Company is exploring the full impact of the legislation and will finalize its repatriation plan in 2005. In accordance with FASB Staff Position FAS 109-2, the Company will recognize the income tax benefit of this special one-time dividends received deduction in the period that the Company has decided on a plan for repatriation.

 

10.          Authorized Shares of Common Stock

 

At the annual meeting of stockholders on June 27, 2005, the holders of Common Stock approved an amendment to SEACOR’s Restated Certificate of Incorporation increasing the number of authorized shares of SEACOR from 40,000,000 shares to 60,000,000 shares. To effect this change, SEACOR amended its certificate of incorporation.

 

11.        Stock and Debt Repurchases

 

During the nine months ended September 30, 2005, the Company acquired a total of 91,876 shares of Common Stock for treasury at an aggregate cost of $6.0 million. At September 30, 2005, repurchase authority of $37.2 million granted by the Company’s Board of Directors remains available for acquisition of additional shares of Common Stock, the Company’s 7.2% Senior Notes Due 2009 (“7.2% Notes”) and its 5-7/8% Senior Notes due 2012 (“5-7/8% Notes”). Securities are acquired from time to time through open market purchases, privately negotiated transactions or otherwise, depending on market conditions.

 

12.          Earnings Per Common Share

 

Basic earnings per common share were computed based on the weighted average number of common shares issued and outstanding during the relevant periods. Diluted earnings per common share were computed based on the weighted average number of common shares issued and outstanding plus all potentially dilutive common shares that would have been outstanding in the relevant periods assuming the vesting of restricted stock grants and the issuance of common shares for stock options and convertible subordinated notes through the application of the treasury stock and if-converted methods. Diluted earnings per common share exclude certain options and share awards, totaling 27,058 and 109,768 in the three and nine months ended September 30, 2005, respectively, and 70,000 and 180,924 in the three and nine months ended September 30, 2004, respectively, as the effect of their inclusion in the computation would have been antidilutive.

 

 

 

For the Three Months Ended

 

For the Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

Net Income

 

Average O/S
Shares

 

Per
Share

 

Net Income

 

Average O/S
Shares

 

Per
Share

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

$

20,497

 

24,789

 

$

0.83

 

$

64,212

 

20,486

 

$

3.13

 

Effect of Dilutive Securities, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Options and Restricted Stock

 

 

 

355

 

 

 

 

 

247

 

 

 

Convertible Securities

 

1,211

 

3,418

 

 

 

3,619

 

3,418

 

 

 

Diluted Earnings Per Common Share

 

$

21,708

 

28,562

 

$

0.76

 

$

67,831

 

24,151

 

$

2.81

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Common Share

 

$

3,364

 

18,211

 

$

0.18

 

$

573

 

18,341

 

$

0.03

 

Effect of Dilutive Securities, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

 

Options and Restricted Stock

 

 

146

 

 

 

 

155

 

 

 

Diluted Earnings Per Common Share

 

$

3,364

 

18,357

 

$

0.18

 

$

573

 

18,496

 

$

0.03

 

 

7



 

13.          Comprehensive Income

 

For the three months ended September 30, 2005 and 2004, total comprehensive income was $12.2 million and $9.4 million, respectively. For the nine months ended September 30, 2005 and 2004, total comprehensive income was $47.8 million and $8.0 million, respectively. Other comprehensive income (loss) consisted of gains and losses from foreign currency translation adjustments and unrealized holding gains and losses on available-for-sale securities.

 

14.          Stock Compensation

 

Under Statement of Financial Accounting Standards No. 123 (“SFAS 123”), companies could either adopt a “fair value method” of accounting for its stock based compensation plans or continue to use the “intrinsic value method” as prescribed by APB Opinion No. 25. The Company has elected to continue accounting for its stock compensation plans using the intrinsic value method. Had compensation costs for the plans been determined using a fair value method consistent with SFAS 123, the Company’s net income (loss) and earnings (loss) per share would have been reduced to the following pro forma amounts:

 

 

 

 

For the Three Months
Ended September 30,

 

For the Nine Months
Ended June 30,

 

(in thousands, except per share data)

 

2005

 

2004

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

Net Income, As Reported

 

$

20,497

 

$

3,364

 

$

64,212

 

$

573

 

Add: Stock Based Compensation Using Intrinsic Value Method

 

467

 

381

 

1,381

 

1,145

 

Less: Stock Based Compensation Using Fair Value Method

 

(686

)

(583

)

(1,894

)

(1,763

)

Net Income (Loss), Pro Forma

 

$

20,278

 

$

3,162

 

$

63,699

 

$

(45

)

 

 

 

 

 

 

 

 

 

 

Basic Earnings (Loss) Per Common Share:

 

 

 

 

 

 

 

 

 

As Reported

 

$

0.83

 

$

0.18

 

$

3.13

 

$

0.03

 

Pro Forma

 

0.82

 

0.17

 

3.11

 

0.00

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings (Loss) Per Common Share:

 

 

 

 

 

 

 

 

 

As Reported

 

$

0.76

 

$

0.18

 

$

2.81

 

$

0.03

 

Pro Forma

 

0.75

 

0.17

 

2.79

 

0.00

 

 

The effects of applying a fair value method consistent with SFAS 123 in this pro forma disclosure are not indicative of future events and the Company anticipates that it will award additional stock based compensation in future periods. During the nine months ended September 30, 2005, the Company issued 418,581 shares of Common Stock for restricted stock grants, director stock grants and the exercise of stock options.  In addition, the Company released from treasury 19,718 shares of Common Stock for employee stock plan purchases.

 

15.          New Accounting Pronouncement

 

On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123 (R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. The impact of adopting Statement 123 (R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted Statement 123 (R) in prior periods, the impact of that standard would have approximated the impact of the SFAS 123 disclosure of pro forma net income and earnings per share presented in Note 13. The Company will adopt the provisions of Statement 123 (R) on January 1, 2006 using the “modified prospective” approach, recognizing compensation expense for all unvested employee stock options as of that date and for all subsequent employee stock options granted thereafter.

 

16.          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 has not changed from those previously described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.  Certain reclassifications of prior period information have been made to conform to the current period’s reportable segment presentation.  As a result of the Seabulk Merger (see Note 2), the Company has identified the following two new operating segments that it acquired:

 

8



 

Marine Transportation Services  Marine transportation services includes 10 U.S.-flag product tankers and, until sold in August and September 2005, two foreign-flag product tankers.  The U.S.-flag product tankers are used to transport petroleum, chemicals, and crude products, primarily from chemical manufacturing plants, refineries and storage facilities along the U.S. Gulf Coast to industrial users and distribution facilities in and around the Gulf of Mexico, Atlantic and Pacific Coast ports.  Certain of the vessels also transport crude oil within Alaska and among Alaska, the Pacific Coast and Hawaiian ports.  One U.S.-flag product tanker operates in foreign trade.

 

Harbor and Offshore Towing Services  (included in Other) – Harbor and offshore towing services are provided by tugs to vessels utilizing the ports in which the tugs operate, and to vessels at sea to the extent required by offshore commercial contract opportunities and by environmental regulations, casualty or other emergencies.  Harbor operations are currently performed in Port Everglades, Tampa and Port Canaveral in Florida and in Mobile, Alabama, Lake Charles, Louisiana and Port Arthur, Texas.  The tugs assist petroleum and chemical product tankers, barges, container ships and other cargo vessels in docking and undocking and in proceeding within the port areas and harbors.  In addition, three tugs with offshore towing capabilities conduct a variety of offshore towing services in the Gulf of Mexico and Atlantic Ocean.

 

(in thousands)

 

Offshore
Marine
Services

 

Marine
Transportation
Services

 

Environmental
Services

 

Inland
River
Services

 

Helicopter
Services

 

Other

 

Total

 

For the Three Months Ended September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers

 

$

146,823

 

35,723

 

$

27,466

 

$

29,702

 

$

40,024

 

$

15,131

 

$

294,869

 

Intersegment

 

19

 

 

 

 

 

138

 

157

 

Operating revenues

 

146,842

 

35,723

 

27,466

 

29,702

 

40,024

 

15,269

 

295,026

 

Operating expenses

 

(82,726

)

(24,692

)

(17,400

)

(17,203

)

(27,705

)

(10,553

)

(180,279

)

Administrative and general

 

(11,290

)

(705

)

(4,546

)

(644

)

(3,083

)

(1,831

)

(22,099

)

Depreciation and amortization

 

(25,040

)

(11,663

)

(901

)

(3,151

)

(4,026

)

(1,412

)

(46,193

)

Gains (losses) on asset sales and impairments

 

(905

)

 

(19

)

 

306

 

 

(618

)

Other income (expense), primarily foreign currency

 

3,288

 

 

17

 

 

 

26

 

3,331

 

Equity in earnings (losses) of 50% or less owned companies

 

2,051

 

 

270

 

 

 

(2,121

)

200

 

Reportable Segment Profit (Loss)

 

$

32,220

 

$

(1,337

)

$

4,887

 

$

8,704

 

$

5,516

 

$

(622

)

 

 

Corporate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,378

)

Other income (expense) not included above

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,828

)

Equity in earnings (losses) of 50% or less owned companies

 

 

 

 

 

 

 

 

 

 

 

 

 

(200

)

Segment Eliminations

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Income before Taxes, Minority Interest and Equity Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

33,968

 

 

For the Three Months Ended September 30, 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers

 

$

72,757

 

$

 

$

21,144

 

$

16,076

 

$

6,509

 

$

 

$

116,486

 

Intersegment

 

68

 

 

 

 

976

 

 

1,044

 

Operating revenues

 

72,825

 

 

21,144

 

16,076

 

7,485

 

 

117,530

 

Operating expenses

 

(48,434

)

 

(14,738

)

(10,405

)

(6,659

)

 

(80,236

)

Administrative and general

 

(7,572

)

 

(2,793

)

(455

)

(228

)

 

(11,048

)

Depreciation and amortization

 

(10,468

)

 

(740

)

(2,067

)

(1,073

)

 

(14,348

)

Gains (losses) on asset sales

 

9

 

 

(131

)

4

 

 

 

(118

)

Other income (expense), primarily foreign currency

 

(202

)

 

(19

)

 

 

 

(221

)

Equity earnings (losses) of 50% or less owned companies

 

1,547

 

 

(21

)

 

 

(138

)

1,388

 

Reportable Segment Profit (Loss)

 

$

7,705

 

$

 

$

2,702

 

$

3,153

 

$

(475

)

$

(138

)

 

 

Corporate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,879

)

Other income (expense) not included above

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,165

)

Equity in earnings of 50% or less owned companies

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,388

)

Segment Eliminations

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

Income before Taxes, Minority Interest and Equity Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

3,595

 

 

(in thousands)

 

Offshore
Marine
Services

 

Marine
Transportation
Services

 

Environmental
Services

 

Inland
River
Services

 

Helicopter
Services

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers

 

$

311,175

 

$

35,723

 

$

98,994

 

$

82,565

 

$

88,838

 

$

20,590

 

$

637,885

 

Intersegment

 

60

 

 

 

 

477

 

212

 

749

 

Operating revenues

 

311,235

 

35,723

 

98,994

 

82,565

 

89,315

 

20,802

 

638,634

 

Operating expenses

 

(186,311

)

(24,692

)

(71,402

)

(48,855

)

(68,387

)

(14,004

)

(413,651

)

Administrative and general

 

(27,032

)

(705

)

(12,534

)

(1,722

)

(7,022

)

(2,336

)

(51,351

)

Depreciation and amortization

 

(46,660

)

(11,663

)

(2,539

)

(8,539

)

(11,938

)

(1,506

)

(82,845

)

Gains on asset sales and impairments

 

13,788

 

 

20

 

11

 

891

 

 

14,710

 

Other income (expense), primarily foreign currency

 

7,118

 

 

58

 

27

 

192

 

76

 

7,471

 

Equity in earnings (losses) of 50% or less owned companies

 

4,911

 

 

930

 

 

 

(1,430

)

4,411

 

Reportable Segment Profit (Loss)

 

$

77,049

 

$

(1,337

)

$

13,527

 

$

23,487

 

$

3,051

 

$

1,602

 

 

 

Corporate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,082

)

Other income (expense) not included above

 

 

 

 

 

 

 

 

 

 

 

 

 

514

 

Equity in earnings (losses) of 50% or less owned companies

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,411

)

Segment Eliminations

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

Income before Taxes, Minority Interest and Equity Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

95,416

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Nine Months Ended September 30, 2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

External customers

 

$

205,739

 

$

 

$

52,190

 

$

34,690

 

$

17,244

 

$

 

$

309,863

 

Intersegment

 

141

 

 

 

 

2,748

 

 

2,889

 

Operating revenues

 

205,880

 

 

52,190

 

34,690

 

19,992

 

 

312,752

 

Operating expenses

 

(149,684

)

 

(37,888

)

(23,677

)

(19,563

)

 

(230,812

)

Administrative and general

 

(24,116

)

 

(7,717

)

(1,228

)

(1,078

)

 

(34,139

)

Depreciation and amortization

 

(32,361

)

 

(2,009

)

(4,761

)

(3,153

)

 

(42,284

)

Gains (losses) on asset sales

 

9,793

 

 

(64

)

77

 

124

 

 

9,930

 

Other income (expense), primarily foreign currency

 

(333

)

 

2

 

 

 

 

(331

)

Equity in earnings (losses) of 50% or less owned companies

 

3,793

 

 

(21

)

 

 

(1,141

)

2,631

 

Reportable Segment Profit (Loss)

 

$

12,972

 

$

 

$

4,493

 

$

5,101

 

$

(3,678

)

$

(1,141

)

 

 

Corporate expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,253

)

Other income (expense) not included above

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,629

)

Equity in earnings of 50% or less owned companies

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,631

)

Segment Eliminations

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

Loss before Taxes, Minority Interest and Equity Earnings

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(1,686

)

 

9



 

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

 

Certain statements discussed in Item 2 (Management’s Discussion and Analysis of Financial Condition and Results of Operations), Item 3 (Quantitative and Qualitative Disclosures About Market Risk) and elsewhere in this Form 10-Q constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements concerning management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of results to differ materially from any future results, performance or achievements discussed or implied by such forward-looking statements. Such risks, uncertainties and other important factors include, among others: the cyclical nature of the oil and gas industry, the operation of each of our business units in a highly competitive environment, changes in foreign political, military and economic conditions, the dependence of each business unit on several customers, industry fleet capacity, the ongoing need to replace aging vessels, restrictions imposed by the Shipping Acts and Aviation Acts on the amount of foreign ownership of the Company’s Common Stock, modification or elimination of the Jones Act, risks associated with oil spills, changes in environmental laws and regulations that would increase competition for Marine Transportation Services provided by our modern double-hull fleet, safety record requirements imposed by customers, changes in foreign and domestic oil and gas exploration, production and refining activity, vessel and helicopter-related operational risks, effects of adverse weather conditions on all business units and of seasonality on Helicopter and Inland River Services, dependence of spill response revenue on the number and size of spills and upon continuing government environmental laws and regulations and our ability to comply with such laws and regulations and other governmental laws and regulations, changes in National Response Corporation’s “Oil Spill Response Organization”  classification, liability in connection with providing spill response services, effects of adverse river conditions on Inland River Services, the level of grain export volume, the effect of fuel prices on barge towing costs, variability in freight rates for inland river barges, adequacy of insurance coverage, currency exchange fluctuations, the attraction and retention of qualified personnel by the Company, and various other matters, many of which are beyond the Company’s control and other factors as described at the end of Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of the Company’s Form 10-K for the fiscal year ended December 31, 2004. The words “expect,” “anticipate,” “estimate,” “project,” “intend,” “believe,” “plan” and similar expressions are intended to identify forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based.

 

Consolidated Results of Operations

 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

Percent Change

 

 

 

2005

 

2004

 

2005

 

2004

 

3 Mos

 

9 Mos

 

(in thousands)

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

 

‘05 / ‘04

 

‘05 / ‘04

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Offshore Marine Services

 

$

146,842

 

50

%

$

72,825

 

63

%

$

311,235

 

49

%

$

205,880

 

67

%

102

%

51

%

Marine Transportation Services

 

35,723

 

12

%

 

%

35,723

 

5

%

 

%

NA

%

NA

%

Environmental Services

 

27,466

 

9

%

21,144

 

18

%

98,994

 

16

%

52,190

 

17

%

30

%

90

%

Inland River Services

 

29,702

 

10

%

16,076

 

14

%

82,565

 

13

%

34,690

 

11

%

85

%

138

%

Helicopter Services

 

40,024

 

14

%

7,485

 

6

%

89,315

 

14

%

19,992

 

6

%

435

%

347

%

Other and Eliminations

 

15,112

 

5

%

(1,044

)

(1

)%

20,053

 

3

%

(2,889

)

(1

)%

1, 548

%

794

%

 

 

$

294,869

 

100

%

$

116,486

 

100

%

$

637,885

 

100

%

$

309,863

 

100

%

153

%

106

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

$

36,465

 

13

%

$

7,981

 

7

%

$

87,431

 

14

%

$

5,274

 

1

%

357

%

1,558

%

Other, net

 

(2,497

)

(1

)%

(4,386

)

(4

)%

7,985

 

1

%

(6,960

)

(2

)%

43

%

215

%

Income (loss) before income taxes, minority interest & equity earnings

 

33,968

 

12

%

3,595

 

3

%

95,416

 

15

%

(1,686

)

(1

)%

845

%

5,759

%

Income tax expense

 

13,894

 

5

%

1,511

 

1

%

36,082

 

6

%

178

 

%

820

%

20,171

%

Income before minority interest & equity earnings

 

20,074

 

7

%

2,084

 

2

%

59,334

 

9

%

(1,864

)

(1

)%

863

%

3,283

%

Minority interest

 

223

 

%

(108

)

%

103

 

%

(194

)

%

306

%

153

%

Equity earnings

 

200

 

%

1,388

 

1

%

4,411

 

1

%

2,631

 

1

%

(86

)%

68

%

Income from continuing operations

 

20,497

 

7

%

3,364

 

3

%

63,848

 

10

%

573

 

%

509

%

11,043

%

Discontinued operations

 

 

%

 

%

364

 

%

 

%

%

%

Net income

 

$

20,497

 

7

%

$

3,364

 

3

%

$

64,212

 

10

%

$

573

 

%

509

%

11,106

%

 

10



 

Overview

 

The table above provides an analysis of the Company’s consolidated statements of operations for each quarter and nine month period indicated. Additional discussions of results of operations by business segment are presented below.

 

The Company’s operations are divided into five main business segments - “Offshore Marine Services”, “Marine Transportation Services” (acquired on July 1, 2005 as part of the Seabulk Merger, as described in Note 2 to the condensed consolidated financial statements), “Environmental Services”, “Inland River Services”, and “Helicopter Services”. The Company also has activities that are referred to and described under “Other”, which primarily includes “Harbor and Offshore Towing Services” (acquired on July 1, 2005 as part of the Seabulk Merger), “Fixed Base Operation” (acquired on December 31, 2004 in the acquisition of Era as described in Note 4 to the condensed consolidated financial statements) and equity in earnings of 50% or less owned companies unrelated to the five reportable business segments. See “Item 1. Financial Statements – Note 16, Segment Information” included in Part I for additional financial information about the Company’s business segments.

 

Consolidated operating revenues increased significantly in the three and nine months ended September 30, 2005 (“Current Year Quarter” and “Current Nine Months,” respectively) as compared to the three and nine months ended September 30, 2004 (“Prior Year Quarter” and “Prior Nine Months,” respectively). Demand improved for vessels in Offshore Marine Services and the fleet grew as a consequence of the Seabulk Merger. Marine Transportation Services were included for the first time as a consequence of the Seabulk Merger. Spill response activities increased in Environmental Services. The fleet grew and freight rates increased in Inland River Services. The acquisition of Era significantly increased the helicopter fleet in Helicopter Services.

 

Consolidated net income also increased in the Current Year Quarter and Current Nine Months due principally to those factors affecting the operating revenues noted above and as a result of increased income from marketable security sales and currency exchange gains partially offset by higher interest expense (primarily as a result of the Seabulk Merger) and a higher income tax provision.

 

Offshore Marine Services

 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

Percent Change

 

 

 

2005

 

2004

 

2005

 

2004

 

3 Mos

 

6 Mos

 

(in thousands)

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

 

‘05 / ‘04

 

‘05 / ‘04

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

66,558

 

45

%

$

32,497

 

45

%

$

152,261

 

49

%

$

90,256

 

44

%

105

%

69

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Kingdom

 

14,386

 

10

%

18,181

 

25

%

46,756

 

15

%

51,791

 

25

%

(21

)%

(10

)%

West Africa

 

35,406

 

24

%

11,014

 

15

%

61,740

 

20

%

35,197

 

17

%

221

%

75

%

Latin America/Mexico

 

9,871

 

7

%

6,850

 

9

%

21,524

 

7

%

18,259

 

9

%

44

%

18

%

Asia

 

12,517

 

9

%

3,924

 

5

%

19,820

 

6

%

9,403

 

5

%

219

%

111

%

Middle East

 

7,881

 

5

%

 

%

7,881

 

3

%

 

%

NA

%

NA

%

Other

 

223

 

%

359

 

1

%

1,253

 

%

974

 

%

(38

)%

29

%

Total Foreign

 

80,284

 

55

%

40,328

 

55

%

158,974

 

51

%

115,624

 

56

%

99

%

37

%

 

 

$

146,842

 

100

%

$

72,825

 

100

%

$

311,235

 

100

%

$

205,880

 

100

%

102

%

51

%

Operating Income

 

$

26,881

 

18

%

$

6,360

 

9

%

$

65,020

 

21

%

$

9,512

 

5

%

323

%

584

%

 

Operating Revenues.  Improvement in demand for offshore support services that began in the third quarter of 2004 continued through the Current Nine Months. Increases in the Current Year Quarter were generally higher due to continued increased drilling in the Gulf of Mexico plus damage assessment and re-construction of offshore installations following Hurricanes Katrina and Rita. This improvement resulted in higher rates per day worked and utilization for SEACOR’s pre-existing Offshore Marine Services’ vessels, which increased operating revenues approximately $12.0 million and $32.4 million in the Current Year Quarter and Current Nine Months, respectively. Of these increases, $10.7 million and $26.7 million, respectively, resulted from improved rates per day worked and $1.3 million and $5.7 million, respectively, resulted from improved vessel utilization. Rates per day worked and utilization improved for many of the Company’s vessels operating in the U.S. Gulf of Mexico, offshore West Africa, the North Sea and Asia.

 

As part of the Seabulk Merger, the Company increased its Offshore Marine Services fleet by 103 vessels which contributed revenues of $50.9 million in the Current Year Quarter and Current Nine Months. The Company continually assesses its asset portfolio and regularly buys, sells and charters vessels in an effort to align Offshore Marine Services’ fleet mix with the needs of customers. Adjustments in SEACOR's pre-existing fleet mix have resulted in increased operating revenues of $6.1 million and $12.3 million in the Current Year Quarter and Current Nine Months, respectively.

 

In addition to the Seabulk vessels, in the Current Nine Months Offshore Marine Services acquired four used anchor handling towing supply and three new crew vessels in the U.S., and sold seven supply, three crew, one towing supply, one anchor handling towing supply, and one mini-supply vessels from its North Sea, West African and U.S. Gulf of Mexico fleets.

 

11



 

Several Offshore Marine Services’ vessels returned to the U.S. Gulf of Mexico for time-charter-out operations upon concluding bareboat charter-out activities in Latin America and Mexico and commenced time charter operations.  This resulted in a net increase in operating revenues of $2.9 million and $9.5 million in the Current Year Quarter and Current Nine Months, respectively.

 

Operating Income.  Operating income increased significantly in the Current Year Quarter and Current Nine Months. Seabulk vessels contributed operating income of $8.7 million in the Current Year Quarter and Current Nine Months. The improvements in operating revenues were partly offset by increased vessel operating expenses in SEACOR’s pre-existing operations. Vessel repair and maintenance expenses, principally due to increases in drydocking and engine overhaul costs, and pension costs incurred in the United Kingdom (see Note 7 to the condensed consolidated financial statements) increased in the Current Year Quarter and Current Nine Months. Administrative expenses remained relatively constant in the Current Year Quarter and the Current Nine Months.

 

Results in the Current Year Quarter and Current Nine Months included gains from asset sales of $0.7 million and $15.4 million, respectively, an increase of $0.7 million and $5.6 million as compared to the Prior Year Quarter and Prior Nine Months. At dates of disposition, the aggregate carrying value for the 13 vessels sold in the Current Nine Months was $110.0 million. In addition, the U.S. Gulf of Mexico logistical operations of Offshore Marine Services incurred significant damage as a result of Hurricanes Katrina and Rita and recognized asset and goodwill impairments of $1.6 million in the Current Year Quarter and Current Nine Months.

 

 

 

As of September 30,

 

 

 

2005

 

2004

 

Fleet Count:

 

 

 

 

 

Anchor Handling Towing Supply

 

30

 

17

 

Crew

 

103

 

77

 

Mini-supply

 

29

 

30

 

Other

 

17

 

2

 

Standby safety

 

27

 

27

 

Supply

 

46

 

21

 

Towing

 

55

 

33

 

Overall Fleet

 

307

(1)

207

 

 


(1)Includes 228 owned, 34 chartered-in, 5 managed and 1 pooled vessels. Joint ventures in which the Company owned a 50% or less interest owned or chartered-in 33 vessels and joint ventures in which the Company owned a majority interest owned 6 vessels.

 

Marine Transportation Services

 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

Percent Change

 

 

 

2005

 

2004

 

2005

 

2004

 

3 Mos

 

9 Mos

 

(in thousands)

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

 

Amount

 

Percent

 

‘05 / ‘04

 

‘05 / ‘04

 

Operating Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

$

29,770

 

83

%

$

 

%

$

29,770

 

83

%

$

 

%

NA

%

NA

%

Foreign

 

5,953

 

17

%

 

%

5,953

 

17

%

 

%

NA

%

NA

%

 

 

$

35,723

 

100

%

$

 

%

$

35,723

 

100

%

$

 

%

NA

%

NA

%

Operating Income

 

$

(1,337

)

(4

)%

$

 

%

$

(1,337

)

(4

)%

$

 

%

NA

%

NA

%

 

Operating Revenues.  Operating revenues for the Current Year Quarter reflect the Company’s tanker fleet operations acquired in the Seabulk Merger and were impacted by the loss of approximately 77 revenue days due to the drydocking of two vessels and the sale of the two foreign-flag double-hull product tankers which occurred in August and September of 2005.

 

Operating Income.  Operating income for the Current Year Quarter was impacted by drydocking costs of approximately $6.7 million for two of the Company’s tankers. No gain or loss was recognized on the $83.7 million sale of the two foreign-flag tankers due to their recent fair valuation as part of the Seabulk Merger.

 

As of September 30, 2005, Marine Transportation Services operated ten Jones Act U.S.-flag product tankers in the domestic coastwise trade, of which it owns nine and leases one.

 

12



 

Environmental Services

 

 

 

For the Three Months Ended September 30,

 

For the Nine Months Ended September 30,

 

Percent Change

 

 

 

2005

 

2004

 

2005

 

2004

 

3 Mos